[Federal Register Volume 61, Number 13 (Friday, January 19, 1996)]
[Notices]
[Pages 1339-1343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-625]
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DEPARTMENT OF COMMERCE
[A-580-008]
Color Television Receivers From Korea; Initiation of
Anticircumvention Inquiry on Antidumping Duty Order
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Initiation of Anticircumvention Inquiry.
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SUMMARY: On the basis of an application filed with the Department of
Commerce (the Department) on August 11, 1995, we are initiating an
anticircumvention inquiry to determine whether imports of color
television receivers (CTVs) from Mexico and Thailand are circumventing
the antidumping duty order on color television receivers from the
Republic of Korea (49 FR 18336, April 30, 1984).
[[Page 1340]]
EFFECTIVE DATE: January 19, 1996.
FOR FURTHER INFORMATION CONTACT: Joseph Hanley or David Genovese,
Office of Antidumping Compliance, Import Administration, International
Trade Administration, U.S. Department of Commerce, Washington, D.C.
20230; telephone (202) 482-3058/4697.
SUPPLEMENTARY INFORMATION:
Background
On August 11, 1995, the Department received an application filed by
the International Brotherhood of Electrical Workers, the International
Union of Electronic, Electrical, Salaried, Machine & Furniture Workers,
and the Industrial Union Department (the Unions), requesting that the
Department conduct an anticircumvention inquiry on the antidumping duty
order on CTVs from Korea pursuant to section 781(b) of the Tariff Act
of 1930, as amended (the Tariff Act). The Unions allege that Samsung
Electronics Co., (Samsung), L.G. Electronics Inc., ((LGE) formerly
Lucky Goldstar Co., Ltd.), and Daewoo Electronics Co., Ltd. (Samsung),
are circumventing the order by shipping Korean-origin color picture
tubes (CPTs), printed circuit boards (PCBs), color television kits (TV
kits), chassis, and other materials, parts, and components to plants
operated by related parties in Mexico. These parts are then assembled
in Mexico into CTVs and shipped to the United States free of any
antidumping duties. Additionally, the Unions allege that Samsung is
circumventing the order by shipping Korean-origin color picture tubes
and other CTV parts to a related party in Thailand for assembly into
complete CTVs prior to exportation to the United States where they
enter free of any antidumping duties.
Initiation of Anticircumvention Proceeding
In accordance with section 781(b) of the Tariff Act, the Department
may find circumvention of an order when the following four conditions
are met:
(1) The merchandise imported into the United States is of the same
class or kind as the merchandise that is subject to the order.
(2) Before importation into the United States, the merchandise is
completed or assembled from merchandise which is subject to the order
or is produced in the foreign country to which the order applies.
(3) The process of assembly or completion is minor or
insignificant.
(4) The value of the merchandise produced in the foreign country to
which the antidumping duty order applies is a significant portion of
the total value of the merchandise exported to the United States.
In order to determine whether a circumvention inquiry is warranted,
we evaluated the publicly available evidence submitted by the Unions
using each of the criteria listed above. We have concluded that the
evidence submitted is sufficient to warrant a circumvention inquiry.
Each criteria is separately addressed below.
(1) Is the Merchandise Imported Into the United States of the Same
Class or Kind as the Merchandise That is Subject to the Order?
The Unions assert that the merchandise completed or assembled in
Mexico and Thailand and imported into the United States is subject to
the order which covers all CTVs, complete or incomplete, regardless of
HTS classification. With regard to Samsung's shipments of CTVs from
Thailand to the United States, the Unions have concluded that data
taken from ship manifests indicate that an estimated 243,062 CTVs were
shipped by Samsung from Thailand to the United States during the period
January 1994 through March 1995. The Unions have not been able to
estimate the number of CTVs that respondents (Samsung, Goldstar, and
Daewoo) are exporting to the United States from Mexico because they are
transported by truck or rail and are not covered by automated manifest
data. However, the Unions have concluded that a clear indication that
respondents are supplying the U.S. market with CTVs from Mexico is the
fact that respondents have not lost U.S. market share despite the fact
that they have terminated CTV assembly in the United States and have
dramatically reduced the amount of direct CTV shipments from Korea.
(2) Before Importation Into the United States, is the Merchandise
Completed or Assembled From Merchandise Which is Subject to the Order
or is Produced in the Foreign Country to Which the Order Applies?
