China Faces Five-Year EU Tariffs on Automotive Yarn

The European Union imposed five-year tariffs on yarn from China used by the automotive industry, dismissing the risk of cost increases for companies such as Michelin & Cie. and Continental AG.

The duties as high as 9.8 percent punish Chinese exporters of high-tenacity, polyester yarn for selling it in the 27-nation EU below cost, a practice known as dumping. The material, made in Europe by companies including Belgium's Sioen Industries NV, is used for tire reinforcement and seatbelts as well as such items as conveyor belts and nets.

European producers suffered "material injury"as a result of dumped imports from China, the EU said in a decision today in Brussels that ended the threat of similar levies against South Korea and Taiwan. The levies, due to take effect by Dec. 3 against Chinese exporters including Wuxi Taiji Industry Co., follow provisional measures as high as 9.3 percent introduced in June.

Chinese exporters more than tripled their share of the EU market for the yarn to 23.6 percent in the 12 months through June 2009 compared with 2005, according to the bloc. European producers’ share of their home market fell to 39.2 percent from 51.1 percent in the period, the EU said.

Benefits

The benefits of the duties for EU manufacturers of the yarn outweigh the potential disadvantages for users of it, according to the EU. It listed Michelin, the world's second-largest tiremaker, Continental, a producer of tires as well as the biggest maker of car instruments and display systems, and Autoliv Romania, a unit of Autoliv Inc., the top manufacturer of automotive air bags and seatbelts, as among EU users.

High-tenacity, polyester yarn accounts for less than 1 percent on average of the cost of tire production, according to the EU. Only one tiremaker that cooperated in the EU inquiry into whether to impose duties imported the yarn from China and all those shipments were from a Chinese company that didn't dump, according to the bloc.

"It is therefore concluded that, on the basis of the data available, the tire sector will not be affected" by the five- year duties, said the EU.

It said European makers of seatbelts and air bags are "not likely to be seriously affected overall" because they would remain profitable and because China isn't the main source of supply, while the impact on the rope industry "should be limited."

Duty Breakdown

The five-year levies are 5.1 percent against Zhejiang Guxiandao Industrial Fiber Co., 5.3 percent against a group of six exporters including Wuxi and Sinopec Shanghai Petrochemical Co., 5.5 percent against Zhejiang Unifull Industrial Fiber Co. and 9.8 percent against all other Chinese exporters except Zhejiang Hailide New Material Co. and Hangzhou Huachun Chemical Fiber Co., which are exempted with a zero rate.

The rates below the maximum are lower than the provisional duties. In those cases, the EU will refund importers the difference with the lower five-year rates.

The trade protection is the outcome of a probe stemming from a July 2009 dumping complaint by the European Man-Made Fibres Association on behalf of producers that account for more than 60 percent of the EU's output of the yarn targeted by the levies.

As a result of the complaint, the European Commission began an inquiry last September that also covered Korea and Taiwan. Both countries were spared EU trade protection because their exporters are deemed not to have sold at dumped prices in Europe.