Commerce Department will examine whether foreign aluminum production subsidies have made U.S. more vulnerable
Aluminum is a key component in the production of U.S. warplanes, naval vessels and military vehicles, and the substantial increase in imports of this metal and dwindling American production in recent years have compelled the Trump administration to launch an investigation into the effects of this rapidly changing industry on U.S. national security.
“The artificially low prices caused by excess capacity and unfairly traded imports suppress profits in the American aluminum industry, which discourages long-term investment in the industry and hinders efforts by American aluminum producers to research and develop new and better grades of aluminum,” the Whited House said in announcing the investigation April 27.
The so-called Section 232 investigation, which is part of the 1962 Trade Expansion Act, will be carried out by the Commerce Department. It will consider overcapacity, dumping, illegal subsidies, and other factors to determine whether aluminum imports threaten American economic security and military preparedness.
If threats to national security are found during the investigation, Section 232 gives the president broad powers to adjust aluminum imports, including through the use of tariffs.
The Aluminum Association praised the Trump administration for launching the investigation.
“This action recognizes the value of the U.S. aluminum industry, its full growth potential and its ability to compete successfully in the global marketplace,” said Heidi Brock, president and chief executive officer of the Washington-based group, in a statement.
Commerce Secretary Wilbur Ross called the investigation “an historic step in our efforts to restore America’s depleted manufacturing and defense industrial base.”
He said the Commerce Department investigation will “determine whether aluminum imports make us less safe in a world that is increasingly fraught with geopolitical tensions.
“The volume of aluminum imports and decrease in U.S. aluminum capacity make it clear that global aluminum overcapacity has an impact on our economy, but for the first time we will examine its impact on our national security,” he added.
Eight U.S.-based smelters have either closed or curbed production since 2015, according to the Commerce Department. There are only two U.S. smelters that remain fully operational, and only one North American smelter capable of producing high purity aluminum needed for numerous national security applications. Products that require high purity aluminum include U.S. military planes, such as the F-35, F-18, and C-17, and a number of next-generation military vehicles.
The volume of aluminum imports and decrease in U.S. aluminum capacity make it clear that global aluminum overcapacity has an impact on our economy, but for the first time we will examine its impact on our national security.
“We will conduct this investigation thoroughly and expeditiously so that we can fully enforce our trade laws and defend this country against those who would do us harm,” Ross said.
The problems with the flood of aluminum, particularly from China, entering the United States has been a concern to both the U.S. government and domestic producers.
The outgoing Obama administration in early January filed a trade enforcement complaint in the World Trade Organization concerning China’s continued subsidization of its aluminum producers.
The Office of the U.S. Trade Representative at the time said in the face of falling aluminum prices that China has continued to expand or build new aluminum production facilities. Between 2007 and 2015, Chinese primary aluminum production increased by 154 percent and capacity rose 243 percent, while global prices for the metal dropped 46 percent. Also during this period, the USTR said U.S. primary aluminum production decreased 37 percent and capacity decreased 46 percent.
In late March, the Commerce Department initiated antidumping and countervailing duty investigations into aluminum foil imports from China.
Dumping occurs when a foreign company sells a product in the United States at less than its fair value, while countervailing subsidies are given to foreign companies by their respective governments based on their export performance and use of domestic goods over imported goods.
The Aluminum Association Trade Enforcement Working Group, a coalition of U.S. aluminum foil producers, filed the petition March 9 to seek relief from the effects of dumped and subsidized aluminum foil on the U.S. industry.
According to the Commerce Department, more than 230 Chinese companies are identified in the petition. The estimated dumping margins range from 38.4 percent to 140.2 percent. Commerce also initiated an investigation into 26 separately alleged subsidy programs.
In 2016, imports of aluminum foil from China were valued at $389 million.
The U.S. International Trade Commission (ITC) made its preliminary injury determinations into Chinese aluminum foil imports April 24, stating that there is a “reasonable indication” U.S. aluminum foil producers are harmed by dumped and subsidized Chinese aluminum foil.
As a result of the commission’s affirmative determinations, Commerce will continue to conduct its antidumping and countervailing duty investigations on these imports from China, with its preliminary countervailing duty determination due June 2, and its preliminary antidumping duty determination due Aug. 16.