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AHRI Urges 'Less Disruptive' Anti-Dumping Measures

Dec. 15, 2023
Industry advocacy group releases comments submitted last month to Commerce Dept. to help guide investigation.

The Honorable Gina M. Raimondo
U.S. Secretary of Commerce
International Trade Administration

Noember 20, 2024

Dear Secretary Raimondo: 

The Air-Conditioning, Heating, and Refrigeration Institute (AHRI)1 appreciates the opportunity to provide comments to the U.S. Department of Commerce (Commerce) regarding the initiation of countervailing duty investigations of aluminum extrusions from the People's Republic of China, Indonesia, Mexico, and the Republic of Turkey and antidumping duty investigations of aluminum extrusions from the People's Republic of China, Colombia, the Dominican Republic, Ecuador, India, Indonesia, Italy, the Republic of Korea, Malaysia, Mexico, Taiwan, Thailand, the Republic of Turkey, the United Arab Emirates, and the Socialist Republic of Vietnam.

AHRI’s members, who sell in or have supply chain relationships with more than 100 countries, have a direct interest in trade issues.

Further, AHRI member company manufacturing facilities in the United States require access to a range of raw materials, components, and subcomponents to stay competitive in the global marketplace, including the U.S. market. These materials must remain accessibly priced for AHRI members’ U.S. factories to remain in business, employing U.S. workers, and producing U.S.-made products for U.S. consumers. In addition to products made in the U.S., other equipment and components are imported for installation and servicing.

AHRI urges Commerce, and the International Trade Commission (ITC), to approach these cases with caution and to understand the entire market dynamics of how aluminum extrusions, both produced in the U.S. and produced abroad and then imported, contribute to a healthy U.S. manufacturing sector. Please find below AHRI’s comments about “subassemblies” and some additional general comments.

AHRI Comments About Subassemblies

AHRI would like to voice its concerns about the administrability of the scope of the investigation concerning subassemblies and complex parts, and these concerns relate to Commerce’s own significant concerns as stated in its initiation notice.2 Commerce should neither include subassemblies containing extrusions, nor complex downstream parts produced from aluminum extrusions, in the scope of its investigations. 

In these cases, aluminum extrusions likely make up a small portion of the overall value of the equipment or major component of the equipment. As an example, an imported air-cooled chiller, which is sold for hundreds of thousands or even millions of dollars, could be considered part of a system, as it is attached to other components when installed, and thus covered under the scope language. This seems counterintuitive since aluminum extrusions likely make up a small portion of the overall value of the air-cooled chiller.

Moreover, because the scope would make the subassembly, here the imported chiller, itself subject to the Orders, despite providing for duties to only be paid on the relative value of the aluminum extrusions contained therein, AHRI believes that the petitioners have included goods in the scope that go far beyond aluminum extrusions. 

Moreover, the scope includes products – complex parts – such as parts computer numerical control (CNC) machined or hydroformed from aluminum extrusions that would be covered by the scope whether imported alone or as part of a subassembly. For example, a bushing could be CNC machined from extruded aluminum round bar as a feedstock. According to the scope, these types of parts – even though they do not even resemble the feedstock from which they were produced –would be covered by the scope.

According to the scope, the country of origin for the AD/CV duties case is the country in which the aluminum was extruded. Due to U.S. Customs and Border Protection (CBP) requirements, companies are required to report to CBP the country of origin of the assembly. However, they are not set up to track the country in which a part of a subassembly (or part of a part) is extruded. Take the above imported air-cooled chiller as an example. The air-cooled chiller could contain several subassemblies like heat exchangers and structural channels and parts, like bushings.

First, it would be an enormous task for a manufacturer to be able to even identify which subassemblies contain extrusions. It would entail going through every bill of materials for every import. Over the thousands of imported stock keeping units (SKUs), this is an entirely impractical burden to place on importers. For some products, it is virtually impossible to identify parts – such as bushings – that were produced from aluminum extrusions. Manufacturers simply do not have information on how all its parts were produced, let alone the country of extrusion of the part/product.

Moreover, for a product such as an imported air-cooled chiller, some of the more mundane parts, such as structural channels, could be purchased from distributors. Therefore, to properly report the country of extrusions, an importer would have to require its distributor to track the country of extrusion for the channels. Multiplying this by the thousands of parts in the thousands and thousands of SKUs, what the petitioners have specified in the scope is not administrable. 

In addition, even if an importer were able to identify the country of extrusion for all its parts, the extruded parts that are used to produce the air-cooled chiller in for instance, Mexico, could come from several countries. Channels could come from several countries themselves, the heat 
exchanger from another country, etc., thereby compounding the complexity of the reporting burden. 

