The Risks of a Proposed Expansion of ADD & CVD Orders to Pipe Rack Modules

The Risks of a Proposed Expansion of ADD & CVD Orders to Pipe Rack Modules

Importers of pipe rack modules from China may soon have to pay ADDs & CVDs applicable to Chinese origin pipe.  On April 6, 2017, the International Trade Association (ITA) posted on its web site a scope ruling request filed by United Steel, Paper and Forestry, Rubber, Manufacturing Energy, Allied Industrial and Service Workers International Union (“USW”) attempting to extend the existing ADD & CVD cases (A-570-956 and C-570-957) against seamless pipe from China to include pipe rack modules.  This new scope ruling relies heavily on an August 2016 scope ruling issued to Westlake Vinyls (“Westlake”) holding that pipe spools fabricated in China using Chinese origin components remain subject to the same ADD & CVD cases as the pipes they are made from.  Specifically, the Westlake decision applied directly to 4 ADD cases and 3 CVD cases covering various types of pipe and pipe fittings.  Worryingly for importers, it is not clear how far the ITA could take the logic espoused in Westlake.

What are pipe spools and pipe rack modules?

A “pipe spool” is a loose commercial term referring to custom pipe segments designed to fit into a specific location in an existing or proposed industrial facility (e.g. chemical plant, refinery, power generation facility, etc.).   Pipe spools often include multiple sections of pipes and pipe fittings joined together and shaped.  They may also include insulation, painting, or other forms of finishing.

A “pipe rack module” is also a loose commercial term referring to pipe segments or pipe spools that have been combined with supporting structural elements.  Again, these modules are custom products designed to fit into a specific spot in an industrial facility.

What is the risk to importers and foreign producers?

The ITA has over time displayed a tendency to expand the interpretation of ADD & CVD cases to cover a greater variety of products – especially when they only hear one side of an issue.  The USW’s ruling request proposes just such an expansion.  If their position remains unchallenged then these orders will likely expand both broadly and ambiguously.  As pipe rack modules are often integrated with larger structures, it is difficult to say exactly how complex of a structure a scope ruling might extend to.  Perhaps even worse, is the possibility of a poorly worded ruling that is unclear exactly how the order should be applied.  (e.g. Do ADDs & CVDs apply to just the pipe or the entire structure?  What are the limits to a rack module?  If multiple types of pipe are in a rack, which order applies?)

Finally, while the current scope ruling request only applies to pipe rack modules incorporating seamless pipe from China, it is far from clear that it would not ultimately be applied to other types of pipe and modules produced in other countries.

What is the opportunity for importers and foreign producers?

Interested parties, which include both U.S. importers and foreign producers of pipe rack modules, can currently participate in the action and make their concerns and objections known to the ITA when making its decision.  Once a decision is reached, the ability to challenge it goes down, and the cost of doing so goes up.  A challenge now could significantly affect the impact to these importers and producers.

Givens & Johnston is currently pursuing multiple scope rulings clarifying Westlake pipe spool rulings and can provide immediate consultations about how importers and producers might respond.

Please call James Hurst or Scott Johnston at 713 932 1540 if you have any questions or would like more information.

2017-04-24T14:57:34+00:00 April 24th, 2017|News & Events, Spotlight|
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