US tariffs on Chinese exports of tires set to expire


   US tariffs on Chinese exports of tires for passenger cars and light trucks are set to expire Wednesday, and domestic companies are anticipating a bump in sales.

  Analysts said that the expiry of the tariffs will boost exports of tires to the US and improve the profit margin for Chinese firms, but it will be hard for China to regain its dominant market share in the US tire market given the weak world economy.
  The deadline for "interested parties to request an extension of the tire tariff" has passed, Carol J Guthrie, assistant US trade representative for public and media affairs at the Office of the United States Trade Representative (USTR), said in a statement e-mailed to the Global Times on September 15.
  "The deadline for an extension request is six months prior to the termination of the tire tariffs, and no interested parties made a request for an extension," she said.
  This means the tariffs "will automatically expire and the duties will be scrapped," said Tu Xingquan, associate director of the China Institute of WTO Studies with the Beijing-based University of International Business and Economics.
  Back in April 2009, the US United Steelworkers union filed a complaint with the US International Trade Commission (ITC), accusing Chinese tire makers of flooding the US market with tires and causing thousands of job losses and plant closures.
  The ITC's investigation resulted in punitive tariffs on tire imports from China for a three-year period starting from September 2009.
  The tariffs have not had the intended effect of creating jobs in the US, said Tu. Instead they raised costs for US importers, as well as making it difficult for Chinese exporters to develop in the US market.
  The average price of passenger car tires imported from China increased from $30.79 per tire in the third quarter of 2009 to $38.92 in the third quarter of 2011, a 26 percent increase, Peterson Institute for International Economics, a Washington-based research firm, said in a report in April.
  The safeguard measures actually cost the US economy around 2,531 jobs instead of adding more jobs between 2009 and 2011, the report said.
  China exported 43 million passenger car and light truck tires to the US in 2009, but exports dropped to 27.30 million in 2011, a research report by Sinolink Securities showed.
  US imports of tires from China fell by 23.6 percent in 2010 and by a further 6 percent in the first six months of 2011, according to the latest available official data.
  The tariffs not only affected China's tire production capacity but also the upstream synthetic rubber and black carbon industries, causing 30 domestic tire companies to cut or suspend production, the General Administration of Customs said.
  Shifting production
  Chinese tire makers responded to the tariffs by taking measures to minimize losses, such as shifting their production capacity to other countries and regions and changing their product structures.
  Kumho Tires (China), a Chinese-South Korean joint venture, shifted part of its production to its headquarters in South Korea to avoid the tariffs and its China plants mainly focused on exports to the EU, said Zhao Huaqiao, a manager in charge of advertising at Kumho Tires (China)。
  "We will make new sales strategies targeting our US customers after the removal of the tariffs. We may consider shifting production of passenger car and light truck tires back to China, depending on the demand in the US market," he said.
  "Over the last three years, we have adjusted our product structures to produce more high-end tires to minimize our losses," said Yu Hongfa, secretary of the president of Shandong Linglong Tire Co.
  According to Yu, prior to the imposition of the US tariffs, exports of passenger car and light truck tires to the US accounted for around 20 percent of the company's total exports.
  "The removal of the tariffs is good news for the entire tire industry in China and may help raise our export volume," Yu noted. Yu said the company has received many orders from US importers since August and will deliver the goods after the expiry of the tariffs.
  Hangzhou Zhongce Rubber Company Limited, China's biggest tire maker by revenue, told the Global Times that its sales of passenger car tires exported to the US dropped by 37 percent in 2011 from 2008.
  Sales to the US market are forecast to expand 25 percent in 2012 from a year earlier but will still be much lower than the level achieved in the peak year of 2008, the company said.
  "The lifting of the tariff could boost exports by 10 percent and raise the profit margin of Chinese exporters by 5 percent," said Su Peng, an analyst with Shandong-based industry research agency SCI.
  "But it is almost impossible for Chinese tire makers to regain their previous market share in the US amid the slowdown of the world economy and possible new measures against Chinese tire imports during the US election year," Su said.
  New challenges
  Meanwhile, Chinese tire makers are facing many other uncertainties including trade frictions with other countries and regions and new standards for tire exports to the EU.
  On September 6, Brazil announced an anti-dumping probe into bicycle tire imports from China, following its anti-dumping probe into Chinese motorbike tire imports launched in June.
  Colombia also launched an anti-dumping investigation into Chinese passenger car and truck tires in June.
  Also, in November, the EU's new tire labeling system is set to take effect. All tires exported to the EU must be graded A to G according to their fuel efficiency, grip in the wet and rolling noise. Tires graded below G will not be allowed to enter the EU market.
  The EU's new labeling system, which requires higher performance and energy-saving standards, is expected to put pressure on Chinese tire makers, whose products rate poorly in terms of environmental standards.
  "China's development of green tires is at least five years behind developed countries," Fan Rende, chairman of the China Rubber Industry Association (CRIA), told the China Securities Journal on September 13.
  "The new EU tire labeling poses both challenges and opportunities. Developing green tires will be the direction for Chinese tire makers who wish to compete in the global market," said a staff member at the Tire Branch of the CRIA who did not wish to be named.