[Federal Register Volume 69, Number 203 (Thursday, October 21, 2004)]
[Notices]
[Pages 61796-61798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2786]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-046]


Notice of Preliminary Results of Antidumping Duty Changed 
Circumstances Review: Polychloroprene Rubber From Japan

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

ACTION: Notice of preliminary results of antidumping duty changed 
circumstances review.

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SUMMARY: On March 1, 2004, the Department of Commerce (the Department) 
published a notice of initiation of changed circumstances review of the 
antidumping duty finding on polychloroprene rubber (PR) from Japan to 
determine whether Showa Denko K.K. (SDK) is the successor-in-interest 
company to the joint venture of Showa DDE Manufacturing K.K. (SDEM) and 
DDE Japan Kabushiki Kaisha (DDE Japan) (collectively, SDEM/DDE Japan 
joint venture). See Notice of Initiation of Antidumping Duty Changed 
Circumstances Review: Polychloroprene Rubber from Japan, 69 FR 9586 
(March 1, 2004) (Notice of Initiation). We have preliminarily 
determined that SDK is not the successor-in-interest to the SDEM/DDE 
Japan joint venture, for purposes of determining antidumping liability 
in this proceeding. Interested parties are invited to comment on these 
preliminary results.

EFFECTIVE DATE: October 21, 2004.

FOR FURTHER INFORMATION CONTACT: Zev Primor, AD/CVD Operations, Office 
4, Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone (202) 482-4114.

SUPPLEMENTARY INFORMATION: 

Background

    On December 6, 1973, the Department of Treasury published in the 
Federal Register (38 FR 33593) the antidumping finding on PR from 
Japan. On January 14, 2004, SDK submitted a letter stating that it is 
the successor-in-interest to the SDEM/DDE Japan joint venture and, as 
such, entitled to receive the same antidumping duty treatment 
previously accorded to the joint venture (i.e., zero cash deposit). See 
Notice of Final Changed Circumstances Antidumping Duty Administrative 
Review: Polychloroprene Rubber from Japan, 67 FR 58 (January 2, 2002), 
(Changed Circumstances). In that same letter, SDK explained that on 
November 1, 2002, the SDEM/DDE Japan joint venture was dissolved. Prior 
to the joint venture's dissolution, SDK and DuPont Dow Elastomers 
L.L.C. (DuPont) each owned 50 percent of the joint venture. SDK, 
therefore, requested that the Department conduct an expedited changed 
circumstances review of the antidumping duty finding on PR from Japan 
pursuant to section 751(b)(1) of the Tariff Act (the Act), as amended, 
and 19 CFR 351.221(c)(3)(ii). However, because the submitted record 
supporting SDK's claims was deficient, the Department found that an 
expedited review was impracticable and, on March 1, 2004, issued a 
Notice of Initiation without the preliminary results.
    In response to the Department's supplemental questionnaire, on 
March 10 and 19, 2004, SDK provided the Department with supplemental 
questionnaire responses. Additionally, on February 4 and May 3, 2004, 
DuPont, a U.S. producer of PR and the petitioner in this proceeding, 
notified the Department that it opposes SDK's request to be considered 
the successor-in-interest to the SDEM/DDE Japan joint venture. In 
particular, DuPont argued that differences between the corporate 
structures, distribution channels, price structure, and customer base 
preclude SDK from being considered the successor-in-interest to the 
SDEM/DDE Japan joint venture.
    From August 25 through August 27, 2004, the Department conducted a 
verification of information in connection with this changed 
circumstances review at SDK's offices in Kawasaki, Japan. On September 
20, 2004, the Department issued its Verification Report. See Memorandum 
from Zev Primor to the File ``Antidumping Duty Changed Circumstances 
Review of Polychloroprene Rubber (PR) from Japan: Verification Report 
for Showa Denko K.K. (SDK) Regarding Successorship,'' September 20, 
2004, (Verification Report).

Scope of Review

    Imports covered by this review are shipments of PR, an oil 
resistant synthetic rubber also known as polymerized chlorobutadiene or 
neoprene, currently classifiable under items 4002.42.00, 4002.49.00, 
4003.00.00, 4462.15.21, and 4462.00.00 of the Harmonized Tariff 
Schedule of the United States (HTSUS). HTSUS item numbers are provided 
for convenience and customs purposes. The written description remains 
dispositive.

