February 28, 2013

Real Estate Developers, Beware: The Windows Used In Your Projects Could Cost A Lot More Than You Budgeted!

By Douglas J. Heffner

If your development project includes windows, be alert because those curtain wall systems or window wall systems could be much more costly than you budgeted. The reason is that a nasty trade fight exists between the United States and China over imported aluminum extrusions. So what does this trade fight have to do with curtain wall systems and window wall systems? The answer is that if the systems contain aluminum extrusions – which most do – and those extrusions were produced in China, then the window systems could face an additional tariff (consisting of additional antidumping and countervailing duties) ranging from 170 percent to 407 percent (depending on the time period involved), thereby either dramatically increasing the cost of the window system or significantly constraining your ability to source the window systems from Chinese suppliers.

The issue was highlighted late last year when the U.S. agency that administers the U.S. antidumping and countervailing duty laws -- the Department of Commerce -- ruled that curtain wall systems are included within the scope of the antidumping duty and countervailing duty orders covering aluminum extrusions from China. The dispute arose because the Northern California Glass Management Association asked the Department of Commerce to affirmatively include curtain wall systems in the case, thereby subjecting the curtain wall systems to additional duties.

How does this ruling impact you as a developer? If you are not the importer of record of the curtain wall systems, you are not most likely legally liable for the additional duties. Nevertheless, this might not give you business certainty if in fact the importer of record, which could be either your Chinese supplier or the U.S. installer, backs out of the supply contract because it learns after the fact that it owes possibly up to 4 times the value of the windows as additional duties.

What can you do to eliminate or minimize the impact of the additional duties? First, you could simply not purchase the window systems from Chinese suppliers. However, if you are going to go down this route, you still need to verify that the supplier is not using Chinese extrusions in its systems. Second, if you decide that you still want to purchase window systems from Chinese suppliers, then procedures exist that can be put in place to minimize and/or eliminate the additional duties. Nevertheless, those procedures need to be in place before the windows are imported into the United States.

Finally, please beware that many Chinese companies – whether intentionally or not – may tell you that they are exempt from these additional duties. However, only one importer to date has obtained a ruling exempting its own window systems. In other words, this ruling is specific to the importer. Any other importer that would like to have its window systems exempted must apply for an exemption through a procedure called a scope ruling request, which is obtained from the Department of Commerce. Careful planning must go into this request in order to comply with the detailed exclusion criteria of the Department of Commerce.

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