New AD/ CVD Petition –Pentafluoroethane (“R-125”) from China

Antidumping and countervailing duties international trade lawyers

On January 12, 2021, Honeywell International Inc. filed antidumping (AD) and countervailing duty (CVD) petitions against U.S. imports of pentafluoroethane (“R-125”) from China. This is just the latest in a long series of AD/CVD cases that have targeted various hydrofluorcarbon (HFC) gases that are largely used as refrigerants in refrigerators and air conditioners.  This case is an example of how one AD/CVD case can quickly spawn sequel cases that spread to similar or related products or to different countries. Anyone in the HVAC industry who replaces refrigerants has seen how prices for HFC refrigerants have increased dramatically over the past few years thanks to all these trade cases.

Under U.S. trade laws, a domestic industry can petition the U.S. Department of Commerce (“DOC”) and U.S. International Trade Commission (“ITC”) to investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”). For AD duties to be imposed, the U.S. government must determine not only that dumping, but also that the subject imports are causing “material injury” or “threat of material injury” to the domestic industry.

This case can be linked to the AD order imposed in August 2016 on HFC blends from China. That AD order on HFC blends covered 404A, 407C, 407A, 410A and R-507A, but specifically excluded individual components such as R-125, R-32 and R-143A.  Instead of shipping HFC blends to the United States (because they were now subject to high AD duties), the Chinese started shipping the input components (which at that point were not subject to any AD duties) to companies who produced HFC blends in the United States. In other words, instead of shipping the finished HFC blends, the Chinese import competition moved upstream to the input component level.

In 2019, U.S. producers decided the protection from the AD order on HFC blends was not enough to protect its U.S. operations. One U.S. producer, Arkema filed an antidumping petition against difluromethante (R-32) while others in the U.S. industry requested that the government investigate whether the AD order on HFC blends was being circumvented by imports of HFC components R-125, R-32 and R-143A.

in August 2020, preliminary AD duties of close to 200% were imposed against imports of R-32.  Now another U.S. producer, Honeywell, wants to try to get similar AD/CVD protection against imports of another HFC component, R-125.  If the track record of the prior HFC cases are any indication, it seems like there is a very good chance that this new case on R-125 will lead to even further price increases for HFC refrigerants.

Sure hope my air conditioner doesn’t break down anytime soon.

Below is  a summary of the R-125 AD/CVD petitions

 

Scope

The petition proposes the scope of the merchandise to be covered by this AD investigation as pentafluoroethane (“R-125”), or its chemical equivalent, regardless of form, type or purity level.  See the proposed scope definition for a complete description of the physical characteristics of the covered merchandise, and the HTS numbers that may be used to import the subject merchandise.

 

Alleged AD/CVD Margins.

Petitioner calculated estimated dumping margins of up to 155.78 – 230.52%.

Although Petitioner alleged numerous government subsidy programs that benefitted the Chinese R-125 industry, Petitioner did not allege a specific subsidy rates.

 

Named Exporters/ Producers

Petitioner included a list of companies it believes are producers and exporters of pentafluoroethane from China here.

 

Named U.S. Importers

Petitioner included a list of companies it believes are U.S. importers of pentafluoroethane from China here.

 

Estimated Schedule of Investigations

January 12, 2021 – Petitions filed

February 1, 2021 – DOC initiates investigation

February 2, 2021 – ITC Staff Conference

February 26, 2021 – ITC preliminary determination

June 11, 2021 – DOC CVD preliminary determination (assuming extended deadline) (4/7/21 – unextended)

August 10, 2021 – DOC AD preliminary determination (assuming extended deadline) (6/21/21 – unextended)

December 23, 2021 – DOC final determination (extended)

February 6, 2022 – ITC final determination (extended)

February 13, 2022 – DOC AD orders issued (extended)

 

The Future of International Trade — FREE Webinar on February 3 

The U.S. government under President Trump has been tough on international trade, and the number of anti-dumping and countervailing duty cases it has brought in the last four years — and especially in the last two years — is further proof of this. We expect President-Elect Biden’s administration to treat trade very differently from President Trump did, but not necessarily in how he treats China. To find out more on what our international trade lawyers think you should expect from the Biden administration on international trade, and what your business can be doing to prepare for that, sign up for our upcoming free webinar: Biden Administration Transitions – International Trade.

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