[Federal Register Volume 70, Number 125 (Thursday, June 30, 2005)]
[Notices]
[Pages 37764-37766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3441]


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DEPARTMENT OF COMMERCE

International Trade Administration


Duty Drawback Practice in Antidumping Proceedings

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

ACTION: Request for comments.

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SUMMARY: The Department of Commerce (the Department) has a long-
standing policy in antidumping proceedings, based on section 
772(c)(1)(B) of the Tariff Act of 1930, as amended (the Act), of 
granting a duty drawback adjustment to export price where a respondent 
party establishes that: (1) the import duty paid and the rebate payment 
are directly linked to, and dependent upon, one another (or the 
exemption from import duties is linked to exportation); and (2) there 
were sufficient imports of the imported raw material to account for the 
drawback received upon the exports of the manufactured product.
    In a number of recent proceedings, the Department has received 
comments expressing concerns about its current duty drawback adjustment 
policy and practice. This notice describes various issues that have 
been raised concerning the Department's practice and provides the 
public with an opportunity to comment on whether any changes to the 
Department's current practice would be warranted and specifically what 
such changes would entail.

DATES: Comments must be submitted by July 25, 2005.

ADDRESSES: Written comments (original and six copies) should be sent to 
the Assistant Secretary for Import Administration, U.S. Department of 
Commerce, Central Records Unit, Room 1870, Pennsylvania Avenue and 14th 
Street NW, Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: John C. Kalitka, Office of Policy, 
Import Administration, U.S. Department of Commerce, Room 3712, 
Pennsylvania Avenue and 14th Street, NW, Washington, DC 20230, (202) 
482-2730.

SUPPLEMENTARY INFORMATION:

Background

    With respect to the duty drawback adjustment, the Department is 
directed by section 772(c)(1)(B) of the Act, which states that ``[t]he 
price used to establish export price and constructed export price shall 
be -- (1) increased by (B) the amount of any import duties imposed by 
the country of exportation which have been rebated, or which have not 
been collected, by reason of the

[[Page 37765]]

exportation of the subject merchandise to the United States.''
    Based upon this statutory language, the Department applies a two-
prong test to determine entitlement to a duty drawback adjustment. That 
is, the party claiming such adjustment must establish that: (1) the 
import duty paid and the rebate payment are directly linked to, and 
dependent upon, one another (or the exemption from import duties is 
linked to exportation); and (2) there were sufficient imports of the 
imported raw material to account for the drawback received upon the 
exports of the manufactured product. See, e.g., Stainless Steel Wire 
Rods From India: Preliminary Results of Antidumping Duty Administrative 
Review, Intent To Revoke Order In Part, and Extension of Time for the 
Final Results of Review, 70 FR 1413, 1420 (January 7, 2005); Light-
Walled Rectangular Pipe and Tube From Turkey: Notice of Final 
Determination of Sales at Less Than Fair Value, 69 FR 53675 (September 
2, 2004) and accompanying Issues and Decision Memorandum at Comment 1 
(Pipe & Tube from Turkey). Moreover, the courts have sustained the 
Department's traditional two-prong test. See, e.g., Allied Tube & 
Conduit Corp. v. United States, 05-56, slip op. at 16-17 (CIT, May 12, 
2005); Allied Tube & Conduit Corp. v. United States, 132 F. Supp. 2d 
1087, 1093 (CIT 2001); Far East Machinery Co., Ltd. v. United States, 
699 F. Supp. 309, 311 (CIT 1988); Carlisle Tire & Rubber Co. v. United 
States, 657 F. Supp. 1287, 1289-90 (CIT 1987).
    One economic justification that parties have offered for the duty 
drawback adjustment is that the measure seeks to preserve accurate 
price comparability between home market and United States prices. See, 
e.g., Pipe & Tube from Turkey at Comment 1. Under this rationale, an 
adjustment is required for price differences created entirely by the 
imposition of import duties, which increase the cost of raw materials 
used to produce the product sold in the home market. Even where 
materials are sourced domestically and thus no import duties are paid 
on certain raw materials used in producing merchandise sold in the home 
market, an addition to United States price equal to the import duty is 
still appropriate to neutralize the effect of the increase in prices of 
domestically sourced raw material that is caused by the imposition of 
the duty. In these circumstances, it is argued, domestic suppliers of 
raw materials will raise the home market price of inputs as high as 
they can without facing competition from imported raw materials. For 
example, home market suppliers of domestically produced raw material 
inputs used in the production of the foreign like product likely would 
price their material just short of or equal to the total duty-inclusive 
cost of imported raw material inputs. Thus, the duty drawback 
adjustment seeks to account for the difference between the price of 
imported and locally sourced raw material inputs created solely by the 
duty on imported raw material inputs. Id. Furthermore, parties have 
argued, the price of the foreign like product would still be influenced 
by a respondent's home market competition, which may have paid import 
duties on the raw material. Id.
    The Department is considering whether changes to its practice, 
including the two-prong test detailed above, may be appropriate. For 
instance, some parties have argued that the Department's practice 
should be modified by requiring a respondent party seeking a duty 
drawback adjustment to demonstrate payment of import duties on raw 
material inputs used to produce merchandise sold in the home market. 
They argue that such a requirement is consistent with principles of 
price comparability and the implementation of Congressional intent with 
respect to the duty drawback adjustment. In addition, according to such 
parties, any duty drawback adjustment made should also be limited to 
the amount of duties actually paid on material inputs used to produce 
merchandise sold in the home market. See, e.g., Certain Welded Carbon 
Steel Pipes and Tubes from Thailand: Final Results of Antidumping Duty 
Administrative Review, 69 FR 61649 (October 20, 2004); Antidumping 
Administrative Review: Certain Welded Carbon Steel Pipe and Tube From 
Turkey, 69 FR 48843 (August 11, 2004); Circular Welded Non-Alloy Steel 
Pipe From the Republic of Korea; Final Results of Antidumping Duty 
Administrative Review, 69 FR 32492 (June 10, 2004). Certain parties 
have also argued that the Department should allocate the total pool of 
relevant drawback available under some systems to total exports of 
subject merchandise to ensure that the adjustment claimed on U.S. sales 
is not overstated. See Notice of Final Results of the Tenth 
Administrative Review and New Shipper Review of the Antidumping Duty 
Order on Certain Corrosion-Resistant Carbon Steel Flat Products from 
the Republic of Korea, 70 FR 12443 (March 14, 2005) and accompanying 
Issues and Decision Memorandum at Comment 4.
    Parties advocating a change in Department practice argue that in 
creating the duty drawback adjustment, Congress intended that an 
increase in the export price resulting from the duty drawback 
adjustment was designed to offset an increase in the home market price 
resulting from the payment of import duties on inputs. As a result, the 
duty drawback adjustment was designed to prevent dumping margins from 
arising simply because of the rebate (or non-collection) of import 
duties on the inputs resulting from the export of subject merchandise 
to the United States. Yet, these parties argue, to permit a drawback 
adjustment where home market sales do not include import duties leaves 
nothing for the rebate or exemption to offset.
    In order to fully consider and address these claims as well as 
other concerns about the Department's practice regarding duty drawback, 
the Department is providing an opportunity for the public to comment. 
Such comments should be submitted by the date specified above. The 
Department is particularly interested in comments relating to questions 
and possible approaches set forth in the Appendix to this notice, 
including comments on the consistency with the statute and 
Congressional intent.