Finally, although the scope says that AD/CV duties are due only on the aluminum extrusions, reporting the value of the extrusions, especially from tier 2 and tier 3 suppliers, would be almost impossible. Manufacturers would have to have their suppliers break out the value of the extrusions on all their invoices. Even then, CBP almost always requires the importer to pay the AD/CV duties on the entire value of the merchandise. Later, it is up to the importer to prove the value of the extrusions to the satisfaction of CBP to get a refund. Thus, the ability of importers to report the value of the extrusions themselves is not administrable.

Given the administrability issues discussed above, Commerce should not include in the scope of the investigations such subassemblies containing aluminum extrusions or complex parts that are produced from aluminum extrusions.

AHRI General Comments

U.S. consumers require access to affordable equipment to provide comfort cooling/heating and hot water for health and safety at home and at work. Additionally, AHRI member companies’ products perform essential functions across critical infrastructure sectors including healthcare, education, energy, electric grid, foodservice and hospitality, information technology, and cold chain transportation of food and pharmaceuticals/vaccines.

In this context, AHRI has great concerns about the aluminum extrusion AD/CV duty petition filed on October 4 by the U.S. Aluminum Extruders Coalition. The percentage rates of the duties involved, and the long list of source countries targeted will have a significant impact on the HVACR and water heating industry, and the costs will be felt by U.S. consumers directly. 

The HVACR and water heating industry is still evaluating the ramifications of the October 4 petition, but early indicators point to the entire industry’s value chain being disrupted. Decisions about sourcing raw materials, components, subcomponents, and finished equipment can take years, often requiring time-consuming and costly quality and certification evaluations. AHRI is especially concerned that imposition of the duties proposed by the petitioner would raise the cost of the industry’s equipment, including the servicing of this equipment over time, placing new burdens on consumers. 

Imposing such high rates of duties on imported components that U.S. manufacturers and equipment servicing technicians need will be a shock to the industry. Based on the effects of the Section 232 tariffs on steel and aluminum, which have negatively impacted the HVACR and water heating industry, domestic aluminum extrusion producers likely will not be able or willing to produce the required aluminum extruded products needed by U.S. manufacturers and servicing technicians. Further, the products they can provide will likely be offered at an inflated price.

AHRI also would like to point out that these duties will likely present complications in the Biden Administration’s clean energy/climate policies regarding building decarbonization, as many of our members' technologies contribute to those goals. 

Aluminum is an essential component of HVACR and water heating equipment, within the scope of the petition are “water heater anodes” and “micro channel heat exchangers,” in addition to a wide range of other “subassemblies” and subcomponents. As you know, the use of aluminum goes way beyond our industry and is an important input to several industries critical to the energy transition.

Therefore, for the reasons stated above, AHRI urges Commerce and the ITC to consider other policies that would be less disruptive to U.S. workers and consumers and do not conflict with other administration policy goals. 

AHRI appreciates the opportunity to comment on this investigation and is happy to answer any questions. AHRI will be following the progress of the investigation as it develops.

Sincerely,
Michael LaGiglia, AHRI
Senior Director, International Affairs

Notes

1 AHRI represents more than 330 manufacturers of heating, ventilation, air conditioning, and water heating equipment (HVACR). It is an internationally recognized advocate for the HVACR industry and certifies the performance of many of the products manufactured by its members. In North America, the annual economic activity resulting from the HVACR industry is approximately $256 billion. In the United States alone, AHRI member companies, along with distributors, contractors, and technicians employ more than 1.3 million people. AHRI is an advocate for the industry and develops standards for and certifies the energy efficiency of many of the products manufactured by our members. AHRI is an accredited (by the American National Standards Institute (ANSI) and the Standards Council of Canada (SCC)) Standards Developing Organization (SDO), producing over 100 standards that define testing and rating (for energy efficiency) practices. AHRI is also a voluntary, industry certification body that verifies the claimed efficiency of HVACR and water heater products in 44 certification programs with nearly 900 participants and is recognized and used by the U.S. Department of Energy (DOE), the California Energy Commission (CEC), Natural Resources Canada (NRCan) and COFRAC (the national accreditation body of France), as well as by the Environmental Protection Agency (EPA) for the ENERGY STAR® program.

2 “As discussed in the Preamble to Commerce’s regulations, we are setting aside a period for parties to raise issues regarding product coverage (i.e., scope). We have some concerns related to the administrability of certain provisions in the proposed scope. For example, we find the definition of subassemblies (included) and imported merchandise that is not a part or subassembly of a 
larger product or system (excluded) remains an outstanding issue. Accordingly, Commerce intends to continue evaluating the scope of these investigations, with the possibility of making additional modifications to clarify further what products are covered and not covered by the scope of these investigations.” (Page 74434 of the notice)

3 “micro channel heat exchangers” are included in the scope of this investigation.