[Federal Register Volume 71, Number 106 (Friday, June 2, 2006)]
[Notices]
[Pages 32033-32044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8629]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-504]


Later-Developed Merchandise Anticircumvention Inquiry of the 
Antidumping Duty Order on Petroleum Wax Candles from the People's 
Republic of China: Affirmative Preliminary Determination of 
Circumvention of the Antidumping Duty Order

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

ACTION: Notice of Affirmative Preliminary Determination of 
Circumvention of Antidumping Duty Order.

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SUMMARY: In response to a request from the National Candle Association 
(``NCA'' or ``Petitioners''), the Department of Commerce (``the 
Department'') initiated an anticircumvention inquiry pursuant to 
section 781(d) of the Tariff Act of 1930, as amended (``the Act''), to 
determine whether candles composed of petroleum wax and over fifty 
percent or more palm and/or other vegetable oil-based waxes (``mixed-
wax candles'') can be considered subject to the antidumping duty order 
on petroleum wax candles from the People's Republic of China (``PRC'') 
under the later-developed merchandise provision. See Notice of 
Initiation Anticircumvention Inquiries of Antidumping Duty Order: 
Petroleum Wax Candles from the People's Republic of China, 70 FR 10962 
(March 7, 2005) (``Initiation Notice'').
    We gave interested parties an opportunity to comment on the 
Initiation Notice, on the commercial availability of mixed-wax candles 
at the time of the less-than-fair-value (``LTFV'') investigation, and 
on whether mixed-wax candles otherwise should be subject to the 
antidumping duty order on petroleum wax candles from the PRC under the 
later-developed merchandise provision. See Notice of Antidumping Duty 
Order: Petroleum Wax Candles

[[Page 32034]]

from the People's Republic of China, 51 FR 30686 (August 28, 1986) 
(``Order'').

EFFECTIVE DATE: June 2, 2006.

FOR FURTHER INFORMATION CONTACT: Alex Villanueva or Julia Hancock, AD/
CVD of Office 9, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC, 20230; telephone: (202) 482-
3208 and (202) 482-1394, respectively.

SUPPLEMENTARY INFORMATION:

Background:

    On October 8, 2004, Petitioners requested that the Department 
conduct a later-developed merchandise anticircumvention inquiry 
pursuant to section 781(d) of the Act to determine whether candles 
containing palm or vegetable-based waxes as the majority ingredient and 
exported to the United States are circumventing the Order.
    On October 12, 2004, Petitioners also requested that the Department 
conduct a minor alterations anticircumvention inquiry pursuant to 
section 781(c) of the Act to determine whether candles containing palm 
or vegetable-based waxes and exported to the United States are 
circumventing the Order.
    On February 25, 2005, the Department initiated the later-developed 
merchandise anticircumvention inquiry to determine whether mixed-wax 
candles can be considered subject to the Order, as provided in section 
781(d) of the Act. Also, on February 25, 2005, the Department initiated 
a minor alterations anticircumvention inquiry to determine whether 
mixed-wax candles have been subject to a minor alterations from the 
subject merchandise such that mixed-wax candles can be considered 
subject to the Order, as provided in section 781(c) of the Act. See 
Initiation Notice, 70 FR at 10962, 10964.
    On March 9, 2005, a memorandum to the file was placed on the record 
of this inquiry by the Department noting that the date of initiation 
was the signature date of February 25, 2005. On March 10, 2005, the 
Department issued a letter to all interested parties that the 
Department established a separate record for these anticircumvention 
inquiries. Additionally, on March 10, 2005, the Department issued a 
letter notifying all parties that the final determination had initially 
been extended by 12 days from December 22, 2005, to January 3, 2006.
    On March 15, 2005, the Department issued a letter to all interested 
parties informing them that submissions must follow the appropriate 
filing format. On April 4, 2005, a memorandum to the file was placed on 
the record of these inquiries by the Department regarding the 
administrative protective order (``APO'').
    On April 6, 2005, Petitioners; Target Corporation (``Target''); 
Candle Corporation of America (``CCA''); Silk Road Gifts, Ltd. (``Silk 
Road''); CCCFNA;\1\ GDLSK Respondents;\2\ Coalition for Free Trade in 
Candles (``CFTC'');\3\ and Michaels' Stores, Inc. (``Michaels'') 
submitted comments regarding the appropriateness of the Department's 
initiation of the later-developed merchandise anticircumvention 
inquiry. On April 18, 2005, Petitioners; Target; CCA; Silk Road; 
CCCFNA; and CFTC submitted rebuttal comments. Additionally, on April 
18, 2005, Petitioners submitted a letter requesting that the Department 
issue a questionnaire to respondents in these inquiries.
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    \1\ The China Chamber of Commerce for Imports and Exporters of 
Foodstuffs, Native Products and Animal By-Products, and the China 
Daily Chemical Association, as well as their common members, 
including Dalian Talent Gift., Ltd.; Kingking A.C. Co., Ltd.; 
Shanghai Autumn Light Enterprise Co., Ltd.; Aroma Consumer Products 
(Hangzhou) Co., Ltd.; Amstar Business Company Limited; Zhongshan 
Zhongnam Candle Manufacturer Co., Ltd., and Jiaxing Moonlite Candle 
Art Co., Ltd., collectively known as ``CCCNFA.''
    \2\ Qingdao Kingking Applied Chemistry Co., Ltd.; Shonfeld's 
(USA), Inc.; Alef Judaica, Inc.; and Amscan, Inc., collectively 
known as ``GDLSK Respondents.''
    \3\ This coalition consisted of J.C. Penney Company, Inc., 
Target Corporation, the National Retail Federation, the MVP Group, 
the Candle Company, and the World at Large. On May 26, 2005, the 
CFTC was disbanded. However, counsel for the CFTC was retained for a 
former CFTC member, the MVP Group, which remains an interested 
party.
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    Between May 11-17, 2005, the Department issued quantity and value 
(``Q&V'') questionnaires to 115 PRC producers and/or exporters for the 
minor alterations anticircumvention inquiry. Also, between June 6, 
2005, and June 17, 2005, the Department received Q&V questionnaire 
responses from ten companies\4\ for the minor alterations 
anticircumvention inquiry.
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    \4\ The ten companies that submitted Q&V questionnaire responses 
are: (1) Fleming International; (2) Zhongshan Zhongnam Candle 
Manufacturer Co., Ltd.; (3) Dalian Talent Gift Co.; (4) Shanghai 
Autumn Light Enterprises Co. Ltd; (5) Jiaxing Moonlite Candle Art 
Co. Ltd.; (6) Universal Candle; (7) Qingdao Kingking Applied 
Chemistry Co. Ltd.; (8) PeakTop and Silk Roads Gifts; (9) Aroma 
Consumer Products (Hangzhou) Co., Ltd.; and (10) Amstar Business 
Company Limited.
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    On December 20, 2005, the Department issued a letter to all 
interested parties notifying them that the Department was extending the 
deadline of the final determination for the anticircumvention inquiries 
by 90 days from January 3, 2006, to April 3, 2006. On January 6, 2006, 
CCCFNA submitted a letter requesting that the Department not issue any 
more extensions of the deadline of the final determination for these 
anticircumvention inquiries.
    On January 17, 2006, a memorandum to the file was placed by the 
Department placing the International Trade Commission (``ITC'')'s 
determination in the second five-year review regarding the antidumping 
duty order on petroleum wax candles from the PRC on the record.
    On January 18, 2006, the Department issued a letter, with respect 
to the later-developed merchandise inquiry, to all interested parties 
inviting parties to submit comments, including evidence, on: (1) the 
``commercial availability'' of mixed-wax candles in the marketplace at 
the time of the LTFV investigation; (2) significant technological 
advancements between 1985 and 2005 that allowed the commercial 
production of mixed-wax candles; (3) whether mixed-wax candles are 
later-developed merchandise, in light of the findings of the ITC Second 
Sunset Review Report\5\; and (4) all other factors that are required 
for a later-developed merchandise analysis, pursuant to section 781(d) 
of the Act.
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    \5\ See Petroleum Wax Candles from China, Inv. No. 731-TA-282 
(Second Review), USITC Pub. 3790 (July 2005) (``ITC Second Sunset 
Review Report'').
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    On January 19, 2006, and January 20, 2006, CCCFNA and Target 
requested a two-week extension of the deadlines for interested parties 
to submit comments and rebuttal comments with regard to the 
Department's January 18, 2006, letter. On January 25, 2006, the 
Department extended the deadlines by two-weeks for interested parties 
to submit comments from February 1, 2006, to February 15, 2006, and for 
rebuttal comments from February 13, 2006, to February 27, 2006.
    On February 10, 2006, Lava Enterprises, Inc., (``Lava''), submitted 
comments in response to the Department's January 18, 2006, letter. On 
February 15, 2006, Target; CCCFNA; the MVP Group; CCA; and Petitioners 
also submitted comments. Also, on February 15, 2006, the MVP Group 
submitted a request for a public hearing. On February 27, 2006, Target; 
CCCFNA; Petitioners; and CCA submitted rebuttal comments.
    On March 6, 2006, CCCFNA submitted a letter to the Department 
stating that Petitioners' rebuttal comments contained significant 
portions of non-publicly available information. On March 15, 2006, the 
Department issued a letter to all interested parties requesting 
comments

