[Federal Register Volume 67, Number 29 (Tuesday, February 12, 2002)]
[Notices]
[Pages 6485-6488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3387]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-860]


Notice of Initiation of Antidumping Duty Investigation: Pneumatic 
Directional Control Valves from Japan

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

ACTION: Initiation of antidumping duty investigation.

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EFFECTIVE DATE: February 12, 2002

FOR FURTHER INFORMATION CONTACT: Brian Ledgerwood or Frank Thomson at 
(202) 482-3836 or (202) 482-4793, respectively; Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230.

Initiation of Investigation

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, as amended 
(``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 references to the 
provisions codified at 19 CFR Part 351 (2001).

The Petition

    On January 14, 2002, the Department received a petition filed in 
proper form by the Pneumatics Group (``the petitioners''), consisting 
of the following parties: Festo Corporation\1\, IMI Norgren, Inc., 
Numatics, Inc., and Parker Hannifan Corporation. The

[[Page 6486]]

Department received information supplementing the petition on January 
30, 2002 and January 31, 2002.
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    \1\ Produces pneumatic fluid power products, but not pneumatic 
directional control valves (``PDCVs''), in the United States
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    In accordance with section 732(b) of the Act, the petitioners 
allege that imports of PDCVs from Japan 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 are threatening to materially injure, an industry in the United 
States.
    The Department finds that the petitioners filed this petition on 
behalf of the domestic industry because they are an interested party, 
as defined in sections 771(9)(E) and 771(9)(F) of the Act and have 
demonstrated sufficient industry support with respect to the 
antidumping investigation that they are requesting the Department to 
initiate. (See the Determination of Industry Support for the Petition 
section below.)

Scope of Investigation

    The scope of the investigation includes all pneumatic directional 
control valves, whether assembled or unassembled, regardless of size, 
configuration, intended or actual use, method of actuation, and 
material(s) employed in construction, other than aerospace-type fluid 
power valves as further described below. The subject merchandise thus 
includes, but is not necessarily limited to, manual, mechanical, air-
operated, and solenoid type pneumatic directional control valves.
    Specifically excluded from the scope are aerospace-type pneumatic 
fluid power valves, defined as pneumatic fluid power valves that have 
been certified for use in airframes, aircraft engines, or other 
aerospace applications pursuant to standards established or required by 
the Federal Aviation Administration or Department of Defense in the 
United States, or by the counterparts of these agencies in other 
countries.
    The subject merchandise is currently classified under subheadings 
8481.20.0060 and 8481.20.0070 of the Harmonized Tariff Schedule of the 
United States (``HTSUS''). Aerospace-type fluid power valves, which are 
excluded from the scope, are not entered under the subheadings just 
described, but are instead entered under various other subheadings.
    Although the HTSUS subheadings are provided for convenience and 
U.S. Customs Service (``Customs'') purposes, the written description of 
the merchandise under investigation is dispositive.
    During our review of the petition, we discussed the scope with the 
petitioners to ensure that the scope in the petition accurately 
reflects the product for which the domestic industry is seeking relief. 
Moreover, as discussed in the preamble to the Department's regulations 
(Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 
27323 (May 19, 1997)), we are setting aside a period for parties to 
raise issues regarding product coverage. The Department encourages all 
parties to submit such comments within 20 days of publication of this 
notice. Comments should be addressed to Import Administration's Central 
Records Unit at Room 1870, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, D.C. 20230. The period of scope 
consultations is intended to provide the Department with ample 
opportunity to consider all comments and consult with parties prior to 
the issuance of the preliminary determination.

