Washington, 30 November 1998 (RFE/RL) -- The U.S. has signaled that a simmering trade dispute with Russia is getting serious.
In an unannounced move last week, the U.S. Commerce Department issued a preliminary finding that could retroactively impose high duties on hot-rolled steel imported from Russia or Japan.
Russia exported $500 million worth of the steel to the U.S. in 1997 and through the end of July, according to American data, had sold $261 million worth this year. Fifty-three percent of Russia's steel output is exported, generating 10 percent of the country's total export revenues.
But since August, when the devalued ruble made Russian steel a cheap bargain for American dollars, Russian sales into the U.S. have increased 100 percent.
Selling a product in another country at prices deemed to be below home-nation costs is called "dumping" and American steel companies and worker's union's cried foul when cheap steel from Russia, Japan and other nations in financial crisis, began flooding U.S. markets.
In addition to seeking political help -- U.S. President Bill Clinton earlier this month said it was unfair to threaten American jobs -- the American producers filed anti-dumping charges.
Moscow asked through the U.S.-Russian Binational Commission, popularly known as the Gore-Chernomyrdin commission, to open negotiations for a broad trade agreement on all steel products.
The U.S., according to sources, declined, but did agree to low-level discussions three weeks ago in Washington. Neither side would comment publicly, but sources say the talks bogged-down on U.S. demands that Russia limit its shipments of hot-rolled coil steel to well below 1997 levels while Moscow wanted to at least equal last year's sales.
Russian steel makers have been so concerned about losing the American market that they even took out full-page newspaper ads in several major U.S. newspapers in recent weeks, at a cost of tens of thousands of dollars.
The ads, signed by the general directors' of the Severstal, Novolipetsk and Magnitogorsk steel enterprises, and addressed to U.S. Vice President Al Gore and Russian Prime Minister Yevgeny Primakov, urged a comprehensive steel trade agreement for a balanced, long-term solution protecting the interests of the steel industries in both countries.
They said that the major steel mills are a vital part of Russia's economy, employing 160,000 people and making export earnings of more than seven percent of Russia's hard currency earnings.
But, the advertisement said, Russia, along with many other countries, is experiencing a serious economic crisis and anti-dumping legal actions "do not fit the present situation and cannot provide an immediate and comprehensive solution."
The Russian steel makers said these actions only threaten the viability of the Russian steel industry and further endanger Russia's transition to a market economy.
The arguments apparently fell on deaf ears because in an unusual move, the U.S. Commerce Department issued a preliminary finding of "critical circumstances" in the dispute.
If that finding is made final in February, it would impose high tariffs on Russian hot-rolled steel imports retroactively for the 90 days leading up to a final ruling on the dumping charges themselves.
The Commerce Department says the action is taken when it fears there might be a massive surge of goods imported just before new high tariffs are imposed.
Importers say the action puts a major brake on any product covered because the importers would be responsible for the higher duties going back three months if a dumping determination is made.
The Commerce Department said it was necessary in Russia's case because the country has a "history of dumping" hot-rolled steel in third countries.
The process of deciding on the charges is a long, complicated one. The charge was first filed with the independent U.S. International Trade Commission (ITA), which passed it along to the Commerce Department for investigation.
The Commerce Department must make it's final determination by next May. If it decides that Russian steel is being dumped, then it returns the case to the ITA which has several months to determine if U.S. companies have been hurt by the dumping. And if it decides they were hurt, what level of new duties should be added on Russian hot-rolled steel.
It is those new, higher duties which would then be assessed on any Russia steel which had been imported into the U.S. in the three months leading up to the Commerce Department's finding, or from March 1999.
Since steel shipments normally take weeks to arrange and move, the department's preliminary finding is enough to send a strong immediate signal to importers to stop shipments before March. At a time of serious financial difficulty for Russia, it's a signal the country's steel industry did not want to hear.