Preliminary Results of Changed Circumstances Review

    In submissions to the Department dated January 14, 2004, and March 
10 and March 19, 2004, SDK advised the Department that on November 1, 
2002, the SDEM/DDE Japan joint venture was dissolved. SDEM was the 
manufacturing arm of the joint venture, while DDE Japan was its 
marketing and selling arm. When the joint venture was dissolved, DuPont 
sold its interest in SDEM to SDK. SDK, in turn, sold its interest in 
DDE Japan to DuPont. As a result of those interest transfers, SDK 
became the sole owner of SDEM and DuPont became the sole owner of DDE 
Japan. On the same date, November 1, 2002,

[[Page 61797]]

SDEM was renamed Showa Denko Elastomers (SDEL), while maintaining the 
original production facility. SDK assumed the marketing and selling end 
of SDEL's business. On January 1, 2004, SDK merged with its wholly-
owned subsidiary SDEL, thus creating a single corporate entity by the 
name of SDK.

Analysis

    In making a successor-in-interest determination, the Department 
examines a number of factors, including, but not limited to, changes 
in: (1) Management; (2) customer base; (3) production facilities; and 
(4) supplier relationships. See Brass Sheet and Strip from Canada: 
Notice of Final Results of Antidumping Administrative Review, 57 FR 
20460, 20462 (May 13, 1992) (Canadian Brass); Notice of Final Results 
of Changed Circumstances Antidumping Countervailing Duty Administrative 
Reviews: Certain Pasta from Turkey, 69 FR 1280 (January 8, 2004). While 
none of these factors alone will necessarily be dispositive, the 
Department will generally consider the new company to be the successor 
to the previous company if--considering all of the factors together--
the new company's resulting operation is not materially dissimilar to 
that of its predecessor. See, e.g., Industrial Phosphoric Acid from 
Israel: Final Results of Changed Circumstances Review, 59 FR 6944, 6945 
(February 14, 1994), and Canadian Brass, 57 FR 20460. In other words, 
if the evidence demonstrates that, with respect to the production and 
sale of the subject merchandise, the new company essentially operates 
as the same business entity as the former company, the Department will 
assign the new company the cash deposit rate of its predecessor.
    Based on our review of the evidence provided by SDK and DuPont, we 
preliminarily determine that SDK is not the successor-in-interest to 
the SDEM/DDE Japan joint venture. While record evidence indicates that 
SDK retained the same production facility and suppliers as the joint 
venture entity (see Verification Report, at 10, and Exhibits 10, 14), 
the record evidence also indicates that SDK's management composition 
and customer base changed significantly from that of the SDEM/DDE Japan 
joint venture.

1. Customer Base

A. Selling and Marketing Operations
    Under the joint venture arrangement, DDE Japan was solely 
responsible for developing and maintaining the customer base, planning 
future sales and marketing PR to customers in Japan and the United 
States. In contrast, SDEM's role in the joint venture was to 
manufacture PR and supply it to DDE Japan once DDE Japan secured an 
order. For example, SDK's officials stated at verification that SDEM 
``did not maintain contact with the U.S. customers.'' See Verification 
Report, at 8. Moreover, the record in this case suggests that to 
compensate for the lack of a distribution channel in the United States 
after the dissolution of the joint venture, SDK established its own 
subsidiary, Showa Denko America (SDA), in order to develop new business 
in the United States. According to the record, SDA purchases PR from 
SDK and resells it to the end-user customers in the United States. In 
consultation with SDK, SDA sets the prices and arranges for delivery of 
PR to such customers. See SDK's submission dated March 10, 2004, at 16. 
Previously under the joint venture arrangement, DDE Japan handled all 
of these functions. Consequently, SDK is operating a different business 
now than that which existed before the dissolution of the joint 
venture, as SDK must now assume all the selling, marketing and credit 
risks previously borne by its joint venture partner, DDE Japan. See 
Submission by DuPont, at 3 (May 3, 2004).
B. Price Structure
    With regard to the price structure, DDE Japan negotiated all prices 
with the unaffiliated customers. Under the terms of the joint venture 
arrangement, SDEM was guaranteed a fixed transfer price regardless of 
the price obtained by DDE Japan in the relevant market. In the post-
dissolution period, SDK has to negotiate its own prices in the relevant 
markets and is no longer guaranteed a profit on each transaction. The 
Department considers this to be a significant change in the competitive 
environment for SDK.
C. Customer Base
    As mentioned above, upon the loss of its joint venture marketing 
arm, DDE Japan, SDK had to develop its own customer base in both the 
United States and in Japan. At verification, we determined that a 
significant number of the joint venture's former customers were no 
longer customers of SDK. See Verification Report, at 8 and Exhibit 11. 
Consequently, we preliminarily determine that the customer base changed 
significantly since the dissolution of the SDEM/DDE Japan joint 
venture.