The Unions have supported their assertion that the merchandise
completed or assembled in Mexico is of Korean origin by submitting data
taken from ship manifests that indicate that respondents are shipping
CPTs, CTV kits, chassis, tuners, deflection yokes, flyback
transformers, or unspecified CTV parts of Korean origin to their
affiliated companies in Mexico. The Unions do not have access to
manifest or bill of lading information on shipments by Samsung of
Korean origin CTV parts and subassemblies to Thailand. However, the
Unions contend that the overall patterns of trade between Korea,
Thailand and the United States indicate a dramatic increase in the
overall amount of CTV parts exported from Korea to Thailand and a
corresponding increase in the amount of CTVs imported into the United
States from Thailand. The Unions contend that Samsung's activities in
Mexico, coupled with the fact that Samsung established a CTV assembly
manufacturing facility in Thailand after the CTV and CPT orders were in
place, warrants a circumvention inquiry into Samsung's operations in
Thailand as well.
(3) Is the Process of Assembly or Completion Minor or Insignificant?
When considering whether the process of assembly or completion is
minor or insignificant, section 781(b)(2) of the Tariff Act further
instructs the Department to take into account: (1) The level of
investment and research and development in the foreign country; (2) the
nature of the production process in the foreign country; (3) the extent
of production facilities in the foreign country; and, (4) whether the
value of the processing performed in the foreign country represents a
small proportion of the value of the merchandise imported into the
United States.
The Unions, relying on the characteristics of the CTV industry, the
legal framework under which respondents' affiliated companies have been
established in Mexico, and the amount and type of CTV parts shipped to
Mexico and Thailand, conclude that the process of assembly or
completion in these countries is minor or insignificant.
The Unions explain that the production of CTVs may be segmented
into three parts: (1) Product development, engineering and design; (2)
component production; and (3) assembly and testing of finished
televisions. According to the Unions, the first two segments of CTV
production require large amounts of capital investment. In contrast,
the assembly and testing of finished televisions is a relatively
inexpensive labor-intensive operation that tends to be located where
economic conditions, such as labor costs, are inexpensive. According to
a cost analysis submitted by the Unions, the cost of labor and overhead
for final assembly operations is less than seven percent of the overall
cost of producing a CTV.
The Unions claim that data from ship manifests and overall patterns
of trade reflected in U.S. import and Korean export statistics clearly
indicates that respondents have continued to locate
[[Page 1341]]
the first two segments of CTV production (product development,
engineering and design, and component production) in Korea while
shifting only the relatively minor or insignificant operations of
assembly and testing to Mexico and Thailand.
(4) Is the Value of the Merchandise Produced in the Foreign Country to
Which the Antidumping Duty Order Applies a Significant Portion of the
Total Value of the Merchandise Exported to the United States?
The Unions have submitted information taken from ship manifests
that they claim indicates that the various CTV parts and components
shipped from Korea to Mexico account for a significant portion of the
total value of the CTVs exported to the United States. According to the
Unions, the value of a CPT alone constitutes a significant portion of
the value of a CTV. The Unions, citing Color Picture Tubes from Canada,
Japan, Republic of Korea & Singapore; Negative Final Determination of
Circumvention of Antidumping Duty Orders, 56 FR 9667, 9669 (March 7,
1991), claim that a CPT typically represents between 30 and 45 percent
of the value of a finished CTV. The Unions assert that this ratio has
not changed significantly since the CPT finding. The Unions claim that
official data published by the Government of Korea show that a total of
3,635,630 CPTs were exported from Korea to Mexico during the period
January 1994 through March 1995. Using manifest data for the same
period, the Unions estimate that Samsung, Goldstar, and Daewoo shipped
a total of 1,078,995 CPTs to affiliated parties in Mexico.
Furthermore, using ship manifests, the Unions have identified
numerous shipments by respondents of CTV kits to their affiliates in
Mexico. While the Unions acknowledge that the ship manifests do not
provide enough information to determine what each CTV kit contains, the
Unions claim that in some cases the unit weights of the kits suggest
that the kit contains a significant portion of a finished CTV. In
addition to CPTs and CTV kits, the Unions have used manifest data to
identify other shipments of CTV parts along with other electronic parts
or equipment they believe may be associated with CTV production. The
Unions acknowledge that, due to the limited information provided on
ship manifests, it was often necessary to estimate the total quantities
submitted using the reported weight or model listed on the manifest.
