ITC Initiates Section 421 Market Disruption Investigation on Tires From China

The U.S. International Trade Commission (ITC) announced in today's Federal Register the initiation of a market disruption investigation on certain passenger vehicle and light truck tires from China. This case is being initiated by the ITC after receiving a petition filed by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union.

Section 421 was added to the Trade Act of 1974 by the U.S.-China Relations Act of 2000 (H.R. 4444), which established permanent normal trade relations with China and cleared the way for China's accession to the World Trade Organization (WTO). The China-specific safeguard provision was added to U.S. law in order to alleviate concerns over possible market disruption due to increased imports from China during the first 12 years that it is a WTO member.

In Section 421 investigations the ITC determines whether imports of a product from China are being imported into the U.S. in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products. If the ITC makes an affirmative determination, it proposes a remedy to the President and the President makes the final remedy decision. Such remedies can include quotas and other relief.

According to the petition filed in this case, China exported nearly 46 million consumer tires with a value of more than $1.7 billion to the U.S. in 2008, making it the largest source of consumer tire imports. The petition also claims that imports of consumer tires from China increased from 2004 to 2008 by 215% in volume and 295% by value.

This Section 421 investigation will move very quickly. The ITC has already issued questionnaires to producers and importers, and responses to these questionnaires will have a large impact on the outcome of the case. Companies affected by this investigation, including those in the automotive industry and retailers of tires, only have until May 5, 2009 to notify the ITC that they intend to participate.

The Bush administration considered and rejected seven Section 421 petitions. Thus, this investigation will be watched very closely to determine how the Obama Administration responds if the ITC recommends that relief be granted.