ITC finds "Safeguard" Injury against Imports of Tires from China; Additional Cases may be on the Horizon

June 19, 2009

After conducting a China Safeguards (Section 421) investigation, the United States Trade Commission (ITC) has announced its affirmative finding that the U.S. consumer tire industry is being injured as a result of market disruption caused by increased tire quantities imported from China. The ITC will now draft a remedy proposal and require President Obama to decide whether to provide import relief.

The ITC is expected to submit its remedy proposal to the U.S. Trade Representative (USTR) by July 9, 2009. The remedy proposal will contain recommendations to prevent or remedy market disruption by the use of increased tariffs or quotas, or a combination of the two. The USTR may hold a hearing on the remedy issue before presenting its own recommendation to the President. At the same time, bilateral consultations will be held, with the possibility of an agreed resolution. After the USTR makes a recommendation on what, if any, provisions should be adopted, the President then has 15 days to provide import relief, unless he determines that such relief is "not in the national economic interest of the U.S." or "would cause serious harm to the national security of the U.S." 

While the ITC made affirmative injury determinations under the previous administration, few petitions were pursued because President Bush declined to provide import relief for the domestic industry. However, President Bush’s decisions not to provide relief angered many in Congress, which has since passed legislation limiting the President’s ability to deny relief. Sources indicate that the pressure is on President Obama to find a way to appease congressional concerns without opening a floodgate to new petitions. As an indicator of the level of congressional interest, more than half a dozen Members of Congress from both the Senate and House of Representatives appeared at the tires hearing held by the ITC earlier this month.

Section 421 was added to the Trade Act of 1974 by the U.S.-China Relations Act of 2000 and implements a transitional bilateral safeguard provision in the U.S.-China agreement relating to China’s accession to the World Trade Organization (WTO), which remains in effect until December 11, 2013.  Domestic producers can obtain relief under the provision if the ITC finds that Chinese products are being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of likely or directly competitive products. The statute provides that market disruption “exists whenever imports of an article like or directly competitive with an article produced by a domestic industry are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury, to the domestic industry. Similar to the global safeguard investigations, if the ITC makes an affirmative determination, it also proposes a remedy to the President.  The President makes the final decision concerning whether to provide relief to the U.S. industry and if so, the type and duration of relief.