Foreign-Trade Zone 29; Application for Subzone Authority; Dow Corning Corporation; Invitation for Public Comment on Preliminary Recommendation

The FTZ Board is inviting public comment on its staff's preliminary recommendation pertaining to the application by the Louisville and Jefferson County Riverport Authority to establish a subzone at the Dow Corning Corporation (Dow Corning) facilities in Carrollton, Elizabethtown and Shepherdsville, Kentucky (Docket 20-2009). The staff's preliminary recommendation is for approval of the application with a restriction prohibiting admission of foreign status silicon metal subject to an anti-dumping duty (AD) or countervailing duty (CVD) order. The bases for this finding are as follows:

Analysis of the application record indicates that full approval of the request could negatively impact domestic silicon metal production. This finding is based primarily on the potential impact to domestic silicon metal prices from the volume of production involved and the cumulative impact of multiple applications potentially involving avoidance of AD/CVD duties on silicon metal used in export production.

Dow Corning is a major U.S. consumer of silicon metal, and access to the material for its export production without the payment of AD/CVD duties would decrease the average price of silicon metal paid by the company, providing a new, lower benchmark to be used in supply negotiations. Given the volume of silicon metal consumed by the company in the U.S., the ripple effect on silicon metal suppliers could be significant and the likely resulting impact would be a decline in the U.S. price of silicon metal.

Currently, very little silicon metal subject to AD/CVD orders is imported into the United States. However, due to the size of Dow Corning's production in the U.S., and the amount of silicon metal consumed by the company's operations, the potential increase in supply to the U.S. market and resulting price effect would likely be significant.

In part due to the AD/CVD duties in place, U.S. silicon metal prices have increased. This has led to the recent restarting of a shuttered silicon metal production facility in New York. A weakening of the U.S. price of silicon metal could threaten the viability of this facility as well as the continuation of production at other domestic facilities.

The preliminary recommendation also reflects the cumulative effect on domestic silicon metal prices and on the integrity of the domestic silicon metal industry's AD/CVD relief should there be multiple applications to avoid AD/CVD duties on silicon metal for export production. In addition to the Dow Corning application, a similar application is pending for REC Silicon in Moses Lake, Washington and we have received indication that further requests are being prepared for additional facilities.

Given the volume of silicon metal involved in the current and anticipated applications, even a limit on the amount of silicon metal subject to AD/CVD orders that could be used in the facilities for export production could have a significant impact on the U.S. price of silicon metal. The timing of that impact would also be occurring as domestic silicon metal production facilities are recovering and restarting, likely due (at least in part) to the relief provided through the AD/CVD orders that are in place. The FTZ regulations require that evaluations of manufacturing authority consider, “whether the approval is consistent with trade policy and programs, and whether its net economic effect is positive” (15 CFR 400.31(a)). In this case, given the potential impact on the silicon metal industry and based on the evidence currently on the record, the staff is unable to find that the net (national) economic effect of approving the use of silicon metal subject to AD/CVD orders for export production would be positive.

While unrestricted approval could have a negative impact, the issues raised do not extend to silicon metal not subject to AD/CVD orders. No arguments or evidence have been presented to the FTZ Board in opposition to FTZ savings on silicon metal not subject to AD/CVD orders and on other imported components. Such savings would allow for duty deferral, inverted tariff, scrap and export savings on imported silicon metal and other components not subject to AD/CVD orders. In addition, the facilities could benefit from logistical savings involved in FTZ operations. The savings from restricted approval would constitute a significant portion of those projected in the application and could help encourage continued production and employment at Dow Corning's Kentucky facilities.

Public comment on the preliminary recommendation and the bases for the finding is invited through July 12, 2010. Rebuttal comments may be submitted during the subsequent 15-day period, until July 27, 2010. Submissions (original and one electronic copy) shall be addressed to the Board's Executive Secretary at: Foreign-Trade Zones Board, U.S. Department of Commerce, Room 2111, 1401 Constitution Ave., NW., Washington, DC 20230.

For further information, contact Elizabeth Whiteman at Elizabeth.Whiteman@trade.gov or (202) 482-0473.