U.S. Commerce Department opens Chinese steel tariff-dodging probe

WASHINGTON (Reuters) - The U.S. Commerce Department on Monday formally opened an investigation into allegations that Chinese steel producers are diverting shipments through Vietnam to avoid American import tariffs, according to a legal filing.

The probe will determine whether imports of hot-rolled and cold-rolled steel made in China that is further processed in Vietnam are circumventing previous anti-dumping and anti-subsidy duties on Chinese steel, the Commerce Department said in a filing with the International Trade Commission.

The move adds a new twist to heightened trade tensions between the United States and China over steel and aluminum imports from China, which U.S. producers say is flooding world markets with excess production as demand wanes at home.

The Commerce Department has levied anti-dumping and anti-subsidy duties on a range of steel products from China, in some cases imposing tariffs of more than 200 percent.

A petition filed in September by ArcelorMittal USA, Nucor Corp, AK Steel Holdings Corp and United States Steel Corp alleges that Chinese producers diverted their steel shipments to Vietnam “immediately” after the duties were imposed.

According to the petition, Chinese steelmakers sent their shipments to Vietnam, where they were modified to make them corrosion-resistant, and then sent them to the United States by paying Vietnam’s U.S. tariff rate, which is lower than for China.

The U.S. producers requested that Commerce investigate the issue and suspend imports of corrosion-resistant steel and cold-rolled steel imported from Vietnam.

In launching the probe, Commerce said the U.S. producers’ submission sufficiently indicates that the level of investment in reprocessing the Chinese-made steel in Vietnam was minimal compared to basic steelmaking facilities in China, with little or no research and development work taking place in Vietnam.

The Vietnamese corrosion resistance processing was “simple” and added only a small amount of value to the finished product imported into the United States, with up to 90 percent of the value produced in China, Commerce said.

Reporting by David Lawder; Editing by Tom Brown