[Federal Register Volume 64, Number 157 (Monday, August 16, 1999)]
[Notices]
[Pages 44480-44482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21197]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-505-801, A-201-825, A-517-802, A-307-817, C-505-802, C-201-826, C-
517-803, C-307-818]


Dismissal of Antidumping and Countervailing Duty Petitions: 
Certain Crude Petroleum Oil Products From Iraq, Mexico, Saudi Arabia, 
and Venezuela

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

EFFECTIVE DATE: August 16, 1999.

FOR FURTHER INFORMATION CONTACT: Mark Ross or Thomas Schauer 
(Antidumping) or Roy Malmrose (Countervailing Duty), Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, DC 
20230; telephone: (202) 482-4794, (202) 482-0410, or (202) 482-5414, 
respectively.

SUPPLEMENTARY INFORMATION:

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 of Commerce's (the 
Department's) regulations are to the provisions codified at 19 CFR Part 
351 (1998) and to the substantive countervailing duty regulations 
published in the Federal Register on November 25, 1998 (63 FR 65348).

The Petitions

    On June 29, 1999, the Department received petitions filed in proper 
form by Save Domestic Oil, Inc. (hereinafter referred to as the 
petitioner), an organization composed of producers of crude oil. The 
Department received supplemental submissions during June, July, and 
August 1999.
    In accordance with section 732(b) of the Act, the petitioner 
alleges that imports of crude oil from Iraq, Mexico, Saudi Arabia, and 
Venezuela 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 such imports are materially injuring, or threatening material 
injury to, a regional 1 industry in the United States. In 
addition, in accordance with section 702(b)(1) of the Act, the 
petitioner alleges that producers or exporters of crude oil from Iraq, 
Mexico, Saudi Arabia, and Venezuela received countervailable subsidies 
within the meaning of section 701 of the Act.
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    \1\ The region identified by the petitioner consists of the 48 
contiguous states, excluding Arizona, California, Nevada, Oregon, 
and Washington.
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    The Department finds that the petitioner is an interested party as 
defined in section 771(9)(E) of the Act. However, as discussed below, 
the petitioner has not demonstrated that it filed the petitions on 
behalf of the domestic industry. Because the petitioner has failed to 
demonstrate sufficient industry support, as required by sections 
702(c)(4) and 732(c)(4) of the Act, the Department has no basis to 
initiate the requested investigations (see the ``Determination of 
Industry Support for the Petitions'' section, below).

Scope of the Petitions

    For purposes of these petitions, the product covered is all crude 
petroleum oils and oils obtained from bituminous minerals testing at, 
above, or below 25 degrees A.P.I. The merchandise covered by these 
petitions is classifiable under subheadings 2709.00.10 and 2709.00.20 
of the Harmonized Tariff Schedule of the United States.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Governments of Mexico, Saudi Arabia, and 
Venezuela for consultations with respect to the countervailing duty 
petitions filed. On August 2, 1999, consultations were held with 
representatives of the Government of Venezuela. On August 5, 1999, 
consultations were held with representatives of the Governments of 
Mexico and Saudi Arabia. See the August 3, 1999, August 5, 1999, and 
August 6, 1999, memoranda to the file regarding these consultations.

Determination of Industry Support for the Petitions

a. The Regional Industry

    The petitioner alleges that there is a regional industry for the 
domestic like product. In support of its allegation, the petitioner 
provided sufficient information, reasonably available to the 
petitioner, regarding the criteria set out in section 771(4)(C) of the 
Act: (1) the producers within such market sell all or almost all of 
their production of the domestic like product in question in that 
market; (2) the demand in that market is not supplied, to any 
substantial degree, by producers of the product in question located 
elsewhere in the United States; and (3) appropriate

[[Page 44481]]

circumstances exist to divide the United States into the two markets 
alleged.
    In accordance with sections 702(c)(4)(C) and 732(c)(4)(C) of the 
Act, if the petitioner alleges that the industry is a regional 
industry, the Department shall determine whether the petition has been 
filed by or on behalf of the industry by applying the requirements set 
forth in sections 702(c)(4)(A) and 732(c)(4)(A) of the Act on the basis 
of the production in the region. The Department has reviewed the 
adequacy and accuracy of the information supplied by the petitioner 
with respect to its regional-industry claim. Based upon this review and 
in accordance with the statutory criteria stated above, the petitioner 
has made an adequate regional-industry claim for initiation purposes. 
For a further discussion regarding the regional-industry claim, see 
Memorandum from Laurie Parkhill to Richard W. Moreland, dated August 8, 
1999.

