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|Aluminum Extruders Council Demands an End to the Section 232 Tariffs on Imported Aluminum|
FOR IMMEDIATE RELEASE
Aluminum Extruders Council Demands an End to the Section 232 Tariffs on Imported Aluminum
June 9, 2020; Wauconda, Illinois – When the Trump Administration announced the 232 investigation into the national security implications of imported aluminum products three years ago, the domestic U.S. aluminum industry was encouraged. It was assumed that finally, action would be taken on the largest threat to the domestic aluminum industry: China. However, that is not what happened. On June 22, 2017, the Administration held a Public Hearing on Section 232 Investigation of Aluminum Imports on National Security. At that hearing, nearly 50 aluminum industry professionals described how the single biggest threat to our industry was the unfettered overproduction and excessive buildup in capacity of the Chinese aluminum industry. Nevertheless, the Administration decided that the real threat was not from China but from ... everyone. The industry was told that a global tariff would rebuild domestic production of primary aluminum, would address transshipment and circumvention issues, and would protect the downstream markets by expanding the 232 order to include all Harmonized Tariff Schedule (HTS) codes in Chapter 76, which includes extruded shapes. Sadly, none of those things happened.
With the closure of Alcoa's Intalco Works in Ferndale, Washington, U.S. extruders lost their only remaining primary billet supplier west of the Mississippi. Having no other option, those extruders have been forced to place orders for imported billet. How could another American smelter close while the 232 has been in place for nearly three years? If the 232 was to grow U.S. production of primary aluminum, where are the announcements of expansions and new operations? The truth is, no one is going to build primary aluminum production in the U.S. with or without the 232.
As long as China is allowed to build capacity and spew its metal to the world in the form of semi-fabricated and fabricated products, they will be the beneficiaries of a dynamic and growing aluminum industry – not U.S. producers as a whole. It's easier for China to do this because they have decided to subsidize downstream development of aluminum products with heavily subsidized Chinese ingot. China recognizes that employment, growth, and product development come in the downstream markets, not at the raw material level. Left unabated, the Chinese aluminum industry will ultimately enjoy the benefits of cornering the market and product development of tomorrow's better ideas, which will help them grow their manufacturing base in a variety of applications. You can kiss American innovation and "Made in the U.S.A." goodbye.
The Aluminum Extruders Council (AEC) applauds the work of the Aluminum Association in the Section 232 tariff exclusion process. Having allowed the 232 to injure our market, it only adds to the pain to see massive shipments of aluminum come across the border duty free.
However, for extruders the pain is not necessarily coming from the tariff exclusion process. Instead, exporters circumvent the orders by fabricating the extrusions and labelling them under an HTS code not covered by the 232. The net effect of this is that the U.S. extruder not only loses the extrusion volume, but also the additional revenue that comes from that fabrication work. That is why the U.S. industry created a very wide scope in its trade case against China that included fabricated extrusions. It worked because we addressed the threat to our market: China, and covered the range of services extruders routinely provide to their customers. The Section 232 tariff order does neither.
The truth is that extruders are seeing business go the other direction. Due to the 232 tariff on primary aluminum, U.S. extruders pay more for their aluminum than any country in the world. So, while China subsidizes aluminum prices to fabricators, our country is doing the exact opposite. The 232 tariff order has put a target on our backs. Furthermore, to avoid the 232 tariffs on extrusions, foreign extruders are simply adding value to the product and plundering our customers. Even worse, U.S. extruders trying to retain that business see a wider price gap versus low-cost countries when more value is added to the part. So, those low-cost countries have us right where they want us. There isn't a week that has gone by since the third quarter of 2019 that we haven't heard of an extruder losing business or price to a low-cost country, and that was before the coronavirus pandemic. Now that our nation, and the world, finds itself digging out of the economic tragedy from Covid-19, every order is precious. That next order may determine whether a facility has another round of layoffs.
U.S. extruders can compete with anyone in the world, as long as they have a level playing field. When the field was uneven we took action against China, and that has been working. U.S. extruders hoped when the 232 Investigation was announced that action would be taken to stand up against the Chinese aluminum industry. We hoped that measures would be taken so that there could be a robust U.S. aluminum primary industry from which we could buy our metal. Our hopes have been bitterly disappointed.
In a letter sent to U.S. Secretary of Commerce, Wilbur Ross, the AEC has made its position known. Our members will be reaching out to their lawmakers calling on them to support us in this fight for our very existence. The message is clear. The 232 aluminum tariff orders have been a failure. It is time for the Administration to re-examine its policy in this area. We applaud their goal. We really do. However, the path they have taken has been proven to be ineffective, and ultimately counterproductive.