Plastics industry speaks up to support domestic supply chain

Plastics industry trade groups and businesses are urging federal officials to adopt trade and investment policies that support specialty materials for EV batteries, mold building and recycling to make the supply chain more resilient.

Material manufacturers Arkema Inc. and Solvay America LLC are calling for support of domestic polyvinylidene fluoride (PVDF) production to strengthen the domestic EV supply chain against foreign entities of concern (FEOC) and protect investments made through the Bipartisan Infrastructure Law.

PVDF plays important roles in powering batteries, particularly lithium-ion batteries (LIB), and in the semiconductor market. The material is used as binders and separator coatings that enable higher voltages and resist high temperatures.

"A PVDF supply chain that allows FEOC PVDF is not resilient because it is not transparent, does not provide security, and is less sustainable," Kyle Liske, Arkema assistant general counsel, said in written comments to the United States Trade Representative (USTR).

The U.S. needs to increase Section 301 tariffs on battery-grade PVDF, according to David Cetola, vice president of global government affairs at Syensqo SA, a polymer and composites supplier that was until recently part of Solvay SA.

In October 2022, Solvay was awarded a $178 million grant from the Department of Energy as part of an Infrastructure Investment and Jobs Act battery material funding program for a PVDF production facility in Augusta, Ga.

"This facility has the potential to provide enough PVDF to supply more than 5 million EV batteries per year at full capacity, and the project is expected to create more than 500 local construction jobs and 100 highly skilled manufacturing jobs," Cetola said. "Once fully operational, our project will be an American investment that will fill a significant domestic supply gap with all major feedstocks coming from North America."

However, establishing manufacturing capacity for material inputs is only one component of securing a resilient supply chain for critical products, Cetola said.

"An ongoing effort must be made to ensure that these American-made battery materials are the preferred choice for downstream users," he told the USTR.

Through testimony and written comments, the USTR is seeking "a more granular understanding" of supply chain challenges across a range of sectors to identify potential policy solutions, Ambassador Katherine Tai said.

"The pandemic disrupted supply chains, which drove up costs on everyday goods for hardworking Americans. This is why a centerpiece of our work at USTR is developing innovative trade tools and strategies for connecting trade and other economic policy measures to advance supply chain resilience, while also reevaluating earlier policy approaches that prioritized efficiency to the exclusion of resilience," Tai said in a statement.

USTR officials also heard from the American Mold Builders Association (AMBA), Recycled Materials Association (REMA), American Chemistry Council (ACC) and Polysilicon Coalition.

Arkema's Liske said FEOC PVDF manufacturers use potentially unfair trade and competition practices.

"FEOC PVDF manufacturers frequently produce at such a high capacity to maintain their dominance in the EV market and supply chain. This can cause artificially depressed prices that threaten domestic manufacturing and the domestic EV supply chain. This could lead to 'dumping' actions that could negatively affect the U.S. market and industry," Liske said.

To combat this, the USTR should urge the U.S. Treasury and Internal Revenue Service to finalize a 30D rule that wouldn't make any exceptions for PVDF in the FEOC provisions.

"It would do this by not allowing for a phase-in of 'non-traceable materials' and ensure all critical minerals are accounted for, whether they are fully consumed in a downstream product or not," Liske said. "To not do this could significantly threaten domestic PVDF manufacturing and have a direct negative impact on investments, including those made through the Bipartisan Infrastructure Law."

Syensqo's DOE grant is a terrific "Step 1" to advance U.S. competitiveness, Cetola said, "but the administration should look to deploy a 'Step 2,' whole of government approach to ensuring that we protect these large investments from price disruption from foreign rivals."

The Indianapolis-based AMBA presented formal testimony on May 23, emphasizing the essential role mold builders play in the supply chain and their top areas to consider when developing policies to support U.S. supply chain resiliency.

Industrial molds are a critical component of the U.S. and global supply chain and the downstream inputs used by the defense, medical device, transportation and other industries, according to AMBA Managing Director Kym Conis

"AMBA members play an essential role in the supply chain," Conis testified. "Knowing our domestic capabilities, identifying import spikes as they happen, and addressing tariff evasion through transshipment will help strengthen U.S. downstream supply lines."

The topic of tariffs was touched on with AMBA restating in its testimony that a rate of 50 percent would be more effective than the current rate of 25 percent, Conis added in an email.

"Regardless of the rate, we are increasingly seeing molds entering the U.S. through third countries to evade the tariff," Conis said.

The government should monitor the import of molds like it does steel, aluminum and finished goods, she added, saying a process to identify and track the true country of origin is needed.

"USTR should work with the commerce department and industries identified as critical to establish a mechanism for businesses to report incidents of tariff evasion and transshipment," Conis said.

She also stressed that policies intended to support U.S. supply chain resiliency must first begin with understanding domestic capacity and capabilities.

"AMBA maintains a Capacity Tool, allowing its members to identify others in the association with open capacity and varying capabilities. Die builders report a 68 percent capacity utilization rate with mold builders reporting 74 percent. Both industry figures are below the most recent monthly Federal Reserve estimate for manufacturing of 76.9 percent capacity utilization."

Founded in 1973, AMBA is a national non-profit trade association with more than 200 member companies and 50 supplier partner companies.