Furthermore, in cases where the manifest descriptions were vague, the
Unions acknowledge that it was necessary to subjectively interpret the
descriptions of the merchandise. As noted earlier, the Unions stated
that they do not have access to manifest or bill of lading information
on shipments by Samsung of Korean origin CTV parts and subassemblies to
Thailand. Therefore, the Unions have relied on Korean export figures
which show an increase in the amount of CPTs and PCBs exported from
Korea to Thailand at the same time that U.S. imports of CTVs from
Thailand began to increase. The Unions maintain that a general picture
emerges after reviewing the numerous shipments by respondents to Mexico
and the Korean export data to Thailand that the amount and type of CTV
parts shipped to these countries for assembly and testing indicate that
such parts constitute a significant portion of the total value of the
finished CTV.
Additional Factors
In addition to the criteria discussed above, section 778(b)(3) of
the Tariff Act instructs us to consider other factors before
determining whether to include the merchandise in question in an
antidumping duty order. These are: (1) The pattern of trade; (2)
whether a relationship exists between the manufacturer or exporter and
the third country assembler of the product; and (3) whether imports of
the product into the foreign country have increased after the
initiation of the investigation which resulted in the issuance of the
order.
First, the Unions assert that the pattern of trade clearly
demonstrates that respondents have been circumventing the order by
shifting the CTV assembly operations to Mexico and Thailand and
shipping the assembled CTVs to the United States. The Unions, using
U.S. import statistics, show that U.S. imports of CTVs from Korea began
a sharp and consistent decline from a level of 1,811,613 in 1987 to
156,781 in 1994. Furthermore, the Unions note that overall U.S. imports
of CTVs from Mexico, which were practically nonexistent in 1983, rose
consistently to a level of 11,007,211 by 1994. During this period, the
Unions contend that according to Korean export figures, CPT exports
from Korea to the United States fell from a level of 1,367,024 in 1986
to 63,934 in 1994 while exports of CPTs from Korea to Mexico rose from
3,170 in 1986 to 2,893,579 in 1994. The Unions contend that there was a
similar increase in exports from Korea to Mexico of printed circuit
boards used in CTVs with 1988 exports of 1,507,747 rising to a level of
14,078,148 in 1994.
The Unions assert that such a pattern of trade is equally apparent
with Thailand. According to Korean export figures submitted by the
Unions, Korean exports of CPTs and PCBs to Thailand rose from a 1988
level of 186,904 and 81,806 respectively, to a 1994 level of 996,576
and 26,234,820. Further, the Unions note that U.S. import figures show
a rise in overall U.S. CTV imports from Thailand from zero in 1988 to
1,705,430 in 1994. More specifically, the Unions, using ship manifest
data, estimate that Samsung exported 243,062 CTVs from Thailand to the
United States during the period January 1994 through March 1995.
Second, the Unions' allege that CTVs are being completed in Mexico
by Daewoo Electronics De Mexico S.A., Goldstar Mexico S.A., and Samsung
Mexicana, which are affiliated with the respondents and in Thailand by
Thai Samsung Electronics Co., Ltd., which is affiliated with Samsung.
Finally, the Unions assert that the pattern of trade evidence discussed
above demonstrates that Korean exports of CTV parts and components to
Mexico and Thailand increased after the May 27, 1983 initiation of the
less than fair value investigation.
Based on our review of the foregoing allegations and supporting
information submitted in the circumvention application, we find that
the Unions' application contains sufficient evidence to warrant a
circumvention inquiry. Therefore, we are initiating a circumvention
inquiry concerning the antidumping duty order on CTVs from Korea (case
number A-580-008), pursuant to section 781(b) of the Tariff Act. The
Department will not suspend liquidation at this time. However, the
Department will instruct Customs to suspend liquidation in the event of
an affirmative preliminary determination of circumvention.
Respondents have challenged the initiation of this
anticircumvention inquiry on several grounds. As discussed below, these
arguments do not provide a legal basis for rejecting the Unions'
application for an inquiry.
Standing
A. Interested Party Status
The Department's regulations provide that any interested party may
file an application to determine whether merchandise imported into the
United States is circumventing an existing order. 19 C.F.R.
Sec. 353.29(b). The statute defines ``interested party'' to include
unions that are ``representative of'' the domestic industry.
Respondents argue that, because the statute defines ``industry'' as
``the producers as a whole'' of the like product, the ``union
[[Page 1342]]
cannot qualify as an interested party if it represents only an isolated
segment of all domestic workers.'' To be representative, the views of
the workers represented by the union ``must be `typical' or must
coincide with those of at least a `major proportion' of the industry.''
