[Federal Register Volume 63, Number 81 (Tuesday, April 28, 1998)]
[Notices]
[Pages 23267-23269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11274]



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DEPARTMENT OF COMMERCE

International Trade Administration
[A-560-803, C-560-804]


Initiation of Antidumping and Countervailing Duty Investigations: 
Extruded Rubber Thread From Indonesia

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: April 28, 1998.

FOR FURTHER INFORMATION CONTACT: Anne D'Alauro (antidumping 
investigation) or Stephanie Moore (countervailing duty investigation), 
Office of CVD/AD Enforcement VI, International Trade Administration, 
U.S. Department of Commerce, Room 1870, 14th Street and Constitution 
Avenue, N.W., Washington, DC 20230; telephone (202) 482-2786.

INITIATION OF INVESTIGATIONS:

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (``the Act'') by 
the Uruguay Round Agreements Act (``URAA''). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the regulations codified at 19 CFR Part 351, published in the 
Federal Register on May 19, 1997 (62 FR 27296).

The Petition

    On March 31, 1998, the Department of Commerce (the Department) 
received a petition filed in proper form by North American Rubber 
Thread Co., Ltd. (``the petitioner''). A supplement to the petition was 
filed on April 13, 1998.
    The petitioner alleges that imports of extruded rubber thread from 
Indonesia are being, 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 countervailable subsidies are being provided to producers and/or 
exporters of extruded rubber thread from Indonesia within the meaning 
of section 701 of the Act. The petitioner alleges that imports of such 
unfairly traded (i.e., dumped and subsidized) extruded rubber thread 
from Indonesia materially injure, or threaten material injury to, an 
industry in the United States.
    The Department finds that the petitioner filed the petition on 
behalf of the domestic industry because it is an interested party as 
defined in section 771(9)(C) of the Act and it has demonstrated 
sufficient industry support (see discussion below).

Scope of Investigation

    For purposes of the antidumping and countervailing duty 
investigations, the product covered is extruded rubber thread (``rubber 
thread'') from Indonesia. Rubber thread is defined as vulcanized rubber 
thread obtained by extrusion of stable or concentrated natural rubber 
latex of any cross sectional shape, measuring from 0.18 mm, which is 
0.007 inches or 140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge, 
in diameter.
    Rubber thread is currently classified under subheading 4007.00.00 
of the Harmonized Tariff Schedule (HTS). Although the HTS subheadings 
are provided for convenience and Customs purposes, the written 
description of the merchandise under investigation is dispositive.
    During our review of the petition, we discussed the scope with the 
petitioner to insure that the scope in the petition accurately reflects 
the product for which the domestic industry is seeking relief. The 
petitioner addressed the scope in its March 31, 1998 and April 13, 1998 
submissions to the Department. As discussed in the preamble to the new 
regulations (62 FR at 27323), the Department is setting aside a period 
for parties to raise issues regarding product coverage. We encourage 
parties to submit such comments by May 8, 1998. Comments should be 
addressed to Import Administration's Central Records Unit at Room 1870, 
U.S. Department of Commerce, Pennsylvania Avenue and 14th Street, N.W., 
Washington, D.C. 20230. This 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.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Government of Indonesia to participate 
in consultations with respect to the countervailing duty petition. The 
Government of Indonesia did not avail itself of this opportunity.

Determination of Industry Support for the Petition

    Sections 702(b)(1) and 732(b)(1) of the Act require that a petition 
be filed on behalf of the domestic industry. Sections 702(c)(4)(A) and 
732(c)(4)(A) of the Act provide that 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.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, to determine whether the 
petition has the requisite industry support, the statute directs the 
Department to look to producers and workers who account for production 
of the domestic like product. The 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 provision regarding the domestic like product 
(section 771(10) of the Act), they do so for different purposes and 
pursuant to separate and distinct statutory authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
domestic like product, such differences do not render the decision of 
either agency contrary to the law.1
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    \1\ See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp. 
639, 642-44 (CIT 1988); High Information Content Flat Panel Displays 
and Display Glass Therefor from Japan: Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition, 56 
Fed. Reg. 32376, 32380-81 (July 16, 1991).
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    Section 771(10) of the Act defines 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.
    The domestic like product referred to in the petition is the single 
domestic like product defined in the ``Scope of Investigation'' 
section, above. The Department has no basis on the record to find the 
petition's definition of the domestic like product to be inaccurate. 
The Department has adopted the domestic like product definition set 
forth in the petition.
    The Department's analysis indicates that the petitioner accounts 
for at least 25 percent of the total production of the domestic like 
product. The Department has confirmed the petitioner's assertion