[[Page 32035]]

and rebuttal comments on the non-publicly available information 
contained within Petitioners' February 27, 2006, rebuttal comments. 
Also, in the letter, the Department notified interested parties that 
deadline of the final determination wax extended by 50 days from April 
3, 2006, to May 23, 2006.
    On March 28, 2006, Target; CCCFNA; and CCA submitted comments on 
the non-publicly available information contained within Petitioners' 
February 27, 2006, rebuttal comments. On April 7, 2006, Petitioners 
submitted rebuttal comments.
    On April 19, 2006, the MVP Group withdrew their request for a 
hearing that had been submitted within their February 15, 2006, 
comments. On April 24, 2006, CCCFNA submitted a request for a public 
hearing for the later-developed merchandise inquiry. On April 26, 2006, 
Petitioners submitted a letter objecting to CCCFNA's request for a 
public hearing due to the lateness of the request in this proceeding.
    On April 28, 2006, the Department issued a letter to all interested 
parties announcing that it would hold a public hearing on May 9, 2006, 
limited to issues raised in the comments and rebuttal comments 
submitted by parties in response to the Department's January 18, 2006, 
letter.
    On May 2, 2006, the Department issued a letter to the ITC notifying 
them of the Department's upcoming determination scheduled for May 23, 
2006.
    On May 3, 2006, the Department issued a letter to all interested 
parties notifying them of a room change with respect to the public 
hearing. On May 5, 2006, the Department issued a letter to all 
interested parties notifying them of a further room change. On May 9, 
2006, the Department held a public hearing on the later-developed 
merchandise inquiry.
    On May 23, 2006, the Department placed the hearing transcript on 
the record. Also, on May 23, 2006, the Department placed a memorandum 
on the file regarding additional information considered in making this 
preliminary determination.

Scope Of Order

    The products covered by this order are certain scented or unscented 
petroleum wax candles made from petroleum wax and having fiber or 
paper-cored wicks. They are sold in the following shapes: tapers, 
spirals, and straight-sided dinner candles; round, columns, pillars, 
votives; and various wax-filled containers. The products were 
classified under the Tariff Schedules of the United States (``TSUS'') 
755.25, Candles and Tapers. The products covered are currently 
classified under the Harmonized Tariff Schedule of the United States 
(``HTSUS'') item 3406.00.00. Although the HTSUS subheading is provided 
for convenience purposes, our written description remains dispositive. 
See Order and Notice of Final Results of the Antidumping Duty New 
Shipper Review: Petroleum Wax Candles from the People's Republic of 
China, 69 FR 77990 (December 29, 2004).

Preliminary Determination

    We have analyzed the information, comments, and rebuttal comments 
of interested parties in this anticircumvention inquiry, and conducted 
our own research. Based upon our analysis of the comments and 
information received, we determine that mixed-wax candles are later-
developed products pursuant to section 781(d) of the Act. However, for 
the purposes of this preliminary determination, we have determined that 
only mixed-wax candles containing no more than 87.80 percent palm or 
vegetable oil-based wax with petroleum wax are within the scope of the 
antidumping duty order on petroleum wax candles from the PRC, as 
provided in section 781(d) of the Act.\6\
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    \6\ If the Department affirms this preliminary determination 
which covers all mixed-wax candles in proportions of no more than 
87.80 percent palm or vegetable oil-based wax with petroleum wax, 
then the minor alterations anticircumvention inquiry will be 
rescinded as the products subject to that inquiry would already have 
been determined to be within the scope pursuant to the instant 
inquiry. If any candles with a higher percentage are brought to the 
Department's attention, we will conduct a scope inquiry on a model-
specific basis.
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General Overview

    In reaching its preliminary determination, the Department undertook 
several analytical steps in response to its obligations under the 
statute, as well as information and comment provided by the interested 
parties. The Department first considered again, the issue of whether it 
was appropriate to initiate this anticircumvention inquiry. Then, the 
Department analyzed whether these mixed-wax candles were later-
developed merchandise pursuant to section 781(d) of the Act. Prompted 
by comments raised by interested parties, the Department began this 
analysis by first considering whether the ``commercial availability'' 
factor it had used in prior later-developed merchandise inquiries was 
appropriate in this instance. Next, the Department considered whether 
these mixed-wax candles were commercially available at the time of the 
LTFV investigation, as well as considering whether a significant 
technological advancement or a significant alteration of the 
merchandise involving commercially significant changes occurred. The 
Department's analysis next examined whether these mixed-wax candles are 
properly included within the scope of the Order pursuant to section 
781(d) of the Act. Finally, the Department considered certain 
additional issues submitted the parties.

