United States anti-dumping duties on steel rods from South Africa
On 25 October 2017 the United States (US) Department of Commerce announced the commencement of preliminary anti-dumping duties on imports of carbon and alloy steel wire rod from seven countries, one of which is South Africa (the others are Italy, Korea, Spain, Turkey, Ukraine and the United Kingdom).
The investigation period is 1 January 2016 to 31 December 2016. 22% of US imports in 2016 were from the seven countries subject to the preliminary anti-dumping duties. During this period the US imported US$ 1.14 billion of the designated steel rods, mainly from countries not subject to the new duties – notably, Japan (30 percent) and Canada (29 percent).
The products covered in the investigation are hot-rolled bars and rods of iron, non-alloy steel and silco-manganese under HS 721391, HS 721399, HS 722720 HS 722790 and the anti-dumping duty rates varies from 2.80% (Turkey) to 147.63% (United Kingdom). The anti-dumping duty for imports from South Africa is 142.26% (ArcelorMittal South Africa Limited (AMSA), Scaw South Africa (Pty) Ltd. and Consolidated Wire Industries (CWI) and 135.46% for imports from all other producers and/or exporters. The final anti-dumping determination is expected in January 2018.
Imports from South Africa were US$ 8 million, a 58% decline from the US$ 18 million the US imported from South Africa in the previous year. However, the US is the biggest destination market for these products exported from South Africa, 32% of South Africa’s steel rod exports were to the US in 2016. For six of the seven countries subject to the anti-dumping duties steel rods enter the US market at the Most Favoured Nation (MFN) applied tariff of 0%; the applied tariff for Korea’s imports are either 5% or 10%, depending on the specific product.
In the dumping investigation for South African producers and exporters three companies were specifically named in the petition; AMSA, Scaw and Davsteel Division of Cape Gate (Pty) Ltd. The latter successfully proved a lack of exports and shipments of the specific products during the investigation period and was excluded from the investigation. However, the Department of Commerce made some interesting findings regarding AMSA and Scaw:
AMSA, Scaw and CWI were determined to be affiliates in the South African market and consequently collapsed into a single entity for the purpose of the anti-dumping investigation. It was found that ‘AMSA and Scaw each have production facilities for similar or identical products that would not require substantial retooling in order to restructure manufacturing priorities, and that there is significant potential for manipulation of price or production. Additionally, the Department has treated producers and non-producing entities, such as affiliated exporters, trading companies, invoicing companies, and input suppliers, as a single entity in prior cases where there is a significant potential for manipulation of price or production.’
Scaw received the anti-dumping questionnaire from the Department of Commerce but failed to complete and return the questionnaire and did not participate in the investigation; on the contrary the Department is of the view that Scaw intentionally impeded the investigation by its lack of participation.
Due to the treatment of AMSA, Scaw and CWI as one entity and the lack of participation by Scaw, the International Trade Administration (ITA) determined the applicable preliminary anti-dumping duty based on ‘facts otherwise available’ and in accordance with the principle of adverse inferences.
The ITA has a wide discretion to determine the applicable anti-dumping rate based on the information in the filed anti-dumping petition, the final determination of the less-than-fair-value determination, a previous administrative review or any other information on the record. The ITA’s standard practice is to use the highest of either the dumping margin alleged in the petition or the calculated rate of any respondent in the investigation. For imports from AMSA, Scaw and CWI, it was decided to use the highest dumping margin for South African imports alleged in the petition, 142.26%, as the anti-dumping duty.
What are the implications for the South African steel rod industry?
The US was the main destination market for South African steel rod exports in 2016, but previously the main destination markets were Kenya and Uganda. Since 2015 South Africa’s exports to the US increased as Kenya and Uganda increased their imports from China.
The significant increase in the duty South African steel rod exporters now face in the US market can have a trade diversion effect; South African exporters might now once again look at increasing exports to other African economies. However, whether trade diversion takes place will depend on the competitiveness of the South African steel rod industry – to what extent are they still able to compete in the US market after absorbing the cost of the increased duty versus how competitive they are in comparison with Chinese steel rod imports in the African market?
 An adverse inference can be used ‘to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.’ In doing so the Department is not required to make ‘any adjustments to, a weighted-average dumping margin based on any assumptions about information an interested party would have provided if the interested party had complied with the request for information.’
ITC TradeMap (www.trademap.org);
ITC MacMap (www.macmap.org);
United States International Trade Commission (https://www.usitc.gov/investigations/title_7/2017/carbon_and_certain_alloy_steel_wire_rod_belarus/preliminary.htm)