Sept. 10 (Bloomberg) -- China “strongly opposes” a ruling by the U.S. Commerce Department to impose duties of as much as 31 percent on steel pipes, the Ministry of Commerce said today.

The U.S. decision doesn’t comply with rules set by the World Trade Organization, the ministry said on its Web site.

The average duties on $2.8 billion in annual imports of the pipe, used in oil and gas wells, will be 21.3 percent, the Commerce Department said yesterday in a preliminary decision. The ruling agreed with American producers led by U.S. Steel Corp. that the imports were supported by unfair subsidies.

The tariffs may help U.S. Steel and other domestic producers weather a drop in pipe demand following last year’s collapse in oil prices. The U.S. is also investigating a complaint about Chinese tires, and China is probing subsidies allegedly paid to U.S. steelmakers.

“The miscalculation on the alleged subsidies has hurt the interests of Chinese companies, and China urges the U.S. to rectify its mistakes in the final ruling,” the ministry said.

The pipe case, the largest so-called countervailing duty complaint filed against Chinese-made products, was brought by the United Steelworkers union; U.S. Steel, the largest U.S.- based steelmaker; U.S. operations of Evraz Group SA, Russia’s second-largest mill; and Pennsylvania-based Wheatland Tube Co.

Falling Exports

China produced more than 500 million metric tons of crude steel last year. Steel product exports may plunge 60 percent to 20 million tons this year, the China Commercial Distribution and Productivity Promotion Center, an affiliate of the commerce ministry, said yesterday.

After the ruling is published in the Federal Register, importers of the product -- known as oil country tubular goods -- will have to deposit duties of the assigned amount, pending a final ruling later this year by the Commerce Department and a separate decision by the U.S. International Trade Commission.

The Commerce Department said in its decision that steel pipe from Jiangsu Changbao Steel Tube Co. would face duties of 24 percent; Tianjin Pipe Group Corp., 11 percent; Wuxi Seamless Pipe Co., 25 percent; and Zhejiang Jianli Enterprise Co., 31 percent. All other producers must pay the trade-weighted average of those figures, or 21 percent.

“I’m worried we might face higher duties in the final ruling,” Li Liancang, export manager at state-owned Tianjin Pipe, said. “Chinese producers haven’t exported to the U.S. since May because of the investigation.”

Wu Xinchun, deputy secretary general of the China Iron & Steel Association for steel trade, couldn’t be reached for comment.

‘Damage Done’

“This finding once again confirms what we have known for many years -- the Chinese steel industry benefits from substantial subsidies,” Dan DiMicco, the chief executive officer of Nucor Corp., the second largest U.S. steelmaker, said in an e-mail. “Unfortunately the damage has already been done and inventories are still at near record levels,” he said.

In the steel-pipe case, U.S. manufacturers saw their gross profits almost triple to $2.42 billion in 2008 from the previous year, according to the International Trade Commission. Record oil prices drove demand for the product. While imports from China surged, U.S. production and employment increased too.

China has filed a complaint to the World Trade Organization arguing that the U.S. punishes China twice for the same subsidies. The U.S. categorizes China as a subsidized economy, allowing higher anti-dumping duties, and then imposes tariffs for the alleged subsidies too, according to the complaint.

The Asian nation’s commerce ministry said Aug. 19 that it was investigating complaints from its mills that U.S. exporters received fuel subsidies from their government.

China became a net crude-steel importer for the first time in three years in March as the government’s 4 trillion yuan ($586 billion) stimulus spending spurred domestic demand even as exports collapsed.

--Helen Yuan, Mark Drajem, Li Yanping. Editors: Tan Hwee Ann, Simon Casey.

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net; Helen Yuan in Shanghai at hyuan@bloomberg.net

Last Updated: September 10, 2009 06:48 EDT