2. Management

A. Corporate Structure
    The parent companies, SDK and DuPont, initially formed the SDEM/DDE 
Japan joint venture through a stock exchange, whereby each parent 
company purchased shares in the other company's subsidiary. As noted 
above, SDK and DuPont shared ownership of the joint venture equally 
(i.e., a 50/50 split). The record shows that on November 1, 2002, the 
corporate structure of the SDEM/DDE Japan joint venture changed 
significantly. Upon dissolution, each parent company sold to the other 
parent company its share in that company's subsidiary. The former joint 
venture companies were then absorbed by their respective parent 
companies. As explained above, as a result of those interest transfers, 
SDK became the sole owner of SDEM, which it in turn absorbed. Because 
SDEM comprised the production arm of the former joint venture, SDK had 
to create its own PR marketing and selling division following the 
dissolution. Consequently, the Department preliminarily views SDK's 
current corporate structure as significantly different from the SDEM/
DDE Japan joint venture.
B. Management Composition
    The record evidence also shows that the management structure of the 
SDEM/DDE Japan joint venture resulted was significantly different from 
SDK's management structure. None of the senior managers employed by the 
DDE Japan office accepted positions with SDK after the dissolution of 
the joint venture. Only a very small number of former supervisors 
employed by DDE Japan are now employed by SDK. Further, the composition 
of the board of directors governing the SDEM/DDE Japan joint venture 
differed significantly from that of SDK. Prior to the creation of the 
joint venture, each of the underlying companies, SDEM and DDE Japan, 
had its own board of directors governing its operations. This 
management arrangement continued throughout the course of the joint 
venture arrangement. Upon dissolution of the joint venture, with one 
exception, the board of directors remained with their respective joint 
venture partner. Therefore, the Department considers the SDK board of 
directors to be significantly different from the joint venture board 
structure. See Verification Report, at Exhibit 9. Thus, the record 
evidence discloses that SDK's management composition varies 
significantly from that of the SDEM/DDE Japan joint venture entity.

[[Page 61798]]

Conclusion

    In sum, we preliminarily find that SDK has not presented evidence 
to establish a prima facie case of its successorship status. The 
dissolution of the SDEM/DDE Japan joint venture precipitated 
significant changes to the company ultimately absorbed by SDK. While 
SDK absorbed the joint venture's production facility and retained the 
venture's supplier base, SDK's management and corporate structure, 
selling and marketing operations, customer base, and price structure 
are significantly different from those of the SDEM/DDE Japan joint 
venture. Therefore, given the totality of the considered factors, the 
record evidence demonstrates that SDK is a new entity that operates in 
significantly different manner from its predecessor, the SDEM/DDE Japan 
joint venture. Consequently, we preliminarily determine that SDK should 
not be given the same antidumping duty treatment as the joint venture, 
i.e., zero percent antidumping duty cash deposit rate. Instead, SDK, as 
a new entity, should continue to be assigned as its cash deposit rate 
the ``all others'' rate, which in this proceeding is 55 percent.
    The cash deposit determination from this changed circumstances 
review will apply to all entries of the subject merchandise entered, or 
withdrawn from warehouse, for consumption on or after the date of 
publication of the final results of this changed circumstances review. 
See Granular Polytetrafluoroethylene Resin from Italy; Final Results of 
Antidumping Duty Changed Circumstances Review, 68 FR 25327 (May 12, 
2003). This deposit rate shall remain in effect until publication of 
the final results of the next administrative review in which SDK 
participates.

Public Comment

    Any interested party may request a hearing within 14 days of 
publication of this notice. See 19 CFR 351.310(c). Any hearing, if 
requested, will be held 15 days after the date of publication of this 
notice, or the first working day thereafter. Interested parties may 
submit case briefs and/or written comments not later than 7 days after 
the date of publication of this notice. See 19 CFR 351.309(c)(ii). 
Rebuttal briefs, which must be limited to issues raised in such briefs 
or comments, may be filed not later than 12 days after the date of 
publication of this notice. See 19 CFR 351.309(d). Parties who submit 
arguments are requested to submit with the argument (1) a statement of 
the issue; (2) a brief summary of the argument; and (3) a table of 
authorities. Further, we would appreciate it if the parties submitting 
written comments would provide the Department with an additional 
electronic copy of the public comments. Consistent with 19 CFR 
351.216(e) of the Department's regulations, we will issue the final 
results of this changed circumstances review not later than 270 days 
after the date on which this review was initiated.
    This notice is in accordance with sections 751(b) and 777(I)(1) of 
the Act, and 19 CFR 351.221(c)(3)(I) of the Department's regulations.

    Dated: October 15, 2004.
Jeffrey A. May,
Acting Assistant Secretary for Import Administration.
 [FR Doc. E4-2786 Filed 10-20-04; 8:45 am]
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