Commerce Department’s ruling on rubber band complaint stretches from Hot Springs to China

A fast-growing Garland County company has received a favorable preliminary determination from the U.S. Commerce Department about a complaint that cheap rubber bands made in the Far East are eroding its market share.

On July 3, the U.S. Department of Commerce announced preliminary rulings concerning a countervailing duty (CVD) investigation of imports of rubber bands from China and Thailand following a petition by Hot Springs-based Alliance Rubber Company.

Under the initial CVD findings, the Commerce Department ruled affirmatively that Chinese rubber exporters received countervailable subsidies of 125.77% in shipping foreign bands into the U.S. On the other hand, trade officials ruled that imports of rubber bands from Thailand had received minimal subsidies of 0.23% and 0.37%. Countervailing duties serve as an import tax on certain goods coming into the U.S. to prevent dumping, or to counter subsidies from the exporting country.

Under the Trump administration’s stricter enforcement of U.S. trade laws, the Commerce Department will now instruct U.S. Customs and Border Protection officials to collect cash deposits from importers of rubber bands from China and Thailand based on these preliminary rates.

Jason Risner, Alliance’s director of business strategy, told Talk Business & Politics that the Hot Springs manufacturer filed the CVD complaint in January against rubber band companies in China and Thailand because the Arkansas manufacturer was rapidly losing business. Following that complaint, Alliance officials met a month later with the Commerce Department’s International Trade Commission (ITC), which investigates anti-dumping and CVD complaints against international companies that import product into the U.S.

“It has been apparent for years … that we were losing business from companies that were (buying) our private label (rubber) bands,” Risner said. “You slowly start to lose companies that were doing business with you because those bands are so much less expensive than the private label bands that we produce here domestically, and then you see those (products) start to eat away at your market share.”

According to Alliance’s original complaint, imports of rubber bands from China and Thailand were valued in 2017 at an estimated $4.9 million and $12.1 million, respectively. In its preliminary investigation, the Commerce Department assigned the preliminary subsidy rate of 125.77% to Graceful Import & Export Co., Ltd., Moyoung Trading Company, Ltd., and Ningbo Syloon Import & Export Co. All other Chinese rubber band producers must also pay the 125.77% subsidy to import rubber bands into the U.S.

In the Thailand investigation, the ITC assigned a preliminary subsidy rate of 0.23% to Liang Hah Heng International Rubber Company, Ltd., and a 0.37% subsidy rate to U Yong industry Company, Ltd.  Because the preliminary determination is negative, no rate has been applied to any Thailand rubber band export, ITC officials said.

Risner said Alliance has not yet seen a copy of the final ruling from the ITC on the Thailand complaint but will have a chance to file a rebuttal against the negative determination. Alliance also has a separate anti-dumping complaint against Thailand, he said, on which a ruling is expected later this summer.

“The fact that we didn’t win the countervailing duty (complaint) against Thailand will in no way will impact the ruling on anti-dumping,” said Risner.

Founded in Alliance, Ohio, in 1923, the Garland County rubber band manufacturer has had a presence in Hot Springs since 1944 after its founder, William Spencer, visited the city for its hot baths. In 1991, the company officially moved its headquarters to Hot Springs and consolidated all its operations there. The company has more than 170 employees and manufactures 2,200 products distributed in 55 countries, officials said.

Alliance, which expanded its Garland County factory in 2014 with a $600,000 investment, is also one several Arkansas manufacturers that have benefitted from Walmart’s reshoring initiative to get U.S.-made products on the shelves of its 1,800 stores across the country.

Risner said the dumping of cheap rubber bands from Thailand and Far East into the U.S. market led to the loss of Alliance’s largest private label customer in 2017 and a decline of $3 million in annual sales.

“This affects your overhead, your output and your economies of scale. You know, there is probably half of the U.S. rubber band market or slightly more that we don’t have because of these low-cost imports,” said the Alliance executive. “And it is not just that they are more competitive in their price, but to us it seems like predatory pricing because it is so low that it doesn’t make economic sense that they would be able to buy raw (rubber), then chemically alter and produce it and then be able to price it a cost to sell in the U.S. market.”

The products covered by the Commerce Department are bands made of vulcanized rubber with a flat length from a ½ inch to 10 inches, a width of at least 3/64 inch and no greater than 2 inches, and a wall thickness from 0.02 inch to 0.125 inch. Alliance manufacturers everything from standard rubber bands found in most homes to oversized bands used for bigger tasks.

ITC investigators are scheduled to issue its final CVD determinations on or about Nov. 13, 2018. If the Commerce Department makes affirmative final determinations, then the ITC will make its final injury determinations before the end of the year.