Comments

    Persons wishing to comment should file a signed original and six 
copies of each set of comments by the date specified above. The 
Department will consider all comments received before the close of the 
comment period. Comments received after the end of the comment period 
will be considered, if possible, but their consideration cannot be 
assured. The Department will not accept comments accompanied by a 
request that a part or all of the material be treated confidentially 
because of its business proprietary nature or for any other reason. The 
Department will return such comments and materials to the persons 
submitting the comments and will not consider them in development of 
any changes to its practice. All comments responding to this notice 
will be a matter of public record and will be available for public 
inspection and copying at Import Administration's Central Records Unit, 
Room B-099, between the hours of 8:30 a.m. and 5 p.m. on business days. 
The Department requires that comments be submitted in written form. The 
Department recommends submission of comments in electronic form to 
accompany the required paper copies. Comments filed in electronic form 
should be submitted either by e-mail to

[[Page 37766]]

the webmaster below, or on CD-ROM, as comments submitted on diskettes 
are likely to be damaged by postal radiation treatment.
    Comments received in electronic form will be made available to the 
public in Portable Document Format (PDF) on the Internet at the Import 
Administration Web site at the following address: http://ia.ita.doc.gov/.
    Any questions concerning file formatting, document conversion, 
access on the Internet, or other electronic filing issues should be 
addressed to Andrew Lee Beller, Import Administration Webmaster, at 
(202) 482-0866, e-mail address: [email protected].

    Dated: June 24, 2005.
Joseph. A Spetrini,
Acting Assistant Secretary for Import Administration.

APPENDIX

    The following questions are for consideration in commentary on the 
duty drawback adjustment in antidumping duty proceedings. In 
particular, the Department is interested in comments regarding the 
legal, policy and commercial rationale for the duty drawback adjustment 
and any proposed modifications to the Department's practice.
    (1) What should the requirements be for making a duty drawback 
adjustment in an antidumping proceeding? For example, should a party 
seeking such adjustment be required to demonstrate that it actually 
paid import duties that were not rebated on some portion of raw 
material inputs during the relevant period, i.e., that exports did not 
account for all of the imported material in question? Please explain, 
in detail, any changes to the Department's current practice that would 
be required to implement such a modification.
    (2) How do you propose the amount of the adjustment should be 
determined, assuming that some domestically sourced and some imported 
material was used?
    (3) If duty drawback (or exemption) is claimed for some, but not 
all, exports incorporating the material input in question, how do you 
propose the amount of any duty drawback adjustment should be 
determined?
    (4) Please provide any additional views on any other matter 
pertaining to the Department's practice regarding duty drawback 
adjustments.
[FR Doc. E5-3441 Filed 6-29-05; 8:45 am]
BILLING CODE 3510-DS-S