June 04, 2014

Potential New Risk of High Duties on Chemicals and Gases Imported in High-Pressure Steel Cylinders Manufactured in China

By Douglas J. Heffner, Kathleen M. Murphy and Richard P. Ferrin

If your company imports chemicals or gases in high-pressure steel cylinders that are fabricated in China, please take note—you may be liable for antidumping (AD) and countervailing (CVD) duties imposed on the value of the cylinder.

While importers in the chemical and gas industries may be familiar with the U.S. AD/VD laws as applied to imports of specific chemicals or gases, the chemical/gas importing community may not be aware that there also are AD/CVD orders in effect (since 2012) on high-pressure steel cylinders manufactured in China. (See detailed scope language below.)

Many companies that import chemicals or gases from China use high-pressure steel cylinders as containers for the imports of their chemical/gas contents. Up until now, many importers simply assumed that they did not need to declare the cylinder containers separately at the time of entry as potentially subject to AD/CVD liability, unless the cylinders were entered empty, because the importer was importing the chemical or gas in question, and the cylinder was only used as a container for the imported chemical or gas.

However, the U.S. Department of Commerce (DOC) recently issued a notice that calls that assumption into question. An importer that imported pressurized gases from China using high-pressure steel cylinders, which also happen to be manufactured in China, requested confirmation from the DOC that its filled steel cylinders were outside the scope of the AD/CVD orders. In response, on May 20, 2014, the DOC issued an unpublished notice stating that it could not determine whether filled steel cylinders are within the scope of the orders, based on a review of the order itself, the original AD/CVD petitions, and the original investigations by the DOC and the U.S. International Trade Commission (ITC). As a result, the DOC stated that it has initiated a formal “scope inquiry” regarding this matter.

The DOC’s apparent willingness to seriously entertain applying AD/CVD duties to imports of chemicals or gases that are transported in these containers could have a significant impact on the importing community given the widespread use of these cylinders as a means of overseas transportation and importation of a wide variety of chemicals and gases. If the DOC ultimately decides that imports of filled cylinders are subject to the AD/CVD orders, such imports could be subject to cash deposits in the amount of 15.81 percent ad valorem as surety against potential CVD duties, plus an additional 6.62 percent to 31.21 percent as surety against potential AD duties.

Under the DOC’s scope inquiry procedures, because the DOC concluded that it cannot determine whether the product in question is within the scope based on the scope language itself, the original petition, and the original investigations by the DOC and the ITC, the DOC has invited comments by all interested parties. Based on the current schedule, comments are due by June 17, and rebuttal comments are due by June 27.

The DOC’s ruling could have a significant impact on any importation of chemicals or gases into the United States that require high-pressure steel cylinders as a means of transportation into U.S. customs territory. As a result, importers of chemicals and gases may want to join a coalition of importers of chemicals and gases that use these types containers in order to urge the DOC to determine that filled containers are outside the scope of the AD/CVD orders, and let the DOC know that an adverse ruling would have a significant disruptive effect on a broad range of commerce that could never have been intended.

Scope of Orders

The merchandise covered by the order is seamless steel cylinders designed for storage or transport of compressed or liquefied gas (high pressure steel cylinders). High pressure steel cylinders are fabricated of chrome alloy steel including, but no limited to, chromium-molybdenum steel or chromium magnesium steel, and have permanently impressed into the steel, either before or after importation, the symbol of a U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration (DOT) approved high pressure steel cylinder manufacturer, as well as an approved DOT type marking of DOT 3A, 3AX, 3AA, 3AAX, 3B, 3E, 3HT, 3T, or DOT–E (followed by a specific exemption number) in accordance with the requirements of sections 178.36 through 178.68 of Title 49 of the Code of Federal Regulations, or any subsequent amendments thereof. High pressure steel cylinders covered by the investigation have a water capacity up to 450 liters, and a gas capacity ranging from 8 to 702 cubic feet, regardless of corresponding service pressure levels and regardless of physical dimensions, finish or coatings.

Excluding from the scope of the order are high pressure steel cylinders manufactured to UN–ISO–9809–1 and 2 specifications and permanently impressed with ISO or UN symbols. Also excluded from the investigation are acetylene cylinders, with or without internal porous mass, and permanently impressed with 8A or 8AL in accordance with DOT regulations.

Merchandise covered by the order is classified in the Harmonized Tariff Schedule of the United States (HTSUS) under subheading 7311.00.00.30. Subject merchandise may also enter under HTSUS subheadings 7311.00.00.60 or 7311.00.00.90. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise under the investigation is dispositive.

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