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that Globe Manufacturing Co. (``Globe'') is the only other producer of 
the domestic like product. On April 17, 1998, Globe submitted a 
statement of opposition to the petition. However, the Department has 
determined to disregard Globe's position.
    To satisfy the requirements of sections 702 and 732, petitioners 
and supporters of the petition, in addition to accounting for at least 
25 percent of total domestic production, must account for more than 50 
percent of the production of the domestic like product produced by that 
portion of the industry expressing support or opposition to the 
petition (sections 702(c)(4)(A) and 732(c)(4)(A) of the Act). However, 
under certain circumstances, the Department must disregard the 
positions of domestic producers related to foreign producers. In 
addition, the Department may disregard the position of producers who 
are importers. (Sections 702(c)(4)(B) and 732(c)(4)(B)of the Act). In 
this case, the petitioner alleged that Globe is related to an 
Indonesian producer of subject merchandise and that Globe is also an 
importer of subject merchandise from Indonesia. Globe's April 17, 1998 
submission clarifies the facts alleged by the petitioner. Based on our 
examination of the information presented by Globe, we have determined 
that Globe's position should be disregarded for purposes of determining 
industry support for the petition pursuant to sections 702(c)(4)(B) and 
732(c)(4)(B) of the Act. See Industry Support section of the AD/CVD 
Checklist (Public Version) which is on file in room B-099 of the main 
Commerce building. Therefore, we conclude that the petitioner met the 
statutory requirement for industry support. Accordingly, the Department 
determines that the petition is filed on behalf of the domestic 
industry within the meaning of sections 702(b)(1) and 732(b)(1) of the 
Act.

Injury Test

    Because Indonesia is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, section 701(a)(2) of the Act 
applies to the countervailing duty investigation. Accordingly, the U.S. 
International Trade Commission (ITC) must determine whether imports of 
the subject merchandise from Indonesia materially injure, or threaten 
material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causation

    The petition alleges that the U.S. industry producing the domestic 
like product is being materially injured, or is threatened with 
material injury, by reason of imports of the subject merchandise being 
sold at less than fair value and/or benefitting from the bestowal of 
countervailable subsidies. The allegations of injury and causation are 
supported by relevant evidence including business proprietary data from 
the petitioner and the Indonesian export statistics provided in the 
petition. The Department assessed the allegations and supporting 
evidence regarding material injury and causation and determined that 
these allegations are sufficiently supported by accurate and adequate 
evidence and meet the statutory requirements for initiation. See Tab B 
accompanying the AD/CVD Checklist (public version) which is on file in 
room B-099 of the main Commerce building.

Allegation of Sales at Less Than Fair Value/Constructed Export 
Price and Normal Value

    The following is a description of the allegation of sales at less 
than fair value upon which our decision to initiate the antidumping 
duty investigation is based. Should the need arise to use any of this 
information in our preliminary or final determinations for purposes of 
facts available under section 776 of the Act, we may re-examine the 
information and revise the margin calculations, as appropriate.
    The petitioner identified several exporters and producers of rubber 
thread in Indonesia. The petitioner provided allegations of sales at 
less than fair value based on constructed export price (``CEP''), 
within the meaning of section 772(b) of the Act, and based on normal 
value (``NV''), within the meaning of section 773 of the Act. The 
petitioner based CEP on price quotes during mid-1997 made by a U.S. 
importer affiliated with an Indonesian supplier of rubber thread to 
potential U.S. customers. The petitioner calculated a net U.S. price by 
subtracting estimates of movement costs and selling expenses. Movement 
costs (such as international freight, insurance and brokerage) were 
estimated based on the difference between the CIF values and the U.S. 
Customs values for rubber thread imports from Indonesia reported in the 
official U.S. import statistics during 1997. Selling expenses were 
based on North American's own experience for selling expenses for 1997, 
since the petitioner was unable to determine what the selling expenses 
of the Indonesian affiliated importer were.
    The petitioner stated that it was unable to determine rubber thread 
prices or costs in Indonesia and thus used its own cost information, 
adjusted for known differences, because this was the only information 
which was reasonably available to the petitioner. The calculation of NV 
is thus based on constructed value (``CV'') using the petitioner's own 
cost of producing one pound of rubber thread, with adjustments for 
known differences between its cost experience and those of producers in 
Indonesia. See Tables Accompanying the AD/CVD Checklist (Public 
Version) which is on file in room B-099 of the main Commerce building.
    Constructed value consists of the cost of materials, labor, 
overhead, general expenses, and profit. The petitioner used its own 
cost of rubber latex, the primary material input, from mid-1997 and 
adjusted for potential differences in the precise mixture used by 
Indonesian producers, the percentage of latex content, scrap, and 
transportation costs. Other chemical inputs (about 50 differing 
chemicals and pigments) were provided with adjustments for losses 
incurred in production. The petitioner did not include the cost of 
talc, used by most Indonesian producers, within the calculation of 
material costs, but included these costs as an item of overhead. The 
petitioner provided information regarding skilled labor costs in 
Indonesia and, in combination with its labor experience, made 
adjustments to calculate labor costs in Indonesia. The petitioner 
describes the cost estimates for Indonesian labor so derived as 
conservative since the calculation relies on the petitioner's lowest 
standard cost experience.
    The petitioner calculated factory overhead in two different ways. 
In one example, the petitioner's 1997 costs for overhead as well as 
electricity were provided and adjusted for Indonesian cost differences. 
In a second example, the petitioner calculated factory overhead using 
the Department's ``Index of Factor Values for Use in AD Investigations 
Involving Products from the People's Republic of China'' (AD Factor 
Values) which provided a factory overhead ratio of 25 percent for 
Indonesia. This ratio was applied to the combined costs of labor and 
materials (exclusive of talc). A slight but inconsequential increase to 
the overhead amount results when talc is included within materials 
prior to application of the overhead ratio.
    General expenses were calculated using two similar methodologies. 
The petitioner provided its own 1997 experience for selling, general 
and administration expenses (SG&A). In a less conservative approach, 
the petitioner also provided the ratio reported in the AD Factor Values 
for

