New antidumping and countervailing duty petition: Freight rail coupler systems and components from China – consequences for the industry and downstream transportation companies

On September 29, 2021, the Coalition of Freight Coupler Producers filed a petition with the US Department of Commerce (DOC) and the US International Trade Commission (ITC) alleging that freight rail coupler systems and components (FRC) from China are being sold in the US at less than fair value. The Coalition of Freight Coupler Producers is a US industry trade group comprised of Amsted Rail Company, Inc. and McConway & Torley LLC.

The petitioners additionally allege that the government of China is providing unfair subsidies to its producers and exporters of FRC to the US. The companies seek the imposition of antidumping (AD) and countervailing (CVD) duties on imports of FRC from China, alleging dumping margins ranging from 142.98 percent to 147.11 percent as well as an unspecified total level of subsidies of at least 1 percent.

Under US law, a domestic industry can petition the government to initiate an AD investigation to determine whether an imported product is sold in the US at less than fair value (ie, dumped). A domestic industry may also seek a CVD investigation into alleged subsidization of foreign producers or exporters by a foreign government. AD/CVD duties may be imposed if the DOC determines that imported goods are dumped and/or unfairly subsidized and if the ITC determines that the domestic industry is materially injured or threatened with such injury by reason of the subject imports.

Products covered by the petition

The scope of the investigation covers certain freight rail car coupler systems and components thereof. Subject freight rail car coupler systems are composed of knuckles, coupler bodies, coupler yokes, and follower blocks. Subject coupler systems and components are included within the scope whether finished or unfinished, whether assembled fully or partially or unassembled, whether mounted or unmounted, or if joined with non-subject merchandise, such as other non-subject system parts or a completed rail car. Only the subject coupler system and components are subject to duties if imported with or mounted with other non-subject merchandise. Subject freight rail coupler components imported individually independent from a coupler system are also included within the scope of the investigation.

A coupler system (also known as a “coupling”) is the mechanism used to connect freight rail cars together. The knuckles function as interlocking parts of the couplers that close automatically due to the force of the freight rail cars coming together. The coupler yoke functions as the pocket for the draft gear that connect couplers to the freight car. The follower block is a rectangularly shaped block of steel that is interposed between the back end of the coupler and the front working-end of the draft gear.

The products covered by the scope of this investigation, when imported into the United States, meet, intend to meet, or exceed the Association of American Railroads (AAR) specifications of M211, “Foundry and Product Approval Requirements for the Manufacture of Couplers, Coupler Yokes, Knuckles, Follower Blocks, and Coupler Parts” and/or AAR M215 “Coupling Systems,” or other equivalent domestic or international standards (including any revisions to the standard(s)). Subject merchandise includes: (1) E and E/F couplers; (2) F couplers; (3) E yokes; (4) F yokes; (5) E and F knuckles; and (6) and E and F type follower blocks. The inclusion, attachment, joining, or assembly of non-subject components with subject components or systems does not remove the subject components or systems from the scope.

The country of origin for subject coupler systems and components, whether fully assembled, unfinished, semi-finished, or finished, or attached to a rail car, is the country where the subject coupler components were cast and/or forged. Subject merchandise includes coupler components as defined above that have been further processed or further assembled, creating a more complex assembly in a third country, including those coupler components attached to a rail car in third countries. Only the value of the subject merchandise if entered attached to other non-subject products including the rail car will be subject to duties.

The products covered by the petition are currently classified under subheading 8607.30.1000 of the Harmonized Tariff Schedule of the US (HTSUS). Subject merchandise attached to finished rail cars may also enter under HTSUS heading 8606 or subheading 9803.00 if imported as an Instrument of International Traffic.

Foreign producers and US importers of FRC

The petition identifies eight exporters and 21 US importers of FRC from China. See the lists of exporters and importers from the petition.

Estimated schedule of investigations

AD and CVD proceedings are conducted pursuant to a strict statutory time schedule. Below is an estimated schedule for the AD and CVD investigations on FRC from China.

9/29/2021 – Petition filed

11/15/2021 – ITC preliminary injury determination

12/23/2021 – DOC preliminary CVD determinations, if not postponed

2/26/2022 – DOC preliminary CVD determinations, if fully postponed

3/8/2022 – DOC preliminary AD determinations, if not postponed

4/27/2022 – DOC preliminary AD determinations, if fully postponed

9/16/2022 – DOC final AD and CVD determinations, if both preliminary and final determinations are fully postponed

10/31/2022 – ITC final injury determination, if DOC determinations are fully postponed and DOC final determinations are aligned

11/7/2022 – AD and CVD orders published

Consequences for exporters and US companies

US AD and CVD investigations can result in the imposition of substantial duties in addition to already-applicable duties and tariffs. If the ITC and DOC make affirmative preliminary determinations, US importers will be required to post cash deposits corresponding to the ad valorem AD and/or CVD duty rates determined for the subject merchandise on or after the date on which the DOC’s preliminary determination is published in the Federal Register. In certain circumstances, such duty deposit requirements may retroactively go into effect 90 days prior to the date of publication. The AD and CVD duties will remain in effect if the DOC and ITC make affirmative final determinations.

The DOC calculates specific AD and CVD margins for certain individual foreign producers and exporters selected for examination. Such rates are often much lower than those alleged in the petition. However, foreign producers and exporters that do not participate in the investigations may be subject to substantially higher rates. Duties imposed at these higher rates may force exporters to stop shipping to the US and importers to cease importation of subject merchandise. Thus, interested parties – including US and foreign producers, exporters, importers, and downstream US purchasers of the subject merchandise – should have a strategy for addressing AD and CVD investigations, including possible participation.

Under the statutory time schedule for AD and CVD investigations, the first decision (the preliminary ITC determination of whether there is a reasonable indication that the US industry is materially injured, or threatened with material injury, by reason of the subject imports) must be made within 45 days after the filing of the petition – in this case, by November 15, 2021. An ITC hearing (ie, a public conference) is held around 21 to 23 days after the filing date. As a result, agency staff work, including the issuance of questionnaires to interested parties, begins almost immediately. Thus, quick action is encouraged to understand the specific implications of these developments as well as to prepare and implement a pertinent strategy.

To learn more, please contact any of the authors.