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The Commerce Department, in a preliminary finding, said certain aluminum exports by China Zhongwang Holdings Ltd. to the U.S. circumvented antidumping restrictions imposed on the company in 2010.

The investigation was initiated last year in response to allegations by a U.S. trade group that China Zhongwang and companies affiliated with its founder, Liu Zhongtian, were shipping aluminum in the form of shipping pallets into the U.S. to evade punitive tariffs. The Commerce Department in 2010 punished China Zhongwang and other Chinese producers with tariffs as high as 374.15% after finding they were receiving illegal subsidies and dumping, or selling products in the U.S. below market prices.

The preliminary determination, detailed in a Nov. 3 memorandum from Christian Marsh, the Commerce Department's deputy assistant secretary for antidumping and countervailing duty operations, found that a type of aluminum that didn't fall under the scope of the 2010 ruling should be subject to restrictive tariffs.

The aluminum is so similar to restricted metal that it can be passed off as virtually the same kind, the memo said.

The findings apply to all Chinese aluminum exporters and U.S. importers.

"We are gratified by Commerce's preliminary determination to take steps to shut down what has been a significant avenue of circumvention for Zhongwang and other Chinese producers," Alan Price, counsel to the U.S. trade group and chair of international trade practice at Wiley Rein LLP, a Washington, D.C., law firm.

The decision comes as U.S. metals producers are struggling to compete against a flood of aluminum and steel produced in China, which they say is subsidized by the Chinese government, depressing prices. Alcoa, the largest American aluminum maker, last week split away from its profitable parts-making unit. By the end of the year, only five aluminum smelters will be operating in the U.S., down from 23 in 2000.

The Journal reported Monday that the Commerce Department, following complaints from U.S. steelmakers, has launched new investigations into whether Chinese steelmakers are shipping metal to the U.S. via Vietnam to evade U.S. import tariffs.

China Zhongwang, initially contacted by U.S. government officials in April, didn't respond to questions, the Commerce Department said. By withholding information, "Zhongwang significantly impeded the proceeding," Commerce said.

By not responding, "Zhongwang has failed to cooperate to the best of its ability in providing the requested information," Commerce said.

China Zhongwang President Lu Changquing, in a written response to the findings, said it chose not to participate in the inquiry because it ceased production of the products addressed by the Commerce Department's investigation in early 2015. "[W]e have no plans to produce or sell such products in the future," he wrote.

Write to Scott Patterson at scott.patterson@wsj.com and John Miller at john.miller@wsj.com

(END) Dow Jones Newswires

November 08, 2016 08:35 ET (13:35 GMT)

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