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U.S. Grain-Oriented Electrical Steel Industry Encouraged By Commerce Department's Affirmative Preliminary Determination In China Subsidy Investigation, Says Kelley, Drye & Warren LLP

WASHINGTON, March 5, 2014 /PRNewswire-USNewswire/ -- Today, the U.S. Department of Commerce announced its preliminary determination that imports of grain-oriented electrical steel ("GOES") from China are benefitting from unfair government subsidies.  As a result, it will instruct U.S. Customs and Border Protection ("CBP") to begin to require importers of Chinese-origin GOES to deposit estimated countervailing duties at the time of importation. 

The Commerce Department's determination follows the filing, on September 18, 2013, of antidumping and countervailing duty petitions by domestic GOES producers AK Steel Corporation (NYSE: AKS) and Allegheny Ludlum, LLC d/b/a ATI Allegheny Ludlum, an Allegheny Technologies company (NYSE: ATI), as well as the United Steelworkers ("USW"), which represents workers engaged in the production of GOES at ATI Allegheny Ludlum.  The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") subsequently expressed its support for the petitions, which allege that unfairly low-priced (or "dumped") and subsidized GOES imports from China, as well as dumped imports of GOES from the Czech Republic, Germany, Japan, South Korea, Poland, and Russia, are causing material injury to the domestic industry.

Based on information gathered to date, the Commerce Department preliminarily determined that GOES imports from China benefit from subsidies bestowed by the Government of China, resulting in a preliminary countervailing duty margin of 49.15 percent of the value of the imported steel.  The Commerce Department investigated various subsidy programs based on allegations contained in the domestic industry's petition, as well as additional allegations the domestic industry submitted to the agency subsequent to the filing of its petition.

David A. Hartquist, of Kelley, Drye & Warren LLP, counsel to the domestic industry, stated,  "We are very pleased with the Commerce Department's affirmative preliminary determination that the Government of China provides unfair subsidies to its domestic producers of grain-oriented electrical steel.  The U.S. grain-oriented electrical steel industry has suffered lost sales and plummeting profitability due to unfairly traded imports from China and the other six countries named in the industry's petition.  Remedial relief is needed to counteract the significant injury that is being caused by the unfairly traded imports." 

The next step in the trade action will be the Commerce Department's issuance of preliminary antidumping determinations.  The current deadline for the announcement of these preliminary antidumping decisions is Monday, May 5, 2014.  If affirmative preliminary antidumping decisions are issued by the Commerce Department, U.S. importers will be required to post cash deposits or bonds on all future entries of GOES from China and the other six countries in the amount of the subsidy or dumping margin calculated by Commerce.  Thus, as of early May 2014, U.S. importers of GOES from the seven countries named in the petition may be required to deposit estimated duties with CBP at the time of importation.

GOES is a flat-rolled alloy steel product that contains by weight at least 0.6 percent but not more than 6 percent of silicon, not more than 0.08 percent of carbon, and not more than 1 percent of aluminum.  The petitions cover GOES that is sold in either sheet or strip form, in coils or in straight lengths.  GOES is manufactured using a specialized rolling and annealing process that yields grain structures uniformly oriented in the rolling (or lengthwise) direction of the sheet, enabling it to conduct a magnetic field with a high degree of efficiency.  Based on these unique product characteristics, GOES is used primarily in the production of laminated cores for large and medium-sized electrical power transformers and distribution transformers. 

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