[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]
BILLING CODE 3510-DS-P