Appropriateness Of Initiation

    In the Department's January 18, 2006, letter to interested parties, 
the Department explained that it was appropriate to initiate this 
anticircumvention inquiry. However, certain parties continued to argue 
that the Department's initiation was inappropriate.
    Since the issuance of the Department's January 18, 2006, letter to 
interested parties, the Department finds that Respondents have not 
placed any new information on the record that shows that the 
Department's initiation was inappropriate. Respondents argue that, 
pursuant to the findings of Wheatland Tube, the Department may not, 
through the anticircumvention provisions of the statute, expand the 
scope of the Order. The Department disagrees that Wheatland Tube 
precludes finding that later-developed merchandise is within the scope 
of the order. See Wheatland Tube Co. v. United States, 161 F. 3d 1365, 
1371 (Fed. Cir. 1998) (``Wheatland Tube''). In Wheatland Tube, the 
Court of Appeals for the Federal Circuit (``the Federal Circuit'') 
found that a minor alterations anticircumvention inquiry, pursuant to 
section 781(c) of the Act, was not proper if the product at issue was 
``unequivocally excluded from the scope of the order in the first 
place.'' See Wheatland Tube, 161 F. 3d at 1371. Wheatland Tube involved 
an antidumping duty order on standard pipe, and the petitioner had 
``expressly and unambiguously'' excluded a slightly higher grade of 
pipe, ``line pipe,'' from the scope of both its petition at the 
Department and from the ITC's injury determination. Id. at 1369. 
Subsequently, when exporters began to substitute line pipe for standard 
pipe, the petitioner alleged that imports of line pipe were 
circumventing the order on standard pipe, under the minor alterations 
provision. The Court of International Trade (``the CIT'') held that, 
because the petitioner had deliberately excluded line pipe from the 
standard pipe investigations and order, it could not subsequently use 
the

[[Page 32036]]

``minor alterations'' provision to bring line pipe into the scope of 
that order. Id. at 1369. The Federal Circuit affirmed the CIT on 
appeal. Id. at 1371.
    However, a more recent case, Nippon Steel, provided further 
guidance on the application of the minor alterations provision. See 
Nippon Steel Corp. v. United States, 219 F.3d 1348 (Fed. Cir. 2000) 
(``Nippon Steel''). Nippon Steel involved a minor alterations 
circumvention inquiry arising from the antidumping duty order on 
corrosion-resistant carbon steel flat products from Japan. The 
petitioner in that case alleged that respondents had added minute 
amounts of boron to their carbon steel products, so as to remove them 
from the literal scope of the order without significantly affecting 
either their physical characteristics or uses of the steel. See 
Corrosion-Resistant Carbon Steel Flat Products from Japan: Initiation 
of Anticircumvention Inquiry on Antidumping Duty Order, 63 FR 58364 
(October 30, 1998).
    In upholding the Department's circumvention inquiry, the Federal 
Circuit emphasized that, in contrast to Wheatland Tube, which involved 
a distinct product line that the petitioner had expressly and 
unequivocally excluded from the scope of the order, Nippon Steel 
involved simply adding an insignificant amount of boron to the precise 
product covered by the order. In addition, the Federal Circuit held 
that steel with an insignificant amount of added boron had not been 
deliberately excluded from the scope of the order, because there was no 
commercial reason for such steel to exist at the time of the 
investigation, and in fact it did not exist as a commercial product. 
The Federal Circuit observed that indeed such steel would not have been 
purposely manufactured but for the antidumping order, which supplied 
the only reason for its existence. Under these circumstances, the 
Federal Circuit held that, although the Department had previously found 
that the boron-added steel was technically outside the order, the 
circumvention inquiry could proceed. Thus, contrary to Respondent's 
contentions, the Federal Circuit clarified in Nippon Steel that the 
minor alteration inquiry in Wheatland Tube was prohibited only because 
the product in question was well-known prior to the order and was 
specifically excluded from the investigation.\7\ See Nippon Steel, 219 
F.3d at 1356.
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    \7\ The Department recognizes that both Wheatland Tube and 
Nippon Steel were minor alterations anticircumvention inquiries and 
has discussed them here not only because they were raised by 
interested parties but also because they provide guidance as to the 
general issue of initiating anticircumvention inquiries.
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    Having examined relevant precedent, the Department looked anew to 
the original petition, ITC Final Report and previous Department 
determinations to determine if mixed-wax candles were well-known prior 
to the Order and were specifically excluded from the LTFV 
investigation, such that Wheatland Tube applies. See Candles from the 
People's Republic of China, USITC Pub. 1888 (August 1986) (``ITC Final 
Report'')\8\. With respect to the original petition, the Department 
observed that petroleum or paraffin waxes were the only materials used 
in candle production within the PRC at the time of the filing. See 
Antidumping Petition of National Candle Association, (September 3, 
1985) at 3, 6, 28, 36 (``Petition'')\9\.
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    \8\ See Memo to the File from Julia Hancock, International Trade 
Analyst, Subject: Placing Additional Information on the Record (May 
23, 2006), at Attachment 1 (``May 23, 2006, Additional Information 
Memo'').
    \9\ See May 23, 2006, Additional Information Memo, at Attachment 
2.
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    Regarding the ITC Final Report, the Department notes that the 
initial investigation found that ``{PRC{time}  candle factories that 
manufacture for export reportedly use only semi-refined petroleum 
waxes... stearic acid\10\ or plastic wax as a hardening agent accounts 
for approximately one percent of the composition of {PRC{time}  
manufactured candle.'' See ITC Final Report, at 20. Moreover, the 
Department now finds that it is not apparent from the language of the 
ITC Final Report whether mixed-wax candles were being produced within 
the United States at the time of the investigation. The ITC found that 
``petroleum wax candles'' were the domestic ``like product'' after 
considering whether ``candles made of materials other than petroleum, 
principally beeswax,'' were within the ``like product.'' Id. at 2-3. 
However, the Department notes that while the ITC indicated that it 
considered ``candles made of {other{time}  materials,'' as highlighted 
by various Respondents, the domestic ``like product'' analysis did not 
focus on mixed-wax candles, but only on beeswax and petroleum wax 
candles. See ITC Final Report, at 2-3; Petroleum Wax Candles from 
China, Inv. No. 731-TA-282 (Second Review), USITC Pub. 3790 (July 2005) 
at 6-7 (``ITC Second Sunset Review Report'').
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    \10\ Stearic Acid is a fatty acid with long hydrocarbon chains 
varying in length typically found in hydrogenated vegetable or 
animal oils. See Petitioners' April 6, 2005, Comments, at Exhibit F. 
In the LTFV investigation, the ITC noted that ``a composite of 
paraffin and roughly five to ten percent stearic acid as a hardening 
agent became the basic candle stock for U.S. manufacturers.'' See 
ITC Final Report, at 19.
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    Finally, the Department considered its prior scope ruling finding 
certain mixed-wax candles outside the scope of the Order. While the 
Department recognizes that it made previous such scope rulings, the 
Department notes that the factors that govern the Department's analysis 
of whether a product is within the scope of the Order differ for 
anticircumvention inquiries and other scope determinations. In scope 
rulings under section 351.225(k)(1) of the Department's regulations, 
the Department relies upon relevant documents (i.e., descriptions of 
the merchandise contained in the petition, the initial investigation, 
and the determinations of the Secretary (including prior scope 
determinations) and the ITC) in determining whether a particular 
product is included within the scope of an antidumping duty order. If 
the Department finds that the descriptions are dispositive, the 
Department will issue a final scope ruling of whether the product is 
within the scope of the antidumping duty order. But when the 
descriptions are not dispositive, the Department will further consider 
the additional five factors, as stipulated in section 351.225(k)(2) of 
the Department's regulations. In five of the one hundred and forty 
three scope rulings requested, starting with the J.C. Penney Final 
Ruling, the Department found that mixed-wax candles were outside the 
scope of the Order because the ITC Final Report defined a petroleum wax 
candle as one ``composed of fifty percent or more petroleum wax.'' See 
Final Scope Ruling: Antidumping Duty Order on Petroleum Wax Candles 
from the People's Republic of China (A-570-504): J.C. Penney (May 21, 
2001) at 12 (``J.C. Penney Final Ruling'')\11\; ITC Final Report, at 3. 
Thus, the Department found it was unnecessary in these prior scope 
rulings to consider the additional factors, (i.e., physical 
characteristics, expectations of the ultimate purchaser, ultimate use, 
channels of trade, and advertising/display), set forth in section 
351.225(k)(2). See also Final Scope Ruling: Antidumping Duty Order on 
Petroleum Wax Candles from the People's Republic of China (A-570-504): 
Pier 1 Imports, Inc., at 7 (May 13, 2005) (``Pier 1 Final 
Ruling'')\12\.
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    \11\ See May 23, 2006, Additional Information Memo, at 
Attachment 3.
    \12\ See May 23, 2006, Additional Information Memo, at 
Attachment 4.
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    Later-developed merchandise anticircumvention inquiries are 
governed by section 781(d) of the Act,