b. Scope of the Industry Examined for Support

    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 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 provision regarding the domestic 
like product (section 771(10) of the Act), they do so for different 
purposes and pursuant to 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 
domestic like product, such differences do not render the decision of 
either agency contrary to the law.2
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    \2\ See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp. 
639, 642-44 (CIT 1988), and High Information Content Flat Panel 
Displays and Display Glass Therefor from Japan; Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition, 56 FR 
32376, 32380-81 (July 16, 1991).
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    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 
Department's analysis of the domestic like product 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 ``Scope of the Petitions'' section above sets forth the 
domestic like product identified in the petitions. In addition to the 
products included in the petitioner's definition of domestic like 
product, parties have argued that two other products, refined products 
and ``lease condensates,'' should be included within the domestic like 
product.
    With respect to refined products, we determine that there is a 
clear dividing line between the characteristics and uses of crude oil 
and refined products. Crude oil, which is the input product used to 
produce a refined product, must undergo a distinct and significant 
process to become a refined product such as gasoline and other fuel 
oils. While both crude oil and refined products consist of hydrocarbon 
compounds, the refining process changes the physical structure and 
characteristics of the compounds found originally in the crude oil such 
that generally there remains no significant similarities between the 
two products in terms of physical characteristics and uses. Because of 
the differences in characteristics and uses, we determine that refined 
products are not within the domestic like product for purposes of 
determining industry support for the petitions. See Memorandum from the 
Team to Richard W. Moreland, regarding ``Domestic Like Product,'' dated 
August 9, 1999, for additional analysis.
    The issue of whether ``lease condensates'' are included properly 
within the domestic like product is more complicated. Lease condensates 
consist essentially of a mixture of certain hydrocarbon compounds that, 
in terms of weight and complexity, fall between natural gas and crude 
oil. They are liquids formed from natural gas as a result of 
temperature or pressure changes. Often lease condensates are mixed with 
crude oil and the resulting mixture is sold to a refinery as crude oil.
    The petitioner argues that the Department should not include lease 
condensates in the domestic like product because the mixture of 
hydrocarbon compounds in lease condensates is different from the 
mixture of hydrocarbon compounds in crude oils. Consequently, it 
asserts, lease condensates can only be refined into a limited range of 
products. Opposing the petitioner's position, other parties have argued 
that lease condensates are very similar in physical characteristics and 
uses to light crude oil and that, when mixed, they simply become an 
indistinguishable part of the crude-oil stream which is sent to the 
refinery.
    In addition to the extremely complex technical nature of the issue, 
ascertaining the precise nature of available production and 
distribution data as well as attempting to establish the appropriate 
analytical framework for a very diverse industry has been problematic 
for the Department. However, it is not necessary to decide this issue 
because, as discussed below, we have determined that the petitioner 
does not have the requisite industry support, regardless of how the 
issue of lease condensates is resolved.

c. Calculation of Industry Support Within the Region

    Sections 702(b)(1) and 732(b)(1) of the Act require that a petition 
be filed on behalf of the domestic industry. In particular, 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 in the region who 
support the petition account for: (1) at least 25 percent of the total 
production of the domestic like product in the region; and (2) more 
than 50 percent of the production of the domestic like product produced 
in the region by that portion of the industry expressing support for, 
or opposition to, the petition.
    The petitioner alleges that, based on the support of individual 
producers and support by a number of industry associations, the 
petitions have the required support of the industry. As of July 27, 
1999, the Department had received letters from 20 domestic producers 
opposing the petitions. In the aggregate, these producers accounted for 
approximately 50 percent of total production within the region. Because 
there was a question as to whether the petitioner met the statutory 
requirements concerning industry support cited above, we exercised our 
statutory discretion under sections 702(c)(1)(B) and 732(c)(1)(B) of 
the Act to extend the deadline for determining whether to initiate 
investigations to a maximum of 40 days from the date of filing in order 
to resolve this issue. See Memorandum from the Industry Support Team to 
Richard W. Moreland, regarding ``Determination of Industry Support,'' 
dated July 30, 1999.
    In order to determine the level of industry support for the 
petitions, the Department surveyed (1) each of the 410 largest 
producers in the region, which

[[Page 44482]]

