Tariffs have killed off this Australian company's exports to the US

Danny Lawson/PA Images via Getty Images
  • Simcoa, Australia’s only silicon producer, could be the first victim of the beginning of a trade war from the US.
  • The US Department of Commerce has imposed a 51.28% extra import tariff on the company, making the total tax 66%.
  • Part of the argument for the tariff is that Simcoa gets “subsidies” from the federal government in the form of R&D tax incentives — a tax break available to all companies in Australia.
  • The company employs 180 and indirectly supports another 600 within the region.

Simcoa, a resources production company based in Bunbury in Western Australia, has stopped exporting its silicon to the US because proposed duties imposed make the trade unworkable, the company has confirmed.

Australia’s only silicon producer has suddenly been caught up in moves by the Trump administration toward protectionism of local US industry via the imposition of import duties.

Trump’s tariffs — 25% on steel and 10% on aluminium — are billed as supporting American businesses.

The US Department of Commerce has imposed a 51.28% extra import tariff on Simcoa Operations Pty Ltd because the company allegedly receives subsidies from the Australian Government. Added to this is another 14.78%, making a total of 66% or two-thirds extra on top of the price of a shipment.

David Miles, the company’s vice president, site services and marketing, told Business Insider that Simcoa stopped exporting to the US mid last year when it found out about the proposed new duties.

“We first knew about this in April last year when it was lodged (with the US Department of Commerce),” he says.

“It’s taken a long time to get to this point. These investigations by the US are fairly drawn out and very time consuming.

“From our point of view, it’s hugely inconvenient. We had a lovely little business in the United States. We stopped exporting from July last year because we ran the risk of potentially paying these high duties.”

Miles says the decision to impose the duties came after a complaint from another company. “What is it is a UK-based company, with a subsidiary operating in the US, taking advantage of the US trade rules,” he says.

A final decision on whether to impose the high duties on Simcoa is expected on March 23. The company stopped exporting because it would have had to pay the 66% duty even though it had not been finalised.

“The dangerous thing is that this is the first time that the US has ever made an allegation … that an Australian company receives subsidies which enables them to sell at cheaper ‘dumped’ prices into the United States,” says Miles.

“I think that that’s a dangerous thing. In other words, the [research and development] tax scheme which is available to all Australian companies … the US has ruled that this is in fact a subsidy given to Australian industry.

“And any company in the US can now pick up and say … ‘that’s a nasty Australian company over there gets all these federal government subsidies’.

“That’s what has got everybody nervous.”

Hundreds of Australian subsidiaries of US companies also benefit from Australia’s research and development tax incentives, which are available to all companies and allow R&D spending to offset tax liabilities.

Simcoa had been exporting 16,000 to 18,000 tonnes of silicon a year to the US. It has managed to switch to sending its product to Japan where its parent company, Shimizu Chemical Company, is based.

“We kind of like have this fairy godmother to help us,” he says. “From our point of view there was hardly a blip. Any thought that we are in any sort of trouble is untrue.”

The company employs 180 and indirectly supports another 600 within the region. The company says it produces 50,000 tonnes of silicon and 11,000 tonnes of silica fume a year.

The Australian Financial Review reports that Globe Specialty Metals, a US-based competitor to Simcoa, has argued fewer cheap foreign imports would help it reopen a manufacturing plant in the US state of Alabama.

Bluescope Steel and Rio Tinto will also be potentially affected by the tariffs but the extent of that won’t be known until full detail of the US plans are revealed.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.