The United States Department of Commerce (DOC) has made a preliminary determination that Chinese manufacturers have been illegally subsidizing certain amorphous silica fiber (ASF) used to insulate and resist extreme heat in industrial applications.

The subsidization of these imports allows Chinese producers to sell ASF at artificially low prices in the U.S. market, unfairly undercutting U.S.-made products. To combat this illegal subsidization, the DOC on June 28 imposed provisional duties ranging from 4.3 percent to 104.1 percent, depending on the exporter.

Kathie Leonard, president and CEO of Auburn Manufacturing, Inc. (AMI) a Maine-based developer and manufacturer of textile products for extreme temperature industrial applications, called the imposition of provisional duties an encouraging sign that the DOC and the International Trade Commission (ITC) will continue to pursue these illegal trade practices.

“This is just the beginning,” she said. “Although these initial countervailing duty margins show that Chinese exporters are receiving subsidies, we believe the final determination will yield even higher subsidy rates. China must be held accountable. It is using unfair trade practices to tilt the playing field against American workers and businesses.”

The imposition of provisional duties is the latest step in ongoing countervailing duty and anti-dumping investigations. These investigations were launched in response to a pair of petitions from AMI seeking to remedy the adverse effects of the Chinese government’s alleged subsidization of its ASF producers and antidumping duties to combat unfairly low pricing by Chinese exporters. In its January 2016 petition, AMI claimed that its profitability and growth potential has been negatively affected by Chinese trading practices that allow producers to sell ASF at artificially low prices.

As the largest American producer of industrial grade ASF, AMI is the principal supplier of the product to the U.S. Navy and to U.S. defense contractors that supply the Navy. In addition to subsidies and unfair pricing, AMI believes that certain U.S. distributors are selling Chinese-made ASF to U.S. defense contractors, which is then used in the construction, repair and maintenance of Navy ships. AMI believes that these U.S. distributors are selling ASF to U.S. defense contractors in violation of Buy American requirements.

Preliminary findings of the anti-dumping investigation have yet to be announced. “When the DOC announces its anti-dumping determination,” said Leonard, “we expect it will result in further significant duties on Chinese ASF.”

Leonard added that while product dumping is both unfair and illegal, it can also be dangerous. “Product dumping that leads to tragedy is not a new concept,” she said. “We’ve seen the consequences of Chinese tires, pet food, and toothpaste. At best, the quality of ASF from China is inconsistent and buying from a U.S. supplier does not ensure it’s a U.S. product.”

Final determinations of both investigations are scheduled for early November 2016. For both anti-dumping and countervailing duties to be imposed, the U.S. government must determine that dumping and/or subsidization is occurring and also that there is material injury or threat of material injury from the dumped and/or subsidized imports. That determination will be made in January 2017.