American Keg popped a cold one on Friday.
The U.S. government slammed Chinese and German stainless-steel keg makers with unfair-trade tariffs, saying that they dumped below-cost kegs into the U.S. market.
Friday morning’s 3-0 vote at the U.S. International Trade Commission throws a lifeline to the 30-employee Pottstown firm, the only U.S. stainless-steel beer keg manufacturer, which has been getting crushed by low-cost imports.
Investigators for the U.S. Commerce Department also found during the probe that the Chinese government subsidized keg manufacturers, giving them an unfair competitive advantage. Chinese keg imports face unfair-trade tariffs of 16% to 222%, based on Friday’s action. German keg imports face tariffs of 7.5%.
“We are absolutely thrilled,” American Keg chief executive Paul Czachor said Friday on the way to a celebratory lunch with employees at Sly Fox Brewing Co. near his plant. “Great day.”
Czachor said he plans to boost keg-manufacturing capacity — which includes a manufacturing plant and warehouse in Pottstown. “We’re going to use more domestic stainless steel. American Keg will invest more, hire more, and produce more kegs,” he said.
Czachor noted that foreign keg manufacturers stockpiled 403,000 kegs in the United States earlier this year, ahead of the duties. The figures were contained in documents in the trade case. This year’s inventories of imported kegs was almost double the 232,500 kegs available in 2018.
The import stockpiles will diminish the immediate impact of the higher tariffs, Czachor said.
St. Louis-based Anheuser-Busch LLC opposed the penalties on imports and has warned of higher beer prices with the keg tariffs.
Anheuser-Busch and keg importers say that American Keg can’t satisfy the high volume of quality kegs needed to sate the nation’s beer thirst. American Keg also misjudged the U.S. craft brewery market, they say. Those breweries now tend to lease barrels from big keg-leasing companies instead of buying them from American Keg, Anheuser-Busch has said.
American Keg does not disclose how many kegs it manufactures. Czachor said that the company has a business leasing kegs to brewpubs and is seeking to crack into the broader leasing market.
Anheuser-Busch had no immediate comment Friday on the tariffs. Anheuser-Busch and the foreign keg manufacturers can appeal the commission’s decision to the U.S. Court of International Trade.
The Pennsylvania Manufacturers’ Association lauded the commission’s decision.
“Our government is finally addressing Chinese predatory trade practices,” said David N. Taylor, the group’s president and CEO.
But Marc L. Busch, professor of international business diplomacy at Georgetown University, said, “This outcome won’t do anything good for any of the protagonists. Foreign vendors hit with the tariffs will lose; consumers of imported kegs will lose; and even American Keg will lose, lulled by these short-term tariffs into not making the necessary adjustments to compete.”
U.S. trade laws are designed to protect industries. In this case, the trade commission acted to protect one company.
More than 15 Chinese companies failed to respond to the U.S. trade probe, according to the Commerce Department.
Penglai Jinfu Stainless Steel Products, one of the Chinese companies that did not respond, was an Anheuser-Busch supplier and appears to be owned by the Gansu provincial government in China, according to websites and trade documents.
Some Chinese keg makers could abandon the U.S. market, experts say. The penalties also could enable American Keg to boost its prices and profits. The most popular kegs are one-sixth kegs for about $75, while one-half kegs go for $115, according to brewers.
American Keg’s Washington attorney, Whitney Rolig, said “now this company will have a real shot at selling kegs.”