The U.S. Transformer Fair Trade Coalition Files Antidumping Duty Case Against Korea

Three domestic producers of liquid dielectric large power transformers ("LPTs") on July 14, 2011 filed an antidumping duty petition with the United States Department of Commerce ("Commerce Department") and the United States International Trade Commission ("USITC") charging that unfairly traded imports of LPTs with a top rating of 60 MVA or more from Korea are causing material injury to the domestic industry. The petitioners allege dumping margins ranging from 51.71 to 63.20 percent, with an average margin of 60.20 percent.

The petition was filed by an ad hoc coalition of domestic producers, the U.S. Transformer Fair Trade Coalition, in response to a large and increasing volume of imports of LPTs from Korea over the past three years that has injured U.S. LPT producers. Imports from Korea surged to account for 38 percent of all imports of LPTs by value in the U.S. market in 2010. The petition alleges that Korean producers have aggressively expanded their share of the U.S. market between 2008 and 2011 at the expense of U.S. producers by selling LPTs at prices that significantly undercut domestic market prices and in some instances the U.S. producers' cost of materials. As a result of this unfair competition, the domestic industry has suffered declines in production, sales and employment, has watched prices decline even in the face of increased costs, and has seen its profitability evaporate. Korean producers Hyundai Heavy Industries and Hyosung Corporation ("HICO") have massive capacity to produce LPTs, have been building market share at the expense of the domestic industry, and are likely to continue to do so with low prices to the detriment of competing U.S. producers if duties are not imposed to level the playing field.

"Korea has become the dominant import source of large power transformers in the U.S. market through very aggressive pricing practices aimed at capturing significant increased market share," commented Alan Luberda, the domestic industry's trade counsel. "The domestic industry has lost sales worth multiple millions of dollars to Korean producers, that have driven down prices, often to below domestic producers' production costs."

Antidumping duties are intended to offset the amount by which a product is sold at less than fair value (or "dumped") in the United States. The margin of dumping is calculated by the Commerce Department. Estimated duties in the amount of the dumping are collected from importers at the time of importation. The USITC, an independent agency, will determine whether such imports are a cause of or threaten material injury to the domestic industry.

As a result of the filing of the petition, the Commerce Department will determine whether to initiate the antidumping duty investigation within 20 days and the USITC will reach a preliminary determination of material injury or threat of material injury within 45 days. The entire investigative process will take approximately one year, with final determinations of dumping and injury likely occurring in mid-2012.

Liquid dielectric large power transformers with a top power rating of 60 MVA or more are components used extensively in high voltage electrical power systems to transfer power by electromagnetic induction between circuits at the same frequency, usually with changed values of voltage and current. They are used to increase, transfer, or decrease the output voltage levels being transmitted. The subject LPTs include step-up, step-down and transmission power transformers used to connect the generation source of the electricity to the high voltage transmission system and to connect the high voltage transmission system to the lower voltage distribution systems that bring the electricity to end-users. The case covers all such LPTs, regardless of name designation, including step-up transformers, step-down transformers, autotransformers, rectifier transformers, and power rectifier transformers, and also includes OEM parts and subassemblies for such transformers.

The petitioners are ABB Inc. of Cary, North Carolina, Delta Star Inc. of Lynchburg, Virginia, and Pennsylvania Transformer Technologies Inc. of Canonsburg, Pennsylvania. The petitioners are represented in these actions by R. Alan Luberda and Kathleen W. Cannon of the law firm Kelley Drye & Warren LLP.