US-Israel trade dispute threatens to cripple Iron Dome

Finkelstein Metals, a key producer of ammunition for the Iron Dome, was accused of undercutting its prices in the U.S. leading to significant penalties by two U.S. federal agencies.

By Mike Wagenheim, JNS

While the need for the Iron Dome has rocketed since Hamas’s Oct. 7 massacre, a pair of U.S. federal government agencies are threatening to put a key manufacturer of parts for the missile defense system out of commission.

Finkelstein Metals, a small alloy exporter based in the northern Israeli city of Afula, faces customs duties and other penalties imposed separately by the U.S. Commerce Department and U.S. International Trade Commission.

Finkelstein Metals is the sole Israeli producer of brass, bronze and copper alloy products, making its 80-person operation a key cog in the industry.

Its products are of particular significance to the Israeli defense industry, including producing ammunition for Iron Dome batteries.

Without Finkelstein, Israel would likely need to turn to parts imported from Europe or elsewhere to maintain the Iron Dome, a risky proposition given the current state of geopolitics.

The International Trade Commission and the Department of Commerce are responsible for conducting antidumping and countervailing duty investigations under Title VII of the Tariff Act of 1930.

Under this law, U.S. industries may petition the commission and department for relief from imports sold in the United States at less than fair value, also known as dumping.

Importers who benefit from countervailable subsidies provided through foreign government programs can also be penalized. Dumping and certain subsidies are considered unfair trade practices.

“The USITC [U.S. International Trade Commission] and the U.S. Department of Commerce both have roles in these investigations, but each addresses a different question,” a USITC spokesperson told JNS.

“Commerce determines whether the alleged dumping or subsidizing is happening, and if so, the margin of dumping or amount of subsidy. The USITC determines whether the U.S. industry is materially injured or threatened with material injury by reason of the imports under investigation.”

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If both the Commerce Department and the USITC reach affirmative final determinations that unfair trade practices are being carried out, Commerce issues an antidumping duty order to offset the dumping or a countervailing duty order to offset the subsidy.

And that is exactly what has happened to Finkelstein, which has been determined to be undercutting American brass producers and has been paying punishing tariffs on exports to the United States as a result.

Two dominant U.S. players

The International Trade Commission refused to discuss Finkelstein Metals with JNS, saying its practice is to not comment on ongoing investigations.

According to Finkelstein, its Israeli customers—other than defense behemoths such as Elbit Systems and Rafael Advanced Defense Systems—are largely mom-and-pop businesses buying a few kilos of product.

While Finkelstein’s copper alloy exports to the United States account for less than 3% of the U.S. market, the region is key to the company’s survival, as 75% of its total sales come from America, where customers buy by the ton.

But two dominant U.S. players in the sector, Mueller Industries and Wieland Copper Products, accused Finkelstein of manipulating the market, and federal agencies have played along.

“We are tiny compared to these two manufacturers, which are making hundreds of millions of dollars,” Tsachi Apeloig, chairman of the board for Finkelstein, told JNS. “These two producers, they are about 85% of the market.”

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The U.S.–Israel Free Trade Agreement is largely supposed to protect Israeli companies in situations such as this. But an exception of the Tariff Act states that if the International Trade Commission determines that a domestic industry is materially injured or threatened with material injury by reason of imports from Israel, then those imports are eligible for cumulation with imports from the other subject countries.

In Finkelstein’s case, Israel has therefore been lumped together with brass rod imports from Brazil, India, Mexico, South Africa and South Korea. The cumulative effect of those imports was determined to have threatened the U.S. market, thereby exposing all of those exporters to tariffs and countervailing duties.

The American market

Apeloig said the tariffs will “practically” keep Finkelstein out of the American market. When that happens, “we might be out of business,” as the Israeli market is not enough for the company to maintain the capacity at its plant.

Apeloig lamented the situation, pointing out that while a 2018 trade petition was previously brought against the Israel Chemicals Group (now called the ICL Group)—which held a significant share of the U.S. market—that petition was ultimately denied, and no small Israeli company has been pursued in this way before.

“With 80 employees and a turnover of $35 million-$40 million, how can we be materially hurting the American market? It’s protectionism, and they don’t care really what you tell them,” said Apeloig. “Their main intention is to protect the U.S. industry, and they are very aggressive about it.”

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Apeloig told JNS that both the Israeli economy and industry and defense ministries were involved in defending Finkelstein and protesting against the trade petition.

The defense ministry did not respond to multiple requests by JNS for comment.

The Foreign Trade Administration in the Ministry of Economy and Industry sent a statement to JNS, saying that “Israel’s Ministry of Economy and Industry, as well as the Embassy of Israel in D.C., have been intensively involved in the investigation since it began and remains committed to supporting the Israeli industry throughout the process.”

Apeloig told JNS that the Israeli government is “fully involved, and they are very, very concerned because this is a serious danger to the entire small industries in Israel. All of a sudden, they’ve decided that even a small company like Finkelstein is a serious threat. And now the government is really in panic that this will affect all the other companies, and they’re certain that this is what will happen.”

Finkelstein is appealing the American decision, but that process can take three to five years and the tariffs have already been imposed, though they would be returned upon a successful appeal.

“It’s very costly. And God knows what will be at the end of it,” said Apeloig. “By the time the deal will end, we’ll most probably be dead.”