accounted for over 86 percent of regional production, and (2) a 401-
company sample of the remaining producers in the region. The purpose of 
the survey was to ascertain the companies' positions with regard to the 
petitions. We received responses from 41 percent of the 410 companies 
and 18 percent of the sampled 401 companies.
    As mentioned above, we received letters of opposition from a number 
of companies who accounted for approximately 50 percent of total 
regional production. Based on the surveys, additional companies 
indicated that they opposed the petitions.
    The petitioner submitted comments alleging that certain companies 
opposed to the petitions are related to producers in the subject 
countries and that a number of those companies are importers of subject 
merchandise. The petitioner argues that, consistent with sections 
702(c)(4)(B) and 732(c)(4)(B) of the Act, the positions of these 
companies should be disregarded.
    Sections 702(c)(4)(B) and 732(c)(4)(B) of the Act provide that the 
position of certain domestic producers may be disregarded for purposes 
of determining industry support. Specifically, subsection (B)(i) 
provides that the position of domestic producers who oppose the 
petition shall be disregarded ``if such producers are related to 
foreign producers *  *  * unless such domestic producers demonstrate 
that their interests as domestic producers would be adversely affected 
by the imposition of an antidumping [or countervailing] duty order.'' 
Additionally, subsection (B)(ii) provides that the position of domestic 
producers of a domestic like product who are importers of the subject 
merchandise may be disregarded.
    Our analysis of whether to disregard any positions focused on 
whether the opposing companies have demonstrated that their interests 
as domestic producers would be affected adversely by the imposition of 
an antidumping or countervailing duty order. Because we are able to 
resolve the issue on this basis, we need not determine whether these 
companies are related to foreign producers. We note, however, that we 
have serious questions about the sufficiency of the petitioner's 
allegations. For example, we question whether the petitioner has 
provided sufficient evidence of any relationship, as defined in section 
771(4)(B) of the Act, and, in the case of alleged relationships as 
defined in section 771(4)(B)(ii)(IV) of the Act, that these 
relationships would cause the domestic producer to act differently than 
a non-related producer. We have not resolved these questions; rather, 
we looked first at the question of whether the opposing domestic 
producers had established that their interests as domestic producers 
would be adversely affected by the imposition of an antidumping or 
countervailing duty order, in which case the issue of whether they are 
related parties becomes moot. In this regard, we focused our analysis 
on the API Ad Hoc Free Trade Committee (the Committee) because it is 
composed of the largest U.S. producers in opposition to the petitions 
and because its treatment is dispositive of the industry support issue.
    The Committee argues that its opposition is not based on foreign 
interests or imports, but rather on the based on the fact that the 
Committee members' interests as domestic producers would be adversely 
affected by the imposition of antidumping or countervailing duties. The 
Committee also argues that the petitioner has not alleged that each 
U.S. producer about which allegations were made is related to a foreign 
producer in each of the subject countries. Moreover, the petitioner has 
provided no basis for assuming that a relationship in one country would 
cause a producer to oppose a case against another country with 
potentially competing suppliers.
    Even assuming there are relationships, the Committee argues, 
because the interest of domestic producers opposing the petition would 
be adversely affected by the imposition of an order, the Department 
must consider their views. The arguments and information presented by 
the Committee to demonstrate the adverse affects it believes would 
ensue are described in its August 2, 1999, and August 4, 1999, 
submissions. Finally, with respect to imports, the Committee argues 
that importing is a standard practice in the U.S. oil industry and that 
the large producers account for only a small portion of total imports. 
Moreover, the Committee argues, domestic producers which oppose the 
petition are not bound to imports from the subject countries. 
Therefore, the Committee argues, the Department should not disregard 
its opposition.
    After reviewing comments submitted by all parties, we believe that 
the Committee and other opposing companies have demonstrated that their 
interests as domestic producers would be adversely affected by the 
imposition of an antidumping or countervailing duty order. Accordingly, 
we have not disregarded the opposition of the Committee members alleged 
to be related to foreign producers. In addition, we have determined 
that the Committee members who import should not be excluded because 
those domestic producers have demonstrated that their opposition to the 
petitions is based on their concern that the imposition of an 
antidumping or countervailing duty order would adversely affect their 
interests as domestic producers. For a further discussion, see 
Memorandum from the Industry Support Team to Richard W. Moreland, 
regarding ``Consideration of Opposition from Domestic Producers Alleged 
to Be Related to Foreign Producers and/or Importing Subject 
Merchandise,'' dated August 9, 1999.
    Based on the opposition we received from companies we have 
determined not to disregard, we find that the petitions do not have 
support from more than 50 percent of the production in the region of 
the domestic like product produced by that portion of the industry 
expressing support for, or opposition to, the petitions. The opposition 
of the Committee and companies not challenged by the petitioner ranges 
from 65 to 68 percent across the various cases. See Memorandum from the 
Industry Support Team to Richard W. Moreland, regarding ``Calculation 
of Industry-Support Percentages,'' dated August 9, 1999. Accordingly, 
we determine that the petitions are not filed on behalf of the domestic 
industry within the meaning of sections 702(b)(1) and 732(b)(1) of the 
Act.
    There are a number of complex issues regarding the 25-percent test 
which we are not addressing because the 50-percent test has not been 
met.
    Because the petitions did not have the required industry support, 
all other issues are moot. Notice is hereby given that the petitions 
are dismissed and the proceedings terminated.

International Trade Commission Notification

    We have notified the ITC of our determination, as required by 
sections 702(d) and 732(d) of the Act.
    This notice is published pursuant to section 777(i) of the Act.

    Dated: August 9, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-21197 Filed 8-13-99; 8:45 am]
BILLING CODE 3510-DS-P