By James Bikales | POLITICO | Original Article

The International Trade Commission voted Friday to allow the Trump administration to investigate whether China is exporting artificially cheap graphite into the United States — a case that could ultimately lead to new tariffs opposed by Elon Musk’s Tesla.

The ITC voted 3-0 to grant a preliminary determination of injury to a coalition of American graphite producers who argue that China is exporting anode material — a key ingredient in electric vehicle batteries — into the United States at unfair prices.

The affirmative determination allows the Commerce Department to proceed on antidumping and countervailing duty
investigations into whether artificially cheap Chinese material is hampering domestic producers. The Trump administration has identified “restoring America’s mineral dominance” as one of its top priorities. But raising tariffs on imported anode material could be a major blow to Tesla, Panasonic and other companies who rely on it to make battery cells in the United States.

Democratic Commissioner Rhonda Schmidtlein, who is stepping down from the ITC on Saturday to enter private practice, recused herself from the vote. Details: The American Active Anode Material Producers — a coalition made up of Anovion Technologies, Syrah Technologies, NOVONIX Anode Materials, Epsilon Advanced Materials and SKI US Inc. — filed petitions in December asking the Commerce Department and International Trade Commission to launch the investigations.

Currently, most graphite from China is subject to 25 percent tariffs. The petitions request that those tariffs be increased to as high as 920 percent.

Erik Olson, a spokesperson for the graphite producers, said in a statement that Friday’s ruling “validates the basis of our case: that China’s malicious trade practices are undercutting the ability of the domestic industry to grow.”

“We are hopeful that as the case proceeds, the evidence will demonstrate that China dumps artificially cheap graphite into global markets, made possible by state-sponsored policies and massive subsidies,” Olson added.

The petition is opposed by major battery cell producers, including Tesla and Panasonic, who argue that they are doing all they can to support the domestic industry, but new duties would make it much harder for them to produce batteries in the United States in the short term.

In a hearing earlier this month, Matthew Nicely, a partner at Akin Gump representing Tesla, argued that the domestic producers have yet to produce anode material that meets cell makers’ performance standards, while the imported material does.

The Commerce Department formally launched a probe into the allegations earlier this month. It expects to make preliminary determinations on countervailing duties by March and antidumping duties by May, followed by final determinations in May and August, respectively.

The U.S. graphite producers will still need to prove their case before the ITC, with final determinations not expected until the second half of the year.