[[Page 32037]]

which instructs the Department to determine whether the product in 
question was developed after the investigation was initiated, and, if 
so, whether it is within the scope of the order. If the Department 
finds that the product subject to the inquiry is later-developed, then 
section 781(d)(1) of the Act instructs the Department to consider: (A) 
whether the later-developed merchandise has the same general physical 
characteristics as the merchandise with respect to which the order was 
originally issued (``earlier product''); (B) whether the expectations 
of the ultimate purchasers of the later-developed merchandise are the 
same as for the earlier product; (C) whether the ultimate use of the 
earlier product and the later-developed merchandise is the same; (D) 
whether the later-developed merchandise is sold through the same 
channels of trade as the earlier product; and (E) whether the later-
developed merchandise is advertised and displayed in a manner similar 
to the earlier product. In contrast to the prior scope rulings, in the 
present inquiry, the Department is obligated, pursuant to section 
781(d) of the Act, to make a determination by explicitly analyzing 
these additional factors.
    As neither the original petition or the ITC Final Report 
unequivocally excluded these products and as the statute compels a 
different analytical framework than the prior scope ruling in this 
context, the Department conclude it was appropriate to initiate this 
inquiry as Wheatland Tube does not apply in this instance.

Later-Developed Merchandise

Statutory Provision

    Section 781(d) of the Act provides that the Department may find 
circumvention of an antidumping duty order when merchandise is 
developed after an investigation is initiated (``later-developed 
merchandise''). In conducting anticircumvention inquiries under section 
781(d)(1) of the Act, the Department must examine the following 
criteria: (A) whether the later-developed merchandise has the same 
general physical characteristics as the merchandise with respect to 
which the order was originally issued (``earlier product''); (B) 
whether the expectations of the ultimate purchasers of the later-
developed merchandise are the same as for the earlier product; (C) 
whether the ultimate use of the earlier product and the later-developed 
merchandise is the same; (D) whether the later-developed merchandise is 
sold through the same channels of trade as the earlier product; and (E) 
whether the later-developed merchandise is advertised and displayed in 
a manner similar to the earlier product.
    In addition, section 781(d)(2) of the Act also states that the 
administering authority may not exclude later-developed merchandise 
from a countervailing or antidumping duty order merely because the 
merchandise (A) is classified under a tariff classification other than 
that identified in the petition or the administering authority's prior 
notices during the proceeding, or (B) permits the purchaser to perform 
additional functions, unless such additional functions constitute the 
primary use of the merchandise, and the cost of the additional 
functions constitute more than a significant proportion of the total 
cost of production of the merchandise.

Legislative History and Prior Case Precedents

    The statute does not provide further guidance in defining the 
meaning of further development. The only other source of guidance 
available is the brief discussion of later-developed products in the 
legislative history for section 781(d), which although addressed later-
developed products with respect to the ITC's injury analysis, we find 
is also relevant to the Department's analysis. The Conference Report on 
H.R. 3, Omnibus Trade and Competitiveness Act of 1988 defines a later-
developed product as a product that has been produced as a result of a 
``significant technological advancement or a significant alteration of 
the merchandise involving commercially significant changes.'' See H.R. 
Conf. Rep No. 576, 100\th\ Cong., 2d Sess. (1988), reprinted in 134 
Cong. Rec. H2031, H2305 (daily ed. April 20, 1988) (emphasis added). In 
addition, in the first section 781(d) determination involving portable 
electric typewriters, the Department also cited a U.S. Senate report:
    [lsqb]s[rsqb]ection 781(d) was designed to prevent circumvention of 
an existing order through the sale of later developed products or of 
products with minor alterations that contain features or technologies 
not in use in the class or kind of merchandise imported into the United 
States at the time of the original investigation.
See S. Rep No. 40., 100\th\ Cong., 1\st\ Sess. 101 (1987).
Additionally, the Department noted the following:
    The Senate amendment is designed to address the application of 
outstanding antidumping and countervailing duty orders to merchandise 
that is essentially the same merchandise subject to an order, but was 
developed after the original investigation was initiated. Sec. 323(a) 
of Sen. amendment to H.R. 3, October 6, 1987. H.R. Conf. Rep No. 576, 
100\th\ Cong., 2d Sess. (1988), reprinted in 134 Cong. Rec. H2031, 
H2305 (daily ed. April 20, 1988).
    The language of the statute and legislative history makes clear 
that for any product to be considered later-developed it must be an 
advancement of the original product subject to the investigation, as 
opposed to a product recently found to be within the scope of the 
order.
See Portable Electric Typewriters from Japan: Preliminary Scope Ruling, 
55 FR 32107, 32114 (August 7, 1990) (``PET Prelim'') (emphasis added).
    In addition to the legislative history, prior later-developed 
merchandise cases also provide further guidance, foremost of which is 
that the Department has considered ``commercial availability'' in some 
form in its prior later-developed merchandise anticircumvention 
inquiries: PET Final; EMD Final; and EPROMs Final. See Portable 
Electric Typewriters from Japan: Final Scope Ruling, 55 FR 47358 
(November 13, 1990) (``PET Final''); Electrolytic Manganese Dioxide 
from Japan: Final Scope Ruling, 57 FR 395 (January 6, 1992) (``EMD 
Final''); and Eraseable Programmable Read Only Memories from Japan: 
Final Scope Ruling, 57 FR 11599 (April 6, 1992) (``EPROMS Final''). In 
each case, the Department addressed the ``commercial availability'' of 
the later-developed merchandise in some capacity, such as the product's 
presence in the commercial market or whether the product was fully 
``developed,'' i.e., tested and ready for commercial production.\13\
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    \13\ The fourth later-developed merchandise inquiry conducted by 
the Department was Television Receiving Sets, Monochrome and Color, 
from Japan. In that inquiry, the Department found that hand-held LCD 
televisions (LCD TVs) were later-developed merchandise. See 
Television Receiving Sets, Monochrome and Color, from Japan: Final 
Scope Ruling, 56 FR 66841 (December 26, 1991) (``TV Final''). In its 
final determination, the Department reviewed LCD TVs based upon the 
later-developed merchandise provision and noted that the LCD TVs 
technology did not exist at the time the original product 
descriptions were developed. If the technology did not exist, LCD 
TVs could not have been ``commercially available'' at the time of 
the investigation. In other later-developed merchandise inquiries, 
such as EPROMs Final, the Department addressed ``commercial 
availability'' in some form as a factor in its later-developed 
merchandise analysis because the technology to ``developrdquo; the 
new product existed at the time of the original investigation. See 
EPROMs Final, 57 FR at 11602-3.

