New AD/ CVD Petitions – Corrosion Inhibitors from the People’s Republic of China

On February 5, 2020, Wincom Inc. filed an antidumping (AD) and countervailing duty (CVD) petitions against U.S. imports of certain corrosion inhibitors from China.  Included in the proposed scope are inhibitors know as tolyltriazole (“TTA”) and benzotriazole (“BTA”) in all grades and forms, including liquid and solid forms. These corrosion inhibitors are used to protect elements and metal alloys, including copper, copper alloys, zinc, cobalt, silver, aluminum, and steel from corrosion.

Before President Trump unleashed an unprecedented wave of tariffs issued pursuant to obscure sections of the U.S. trade laws (Section 232 – national security – steel/ aluminum, Section 301 – China), the most commonly used trade remedy actions were the AD/CVD investigations.  Under U.S. trade laws, a domestic industry can petition the U.S. Department of Commerce (“DOC”) and U.S. International Trade Commission (“ITC”) to investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies.  For AD/CVD duties to be imposed, the U.S. government must determine not only that dumping or subsidization is occurring, but also that the subject imports are causing “material injury” or “threat of material injury” to the domestic industry.

This latest filing reinforces what our international trade lawyers have been saying pretty much since the US-China trade war began: this trade war involves more than just tariffs. This means that even in the unlikely event all the tariffs are eliminated, large aspects of the trade way, including anti-dumping and technology and national security issues will remain.

This AD/CVD case looks like it involves a very small industry for a very discrete specialty product with just one U.S. producer, and probably very few U.S. importers fighting to sell to a small number of U.S. customers.  This product is a specialty chemical that is used to inhibit corrosion and rust for metals (copper, silver, zinc) used in water cooling towers, engine coolants, industrial water treatment, and for other metal working fluids, lubricant, cleaner applications.

This case has an interesting twist in that the Petitioner is also listed as a U.S. importer of the Chinese product against which AD/CVD duties are being sought.  It is unclear how much of the Chinese subject merchandise the Petitioner is importing and how big oa share of total Chinese imports Petitioner accounts for.  But this does raise questions as to what extent the Petitioner might actually be helped by its Chinese imports rather than being injured by other Chinese imports.

Scope

The petition identifies the scope of the merchandise to be covered by these AD/CVD investigations as:

The merchandise covered by this petition is tolyltriazole and benzotriazole. This includes tolyltriazole and benzotriazole of all grades and forms, including their sodium salt forms. Tolyltriazole is technically known as Tolyltriazole IUPAC 4,5 methyl benzotriazole. It can also be identified as 4, 5 methyl benzotriazole, tolutriazole, TTA, and TTZ.

Benzotriazole is technically known as IUPAC 1,2,3-Benzotriazole. It can also be identified as 1,2,3-Benzotriazole, 1,2- Aminozophenylene, lH-Benzotriazole, and BTA.

All forms of tolyltriazole and benzotriazole, including but not limited to flakes, granules, pellets, prills, needles, powder, or liquids, are included within the scope of these petitions.

The scope includes tolyltriazole/sodium tolyltriazole and benzotriazole/sodium benzotriazole that are combined or mixed with other products. For such combined products, only the tolyltriazole/sodium tolyltriazole and benzotriazole/sodium benzotriazole component is covered by the scope of these investigations. Tolyltriazole and sodium tolyltriazole that have been combined with other products is included within the scope, regardless of whether the combining occurs in third countries.

Tolyltriazole, sodium tolyltriazole, benzotriazole and sodium benzotriazole that is otherwise subject to these investigations is not excluded when commingled with tolyltriazole, sodium tolyltriazole, benzotriazole, or sodium benzotriazole from sources not subject to these investigations. Only the subject merchandise component of such commingled products is covered by the scope of these investigations.

Tolyltriazole has the Chemical Abstracts Service (“CAS”) registry number 299385-43-1. Tolyltriazole is classified under Harmonized Tariff Schedule of the United States (“HTSUS”) subheading 2933.99.82.20.

Sodium Tolyltriazole has the CAS registry number 64665-57-2 and is classified under HTSUS subheading 2933.99.82.90.

Benzotriazole has the CAS registry number #95-14-7 and is classified under HTSUS subheading 2933.99.82.10.

Sodium Benzotriazole has the CAS registry number 15217-42-2. Sodium Benzotriazole is classified under HTSUS subheading 2933.99.82.90.

Although the HTSUS subheadings and CAS registry numbers are provided for convenience and customs purposes, the written description of the scope of these investigations is dispositive.

Alleged AD/ CVD Margins.

Petitioner calculated estimated dumping margins ranging from 388.28% to 420.32% for China.

Petitioner alleged numerous government subsidy programs that benefitted the Chinese corrosion inhibitors industries, but did not allege a specific subsidy rates

Named Exporters/ Producers

Petitioner included a list of companies that it believes are producers and exporters of the subject merchandise.  See attached list here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise.  See attached list here

Estimated Schedule of Investigations.

February 5, 2020 – Petitions filed

February 25, 2020 – DOC initiates investigation

February 26, 2020 – ITC Staff Conference

March 21, 2020 – ITC preliminary determination

July 6, 2020 – DOC CVD preliminary determination (assuming extended deadline) (4/30/20 – unextended)

September 2, 2020 – DOC AD preliminary determination (assuming extended deadline) (7/14/20 – unextended)

January 15, 2021 – DOC final determination (extended and AD/CVD aligned)

March 1, 2021 – ITC final determination (extended)

March 8, 2021 – DOC AD/CVD orders issued (extended)

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.