China Business – U.S. Department Of Commerce Finds That Chinese Government Unfairly Subsidizes Producers Of Laminated Woven Sacks

WASHINGTON–LAWFUEL – US Legal Affairs – The U.S. Department of Commerce announced its preliminary ruling today that the Chinese government has been providing illegal subsidies to Chinese producers of laminated woven sacks. These products are typically used to package pet foods, bird seeds, and similar products sold at retail.

The Commerce Department’s preliminary determination imposes countervailing duties on imports of laminated woven sacks from China to offset the unfair advantage of government subsidies. The duties range from 2.57 percent to 57.14 percent of the customs value of the imports, depending on the identity of the Chinese producer. The Commerce Department also found that critical circumstances exist because of surging imports. Thus, the duty of 57.14 percent may be imposed retroactively by 90 days on imports from two of the largest Chinese producers.

On June 28, 2007, the Laminated Woven Sacks Committee filed antidumping and countervailing duty petitions with the U.S. International Trade Commission (“ITC”) and the Commerce Department. The members of the Committee are Bancroft Bag, Inc.; Coating Excellence International, LLC; Hood Packaging Corporation; Mid-America Packaging, LLC; and Polytex Fibers Corporation.

On August 13, 2007, the ITC made a preliminary determination that imports of laminated woven sacks from China are materially retarding the establishment of an industry in the United States. The ITC found that imports of laminated woven sacks from China doubled from 2004 to 2006, increasing from 78 million bags in 2004 to 153 million bags in 2006. In 2006, unfairly priced imports from China held 80 percent of the U.S. market.

Isaac Bazbaz, President of Polytex Fibers, located in Houston, TX, said, “This important decision sends a strong message to China that government subsidies to producers of laminated woven sacks will not be tolerated by the U.S. government.”

Mike Nowak, President of Coating Excellence, located in Wrightstown, WI, stated, “Surging imports from China at prices below our raw material costs have had a significant adverse impact on our employees and on our company’s investment to make laminated woven sacks. We understand that additional Chinese subsidies will be investigated in the Commerce Department’s final investigation, and we are hopeful that the final countervailing duties will be higher than those announced today.”

Higher Antidumping Duties Anticipated

While countervailing duties are intended to offset the impact of government subsidies, antidumping rules address instances when foreign producers sell at prices in the U.S. that are below the prices or costs in their home market. A preliminary determination in the companion antidumping investigation is due on January 24, 2008. The antidumping petition alleges dumping margins of 74 to 92 percent.

Joe Dorn, a partner at King & Spalding, the law firm representing the petitioners, said: “Today’s decision is an important step in the process of obtaining relief against unfairly traded imports from China.” The next important step occurs on January 24, when the Department will issue its preliminary antidumping determination. Dorn said, “We expect the antidumping duties to be substantial and to be imposed on top of the countervailing duties announced today. The combined duties — countervailing + antidumping — should be very high.”

After the Department of Commerce makes final determinations in both the countervailing duty and antidumping duty investigations, the ITC is scheduled to complete its final investigation in the summer of 2008.

Estimated Timeline for the Investigation

Case Filed June 28, 2007
Commerce Preliminary Subsidy Decision November 27, 2007
Commerce Preliminary Dumping Decision January 24, 2008
Commerce Final Subsidy and Dumping Decisions Spring of 2008
ITC Final Injury Determination Summer 2008

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