With U.S. recyclers processing more materials than domestic manufacturers demand, about one-third of all the country's recyclables enter global commerce, making access to export markets important to the ReMA, the world's largest trade association representing private recyclers.

ReMA's membership includes more than 1,700 predominantly small- and medium-sized companies that operate more than 4,000 sites in the U.S. and globally.

"Because many national governments do not distinguish between certain waste streams and end-of-life products processed by recyclers, our materials are not always treated as other key manufacturing inputs in trade policy discussions and negotiations," wrote Adam Shaffer, vice president of ReMA's International Trade and Global Affairs Recycled Materials Association.

These import restrictions distort the flow of recyclable products, causing both environmental and economic harm, he added.

"Over the last decade, many foreign governments have imposed bans on imported recycled products in an effort to eliminate the dumping of certain types of waste. Many of these bans have inadvertently prevented trade in high-value recyclable materials, reducing the circularity of products and ultimately weakening global supply chains," Shaffer wrote.

The recycling industry has also encountered more export control measures from foreign governments, including burdensome licensing requirements, tariffs, quotas and bans, which limit the global supply of recycled materials.

"Artificial supply constraints create price volatility, which disincentivizes investments in recycling technology by recyclers and processors," Shaffer wrote. "Without key investments in new technologies, recycling collection declines, which will adversely impact governments' ability to meet climate change goals."

ReMA is asking the USTR to prioritize the reduction of barriers to the free movement of recycled materials to make supply chains more resilient, ensure the competitiveness of the recycled materials industry, and benefit the broader manufacturing economy.

"As industries worldwide decarbonize, foreign governments must be discouraged from invoking environmentalism or sustainability to disguise measures that disrupt the free flow of recycled materials to where they are needed most. Such shortsighted measures harm downstream manufacturing consumers worldwide, while also creating adverse climate impacts," Shaffer wrote.

Strengthening domestic polysilicon production also should be a principal focus of the USTR's whole-of- government effort to promote supply chain resilience, according to John Smirnow, general counsel and vice president of supply chain and sustainability for the Solar Energy Industries Association.

Smirnow submitted his comments on behalf of the Polysilicon Coalition, which represents all solar-grade and nearly all semiconductor-grade capacity of polysilicon manufacturing in the United States. Members include Hemlock Semiconductor, REC Silicon and Wacker Chemical Corp.

Polysilicon is a foundational material to producing silicon microprocessors, artificial intelligence chips, memory, power devices and crystalline silicon solar cells, Smirnow told the USTR.

"A healthy and robust domestic polysilicon industry is therefore essential to American supply chain resiliency," he wrote. "U.S. technological leadership and the production of solar and semiconductor-grade polysilicon are at risk due to China's actions to target and increase its dominance of polysilicon production."

Although there is sufficient solar-grade polysilicon production in the United States, Germany, and Malaysia to satisfy near-term U.S. market demand, China, pursuant to its China 2025 plan, has spent billions of dollars to subsidize the production of polysilicon.

As a result, China has created significant global overcapacity for polysilicon production, Smirnow said.

He offered these figures: At the end of 2023, China reached 3 million tons of polysilicon production capacity and even more capacity is under construction. In contrast, polysilicon production outside of China is approximately 156,000 tons.

"Total global demand for polysilicon, however, currently stands at approximately 1.5 million tons," Smirnow wrote. "Chinese polysilicon production capacity is therefore double global demand. As a result of this massive overcapacity, Chinese polysilicon prices have plummeted to unsustainable levels and artificially low-priced Chinese polysilicon is now flooding the world. This unfair competitive environment makes it nearly impossible for non- China polysilicon producers to remain competitive and threatens the long-term health of U.S. and other non-China polysilicon manufacturers."

China's excess polysilicon production capacity is threatening U.S. hopes for a resilient supply chain for solar modules, microprocessors, artificial intelligence chips, electric vehicle batteries, battery energy storage systems, and other products critical to long-term success, Smirnow wrote.

"We encourage the administration to recognize polysilicon as essential to America's supply chain resiliency and long-term national security and, as such, ensure that it receives the requisite policy support," Smirnow wrote.

ACC is pushing the USTR to include the chemical sector in its supply chain efforts and address impediments, such as anticompetitive practices by foreign governments and regulatory proposals.

The USTR should map the chokepoints and barriers impeding domestic production and investment in chemicals and polymers for semiconductor manufacturing, lithium-ion batteries, agricultural products and other sectors, according to Jason Bernstein, the ACC's director of global affairs.

ACC also is urging federal officials to temporarily reduce or eliminate tariffs on materials used to produce domestic chemicals that are not produced domestically or available in sufficient quantities. Many of these materials are used for domestic production of semiconductors, electric vehicle batteries, solar materials, biotechnology, food and construction goods.

"The reduction and elimination of such tariffs is also necessary for ACC members to make highly advanced, organic, and bio-based chemicals right here at home, and to improve our competitive position with respect to other countries," Bernstein wrote.

ACC also recommends the inclusion of circular economy initiatives and standards as part of supply chain initiatives.

"For many countries, especially the United States, advanced recycling and other innovative technologies and products will be key to increasing domestic growth and investment and building stronger relationships with other countries who also want access to these technologies," Bernstein wrote.

Trade groups for chemicals, specialty materials, mold building, recycling, polysilicon urge federal officials to adopt supportive trade and investment policies.