Determination of Industry Support for the Petition

    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers as a whole of a domestic like product. Thus, when determining 
the degree of industry support, the statute directs the Department to 
look to producers and workers who produce the domestic like product. 
The International Trade Commission (``ITC''), which is responsible for 
determining whether ``the domestic industry'' has been injured, must 
also determine what constitutes a domestic like product in order to 
define the industry. While both the Department and the ITC must apply 
the same statutory definition regarding the domestic like product 
(section 771(10) of the Act), they do so for different purposes and 
pursuant to separate and distinct authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
like product, such differences do not render the decision of either 
agency contrary to the law.\2\
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    \2\ 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 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 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. Moreover, the petitioners do not offer a definition of 
domestic like product distinct from the scope of the investigation.
    The petition covers PDCVs as defined in the Scope of the 
Investigation section, above, a single class or kind of merchandise. 
The Department has no basis on the record to find the petitioners' 
definition of the domestic like product to be inaccurate. The 
Department, therefore, has adopted the domestic like product definition 
set forth in the petition.
    On January 25, 2002, the Department received comments regarding 
industry support from the Japan Fluid Power Association (a majority of 
whose members, including SMC Corporation, are producers in Japan of 
PDCVs). On January 29, 2002 and February 1, 2002, the Department 
received comments regarding industry support from SMC Corporation, a 
Japanese producer of PDCVs and SMC Corporation of America, a U.S. 
importer of the subject merchandise (collectively, ``SMC 
Corporation'').
    The Department has reviewed the comments of both the Japan Fluid 
Power Association and SMC Corporation. In order to estimate production 
for the domestic industry as defined for purposes of this case, the 
Department has relied on the petition and amendments thereto, and 
Department research. See the Industry Support Attachment to the Import 
Administration AD Investigation Checklist, dated February 4, 2002 
(``Initiation Checklist'') (public version on file in the Central 
Records Unit of the Department of Commerce, Room B-099) for further 
description.
    Section 732(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that 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. Information contained in the petition and 
its supplements, and information gathered through Department research 
demonstrate that the domestic producers or workers who support the 
petition account for over 50 percent of total production of the 
domestic like product. Therefore, the domestic producers or workers who

[[Page 6487]]

support the petition account for at least 25 percent of the total 
production of the domestic like product, and the requirements of 
section 732(c)(4)(A)(i) and section 732(c)(4)(D) are met. See 
Initiation Checklist. Furthermore, because the Department received no 
domestic opposition to the petition, the domestic producers or workers 
who support the petitions account for more than 50 percent of the 
production of the domestic like product produced by that portion of the 
industry expressing support for or opposition to the petitions. See 
Initiation Checklist. Thus, the requirement of section 732(c)(4)(A)(ii) 
is met.
    Accordingly, the Department determines that the petition was filed 
on behalf of the domestic industry within the meaning of section 
732(b)(1) of the Act. See Initiation Checklist.

Period of Investigation

    The anticipated period of investigation (``POI'') is January 1, 
2001, through December 31, 2001.

Constructed Export Price and Normal Value

    The following are descriptions of the allegations of sales at less 
than fair value upon which the Department has based its decision to 
initiate this investigation. The sources of data for the deductions and 
adjustments relating to home market and U.S. price are detailed in the 
Initiation Checklist.
    The Department has analyzed the information in the petition and 
considers the country-wide import statistics for the anticipated POI 
and pricing information used to calculate the estimated margin to be 
sufficient for purposes of initiation. Based on the information 
submitted in the petition, adjusted where appropriate, we are 
initiating this investigation, as discussed below and in the Initiation 
Checklist. Should the need arise to use any of this information as 
facts available under section 776 of the Act in our preliminary or 
final determinations, we will re-examine the information and may revise 
the margin calculation, if appropriate.
Constructed Export Price
    The petitioners identified one company that they believe accounts 
for a substantial majority of imports of subject merchandise from 
Japan. The petitioners state that this producer sells subject 
merchandise through its U.S. affiliate. The petitioners based 
constructed export price (``CEP'') on the affiliate's price list. The 
list prices include all import charges and duties, but do not include 
U.S. inland transportation. To arrive at a net-price, the petitioners 
deducted from the list price an amount for SMC Corporation of America's 
(``SMC-USA's'') standard-discount. To arrive at ex-factory price, 
petitioners deducted import charges based on the average import charge 
reported in U.S. import statistics for entries of the subject 
merchandise during the last four quarters for which data are available 
(2000Q4 - 2001Q3). Petitioners made a further deduction for import 
duties and a deduction to account for SMC-USA's U.S. selling expenses. 
Petitioners based U.S. selling expenses on the aggregate selling 
expense ratio experienced by the PDCV-producing members of the 
Pneumatics Group during the year 2000.\3\ The petitioners stated that 
SMC-USA's selling expense ratio is not publicly available and cannot 
reasonably be estimated by other publicly available means. Therefore, 
the petitioners calculated a net U.S. price by subtracting import 
charges and duties, and U.S. selling expenses. The petitioners provided 
a publically available selling expense ratio in their January 30, 2002, 
amendment to the petition. However, because the non-public selling 
expense ratio provided in the original petition is more conservative, 
we have continued to use the ratio that was provided in the original 
petition.
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    \3\ The PDCV-producing members of the Pneumatics Group are not 
publically held companies, therefore it was necessary to aggregate 
and average these three companies' selling expenses to derive an 
appropriate ratio.
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Normal Value
    With respect to normal value (``NV''), the petitioners provided 
home market prices that were obtained from a party in Japan for PDCVs 
that are comparable to the products exported to the United States which 
serve as the basis for CEP. Petitioners applied relevant discounts to 
the yen-denominated price and then converted the net price to U.S. 
dollars by using exchange rates applicable to the twelve-month period 
preceding the petition, as published by the Federal Reserve Board. 
Petitioners did not deduct inland freight from the sales value.
    Based on the comparison of CEP to NV, petitioners calculated 
estimated dumping margins from 9.28 to 107.46 percent. Based on an 
examination of the information submitted in the petition, adjusted 
where appropriate, and comparing CEP to NV, we have determined that, 
for purposes of this initiation, there is a reasonable basis to believe 
or suspect that dumping has occurred (see Initiation Checklist).

