TIRE SAFEGUARD CASE: PRC RELEASES AD/CVD PETITION

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 002671

SIPDIS

STATE FOR E, EAP, EAP/CM
STATE FOR EEB/TPP WCRAFT, CLAYTON HAYS, HHELM
STATE FOR H/BETSY FITZGERALD, EAP/CM SHAWN FLATT,SCA/RA
JOHN SIPLSBURY
STATE PASS USTR FOR DMARANTIS, TREIF, TIM STRATFORD, ANN
MAIN, JEAN GRIER
DOC FOR IRA KASOFF, NICOLE MELCHER (5130),MAC (4420),IA
CSHOWERS (5120)
TREASURY FOR OASIA/DOHNER/WINSHIP
GENEVA PASS USTR
NSC FOR JLOI,DBELL

E.O. 12958: DECL: 09/17/2019
TAGS: ETRD EFIN ECON PREL WTRO CH
SUBJECT: TIRE SAFEGUARD CASE: PRC RELEASES AD/CVD PETITION
AGAINST U.S. POULTRY

REF: A. BEIJING 2660

B. BEIJING 2656 BEIJING 2630

C. BEIJING 2626

D. BEIJING 2525

E. BEIJING 02441

F. BEIJING 2299

G. STATE 85673

H. BEIJING 2439

Classified By: ECON Minister Counselor William Weinstein for
reasons 1.4 (b),(d) and (e).


1. (C) SUMMARY: China's Ministry of Commerce (MOFCOM)
formally notified Embassy late the afternoon of September 16
of its considertaion of an anti-dumping/countervailing duty
(AD/CVD) petition on imports of chicken products from the
U.S. Based on the product categories listed in the petition,
the case covers a wide range of U.S. exports to China of
fresh and frozen whole chickens and chicken parts, which in
2008 were valued at more than USD 740 million. A second case
on imports of U.S. auto parts has not yet been notified to
Embassy. Meanwhile, the intensity of debate in China over
the U.S. safeguard action on tires continued to ebb. In
high-level contacts with Embassy and visiting delegations,
Chinese officials stayed on message: disgruntled over U.S.
tariffs on Chinese tires, but intent on cultivating a
positive bilateral relationship. Chinese government websites
on September 16 posted no new related official action or
notices, while the press reporting and blogging declined
significantly. END SUMMARY.

RELEASE OF THE PETITION


2. (C) Late the afternoon of September 16, MOFCOM's Board of
Foreign Trade (BOFT) sent a notification to Embassy in
Chinese that it would conduct an investigation of a petition
from Chinese domestic industry for an AD/CVD investigation
into chicken imports from the U.S., including broiler parts
(or chicken parts, defined by USDA as tenders, breasts,
thighs, drumsticks, leg quarters, and wings) and chicken
feet. The notification included an invitation for U.S.
government representatives to consult with MOFCOM regarding
"subsidy program indicated in the petition," and proposed
September 21-25 for bilateral consultations. Along with the
notice, BOFT provided one hard copy of the much lengthier
petition itself, which Embassy is translating. (Note: If
China determines to initiate an investigation, initiation
usually begins within 20 calendar days, although by WTO
obligations they have up to 60 calendar days. In recent
practice, consultations were conducted via conference calls
between BOFT, the Department of Commerce and USTR (including
officers at Post). End Note.)


3. (C) The petition covers twelve tariff headings of chicken
products and names six U.S. producers. The six U.S.
producers named on the petition appear to be major exporters,
including: 1) Pilgrim's Pride Corporation, listed in Texas,
2) Tyson Foods, Inc., listed in Arkansas, 3) Perdue Farms,
listed in Maryland, 4) Sanderson Farms, Inc., listed in
Mississippi, 5) Wayne Farms LLC, listed in Georgia, and 6)
Mountaire Farms, listed in Delaware. (Note: Business Week
reported that to avoid bankruptcy, Pilgrim's Pride this month
sold 64 percent of the company to a Brazilian conglomerate.)
The twelve tariff headings were 0207110, 02071200, 02071311,
02071319, 02071321, 02071329, 02071411, 02071419, 02071421,
02071422, 02071429, and 05040021.

SCOPE OF U.S. EXPORTS OF CHICKEN PARTS TO CHINA


4. (SBU) Total U.S. exports to China of broiler parts, plus
chicken feet, have increased by almost doubled in value since

2004. In 2004, U.S. chicken exports were valued at more than
USD 322 million. By 2008, that number increased to more than
USD 740 million. Currently, China is the sole market for
U.S. exports of chicken feet.


5. (C) On September 16, rumors had already begun to affect
contracts for imports of U.S. chicken to China. Emboffs

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heard from key importers in Shenzhen that they had decided
against signing additional purchase contracts over fears of a
tariff hike. One importer cited a rumor from a customs
official that MOFCOM would raise tariffs 35 percent within
sixty days.

OFFICIAL AND PRESS REPORTS


6. (C) The U.S. safeguard action on Chinese passenger tires
continued to play in local media today, but fell in
prominence with only four publications running headlines
stories. For a second day running, official government
websites had no new posts, information or official actions
related to either the U.S. tariffs or the Chinese retaliatory
AD/CVD cases. Post has not received any official documents
regarding the announced AD/CVD case against U.S. autos.


7. (C) In a September 16 meeting with NSC Senior Director for
Asian Affairs Ambassador Bader (reftel Beijing 2660),Foreign
Minister Yang was upbeat on the overall trend in U.S.-China
relations, stressing that he did not want retaliation to
become a "pattern" in U.S.-China trade relations. Other
routine contacts with MOFCOM have continued without problems.
Emboffs have had extensive contacts with a variety of MOFCOM
officials this week to advance preparations for the Joint
Commission on Commerce and Trade and at no point did any
officials raise the tire safeguard issue. Additional Embassy
meetings with MOFCOM for September 18 were accepted as well
without difficulty.
HUNTSMAN