As reported by IntelTrak in August 2016, Zhongwang International Group has been in talks to acquire Cleveland-based aluminum producer Aleris Corporation. It was recently announced, however, that a group of twelve U.S. Senators sent a letter to U.S. Treasury Secretary Jack Lew calling on the government to block this acquisition on the grounds that it would threaten U.S. national security interests. The Senators pointed to the role of Aleris in producing aluminum components for the U.S. automotive and aerospace industries and its place in the foundation of the U.S. defense industrial base.
The company, for example, makes aluminum protective plating for military vehicles in Germany. According to the letter, the deal would create “serious risk that sensitive technologies and knowhow will be transferred to China…imperiling U.S. defense interests.” A spokesman for Aleris, Jason Saragian, defended the acquisition saying that the technology used to produces the armor plating is an industry standard and not unique to the company and that, “Less than one percent of our sales go into defense applications.” The types of risk being highlighted by the Senators, however, is asymmetric in nature, making irrelevant the percentage of the company’s overall sales that are implicated by this kind of specialized capability.
It is also the case that, in the month following the announcement of the pending purchase, the U.S. Commerce Department began investigating Zhongwang for its efforts to dodge U.S. tariffs. Zhongwang was discovered to have been stockpiling aluminum in Mexico by disguising its aluminum in the form of pallets before melting them into billets for shipment onto the U.S. This strategy to avoid tariffs is known as transshipping.
Further, according to a report put out by Dupre Analytics, the method used by Zhongwang to bring its product into the U.S. was to sell it to a pair of companies controlled by the Liu family (the owners of Zhongwang): American Apex Aluminum; and Century American Aluminum. The two companies are under the umbrella of PCA/Perfectus, an entity reportedly controlled by the Liu family. The Mexican remelt facility that converted the aluminum extrusions back into billets is operated by the Aluminicaste Group, also owned controlled by the Liu family. Also according to Dupre, the international network of companies controlled by the Zhongwang owners includes: Global Vietnam Aluminum, a remelt facility based in Vietnam; and GT88 Capital PTE, a Singaporean shell-company that is used to ship aluminum from China to Aluminicaste in Mexico.
The group of Senators objecting to this deal is led by Ranking Senate Finance Committee Member Ron Wyden and includes Senators Chuck Schumer, Bob Casey, Joe Manchin, Kirsten Gillibrand, Joe Donnely, Rob Portman, Debbie Stabenow, Jeff Merkley, Amy Klobuchat, Tammin Baldwin and Al Franken. Prior to any of these allegations, the company was found, in 2010, to have benefited from illegal subsidies from the Chinese government and of dumping its products at exorbitantly low prices on the U.S. market.