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[[Page 32038]]

    Based upon the legislative history of the anticircumvention 
provision and prior later-developed merchandise inquiries, the 
Department finds that it should include a ``commercial availability'' 
standard in its analysis of this proceeding, as was indicated in the 
January 18, 2006, letter to interested parties. See January 18, 2006, 
Letter, at 2-3. As noted above, both the legislative history and prior 
later-developed merchandise inquiries place emphasis on evaluating the 
``commercial availability'' of the specific product to determine 
whether that product is later-developed, pursuant to section 781(d) of 
the Act. Accordingly, the Department must find that mixed-wax candles 
were not ``commercially available'' at the time of the LTFV 
investigation in order to be properly considered later-developed 
merchandise.

Consideration of Later-Developed Merchandise Factors

    The legislative history and prior later-developed merchandise 
inquiries show that there are two key elements to a later-developed 
merchandise analysis. Specifically, that the alleged later-developed 
merchandise was not commercially available at the time of the LTFV 
investigation and second, that there was a significant technological 
advancement or a significant alteration of the merchandise involving 
commercially significant changes.
A. Commercial Availability
    There are two key components implicit in the Department's prior 
analyses of the commercial availability factor. The first is whether it 
was possible, at all, to manufacture the product in question. Second, 
if the technology existed, whether the product was available in the 
market.

Existence of Mixed-Wax Candle Technology\14\
---------------------------------------------------------------------------

    \14\ The Department notes that in all previous later-developed 
merchandise inquiries, the existence of the technology central to 
the manufacturing of the product was not at issue.
---------------------------------------------------------------------------

    In previous later-developed merchandise inquiries, the Department 
considered whether technology existed at the time of initiation of the 
LTFV investigation, which may have resulted in the creation of a new 
product. See EPROMs Final, 57 FR at 11602-3. Therefore, the Department 
will consider in this analysis whether the appropriate technology 
required to produce the kind of mixed-wax candles at issue 
(hydrogenation) existed at the time of the LTFV investigation.\15\
---------------------------------------------------------------------------

    \15\ In their petition, Petitioners specifically requested that 
this anticircumvention inquiry focus on mixed-wax candles containing 
palm and/or vegetable-based oils. More importantly, Petitioners 
noted in their request that neither palm and/or vegetable-based oils 
could be used by itself as a candle wax because they are liquid at 
room temperature. Accordingly, Petitioners noted that these oils 
must be chemically modified, (i.e., undergo the hydrogenation 
process), resulting in a carbon chain chemistry that allows the long 
chains to fit closely together, which is a necessity for candle wax. 
See Petitioners' October 8, 2004 LDM Petition (October 8, 2004), at 
15 and Exhibit 4 (``Petitioners' LDM Petition''). As such, the 
hydrogenation process and any developments to it are the central 
technologies to this inquiry.
---------------------------------------------------------------------------

    One of the Respondents, Target, submitted a candle-making manual 
from 1906 that discusses the history of candle-making manufacturing in 
the 19\th\ century.\16\ See Target's February 15, 2006, Comments 
(February 15, 2006), at Exhibit 1. Specifically, it discusses the 
process by which a candle made of paraffin and stearic/fatty acids is 
produced, including the process of distilling fatty and stearic acids 
and the melting and solidifying points of mixtures of stearic and 
palmitic acids. Although the manual does not specifically reference 
hydrogenation, a review of this manual and other patents submitted by 
parties, which details the hydrogenation process, appear to be similar. 
Specifically, the Lamborn manual demonstrates that stearic acid, or 
``stearine,'' which may be ``palm stearin,'' can be produced by either 
a ``lime-saponification process, or by acid saponification with 
distillation.'' Id. at Exhibit 1, p. 493.
---------------------------------------------------------------------------

    \16\ Modern Soaps, Candles and Glycerin: A Practical Manual of 
Modern Methods of Utilization of Fats and Oils in the Manufacture of 
Soap and Candles, and of the Recovery of Glycerin, Leebert Lloyd 
Lamborn, D. Van Nostrand Company, 1906. (``Lamborn Manual'').
---------------------------------------------------------------------------

    In addition, Target also submitted a patent issued by the U.S. 
Patent and Trademark Office (``USPTO'') to Wilhelm Pungs, Ludwigshafen-
on-the-Rhine, and Michael Jahrstorfer in 1930 (``Pungs Patent'') that 
discusses the hydrogenation process in producing candles with paraffin 
and natural waxes. See Target's February 15, 2006, Comments, at Exhibit 
3. The Pungs Patent describes many different candle formulations such 
as
    Candles with a cotton wick are cast in the usual manner from a 
fused mixture (about 85 C.) of equal parts of hard paraffin wax and of 
the mixture of alcohols of high molecular weight obtainable by the 
catalytic hydrogenation, with the aid of hydrogen at about 200 C., at a 
pressure of about 200 atmosphere and in the presence of metallic 
nickel, of a Montan wax which has been bleached with chromic acid and 
the acids of which bleached wax have been esterified with methyl 
alcohol before the hydrogenation.
Id.
    In addition, both Respondents and Petitioners acknowledge the 
existence of hydrogenation technology prior to the time of the LTFV 
investigation as discussed in the patent issued to Howard C. Will in 
1934. See CCA's February 15, 2006, Comments (February 15, 2006), at 
Attachment 8 (``Will Patent''). Specifically, the Will Patent states 
that:
    I have found that a very satisfactory candle can be produced which 
comprises a substantial percentage, as 50[percnt] or more vegetable oil 
combined with paraffin wax, stearic acid, beeswax or other waxes if the 
vegetable oil, such as rapeseed oil is first hydrogenated and then 
mixed with paraffin wax, stearic acid, beeswax or other waxes.
Id.
    Given the description of the candles within the patents on the 
record and the Lamborn Manual, the Department finds that the mixed-wax 
candle technology existed prior to the LTFV investigation.

