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On August 3, 2011, the United States Department of Commerce initiated an anti-dumping investigation of imports of liquid dielectric large power transformers ("LPTs") from Korea (SOURCE). On August 26, 2011, the U.S. International Trade Commission unanimously determined that there is "a reasonable indication" that imports of liquid dielectric LPTs from Korea are causing material injury to the domestic industry (SOURCE).
On July 14, 2011, ABB Inc., Delta Star Inc. and Pennsylvania Transformer Technology Inc., along with the U.S. Transformer Fair Trade Coalition, filed an anti-dumping petition with the United States Department of Commerce and the International Trade Commission (ICT) to investigate LPTs imported from South Korea (SOURCE). The complaint alleges that Korean LPTs with a top rating of 60 MVA or more cause material injury to the American domestic industry. The petition alleges dumping margins from 51.71 to 63.20 percent, with an average margin of 60.20 percent (SOURCE).
The volume of LPT imports from Korea has increased rapidly over the past three years, accounting for approximately 38 percent of all LPT imports into the U.S. in 2010 (SOURCE). From 2008 to 2010, imports of LPTs from Korea increased by 100 percent. In 2010, imports of LPTs from Korea were valued at an estimated USD 415 million (SOURCE). The petition alleges that Korean producers have aggressively expanded their market share in the U.S. at the expense of U.S. producers by selling LPTs at prices that undercut domestic market prices and undercut U.S. producers' cost of materials. (SOURCE). On July 28, 2011, the ICT distributed questionnaires to American producers to gauge the impact of imported LPTs from Korea (SOURCE).
United States Department of Commerce (DOC) and the International Trade Commission (ITC)
The DOC and ITC initiated the investigation after the three above listed U.S. producers, along with the U.S. Transformer Fair Trade Commission filed suit. The U.S. Trade Coalition, an ad hoc lobbying coalition supported by the domestic transformer industry, pressures the government into taking protectionist stances on international trade (SOURCE).
South Korean Ministry of Foreign Affairs and Trade (MOFAT)
The Ministry has yet to comment on the dispute, as duties have not been levied yet.
Large power transformers are components used in electric power high voltage electrical power transmission systems (SOURCE). They transfer power by electromagnetic induction between circuits at the same frequency with changed values of both voltage and current. Usually used for industrial purposes, LTPs operate at the line frequency (60 Hz in the U.S.), and may be single phase or three-phase, designed to handle high voltages and currents (SOURCE). Korean producers including Hyundai Heavy Industries and Hyosung Corporation ("HICO") have massive production capacity in the LPT field and are a key concern of U.S. producers (SOURCE).
This ITC investigation was conducted under the authority of title VII of the Tariff Act of 1930, which allows for protection from foreign imports that cause material injury to the domestic industry. On August 26, 2011, the ITC ruled unanimously in favor of domestic producers (SOURCE). The DOC preliminary determination is due on December 21, 2011. Final determinations from the ITC and the DOC are due out by April 19, 2012 (SOURCE). The two government departments will issue final orders on April 26, 2012 (SOURCE).
The entire investigative process will take more than one year, with final determinations of antidumping likely announced in mid-2012 (SOURCE). It is likely that anti-dumping tariffs will be levied on transformers imported from Korea.
U.S. domestic producers, too inefficient to compete on a level playing field, are seeking protection from the U.S. government. The petitioners statement that "Korean producers' inroads into the U.S. market were accomplished by selling LPTs at prices that significantly undercut domestic market prices and, in some instances, the U.S. producers' cost of materials" (SOURCE), is not supported by facts. Raw material costs are not cheaper in Korea they are in the U.S., nor is the Korean government subsidizing the industry. Furthermore, the ruling will not bode well for the pending U.S.-Korea Free Trade Agreement.
Will the Korean government retaliate through antidumping measures of their own? For over a decade, the U.S.'s implementation of antidumping and countervailing duties on Korean imports has been a sore spot of U.S.-Korea relations. In 1999, for example, 18 antidumping and five countervailing duties covering goods that accounted for USD 2.5 billion, or 7% of all Korean goods imported into the U.S. (SOURCE). Similar to other cases, no evidence has been presented to suggest dumping or unfair trade practices in the import of Korean LPTs. Will duties be implemented evenly, regardless of producer?
No safeguards have been put in place to ensure that implementation of the duties will be transparent and non-discriminatory. Korean producers and American consumers of LPTs will lose out on a high quality affordable product, while inefficient American producers will continue selling a product that the free market has clearly ruled they are not capable of producing efficiently.
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