July 23, 2004 Nashua, NH--The Ministry of Commerce of the People's Republic of China slapped temporary tariffs on imported G.652 fiber from a group of foreign manufacturers accused by two domestic producers of dumping the singlemode product into the Chinese market. Dispersion unshifted G.652 singlemode fiber is the dominant fiber used in China, accounting for more than 70% of the total market.
Effective immediately, the tariffs--which range from 7% to 46%--are the result of the Ministry's preliminary investigation of the charges, which agreed that dumping existed and caused material injury to the domestic fiber industry. The dumping margins must be paid in cash by importers of the investigated products to the General Administration of Customs of the People's Republic of China.
The Ministry, which announced the investigation on July 1, 2003, is extending its inquiry through January 1, 2005, citing its "complex" nature. During the next six months, Ministry representatives will travel to the optical fiber companies named in the investigation. The companies are based in the United States, Japan, and the Republic of Korea. The Ministry representatives will meet with company officials and review whatever defense documentation the companies may offer.
Corning (Corning, NY), which announced that it received a letter from the Chinese Ministry of Commerce notifying the company of the preliminary findings and a 16% cash margin, denies the dumping allegations. The tariffs only pertain to fiber produced in the United States and imported to China. They do not affect Corning fiber products produced by Shanghai Fiber Optics Company Ltd., a majority owned subsidiary of Corning.
Corning officials estimate that fiber export revenues to China account for 6% of its optical fiber and cable revenues. The company expects to receive a final determination from the Ministry of Commerce by the end of the year. If the ruling holds, it is likely to have "a significant negative impact" on the company's fiber export business to China, according to a company statement.
"Corning does a fair amount of business with domestic Chinese cable manufacturers, more than any other, " says Patrick Fay, senior analyst at KMI Research (Providence, RI). "The majority of any fiber requirement--the gap between what has been filled domestically--has been filled by Corning."
China, however, doesn't want to be dependent on importing fiber, and consumers within the country have made huge headway in sourcing their fiber from domestic manufacturers, according to Fay. Bare fiber capacity (singlemode and multimode) in China reached 29.5 million km in 2003, a 150% increase over fiber production capacity in 2001.
In 2003, domestic producers manufactured 12.8 million km of bare singlemode fiber, a significant increase from the 8.2 million km produced in 2001. The net imported singlemode bare fiber in 2003 was 2.9 million km, according to KMI, compared to 4.9 million km of imported singlemode fiber the previous year.
The largest domestic fiber producer, Yangtze Optical Fibre and Cable Company Ltd. (YOFC--Wuhan), manufactured 6 million km of bare fiber in 2003. However, a dependence on imported preforms has inhibited the development of China's domestic fiber industry.
"The process YOFC uses, which is PCVD [preforms] from Draka is good for multimode, but maybe not as good for singlemode," says Fay.
To be competitive, YOFC had been purchasing preforms from Shin-Etsu (Tokyo) during the fiber shortage in 2001, and when the shortage ended YOFC got locked into certain volumes. However, as Shin-Etsu's largest preform customer, they got a break on the price.
"It could be there was some disadvantage against Corning and what Corning was able to do--I don't know," says Fay, "but it all points to what is the definition of dumping really?"
The issue is indeed complex. Since joining the World Trade Organization, China has pursued 18 anti-dumping investigations, most against the Republic of Korea and Japan. However, high-profile tariff actions against Chinese furniture and color television imports in the United States in recent months have led some to suggest that politics, and a quest for dominance in technology, are behind the optical fiber tariffs.