Notice of Initiation of Antidumping Duty Investigation: Tetrahydrofurfuryl Alcohol from the People's Republic of China

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Initiation of an Antidumping Duty Investigation.

EFFECTIVE DATE:

July 18, 2003.

FOR FURTHER INFORMATION CONTACT:

Robert Bolling at (202) 482-3434 or Laurel LaCivita at (202) 482-4243, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

INITIATION OF INVESTIGATION:

The Petition

On June 23, 2003, the Department of Commerce (“the Department”) received a petition filed in proper form by Penn Specialty Chemicals, Inc. (“petitioner”). On July 7, 2003, July 10, 2003 and July 11, 2003, the Department received amendments to the petition filed in proper form by the petitioner.

In accordance with section 732(b)(1) of the Tariff Act of 1930 (“the Act”), the petitioner alleges that imports of tetrahydrofurfuryl alcohol (“THFA”) from the People's Republic of China (“the PRC”) are, or are likely to be, sold in the United States at less than fair value within the meaning of section 731 of the Act, and that imports from the PRC are materially injuring, or are threatening to materially injure, an industry in the United States.

The Department finds that the petitioner filed this petition on behalf of the domestic industry because it is an interested party as defined in sections 771(9)(c) and 771(9)(D) of the Act and has demonstrated sufficient industry support with respect to the antidumping investigation that they are requesting the Department to initiate. See infra, “Determination of Industry Support for the Petition.”

Scope of the Investigation

For the purpose of this investigation, the product covered is tetrahydrofurfuryl alcohol (C5H10O2). THFA, a primary alcohol, is a clear, water white to pale yellow liquid. THFA is a member of the heterocyclic compounds known as furans and is miscible with water and soluble in many common organic solvents. THFA is currently classified in the Harmonized Tariff Schedules of the United States (“HTSUS”) under subheading 2932.13.00.00. Although the HTS subheadings are provided for convenience and for the purposes of the U.S. Bureau of Customs and Border Protection (“Customs”), the Department's written description of the merchandise under review is dispositive.

As discussed in the preamble to the Department's regulations (Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), we are setting aside a period for parties to raise issues regarding product coverage. The Department encourages all parties to submit such comments within 20 calendar days of publication of this notice. Comments should be addressed to Import Administration's Central Records Unit, Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and consult with parties prior to the issuance of the preliminary determination.

Determination of Industry Support for the Petition

Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that the Department's industry support determination, which is to be made before the initiation of the investigation, be based on whether a minimum percentage of the relevant industry supports the petition. A petition meets this requirement if the domestic producers or workers who support the petition account for: (1) at least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 732(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department shall: i) poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A), or ii) determine industry support using a statistically valid sampling method.

Section 771(4)(A) of the Act defines the “industry” as the producers of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The International Trade Commission (“ITC”), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (section 771(10) of the Act), they do so for different purposes and pursuant to a separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the like product, such differences do not render the decision of either agency contrary to the law.

Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation,” i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition.

Based on our analysis of the information presented by the petitioner, we have determined that there is a single domestic like product, THFA, which is defined in the “Scope of the Investigation” section above, and we have analyzed industry support in terms of this domestic like product.

In its initial petition and subsequent submissions, the petitioner states that it comprises 100 percent of U.S. THFA production. Based on all available information, we agree that the petitioner comprises 100 percent of the domestic THFA production.

Our review of the data provided in the petition and other information readily available to the Department indicates that the petitioner has established industry support representing 100 percent of the total production of the domestic like product, requiring no further action by the Department pursuant to section 732(c)(4)(D) of the Act. In addition, the Department received no opposition to the petition from domestic producers of the like product. Therefore, the domestic producer (or workers) who supports the petition accounts for at least 25 percent of the total production of the domestic like product, and the requirements of section 732(c)(4)(A)(i) of the Act are met. Furthermore, the domestic producer who supports the petition accounts for more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for or opposition to the petition. Thus, the requirements of section 732(c)(4)(A)(ii) of the Act also are met. Accordingly, the Department determines that the petition was filed on behalf of the domestic industry within the meaning of section 732(b)(1) of the Act.

Period of Investigation

The anticipated period of investigation (“POI”) is October 1, 2002, through March 31, 2003.

Export Price and Normal Value

The following are descriptions of the allegations of sales at less than fair value upon which the Department based its decision to initiate this investigation. The sources of data for the deductions and adjustments relating to U.S. and foreign market prices, constructed value (“CV”), and factors of production are discussed in greater detail in the Initiation Checklist. Should the need arise to use any of this information as facts available under section 776 of the Act in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate.