Market Availability of Mixed-Wax Candles

    The interested parties submitted a significant amount of 
information on the record as to whether these mixed-wax candles were 
available at the time of the LTFV investigation. The types of 
information the Department received from interested parties was in the 
form of marketing materials (product brochures, etc.), affidavits, 
patents, direct quantity and value information, and statements made in 
various ITC documents. Moreover, the Department conducted its own 
research and placed this information on the record. The record 
information as a whole does not definitively demonstrate that these 
mixed-wax candles were available in the market at the time of the LTFV 
investigation.
    While the marketing materials and affidavits demonstrate a 
commercial presence of candles containing various wax materials, both 
mixed and unmixed, none of the submitted materials demonstrate that the 
subject candles, with the specific kind of mixed-waxes in the specific 
proportions, (i.e., more than fifty percent non-petroleum wax), were 
available for commercial sale in the market prior to time of the LTFV

[[Page 32039]]

investigation.\17\ For instance, one of the respondents, CCCFNA, 
submitted a Colonial Candle/Mrs. Baker's catalogue from 1988 for 
bayberry candles, which this company has sold since 1909, as evidence 
that mixed-wax candles were available for commercial sale at the time 
of the LTFV investigation. See CCCFNA's February 27, 2006, Rebuttal 
Comments, at Exhibit 5. However, this catalogue only references that 
the candles for sale are made of bayberry wax. By not mentioning any 
other wax in a blend with bayberry, this catalogue does not demonstrate 
that the offered candles are either mixed or composed of the waxes 
subject to the inquiry.
---------------------------------------------------------------------------

    \17\ See Petitioners' February 15, 2006, Comments, at Exhibit 
C16 (1987 Candle World brochure, which offers a ``new patented 
process for making candles'' that includes ``only highly-refined 
microcrystalline wax''), C1 (2000 A.I. Root Company brochure which 
offers ``new products in a renewable soy-wax blend''); CCCFNA's 
February 27, 2006, Rebuttal Comments, at Exhibit 1 (1985 Emkay Price 
List, which offers specialty candles, such as ``wax lighting tapers, 
little lites, and bottle decorators''), Exhibit 3 (1993 Williamsburg 
Soap and Candle Company catalogue, which offers handcrafted tapers 
made of ``special blend of waxes``), and Exhibits 5 and 7 (1988 
Colonial Candle/Mrs. Baker's catalogue and price list, which offer 
candles made of bayberry wax); Lava Enterprise's February 13, 2006, 
Comments (February 13, 2006), at Attachment 1 (1997 Lava Enterprises 
product catalogue, which offer Glowing Art-Masters candles); CCA's 
February 15, 2006, Comments, at Exhibit 11 (2004 Health Supplement 
Retailer article, which discusses ``palm oil candles are a 
relatively new addition to the market''), Exhibit 13 (1998 StratSoy 
News Service article, which states that ``new soybean oil-based 
candles were commercially launched at the 1998 Farm Progress 
Show''), and Exhibit 18 (2002 Colonial Candle Company of Cape Cod 
product initiation); Target's February 15, 2006, Comments, at 
Exhibit 2 (Price's Patent Candle Company product brochure, which is 
for a Sherwood dinner candle created in the 1830's, that is composed 
of ``stearine made from pure vegetable wax''); and CCA's March 28, 
2006, Comments (March 28, 2006), at Exhibit 4 (International Group, 
Inc. (``IGI'') Paper which discusses scrape surface heat exchanger 
(``SSHE'') technology that was researched by IGI to develop candles, 
from petroleum wax-only blends, vegetable wax-only blends, and 
blends containing petroleum wax and vegetable wax, for the general 
market).
---------------------------------------------------------------------------

    With respect to the patents, the Department notes that it cannot 
conclusively ascertain that the candle production methods described in 
the patents dated prior to the LTFV investigation were ever used for 
commercial production.\18\ Further, consistent with EMD Prelim, the 
Department notes that patents by themselves are not dispositive in 
determining whether a product is later-developed. See Electrolytic 
Manganese Dioxide from Japan: Preliminary Scope Ruling, 56 FR 56977 
(November 7, 1991) (``EMD Prelim''). In the EMD Prelim, the Department 
found that while patents for CMD-U were in existence at the time of the 
investigation, the product was not ``developed,'' i.e., not fully 
tested or readied for commercial production, at the time of the 
investigation. See EMD Prelim, 56 FR at 56978-81.
---------------------------------------------------------------------------

    \18\ While one of the Respondents, Target, did submit a list of 
patents relating to candles and their production from 1906 through 
1983, the Department notes that Target neither provided the claim 
nor the body of the patent issued within its list. See Target's 
February 15, 2006 Comments, at Exhibit 5. Accordingly, the 
Department is unable to ascertain from the list submitted by Target 
whether the patents listed establish that there were significant 
developments in hydrogenation technology that allowed mixed-wax 
candles, in the specific wax proportions subject to the inquiry, to 
be produced prior to the LTFV investigation. As a result, the 
Department could not consider these patents in its analysis as they 
are not on the record of this proceeding.
---------------------------------------------------------------------------

    As an additional method of gathering direct information on this 
question, the Department sought sales information directly from the 
parties participating in this proceeding. These parties included U.S. 
candle importers, U.S. candle producers, and Chinese candle producers 
and exporters. None provided any evidence that there were any sales of 
candles composed of greater than fifty percent vegetable or palm oil-
based waxes mixed with petroleum wax prior to, or contemporaneous with, 
the LTFV investigation. The record indicates that Petitioners and one 
of the respondents, CCCFNA, did sell mixed-wax candles of the type 
subject to this inquiry, but not until the late-1990s. See Petitioners' 
February 15, 2006, Comments, at Exhibit A; CCCFNA's Quantity and Value 
Submission (February 15, 2006), at Exhibits 1-7.\19\ Although the 
annual sales data submitted by Petitioners and CCCFNA are only 
separated into two categories, (i.e., candles containing more than 
fifty percent petroleum wax and candles containing more than fifty 
percent non-petroleum wax), they show that mixed-wax candles, (i.e., 
less than fifty percent non-petroleum wax), were not available for 
commercial sale as late as 1997.\20\
---------------------------------------------------------------------------

    \19\ The Department notes that all Respondents were requested to 
provide the quantity and value of sales of mixed-wax candles in 
order to establish when these candles were ``commercially 
available.'' However, four of the Respondents either did not submit 
the requested data or stated that they were under no legal 
obligation to maintain such sales records. See CCA's February 15, 
2006, Comments, at 1; Lava Enterprises Comments' on the Department's 
January 18, 2006 Letter (February 13, 2006), at 2 (Lava's 
February 13, 2006, Comments). In addition, only 5 NCA 
members provided quantity and value data because, as noted at the 
hearing, they were the only member companies that had this data or 
made sales of mixed-wax candles. See Anticircumvention Inquiry, In 
the Matter of Petroleum Wax Candles from the People's Repbulic of 
China: Hearing Transcript (May 18, 2006), at 105-106 (``Hearing 
Transcript'').
    \20\ While Lava was one of the respondents that did not provide 
annual sales data of mixed-wax candles, Lava did acknowledge that it 
started selling mixed-wax candles in 1997, over ten years after the 
LTFV investigation. See Lava's February 13, 2006, Comments, at 2.
---------------------------------------------------------------------------