Respondents note that the Unions do not represent the workers employed
by six domestic producers that are not unionized. They then argue that
the Unions' failure to explain which of the remaining domestic
producers employ members of the Unions and in what capacity is a fatal
flaw. We disagree.
The definition of ``interested party'' has remained unchanged since
the 1979 amendments to the law. The legislative history of the 1979
amendments indicates that Congress intended to give unions standing if
they ``[r]epresent workers in the relevant U.S. industry.'' S. Rep. No.
249, 96th Cong., 1st Sess. 90 (1979). Thus, the words ``representative
of'' in the statute are intended to ensure that the union members
include workers in the relevant industry, not to require that the union
establish that it is acting on behalf of a majority of the domestic
industry. See Final Negative Countervailing Duty Determination: Certain
Textile Mill Products and Apparel from Malaysia, 50 F.R. 9852, 9854
(March 12, 1985) (rejecting the interpretation of ``representative''
put forth by respondents in this case). In the present case, the Unions
have submitted evidence that they represent over 15,000 workers in the
CTV industry. Approximately one-third of those workers are employed by
a single company that is engaged in all aspects of CTV production.
Thus, the evidence demonstrates that the Unions ``represent workers in
the relevant domestic industry.'' The Unions, therefore, qualify as an
interested party within the meaning of section 771(9)(D) of the Tariff
Act.
Moreover, respondents' interpretation of the interested party
definition would, in effect, add an industry support requirement to the
interested party definition for unions. Thus, a union would be unable
to participate as an interested party at any stage of a case (e.g.,
request an administrative review or a scope determination) unless it
represented a majority of the workers in that industry. As discussed in
the following section, imposing an industry support requirement at any
stage of a case other than initiation of the investigation would be
inconsistent with the statute.
B. Industry Support
Respondents argue that the legislative history of the Uruguay Round
Agreements Act (URAA) indicates that Congress intended that an
application for a circumvention inquiry must be filed ``on behalf of''
the domestic industry. This argument is based on a statement in the
Senate Report that ``the Committee expects Commerce to initiate
circumvention inquiries in a timely manner and generally consistent
with the standards for initiating antidumping or countervailing duty
investigations.'' S. Rep. 103-412, 103rd Cong., 2d Sess. 83 (1994).
Respondents further argue that applying the industry support
requirement to circumvention applications as well as petitions is
compelled by the fact that both proceedings are designed to determine
whether antidumping duties should be assessed on merchandise that would
otherwise not be subject to such duties. In response, the Unions argue
that the current statute expressly provides that industry support is an
issue that is to be addressed only when initiating an investigation. A
circumvention inquiry, like any scope inquiry, does not require a
showing of industry support.
We agree with the Unions. The statutory requirement that petitions
for investigations be filed ``on behalf of'' the domestic industry pre-
dates the URAA. The URAA amendments merely set forth specific criteria
for determining whether such industry support exists. The Department
has never imposed a similar requirement on the filing of circumvention
applications. Given that longstanding practice, it is unreasonable to
interpret a single reference in the Senate Report to general
consistency with initiation standards as evidence of Congressional
intent to effect a major change in the requirements for circumvention
applications.
Even more compelling is the fact that Congress specifically amended
the law to preclude reconsideration of the issue of industry support at
any stage in the proceeding beyond initiation of the investigation
(section 732(c)(4)(E) of the Tariff Act of 1930, as amended). There is
no exception for anticircumvention inquiries. Accordingly, while the
Senate Report indicates an intent that the general evidentiary
requirements for initiating petitions (e.g., allege the elements
necessary for relief, accompanied by information reasonably available
to support those allegations) be applied to circumvention applications,
we do not interpret it as imposing an industry support requirement.
Further, we disagree with respondents' argument that the nature of
a circumvention inquiry compels a contrary conclusion. Unlike an
investigation, a circumvention inquiry is not designed to determine
whether merchandise is being sold at less than fair value or whether
such sales injure the domestic industry. A circumvention inquiry is
designed to determine whether merchandise is properly within the scope
of an existing order.1 Neither the statute nor prior Department
practice requires that an interested party requesting a scope
determination demonstrate industry support.