Fair Value Comparisons

    The Department has examined the adequacy and accuracy of the 
information the petitioners used in their calculations of U.S. and home 
market prices and has found that it represents information reasonably 
available to petitioners supporting the allegation of dumping (see 
Initiation Checklist).
    Based on the data provided by the petitioners, there is reason to 
believe that imports of PDCVs from Japan are being, or are likely to 
be, sold at less than fair value.

Allegations and Evidence of Material Injury and Causation

    The petitioners allege that the U.S. industry producing the 
domestic like product is being materially injured, or is threatened 
with material injury, by reason of the imports of the subject 
merchandise sold at less than NV. The petitioners contend that the 
industry's injured condition is evident in the decline of U.S. 
producers' output, sales, market share, profits, productivity, return 
on investment, and capacity utilization, as well as negative effects on 
cash flow, inventories, employment, wages, growth, ability to raise 
capital, investment, and existing development and production efforts. 
The allegations of injury and causation are supported by relevant 
evidence including U.S. Customs import data, lost sales, and pricing 
information. We have examined the accuracy and adequacy of the evidence 
provided in the petition and have determined that the petition alleges 
the elements necessary for the imposition of a duty under section 731 
of the Act and contains information reasonably available to the 
petitioners supporting the allegations (see Initiation Checklist, 
Material Injury section).

Initiation of Antidumping Investigation

    Based upon our examination of the petition on PDCVs from Japan and 
the petitioners' responses to our supplemental questionnaire clarifying 
the petition, we have found that the petition meets the requirements of 
section 732 of the Act. See Initiation Checklist. Therefore, we are 
initiating an antidumping duty investigation to determine whether 
imports of PDCVs from Japan are being, or are likely to be, sold in the 
United States at less than fair value. Unless this deadline is 
postponed, we will make our preliminary determination no later than 140 
days after the date of this initiation. See Case Calendar section of 
the Initiation Checklist.

[[Page 6488]]

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representatives 
of the government of Japan. We will attempt to provide a copy of the 
public version of the petition to each exporter named in the petition, 
as appropriate.

International Trade Commission Notification

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

Preliminary Determination by the ITC

    The ITC will determine, no later than February 28, 2002, whether 
there is a reasonable indication that imports of PDCVs from Japan are 
causing material injury, or threatening to cause material injury, to a 
U.S. industry. A negative ITC determination will result in the 
investigation being terminated; otherwise, this investigation will 
proceed according to statutory and regulatory time limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    February 4, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-3387 Filed 2-11-02; 8:45 am]
BILLING CODE 3510-DS-S