    Although the Department is not bound by the ITC's findings in the 
second sunset review, we find that it is relevant to our later-
developed merchandise analysis.\21\ The ITC recently found that mixed-
wax candles\22\ were not considered as part of its analysis at the time 
of the LTFV investigation because there was ``no commercial production 
of the {mixed-wax{time}  candles in 1986 when {the ITC{time}  made its 
original determination.'' See ITC Second Sunset Review Report, at 7. 
The ITC noted that, both during and after the investigation, candles 
produced in the United States and the PRC contained either 100 percent 
petroleum wax or were combined with beeswax. See ITC Second Sunset 
Review Report, at 6. Mixed-wax candles, according to the ITC, were not 
``commercially produced'' until the late 1990s when ``{domestic{time}  
producers began commercial production.'' Id. at 7.\23\ Therefore, the 
Department finds the

[[Page 32040]]

ITC's Second Sunset Review Report relevant to the Department's later-
developed merchandise analysis.
---------------------------------------------------------------------------

    \21\ The Department recognizes that the ITC's findings in the 
ITC Second Sunset Review Report was primarily based on information 
provided by Petitioners. However, U.S. importers did provide 
information to the ITC for consideration in the second sunset 
review.
    \22\ In the ITC Second Sunset Review Report, the ITC defined 
``blended candles'' as ``candles containing any blend of petroleum 
and vegetable wax.'' See ITC Second Sunset Review Report, at 7. The 
Department notes that the merchandise subject to this inquiry, 
mixed-wax candles, are also candles containing blends of petroleum 
and palm or other vegetable oil-based waxes.
    \23\ The Department further observes that in the ITC's 
examination of the U.S. market in the late 1990s, domestic candle 
production was threatened by increased energy and raw material 
costs. Id. at II-3. According to U.S. candle producers, {increased 
petroleum prices were having a significant effect on the price of 
petroleum wax candles,{time}  and thus, hindering these producers' 
ability to compete with foreign imports of mixed-wax candles, (i.e., 
less than fifty percent non-petroleum wax). Id. at II-2 (footnote 8) 
and II-3. These factors, according to the ITC, resulted in an 
increased availability of mixed-wax candles within the U.S. market. 
Of note, U.S. candle producers described the increased availability, 
particularly after 2001, of mixed-wax candles, ``as an explosion.''; 
Id. at II-4. The shift from petroleum wax candles to mixed-wax 
candles was also due to a consumer demand for substitute products, 
particularly candles using materials other than petroleum wax. 
Specifically, the ITC noted that two materials, soy wax, which was 
developed in 1996, and palm wax, were recent developments. Id. at 
II-7. Moreover, the ITC noted that domestic producers and importers 
indicated that the most predominant new substitutes for petroleum 
wax candles, palm and soy wax candles, have only been present within 
the market since 2001. Id. at II-4, II-8, II-9. Due to this change 
in the market, the ITC also found that ``{PRC{time}  candle 
producers have been able to produce and increase their exports to 
the United States of {mixed-wax{time}  candles following {the 
Department's{time}  issuance of scope exclusions.'' Id. at 19. Based 
on the evidence presented during its proceeding, the ITC defined the 
domestic like product to include candles with fiber or paper-cored 
wicks and containing any amount of petroleum wax, except for candles 
containing more than 50 percent beeswax.
---------------------------------------------------------------------------

    Given the overall paucity of data shedding light as to the 
commercial availability factor, the Department is unable to 
conclusively establish that mixed-wax candles were available in the 
market at the time of the LTFV investigation. The most clear evidence 
submitted on the record, quantity and value information, shows that 
these mixed-wax candles were first sold in the late 1990s and 
therefore, were not available in the market at the time of the LTFV 
investigation.
B. Significant Technological Advancement or a Significant Alteration of 
the Merchandise Involving Commercially Significant Changes
    Although the data on the record support a conclusion that the 
mixed-wax candles were not available at the time of the LTFV 
investigation, the Department must also consider this second factor. At 
the outset, the Department notes that this factor was not explicitly 
addressed in prior later-developed merchandise inquiries because 
whether there was a significant technological advancement was not at 
issue in those cases. However, the legislative history cited above 
makes clear that this criteria is implicit in the later-developed 
merchandise provision. This criteria is necessary to distinguish those 
cases in which a product is not commercially available during the LTFV 
investigation merely due consumer preferences or other factors, rather 
than the product not having been developed at the time of the LTFV 
investigation. In this case, the Department finds that the record 
evidence, although adequate for the Department to draw a reasonable 
inference, is somewhat opaque, particularly with respect to the exact 
significant technological advancements that have occurred enabling the 
production of mixed-wax candles and the timing of these advancements.
    The Department notes that numerous patents were issued from the 
late 1990s, onward for the production of candles containing a mix of 
petroleum and other types of waxes. These patents appear at the same 
time the Department began receiving a surge of scope ruling requests 
regarding mixed-wax candles. Moreover, during that same period, large 
volumes of Chinese mixed-wax candles appeared in the market. Finally, 
the Department notes that a few patents issued in the early 2000s 
appear to directly bear on the question of producing candles with less 
than fifty percent petroleum wax. Based on this information, the 
Department finds it reasonable to infer that the patents issued from 
the late 1990s onward are correlated with the commercial presence of 
mixed-wax candles and concludes that a significant technological 
advancement or a significant alteration of the merchandise involving 
commercially significant changes occurred.
    Although the Department's inferences are reasonable and based on 
substantial evidence, there are several serious remaining concerns that 
require further inquiry. Among these considerations are:
 the lack of a clear and definitive statement of the precise 
significant technological advancement that allowed for the commercial 
sale of mixed-wax candles;
 the extent to which the concentration of palm or vegetable-
based oil wax has any effect on the physical properties of the mixed-
wax candle as well as the proper characterization of such as candle as 
a petroleum wax candle;
 a direct link between patents awarded during this period and 
commercial sale of mixed-wax candles;
 a comprehensive survey showing the technological developments 
regarding mixed-wax candles.
C. Conclusion
    Based on the above analysis, although not all evidence is 
definitive or supportive of this conclusion, the Department finds that 
mixed-wax candles were not commercially available at the time of the 
LTFV investigation and infers that there was a significant 
technological advancement regarding such candles well after the time of 
the LTFV investigation. Therefore, the Department finds that mixed-wax 
candles meet the statute's meaning of a later-developed product.

Mixed-Wax Candles As Is-Scope Products

    Pursuant to section 781(d) of the Act, once the Department finds a 
product to be later-developed, it must determine whether it is included 
in the scope of the Order by using the following criteria: (A) whether 
the later-developed merchandise has the same general physical 
characteristics as the merchandise with respect to which the order was 
originally issued (``earlier product''); (B) whether the expectations 
of the ultimate purchasers of the later-developed merchandise are the 
same as for the earlier product; (C) whether the ultimate use of the 
earlier product and the later-developed merchandise is the same; (D) 
whether the later-developed merchandise is sold through the same 
channels of trade as the earlier product; and (E) whether the later-
developed merchandise is advertised and displayed in a manner similar 
to the earlier product. See Section 781(d)(1) of the Act.
    The data available to the Department is not precise regarding the 
proportion of different waxes in mixed-wax candles. As such, the 
Department's analysis necessarily addresses the entire range of 
products (less than one-hundred percent to over fifty percent palm and/
or other vegetable-oil based waxes). However, because the data on the 
record is imprecise with regard to wax proportions, the Department has 
concerns. Chief among them is whether there is a proportion of non-
petroleum wax content of a candle that is so large that the candle can 
no longer properly be considered within the same class or kind of 
merchandise subject to the Order as a petroleum wax candle. While the 
Department has adequate information to address the entire range of 
mixed-wax candles generally, the Department has only limited 
information with which to establish a distinction, if any, between 
subject and non-subject mixed-wax candles. The best information 
available to the Department is the information submitted by Pier 1 
regarding a candle purported to be a mixed-wax candle containing 87.80 
percent of non-petroleum wax. See Pier 1 Final Ruling, at 7. Therefore, 
the Department preliminarily concludes that the preponderance of the 
record evidence supports a finding that candles containing up to 87.80 
percent palm and/or other vegetable-oil based waxes mixed with 
petroleum wax are within the scope of the Order.