Regarding an investigation involving a non-market economy (“NME”) country, the Department presumes, based on the extent of central government control in an NME, that a single dumping margin, should there be one, is appropriate for all NME exporters in the given country. In the course of this investigation, all parties will have the opportunity to provide relevant information related to the issues of a country's NME status and the granting of separate rates to individual exporters. See e.g., Notice of Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585, 22586-87 (May 2, 1994).

Export Price

The petitioner based export price (“EP”) on price quotes from Chinese exporters of THFA to unaffiliated purchasers in the United States. The petitioner calculated net U.S. price by deducting foreign inland freight, domestic inland insurance, ocean freight, and brokerage and handling. Petitioner alleged that India was the appropriate surrogate country (see discussion below) and calculated the adjustments to the EP using the surrogate values recorded in the memoranda to the file from Drew Jackson to Howard Smith, Surrogate Values Used for the Preliminary Results of the Administrative Review of Potassium Permanganate from the People's Republic of China: January 1, 2001 through December 31, 2001 dated January 31, 2003 (“Surrogate Value Memorandum I”), and Surrogate Values Used for the Preliminary Results of the Administrative Review of Potassium Permanganate from the People's Republic of China: January 1, 1999 through December 31, 1999 dated January 30, 2002 (“Surrogate Value Memorandum II”).

We adjusted petitioner's calculation of the surrogate values used to calculate foreign inland freight, domestic inland insurance, ocean freight, and brokerage and handling for inflation. Petitioner used the unadjusted surrogate values recorded in the Department's surrogate value memoranda for potassium permanganate, but did not account for inflation from the date of the source data to the POI. Therefore, we went back to the original source data for each adjustment and inflated the reported price to the POI using the website of the Office of the Economic Adviser to the Government of India, Ministry of Commerce and Industry, http://www.eaindustry.nic.in . We then converted all unit prices expressed in rupees per metric tons to dollars per pound.

The petitioner provided price quotes for the subject merchandise which we determined were sufficient for initiation purposes. In addition, petitioner provided average unit values (“AUVs”) calculated from U.S. import statistics as a second basis to estimate dumping margins. However, since these AUVs were calculated using information from a basket category HTS number, we did not use these average unit values calculated from U.S. import statistics as a basis of estimated dumping margins. Should the need arise to use any of this information as facts available under section 776 of the Act in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate. For our complete analysis of EP, see the Initiation Checklist.

Normal Value

The petitioner asserts that the PRC is an NME country, and notes that in all previous investigations the Department has determined that the PRC is an NME. See e.g., Notice of Final Determination of Sales at Less Than Fair Value: Bulk Aspirin From the People's Republic of China, 65 FR 33805 (May 25, 2000). The PRC will be treated as an NME unless and until its NME status is revoked. See section 771(18)(C)(i) of the Act. Because the PRC's status as an NME remains in effect, the petitioner's estimated the dumping margin using a NME methodology.

For normal value (“NV”), the petitioner based the factors of production (“FOP”), as defined by section 773(c)(3) of Act, on the consumption rates for furfuryl alcohol (“FA”) reported in Technical Progress in Furfuryl Alcohol Production, by Ma Bao-Qi and Chen Fan-Geng of Xian Petroleum College (“Xian Report”), Xian, and on its own experience. Petitioner contends that consumption rates for the Chinese THFA industry are not reasonably available, and that FA is an intermediate product and feedstock in the production process for THFA. Therefore, petitioner used the factor values included in the Xian Report for the production of FA and its own experience as the basis of factor values for the production steps required to convert FA to THFA. As a result, petitioner contends that information provided in the Xian Report, and petitioner's own production experience, is the only information reasonably available to petitioner concerning THFA production in China. Thus, when information from the Xian Report was not available, petitioner assumed that producers in the PRC use the same inputs in the same quantities as the petitioner. Based on the information provided by the petitioner, we believe that the petitioner's FOP methodology represents information reasonably available to the petitioner and is appropriate for purposes of initiating this investigation.

The petitioner asserts that India is the most appropriate surrogate country for the PRC, claiming that India is: i) a market economy, and, ii) at a level of economic development comparable to the PRC in terms of per capita GNP. Petitioner asserts that China is the only other country known to produce THFA. Therefore, none of the potential surrogate countries, including India, are significant producers of the subject merchandise. Petitioners note however, that India is a significant producer of furfural and FA which are intermediate products and feedstocks in the production process for THFA and based on the information provided by the petitioner, we believe that the petitioner's use of India as a surrogate country is appropriate for the purpose of initiating this investigation.

