The U.S. golf car industry has been heavily involved in seeking protection from Chinese imports. The imports primarily involve partially assembled vehicles, shipped to the United States, where final assembly, distribution, and sales take place. It is generally agreed that the competition from domestic producers has been intense, if not overwhelming.
To counter this competition two of the three domestic manufacturers, Club Car and E-Z-GO Textron have formed an alliance, named American Personal Transportation Vehicle Manufacturers Coalition, to seek relief in a petition before the U.S. International Trade Commission (ITC), alleging unfair competition. The U.S. Department of Commerce (DoC) is also conducting its own inquiry to determine whether anti-dumping duties should be imposed.
At the same time the Trump Administration has imposed significant tariffs against U.S. trading partners, particularly those that have substantial positive trade balances with the U.S. China may be identified as the principal target of these tariffs.
So, in this complex picture of governmental actions, the only generalization one can make at this point is that all three trade initiatives could have an impact on the golf car industry—two under the aegis of the Department of Commerce directly focused on golf cars, while the federal government policies encompass a wide range of industries.
The basis for tariffs is first discussed, then ITC/DoC investigations. Finally, we speculate what the final outcomes may be. These are guesses at this point, but analysts, as well as company strategy makers, have little choice but to develop scenarios and strategies with the information at hand.
Are tariffs justified? When free trade and practice diverge
Tariffs have at least three objectives that are reasonably clear. In this article, we discuss the use of tariffs as penalties against what is considered unfair competition. Two other tariff goals should be mentioned because they are currently and simultaneously being formulated, negotiated, and debated in the public square. The categories of tariffs are described below, with the main focus on the remedy for unfair trade.
The most commonly understood purpose of a tariff or quota on imports is to protect domestic manufacturers from foreign competition. This form of tariff has been largely discouraged since the end of World War II. The underlying theory of comparative advantage, formulated in the early 19th century by David Ricardo, has pretty much reigned supreme since the end of the war as the theoretical basis for promoting free trade policies.
Free trade vs. tariff barriers to trade
The basic idea behind comparative advantage is to let countries develop and grow their economies by doing what they do best. As countries specialize in what they do best, their comparative advantage, and then trade their surplus with countries that need their products, it results in a win-win situation for all countries. Protective tariffs, therefore, violate this principle and lead to inefficiencies and reduce benefits to consumers and producers alike. The injured producers in this case are those who would otherwise have access to resources that are now inefficiently allocated to those producers that are protected.
The second common purpose for tariffs is to raise revenue for the government imposing them. It would appear that the Trump tariffs have, for the purpose, a combination of the two purposes—protective and revenue-raising. In addition, however, there is a third purpose, which is to foster the growth of “infant industries”. These are basically start-ups, not yet reaching the world competitive scale. A developing economy might well use tariffs for this purpose, so that it can reach a more mature competitive status.
Reshoring U.S. manufacturing
The Trump tariffs also have a goal of reshoring made in America manufacturing. This could be viewed as a version of the infant industry premise, but applied to a mature economy. There is also a security factor involved, the aim of which is to shorten the supply chain and lessen dependence on foreign suppliers.
The theory is great, but has it gone awry?
Much of the world’s currency system has been based on a stable dollar. The problem with this is that the dollar’s strength and stability is not based on a solid, on-going trade balance, such as would be found in Germany’s Deutschmark, but rather on restively high U.S. Treasury bond rates—which, in turn, has been generated by persistent Federal deficits of quite a long period of time. This is a situation that cannot go on indefinitely. It is in this context that tariff negotiations with creditor nations, particularly China, are proceeding on a bilateral basis.
In addition, the U.S. International Trade Commission, as well as the U.S. Department of Commerce, are investigating specific petitions by companies and industry associations alleging subsidies and/or dumping practices by international competitors. Many of these investigations involve China, as does, of course, that of the American Low Speed Vehicle Manufacturers Coalition, involving LSVs.
How could the two trade protective efforts affect the U.S. market for LSVs?
The tariff impositions of the Trump administration are largely bargaining chips in the initial stage, and have been modified as negotiations with various countries have proceeded. Nonetheless, the end result could see tariffs levied against China at higher levels than in the past. The ITC/DoC investigations could result, independently, on countervailing duties and anti-dumping penalties.
If the final overall tariffs on China, covering all goods, or a selected variety of goods including the HTS codes involved in the ITC/DoC investigation, are substantially higher than what was obtained prior to the Trump administration initiatives, then it is likely that the determination of CVD and AD penalties would be moot. Conversely, if the HTS codes for LSVs and parts are not included in the overall tariff determination, then CVD/AD penalties could apply.
ITC/DoC investigative procedures and reporting schedule
In June 2024, the American Low Speed Personal Transportation Vehicle Coalition, consisting of companies, Club Car, and E-Z-GO filed a petition with the International Trade Commission and the Department of Commerce for relief from what the companies alleged was unfair competition from imported vehicles from China. Relief would be in the form of countervailing duties and/or anti-dumping tariff penalties.
In December 2024, the ITC issued a preliminary finding in favor of the petitioners, pending hearings, the gathering of evidence, and a final determination. As of now the final determination is set for early August. The full preliminary report on these findings can be found here: USITC Publication: Low Speed Personal Transportation Vehicles from China, Inv. Nos. 701-TA-731 and 731-TA-1700 (Preliminary) https://www.usitc.gov/publications/701_731/pub5533.pdf
Additional allegations of Chinese government subsidies
In October 2024, petitioners submitted additional allegations of new subsidies by the Peoples Republic of China befitting suppliers of raw materials to manufacturers and exporters of personal transportation vehicles (PTVs and LSVs). The ITC has proceeded with the investigation of these allegations and has issued its preliminary findings.
