Europe's top polyethylene film producer, which shifted retail PE bag manufacturing to China more than a decade ago, is on the receiving end of crippling European Union import duties aimed at curbing Asian bag dumping.
British Polythene Industries plc of Greenock, Scotland, which makes film and bags in Xinhui and exports them back to Britain, has been hard hit by an 8.2 percent punitive tariff, imposed on certain PE bags imported from Thailand and China.
As a result of the EU duty, imposed in October, BPI said it faces a bill of almost £500,000 ($965,000). The firm also said it has incurred legal costs of £200,000 ($386,000), so far, in arguing against the way the tariff was assessed and its relevance to Xinhui-made products.
BPI Chairman Cameron McLatchie warns that the punitive measure will have ``a significant effect'' on the firm's investment of £3 million to £4 million ($5.8 million to $7.7 million) in an ongoing expansion at the China facility.
BPI began making bags in China to help it compete. The firm had planned on doubling Xinhui's capacity, to 44 million pounds per year. Already, the plant has installed a new, eight-color printing press to produce high-quality printed film and tap new export markets, said managing director of BPI's recycled products division, Andrew Green, who is also responsible for the Xinhui operation.
``We have been producing everything there for the [United Kingdom]. Now we're not looking at the U.K., but at global markets,'' Green said.
Green stressed that the additional EU import duty is enough to make ``the difference between making and losing money on our margins'' on bags exported to Britain from China. McLatchie said BPI will continue to fight the tariff.
``We are certain that its basis is flawed,'' McLatchie said in a news release announcing BPI's 2006 financial results. He warned that the firm may incur ``further considerable sums in legal fees'' on the dispute.
The firm's pretax profit fell by nearly £6 million ($11.6 million) to £14 million ($27 million) in 2006 on sales marginally up, to £414 million ($799 million). McLatchie blamed the results on poor performance in the United Kingdom. He said BPI sees the greatest opportunities for growth in China and the European mainland, where it is concentrating a higher proportion of capital expenditures.