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general expenses in Indonesia of 27.5 percent. The specific 
calculations underlying each of these methodologies are detailed in the 
tables attached to the AD/CVD checklist. Since the petitioner did not 
include an amount for profit within its CV calculation, we note that 
the estimated CV would be higher if an amount for profit were added. In 
accordance with 773 of the Act, the methodology used by the petitioner 
to derive NV comports with Department practice and petition 
requirements.
    The comparisons of NV to net U.S. prices result in estimated 
dumping margins that range from 0.81 percent (highest CEP compared to 
lowest NV estimate) to 62 percent (lowest CEP to highest NV estimate).

Fair Value Comparisons

    Based on the data provided by the petitioner, there is reason to 
believe that imports of rubber thread from Indonesia are being, or are 
likely to be, sold in the United States at less than fair value.

Allegations of Subsidies

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition, on behalf of an industry, that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a), and (2) is 
accompanied by information reasonably available to petitioner 
supporting the allegations. We are including in our investigation the 
following programs alleged in the petition to have provided subsidies 
to producers and exporters of the subject merchandise in Indonesia.

1. Export Financing
2. Import Duty Exemptions on Capital Equipment
3. Corporate Income Tax Holidays
4. Investment Credit for the Expansion of the Rubber Industry

Initiation of Antidumping and Countervailing Duty Investigations

    The Department has examined the petition on rubber thread from 
Indonesia and has found that it complies with the requirements of 
sections 702(b) and 732(b) of the Act. Therefore, in accordance with 
sections 702(b) and 732(b), we are initiating antidumping and 
countervailing duty investigations to determine whether manufacturers, 
producers, or exporters of rubber thread from Indonesia are being, or 
are likely to be, sold in the United States at less than fair value and 
whether manufacturers, producers or exporters of rubber thread from 
Indonesia received subsidies. See Tab B accompanying the AD/CVD 
Checklist (public version) which is on file in room B-099 of the main 
Commerce building. Unless the relevant deadline is extended, we will 
make our preliminary determinations for the countervailing duty 
investigation no later than June 24, 1998 and for the antidumping duty 
investigation no later than September 8, 1998.

Distribution of Copies of the Petitions

    In accordance with sections 702(b)(4)(A)(i) and 732(b)(3)(A) of the 
Act, copies of the public version of the petition have been provided to 
the representatives of the Government of Indonesia. We will attempt to 
provide copies of the public version of the petition to all exporters 
named in the petition, as provided for in section 351.203(c)(2) of the 
Department's regulations.

ITC Notification

    Pursuant to sections 702(d) and 732(d) of the Act, we have notified 
the ITC of these initiations.

Preliminary Determinations by the ITC

    The ITC will determine by May 15, 1998, whether there is a 
reasonable indication that an industry in the United States is being 
materially injured, or is threatened with material injury, by reason of 
imports from Indonesia of rubber thread. A negative ITC determination 
will result in the investigation being terminated; otherwise, the 
investigations will proceed according to statutory and regulatory time 
limits.
    This notice is published pursuant to section 777(i) of the Act.

    Dated: April 20, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-11274 Filed 4-27-98; 8:45 am]
BILLING CODE 3510-DS-P