The ITC found that petitioners (domestic manufacturers) are harmed by unfair competitive practices by Chinese exports, and that there are “critical circumstances” involved. The definition of critical circumstances is found in the DoC’s Handbook of Anti-Dumping/Countervailing Duty Handbook: Antidumping and Countervailing Duty Handbook
According to the Handbook, critical circumstances arise if, pending the principal investigation, manufacturers and/or distributors attempt to circumvent potential duties and tariffs by sending out large volumes of product prior to the investigative outcome.
Surge in imports of golf carts beginning in mid-2024
If the data tells us anything about whether critical circumstances were involved, they certainly suggest the threshold for such a finding was clearly reached.
As may be seen in the above graph, the average monthly imports of golf cars were virtually double what they were in the first five months of the year.
Data collection for subsidies and countervailing duties
Getting the data in order to determine the level of a countervailing duty assessment, depends on the willingness of the government of China to respond to Commerce’s questionnaire seeking information on industries providing inputs to both Chinese manufacturers and import/export companies.
As it turned out, the Chinese government and the firms in question did not cooperate in the data-gathering process. Therefore, investigators resorted to other means to determine the appropriate penalties. Investigators found that the Chinese government’s involvement in the various input markets for the raw materials and components used to manufacture golf cars resulted in less than adequate remuneration (LTAR, the acronym use in the preliminary report). ITC investigators used available world prices for inputs as benchmarks to compare against observed domestic prices in China.
The following is a list of input materials and components of golf cars produced and exported by a respondent company, Lvtong, along with the benefits resulting from less than adequate remuneration in terms of a percentage of sales.
Aluminum Sheet 0.15%
Aluminum Wheels 0.05%
Brake Assemblies 1.81%
Display Screens 0.08%
Electrical Relays 0.04%
Fabricated Steel 0.16%
Fabricated Aluminum 0.02%
High-Voltage Direct Current Contactors 0.12%
Iron Castings 0.02%
Molded Plastic Parts 2.86%
Seat Systems 0.19%
Stainless-Steel Inputs 0.03%
Steel Wheels 0.47%
Windshields 0.51%
Source: See USITC preliminary report
While the above percentages may seem small, adding to about 7%, this is a percentage of sales. If the cost of materials is 50% of the sales price on a per-unit basis, then the subsidy amounts to 14%. Nonetheless, based on this ITC calculation, the countervailing duty assessment would appear to have a smaller impact than anti-dumping assessments.
Benchmarks – Data collection and determination of anti-dumping margins
When it comes to anti-dumping duties, a determination of dumping margins is made, which becomes the basis for anti-duties. A dumping margin is the difference between the price a product sells for in the domestic market (in this case, China) and the landed price of the product in the importing country (in this case, the United States).
The formula for the anti-dumping margin is:
Domestic price – export price = Dumping margin
The dumping margin is often expressed as a percentage.
Two Chinese companies were individually examined by investigators, and the dumping margins calculated, based on the data and methodologies employed, may be seen in the example below. The two companies ae Guangdong Lvtong New Energy Electric Vehicle Technology Co., Ltd and Xiamen Dalle New Energy Automobile Co., Ltd. Companies comprising the rest of the industry were not individually examined, but will be eligible for assessment on an individual basis. All others fall into the category of “China-Wide”, as seen in the table.
Commerce’s preliminary determination of dumping margins
Based on the calculation in the table, anti-dumping duties, based on the dumping margins, would be substantial, ranging from 127% to 250%. The table also includes a subsidy calculation for the purpose of countervailing duties which is about the same range as the dumping margins. In this case, the subsides include not only materials and components, but also prices paid to the companies from purchases by government sources.
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
Preliminary Dumping Margins and Cash Deposit Levels
Exporter Producer Estimated Cash deposit
weighted- rate (adjusted
average dumping for subsidy
margin (percent) offset) (percent)
Guangdong Lvtong Guangdong Lvtong
New Energy Electric New Energy Electric
Vehicle Technology Co., Ltd Vehicle Technology Co., Ltd 127.35 127.29
Xiamen Dalle New Xiamen Dalle New
Energy Automobile Co., Ltd Energy Automobile Co., Ltd 262.55 262.55
Companies Eligible
for a Separate Rate 248.19 248.16
(see Appendix III)
China-Wide Entity * 478.09 478.09
* This rate is based on facts available with adverse inferences.
A dealer’s response to the possible protective duties
Here is an excerpt of a dealer’s posting regarding the impact on retail price:
The preliminary ruling from the U.S. government is a major turning point. As a result, many of these Chinese imports will become significantly more expensive to bring into the U.S. market. This is likely to lead to higher prices for these affected brands or adjustments in product components, features, or the country of origin. In light of these changes, we can expect disruptions to trade values and market conditions.
–Sunshine Golf Cars, Delray Beach, FL
Bottom Line: The roller coaster of uncertainties
Note that this article covers the preliminary findings and determinations of the U.S. ITC and the Department of Commerce. As noted, the final report is due in August, and we will follow up with that information. As a result, there are two key questions, the answers to which will be revealed in due course:
- Will Commerce maintain its findings in the final determination, and will the corrective duties fully compensate for the margins and subsidies we are now seeing?
- What will be the impact of the Trump administration’s tariff policies?
The Policy Roller Coaster—Not So Much Fun
