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 BEIJING 00002671 002 OF 002 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