President Bush dealt a blow to North American PET resin makers July 1 when he denied their request to remove duty-free status given to PET resin from India, Indonesia and Thailand.
The U.S. PET Resin Producers Coalition - consisting of Eastman Chemical Co.'s Voridian division, Wellman Inc., M&G Polymers USA LLC, DAK Americas Inc. and Nan Ya Plastics Corp. USA - filed a petition in June 2003 with the U.S. Trade Representative to get PET removed from the Commerce Department's Generalized System of Preferences list.
The GSP list extends duty-free status for thousands of products to about 120 countries in need of economic development. Dozens of plastic products, including most commodity resins, are on the list, which originated in 1975.
If PET had been removed from the GSP list, a duty amounting to about 3 cents per pound would have been collected on PET imported from those three countries beginning in July.
``Obviously, the coalition is disappointed with the result,'' said Michael Hertzberg, a Washington-based lawyer representing the coalition. ``We feel we had a strong and meritorious case, and we continue to believe that.''
Between 2000 and 2002, the amount of imported PET from GSP nations more than tripled, going from less than 80 million pounds annually to almost 260 million pounds, according to a 27-page petition filed by the coalition.
PET imported from GSP nations accounted for more than 5 percent of total U.S. PET consumption in 2002. That amount was expected to increase more than 10 percent in 2003, industry contacts said. India, Indonesia and Thailand account for about 80 percent of U.S. PET imports.
Hertzberg added that factors such as international trade probably had an impact on Bush's decision.
``This goes way beyond PET resin,'' Hertzberg said. ``The president had issues of diplomacy and international perception to consider.''
Chase Willet, a PET industry consultant with Chemical Market Associates Inc. in Houston, said he was surprised by the president's decision.
``The whole thing was political,'' Willett said ``But I looked at it and thought that [removing GSP status] would be a way not to penalize those countries while making voters happy.''
Willett added that Asian PET imports actually are down more than 20 percent in 2004 as cost structures in Asia have been rising.
The coalition's GSP effort was opposed by the PET Users Coalition, a group formed earlier this year to maintain GSP status for PET. That group consists of large PET processors such as Constar International Inc., Graham Packaging Co. LP and Owens-Illinois Inc., as well as such well-known consumer products companies as Nestle USA, Ocean Spray Cranberries Inc., PepsiCo Inc., Procter & Gamble Co. and Welch's. Several prominent trade groups also are members, including the National Soft Drink Association and the Grocery Manufacturers Association.
Officials with NSDA and Constar testified before a federal committee in March to oppose GSP removal for India, Indonesia and Thailand.
In a July 9 telephone interview, NSDA federal affairs Vice President Drew Davis said Bush ``made the right decision'' on the GSP issue.
``The decision underscored what we were saying all along - that these countries were market followers, not price setters,'' Davis said. ``And when their costs caught up with North American costs, it wouldn't be much of an issue.
``On the part of PET users, we view this as favorable, but it's not going to change anything as far as long-term price pressures in the PET market,'' Davis added.
Separately, the PET makers' coalition is proceeding with an anti-dumping petition and countervailing duty request against the three countries named in the GSP move.
The anti-dumping petition, filed in March, asks the U.S. government to determine if PET makers in India, Indonesia, Thailand and Taiwan are selling resin in the United States at prices below their production costs, thereby creating an unfair trade advantage.
The anti-dumping move could result in fines against those countries, while the countervailing duty request could impose duties to offset subsidies that PET makers in India and Thailand receive from their respective governments.
The coalition already has won a preliminary injury ruling on the matter. A further decision on the countervailing duty is expected in late August, while action on the anti-dumping petition should arrive in early September, Hertzberg said.