\1\ The Mexican Government has argued that the imposition of all
antidumping duties, including those imposed under circumvention
provisions, must be consistent with Article VI of the General
Agreement on Tariffs and Trade. The antidumping order on Korean CTVs
was imposed consistent with Article VI. The circumvention finding
involves a determination whether the merchandise at issue is covered
by that order. If we made an affirmative circumvention finding,
antidumping duties imposed on any merchandise found to be within the
scope of the order would be consistent with Article VI.
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Retroactivity
Respondents argue that, because the circumvention application is
based primarily on data from 1994, initiation of an inquiry would
constitute an impermissible retroactive application of the URAA
amendments, which became effective on January 1, 1995. We disagree.
The statute is clear on this point. Section 291 of the URAA
expressly provides that circumvention proceedings requested after
January 1, 1995, are governed by the Act as amended. The Unions filed
the CTVs circumvention application on August 11, 1995, eight months
after the URAA amendments came into effect. Nothing in the URAA or the
legislative history prohibits the Department from considering
information from a period before the new provisions were enacted.
Further, determinations based on the evaluation of information from
prior periods is part of the normal statutory scheme. Therefore, when
Congress based the coverage of the amendments on the date a petition or
application was filed, it must have envisioned proceedings under the
new law that would be initiated based on, and that would examine, pre-
1995 information. Under respondents' theory it would have been
effectively impossible to initiate any cases under the new law until
well into 1995. Such a result would be inconsistent with the express
intent that the law apply to proceedings requested after January 1,
1995.
[[Page 1343]]
North American Free Trade Agreement (NAFTA)
Respondents argue that NAFTA's detailed provisions concerning trade
with Mexico in CTVs were carefully negotiated and enacted to address
the circumvention concerns of the U.S. industry. Consequently, they
argue, NAFTA and its implementing legislation is the exclusive scheme
by which to protect the domestic CTV industry from circumvention,
through Mexico, of the antidumping order on CTVs from Korea. They
assert that a circumvention inquiry would unilaterally change these
painstakingly crafted provisions.
To the contrary, section 1901:3 of the NAFTA explicitly provides
that nothing in other chapters should be construed as creating
obligations that affect any party's unfair trade statutes. Moreover,
nothing in the NAFTA implementing statute states that the
anticircumvention provisions have been superseded by the NAFTA rules of
origin on CTVs. A review of the history and purpose of those rules
demonstrates that they were not intended to supplant the circumvention
provisions of the Act.
In 1990, the U.S. industry requested an inquiry regarding alleged
circumvention of the U.S. antidumping orders on CPTs through Mexico.
Based on the statutory criteria then in existence, the Department
reached a negative determination. Color Picture Tubes from Canada,
Japan, Republic of Korea and Singapore; Negative Determinations of
Circumvention of Antidumping Duty Orders, 55 FR 52036, (December 19,
1990) (preliminary); 56 FR 9667, (March 7, 1991) (final). Although the
NAFTA rules of origin are rules of preference, not anticircumvention
provisions, the rules (and the related monitoring provisions) were
designed with the circumvention problem in mind. When passing the NAFTA
implementing legislation, Congress, mindful of the deficiencies in the
anticircumvention provisions of the law at the time, expressed its
``expectation that [the monitoring provisions] will give the
Administration the tools necessary to ensure that any circumvention
that is occurring within NAFTA countries will cease.'' S. Rep. No. 103-
189, 103rd Cong., 1st Sess. 25 (1993). Thus, it was intended that the
NAFTA rules of preference and monitoring provisions would succeed where
the existing anticircumvention law had proven inadequate.
After the implementation of NAFTA, the anticircumvention provisions
of the Tariff Act were amended by the URAA. Those amendments improved
the provisions on assembly in third countries by focusing on the nature
of the process in the third country and the portion of total value
represented by parts and components from the country subject to the
antidumping order. Similarly, the NAFTA rules of preference were
tightened to promote significant manufacturing and value added in
Mexico. Thus, although the NAFTA rules of preference are distinct from
the anticircumvention provisions, they may operate in specific cases
such that compliance with the rules of origin for NAFTA preferences may
make it impossible as a factual matter to meet the circumvention
criteria of section 781 of the Act, as amended. It is, therefore,
appropriate to explore as a threshold matter whether imports of CTVs
that satisfy the NAFTA rules of origin could constitute circumvention.
We will be establishing at the outset of this inquiry a schedule for
questionnaires and comments on this issue.
This notice is published in accordance with Section 781(b) of the
Act (19 U.S.C. 1677j(b)) and 19 CFR 353.29.
Dated: December 15, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-625 Filed 1-18-96; 8:45 am]
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