The outcomes of trade investigations could impact users of aluminum foil-based packaging.
The U.S. Department of Commerce (DOC), which along with the U.S. International Trade Commission (USITC) had been petitioned by the Aluminum Association Trade Enforcement Working Group for an antidumping and countervailing duty (CVD) investigation of Chinese importers, has preliminarily found that certain Chinese exporters of aluminum foil have received countervailing subsidies. The DOC will now instruct U.S. Customs and Border Protection to collect cash deposits from these importers. The decision is preliminary, and the DOC will announce its final determination in November. Should that decision be affirmative, the USITC will have 45 days to make its own determination as to injury of domestic manufacturers. Should that decision be affirmation, DOC will order CVDs.
A preliminary determination of the dumping investigation had been scheduled for August 15 but has now been postponed to October 4. The Aluminum Association Trade Enforcement Working Group had requested a postponement.
Also underway is a separate Section 232 investigation under the Trade Expansion Act of 1962 that seeks to determine whether aluminum imports impact national security and the economy. The investigation was announced on May 9, and in June, the DOC held a public hearing and solicited written comments. The Secretary of Commerce is now preparing a report for President Donald Trump on the department’s findings, and recommendations are due within 270 days of initiating the investigation. The President would then have 90 days after receiving the report to take action, which could include imposing tariffs and quotas.
Matt Meenan, Senior Director of Public Affairs for the Aluminum Association, tells PMP News that “our industry recognized that action was needed to restore a level playing field for U.S. producers in the foil market and the facts on the ground supported a case. Aluminum foil production in the United States supports more than 20,000 jobs and $6.8 billion in economic activity. But U.S. companies have been forced to cut back production and close factories in recent years as a result of unfairly low-priced aluminum foil from China flooding the market. Imports of Chinese foil increased by nearly 40 percent between 2014 and 2016 – that does not just happen due to market forces; it happens because of market intervention by China.”
Meenan says that the DOC is now investigating 26 different subsidy programs maintained by the Chinese government to support aluminum foil producers in China, and announced preliminary subsidy margins ranging from 16.5 to 81 percent on August 8. A preliminary announcement by the Commerce Department in the antidumping investigation is expected on October 5. We greatly appreciate the administration’s leadership in vigorously enforcing U.S. trade laws to combat unfair practices.”
The impact of these investigations on flexible packaging manufacturers, however, could be significant. “The unintended consequences of potential remedies under the Section 232 investigation, combined with any imposed actions through the ITC probe on the ability for flexible packaging manufacturers to acquire the aluminum foil necessary to create innovative and functional packaging for food, beverages, candy, and pharmaceuticals, would be a major loss of flexible packaging jobs in the U.S.,” claims the Flexible Packaging Association in a news release posted here.
And in a June 2017 letter to the DOC, FPA President and CEO Alison Keane, Esq, pointed out that “flexible packaging represents over $30 billion in annual sales in the U.S., and is the second largest and fastest growing segment of the packaging industry. The industry employs over 80,000 workers in the United States
If duties and tariffs were to be added to the costs of imported foil, the prices of flexible packaging materials could ultimately increase. And if U.S. foil manufacturers show Chinese imports were sold at less than prevailing values—i.e., dumping—and that activity has been unusually high in the last 90 days, duties could be made retroactive, explains Dhuanne Dodrill, president of Rollprint Packaging Products Inc.
PMP News spoke with Dodrill, who testified at the ITC’s preliminary hearing and plans to testify at the final hearing. “We all want U.S. manufacturing and certainly want a secure nation, but I’m not sure this is the way to go about it,” she says. “We want to protect jobs and security without creating additional risks for packaging, such as those for critical devices and pharmaceutical packaging.”
Switching from imported foil to U.S.-supplied foil may be challenging. The FPA states that the “U.S. supply of foil is not available in the quantities and quality necessary for the U.S. flexible packaging industry because of strategic decisions U.S. aluminum foil producers made decades ago. Over the last several years, domestic producers of aluminum foil have retreated from the production of thin gauge foil, and some have exited the market altogether.”
Meenan tells PMP News that “We are aware of the Flexible Packaging Association’s assertions and we do not agree with them. Domestic producers do, in fact, manufacture substantial volumes of high-quality aluminum foil that are used in flexible packaging applications. We look forward to addressing the Flexible Packaging Association’s assertions during the final phase of the International Trade Commission’s investigation.”
Dodrill tells PMP News that “there is no domestic manufacturer of ultrathin foil.” The ITC seems to acknowledge this, stating at its preliminary hearing on March 30, 2017 that the “interchangeability of aluminum foil with a thickness of 0.0003 inches or less and thicker aluminum foil may be limited or nonexistent.” However, while the ITC reports that a number of respondents have argued that such ultrathin aluminum foil should be treated as a separate domestic like product from other aluminum foil, the commission stated that “we decline to treat ultra‐thin aluminum foil as a separate domestic like product.”
Dodrill adds that “there is one manufacturer of converter-grade aluminum foil less than 1 mil thick, but the material is not available in wide widths. And there are two suppliers of converter-grade foil above 1 mil.”
FPA also describes “a lack of investment by U.S. aluminum foil producers to keep up with technological advances, and not upgrading facilities so that they could produce a product of sufficient quantity and quality to meet the needs of U.S. customers.”
Such “chronic underinvestment, especially in machinery – with many U.S. mills tracing their last significant equipment purchase to the 1970s – has forced the domestic packaging industry to rely on imports to fill their needs,” FPA notes.
Conversely, “Chinese manufacturers have invested in state-of-the-art equipment and provide phenomenal quality,” explains Dodrill. “We’ve got domestic sources qualified, but we use the China sources because of their quality.”
Changing suppliers presents some risk, particularly for medical devices and pharmaceuticals. “Federal and global regulatory agencies require that changes in material be evaluated rigorously. We cannot move to other sources quickly,” she says.
FPA states that “the Administration needs to slow down and fairly and accurately investigate whether or not imports of aluminum have any effect on national security. If not, the unintended consequences of any presidential action will most likely be U.S. job loss and higher costs to consumers for everyday goods.”
“There is simply no scenario where U.S. aluminum foil manufacturers benefit, and in most cases, U.S. flexible packaging jobs will be lost,” it states.
Dodrill adds that “it is hard to plan your business when you don’t know the outcome. Prices could go up; lead times could go out. And there could be supply disruptions.”
Dodrill encourages medical device and pharmaceutical manufacturers “to reach out to their senators and representatives so they understand the ramifications for the medical and pharmaceutical industries,” she says. The Sterilization Packaging Manufacturers Council (SPMC) has prepared a form letter available upon request for these manufacturers to use. For more details pertaining to medical device manufacturers visit SPMC Foil Investigation Advisory to Medical Device Manufacturers.