How to Define the Domestic Tire Industry
Who’s a domestic producer, and who’s an importer?
In each investigation it conducts, the International Trade Commission (ITC) must determine if there’s a reason any U.S. producer should be excluded from what it considers “the domestic industry.” And this is left to the commission’s discretion, based on the facts in the case.
All the parties seem to agree that in this current investigation of the U.S. tire world, the domestic industry should include all U.S. makers of passenger and light truck tires. Even the United Steelworkers, who initiated the investigation and are advocating for tariffs on tires imported from South Korea, Thailand, Taiwan and Vietnam, agree to that definition.
Hankook Tire America Corp. didn’t want to leave it up to chance. Hankook is the only tiremaker to spell out its argument.
Hankook says it doesn’t want to be excluded from the domestic industry as a related party. The company says even though it is “related” to a foreign producer and exporter -- its parent company -- “it does not itself import PVLT tires from Korea, and the imports from its parent company are intended only to supplement its domestically produced PVLT tire product offerings.” Hankook notes its U.S. operations are “significant, growing, and reflect very large investments.”
That might seem like a minor point that Hankook raises, but it’s not minor to the ITC. The agency analyzed several tiremakers that produce tires in the U.S., but also are “related” to foreign producers or U.S. importers. The ITC says six U.S. producers directly imported tires from the four regions under investigation. Eight U.S. tiremakers are “related” to foreign producers of tires from South Korea, Thailand, Taiwan and Vietnam, and three U.S. producers are related to U.S. importers of the subject merchandise.
In at least one instance, commissioners didn’t agree on the determination for a specific tiremaker. (The names of the companies are redacted, along with other specific data, from this section of the report.)
This unnamed company obviously increased, or perhaps initiated, production of tires in the U.S. during the period of investigation. The ITC report notes that the company’s “primary interest during the period of investigation was in importation rather than domestic production. We recognize that it increased domestic production and reported considerable capital expenditures, but the ratio of its affiliated importer’s subject imports to its domestic production remained high throughout the period of investigation.” As a result, the commissioners don’t want to include that particular company as part of the “domestic industry”
A footnote explains that Commissioner David Johanson disagreed with the analysis and finds that the company’s interest was indeed in domestic production rather than importation. The numbers he quoted are redacted, but Johanson seemingly points to a greater utilization of its domestic production in 2019 compared to 2017, and interim production in 2020 outpacing 2019 production, resulting in a lower ratio of tire imports.
Johanson made a similar case for another company, opposing the finding of his fellow ITC members, saying that a company’s primary interest was in domestic production rather than importing tires.
So why is this important? Because the ITC throughout its investigation looks at data and compares the “domestic industry” against that of the tires imported from South Korea, Thailand, Taiwan and Vietnam. Moving a company from one side of the ledger to the other affects the balance of the arguments. Using Commissioner Johanson’s analysis as an example, it would indicate the domestic production had made some gains with at least this one unnamed tiremaker.
Is it enough to say the domestic industry isn’t being harmed? Apparently not, because Johanson still voted with the rest of the commission to say the U.S. industry is being harmed by, or threatened by, the imports from the four regions.
Ultimately, the ITC did make some exceptions. “In sum, we define the domestic industry to include all domestic producers of PVLT tires, except for ***.”
The name(s) of the company(ies) were redacted.
Commissioner Johanson’s final lineup of companies in the domestic industry was different from the rest of the group, but his exception(s) weren’t named either.