Federal regulators are reportedly investigating a New Jersey metals company amid suspicion that it is part of a scheme to evade U.S. tariffs on Chinese-made aluminum.
The Wall Street Journal last week chronicled how an unusually large amount of aluminum pallets became housed by Aluminum Shapes LLC at its facility near Philadelphia.
Pallets are not subject to the sky-high U.S. tariffs imposed on other Chinese aluminum products in 2010 as a result of alleged improper subsidies and market dumping.
The Commerce Department, however, is looking into whether the pallets were melted down to make products that would ordinarily be subject to those tariffs.
The probe stems from a 2015 complaint filed by trade group the Aluminum Extruders Council. The scandal also coincided with U.S. producers that struggled -- or went out of business entirely -- amid a flood of cheap imports from China and plummeting aluminum prices.
According to the Journal report, after some initial discussions in 2011, Aluminum Shapes officials traveled to China to meet with Liu Zhongtian, the billionaire founder of aluminum giant China Zhongwang.
Shortly thereafter, Aluminum Shapes was bought by Global Aluminum — a company run by a China Zhongwang official — and in 2013, pallets stored by a California company began arriving at Aluminum Shapes in China Zhongwang-labeled packaging.
A former Aluminum Shapes manager told the Journal that the pallets were too heavy to be used in normal shipping and that some were melted down to make other products.
Aluminum Shapes told the paper that the pallets were owned by a former company executive and were not marketed to be re-melted. Liu, meanwhile, responded that he does not have a business interest in Aluminum Shapes and is not trying to import aluminum into the U.S.
The report followed a previous Journal article that suggested that Liu's businesses also evaded U.S. tariffs by routing aluminum through Mexico.