PET Resin Consumers Say ITC Should Revoke AD/CVD Orders

The International Trade Commission should revoke the antidumping and countervailing duty orders on polyethylene terephthalate (PET) resin from Canada, China, India and Oman due to the U.S. industry already running at full capacity and undertaking market distorting practices, PET resin consumers will tell the ITC during a sunset review of the orders. The PET resin consumers, including members of the International Bottled Water Association (IBWA), note the inflationary effect the AD/CVD orders on PET resin have on their prices and mark the orders as one of the factors contributing to unsustainable price hikes amid shortages in one of bottled water's essential inputs.

PET resin is a food-grade resin and a byproduct of petroleum refining. The widely used input is found in a variety of different plastic products and is used, in particular, by over 70% of the bottled water industry. Production of PET resin in the U.S. is found primarily along the Gulf Coast due to the location of the U.S. petroleum refining industry. In the past year, this has led to multiple weather-based supply disruptions, including rare southern winter storms that knee-capped PET resin production in February. The storm led to a 30% to 50% rise in resin prices, SupplyChainDive reported.

Lingering delays from the storm were exacerbated by COVID-19-related factory delays and the ongoing supply chain crisis roiling the nation's ports. "We've got products sitting in ships outside ports because they can't get the labor to move it into the country," Joe Doss, president of the IBWA, told Trade Law Daily. Amid this flurry of PET resin supply difficulties and with the sunset review of the PET resin AD/CVD orders looming, the IBWA, along with a coalition of other hurting PET resin consumers, saw the review as a chance to knock down one of the barriers to more easily accessing PET resin.

"There's also on top of [supply issues] the issue of the price, and the price is being increased by these countervailing and antidumping duties that are being imposed by the ITC on PET resin from several countries," Doss said. "And certainly that is causing increased costs and of course unfortunately, and by necessity, those costs are being passed on to consumers. IBWA is part of a coalition that's seeking to have those, what could be referred to as import taxes, rescinded. We're urging ITC to have a full sunset review, which they are doing."

The U.S. PET resin industry has a different take on the supply chain issues for this key input. "Virtually every industry is having supply chain issues," said Paul Rosenthal, counsel for DAK Americas, a leading U.S. PET resin producer. "The supply chain issues in PET resin are temporary and should not be used as an excuse to undermine badly needed relief from pricing that has been shown to hurt companies and their workers."

Having kicked off the sunset review in April, the ITC now enters the heart of the investigation, as questionnaires were due from participants Nov. 29. Pre-hearing briefs are scheduled to find their way to the ITC in January, with the hearing coming at the end of that month. The hearing is scheduled to wrap up in early February with a final determination expected at the end of March.

The consumer coalition looking to revoke the orders argues that U.S. industry is not helped by these orders, since it is already running at full capacity, that greater access to PET resin is greatly needed and that the existing orders skew competition to favor a few international companies via Mexico, Thailand and Taiwan. For starters, the U.S. simply does not have the production capability to replace the current need for imports, with estimates showing that U.S. PET resin production capacity falls about 40% below demand, a lawyer close to the PET resin consumer coalition said. Plans for another PET resin facility were upended once the factory owners went bankrupt before construction was finished.

Further, the U.S. PET resin industry is engaging in import substitution due to these orders, bringing in foreign production from countries not subject to the orders. The four culprits of this are Alpek SAB de CV via DAK Americas, Inc., Indorama Ventures, Nan Ya Plastics Corp. and Far Eastern New Century. The four companies will take an order from one of the bottled water companies and fill that order with Mexican-made PET resin from their Mexican facility, thus bringing in imports that are not subject to antidumping or countervailing duties. The companies do this since they own that product and use it to fulfill U.S. orders and keep out the other countries that are subject to these orders, thereby distorting the market, the lawyer said.

U.S. producers say the orders are needed to ensure fair pricing. "The industry is not opposed to imports generally," Rosenthal said. "Currently, some are necessary to supply the needs of customers. The problem is unfairly priced imports, which is why the AD/CVD orders are so important to maintain. Without fair pricing in this capital-intensive industry, the companies can’t be profitable and stay in business. Revocation of the AD/CVD orders would devastate the industry."

The main pitch from the PET resin consumer coalition, though, is that U.S. production will not be injured, as this is the main basis for establishing the orders under the statute. Since U.S. factories are already running at 100% capacity, revoking the orders will not injure their product, the consumer coalition will argue. What will be harmed are their resin imports from Mexico, the consumer coalition lawyer said. If a PET resin consumer places an order with DAK, and instead of making the PET resin in the U.S., DAK fills the order from its Mexican plant, it benefits from that. If, however, a lot of Chinese capacity opens up because the AD/CVD orders were revoked, the PET resin buyer can then place that order with the Chinese producers, and DAK's parent company will be injured, but this doesn't harm any U.S. production. It injures Mexican production off DAK, the lawyer said.