In accordance with section 773(c)(4) of the Act, petitioner valued FOP, where possible, on reasonably available, public surrogate data from India. Petitioner valued furfural, hydrogen and nitrogen based on Indian import values, as published in the 2000 and 2001 Monthly Statistics of Foreign Trade of India, and inflated based on the Indian wholesale price index (“WPI”). Petitioner was not able to obtain publicly available data for the furfural-to-FA and the FA-to-THFA catalysts, and therefore, used imports into the United States from India for HTS 3815.90.30.00 (furfural-to-FA catalyst) and HTS 3815.11.00.00 (FA-to-THFA catalyst) as reported in the World Trade Atlas. The Department is not using Indian import values into the United States because India maintains broadly available, non-industry specific export subsidies. It is the Department's policy, based on our earlier determinations and legislative history, to reject such factor input values, whether they are market economy purchases or import statistics into a surrogate country, on the basis that we have found that the existence of these subsidies provide sufficient reason to believe or suspect that export prices from those countries are distorted. Therefore, we set the surrogate values for these factors to zero. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Ball Bearings and Parts Thereof from the People's Republic of China, 68 FR 10685 (March 6, 2003) and accompanying Issues and Decision Memorandum. See Attachment IV of the Initiation Checklist.

Petitioner valued labor using the regression-based wage rate for the PRC provided by the Department, in accordance with section 351.408(c)(3) of the Department's regulations. Petitioner valued maintenance supplies based on its own experience. However, the Department has determined that maintenance expenses should be classified as and included in overhead expenses in the calculation of normal value based on the factors of production. See Persulfates from the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 64 FR 69494 (December 13, 1999). Therefore, in order to eliminate the possibility of double counting overhead expenses which are otherwise included in our analysis, we have set the value of maintenance supplies to zero. Petitioner valued steam produced from coal, water, electricity, factory overhead, SG&A and profit using the Surrogate Values Memorandum I. We revised petitioner's factor value calculation for water to take into account inflation from the time period of the original source documentation to the POI. The petitioner inflated these figures to the current POI using the WPI reported on the Indian Office of Economic Advisor website, www.eaindustry.nic.in , for chemicals and chemical products.

Fair Value Comparisons

Based on the data provided by the petitioner, there is reason to believe that imports of THFA from the PRC are being, or are likely to be, sold at less than fair value. As a result of a comparison of EP to NV, petitioner's calculated estimated dumping margins, as adjusted by the Department, range from 159.26 to 200.00 percent.

Allegations and Evidence of Material Injury and Causation

The petitioner alleges that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the individual and cumulated imports of the subject merchandise sold at less than fair value.

The petitioner contends that the industry's injured condition is evident in the declining trends in financial performance, production volume, capacity utilization rates, U.S. shipments, domestic prices, market share, reduced profitability, capital expenditures and research, and development expenditures. The allegations of injury and causation are supported by relevant evidence including affidavits of company officials, U.S. Census Bureau import statistics, lost sales, and pricing information. We have assessed the allegations and supporting evidence regarding material injury and causation, and we have determined that these allegations are properly supported by adequate evidence and meet the statutory requirements for initiation. See Initiation Checklist.

Initiation of Antidumping Investigation

Based upon our examination of the petition on THFA, we have found that it meets the requirements of section 732 of the Act. Therefore, we are initiating an antidumping duty investigation to determine whether imports of THFA from the PRC are being, or are likely to be, sold in the United States at less than fair value. Unless this deadline is extended pursuant to section 733(b)(1)(A) of the Act, we will make our preliminary determination no later than 140 days after the date of this initiation.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the public version of the petition has been provided to the representatives of the government of the PRC. We will attempt to provide a copy of the public version of the petition to each exporter named in the petition, as provided for under 19 CFR 351.203(c)(2).

ITC Notification

We have notified the ITC of our initiation as required by section 732(d) of the Act.

Preliminary Determination by the ITC

The ITC will preliminarily determine no later than August 7, 2003, whether there is a reasonable indication that imports of THFA from the PRC are causing material injury, or threatening to cause material injury, to a U.S. industry. A negative ITC determination will result in the investigation being terminated; otherwise, this investigation will proceed according to statutory and regulatory time limits.

This notice is issued and published pursuant to section 777(i) of the Act.