Physical Characteristics

    With respect to physical characteristics, the Department first 
notes that the available data is limited. No party provided 
comprehensive evidence regarding the wax proportions of the mixed-wax 
candles that they sell. Moreover, no party provided an analysis 
addressing the precise effects of increasing proportions of palm and/or 
other vegetable oil-based waxes on the physical characteristics of 
mixed-wax candles. Absent this information, the Department cannot 
precisely evaluate the physical characteristics of mixed-wax candles in 
varying proportions.
    Despite these consideration, when taken as a whole, the limited 
record evidence supports the conclusion that there is no substantial 
difference

[[Page 32041]]

between mixed and petroleum wax candles' physical characteristics. The 
Department notes that mixed-wax candles and petroleum wax candles 
appear to be indistinguishable in terms of appearance, feel, and scent. 
Although Respondents claim that differences exist, the Department notes 
that Respondents have not submitted evidence, such as sample candles, 
that indicate a difference in physical characteristics. The Department 
observes that one of the Respondents, the MVP Group when it was part of 
the Coalition for Free Trade in Candles (``CFTC''), did submit sample 
candles prior to the Initiation Notice. However, these sample candles 
were neither in the same burn stage nor were the candles the same unit 
of comparison, (i.e., the sample candles were in different containers, 
the color of the wax was different, and the packaging was different). 
See CFTC's Candle Samples (February 7, 2005), at Exhibits 4 and 5. In 
contrast, the Department notes that the sample candles provided by 
Petitioners were visually similar, (i.e., the sample mixed-wax candles 
that contains palm wax and the petroleum wax candles were both pillars 
and the color of the wax was similar). See Petitioners' Sample Candles 
(January 25, 2005), at Sample A. The Department notes that the mixed-
wax candles contained labels on the bottom of the candle, which 
indicated that the candles contained fifty-two percent palm wax. 
However, the Department finds that without turning the mixed-wax 
candles over to identify their wax content, the sample mixed-wax 
candles and the sample petroleum wax candles have similar physical 
characteristics which make them appear to be indistinguishable by 
appearance, feel, and scent. Id.
    Additionally, while there were claims that mixed-wax candles have 
distinct physical differences that stem from these candles' differing 
chemical structures, the Department again notes that there are no 
submitted samples of mixed-wax candles to conclusively establish these 
physical differences. Instead, there are declarations from members of 
the candle industry as support for this argument. For instance, one of 
the Respondents, CCA, submitted a declaration from James Groce, R&D 
Analytical Lab Manager of CCA, who stated that their research showed 
that the difference in the chemical structure of petroleum wax and 
vegetable-based waxes results in a distinct difference in the 
appearance and performance of mixed-wax candles. See CCA's February 15, 
2006, Comments, at 34-43, Exhibit 38. Because of the chemical 
difference in the structure of vegetable-based waxes, another 
declaration from Andrew Birch, Vice President of Manufacturing for 
PartyLite\24\, noted that this required his company to invest 
significant outlays of capital equipment to successfully produce mixed-
wax candles. Id. at Exhibit 37. While the Department acknowledges that 
Respondents have demonstrated that one of the components, palm and 
vegetable-based oils, of mixed-wax candles possesses different chemical 
structures, this does not necessarily lead to a conclusion that these 
candles have distinct physical characteristics. Therefore, the 
Department preliminarily finds the sample candles and information on 
the record tend to support a conclusion that these mixed candles are 
not distinguishable from in-scope petroleum wax candles.\25\
---------------------------------------------------------------------------

    \24\ CCA and PartyLite are divisions of Blyth, Inc., their 
parent company.
    \25\ In response to the argument that the Department should 
address the product's predominant raw material, with respect to 
physical characteristics, the Department notes that the CIT has 
found that the addition of a different material in an ``otherwise 
identical'' product does not alone result in a ``significant, 
general physical distinction.'' See Smith Corona Corp. v. United 
States, 698 F. Supp. 240, 244 (CIT September 20, 1988) (``Smith 
Corona II'').
---------------------------------------------------------------------------

Expectations of the Ultimate Purchaser

    Similar to the record with respect to physical characteristics, 
there is little definitive information on the record with respect to 
the expectations of the ultimate of mixed-wax candles. No party has 
submitted clear information that consumers on a wide-spread basis are 
aware of the wax content of the candles they purchase, or that they 
prefer one specific wax composition in a candle to another. While both 
Petitioners and Respondents have provided information purporting to 
show a preference or lack thereof, none of the submitted evidence 
appears to override the obvious expectations of the ultimate purchaser. 
Specifically, the Department notes that numerous industry studies 
indicate that the two attributes of a candle which primarily drive the 
purchasing decision of a consumer do not include the wax composition of 
a candle. Instead, these attributes are fragrance and decorative 
touches. See Petitioners' LDM Supplemental Response, at Exhibit C, Home 
Fragrances USA Reports from 1995-2002 at Section 3. Of further note, 
the Department observes that, in the Home Fragrances and Candle Report 
for 2005, only thirteen percent of candle purchasers indicated that 
they based their purchase on the quality of the candle. The report 
concluded that this could lead one to infer that the ultimate purchaser 
a candle ``does not know how to distinguish'' between types of candles, 
particularly when there is no distinction of the wax content. See 
Petitioners' February 27, 2006, Rebuttal Comments, at Exhibit 12, pp. 
25-26.
    Respondents argue that the ultimate purchaser of mixed-wax candles 
has different expectations due to the health benefits of these candles. 
Respondents submitted some scientific evidence as support for their 
argument that the ultimate purchaser derives health benefits 
purportedly from using mixed-wax candles instead of petroleum wax 
candles, which are unnatural and allegedly give off more soot. For 
instance, one of the Respondents, CCA, submitted a study conducted by 
their research and development department, which showed that mixed-wax 
candles, containing a mixture of petroleum wax and soy wax, gave off a 
cleaner burn than a one hundred percent petroleum wax candle. See CCA's 
February 15, 2006, Comments, at Exhibit 38. Additionally, Respondents 
also submitted numerous advertisements and news articles as support for 
their argument that petroleum wax candles ``release carcinogenic toxins 
into the air,'' whereas, mixed-wax candles ``burn cleaner, longer and 
more evenly than {petroleum{time}  and do not give the oily soot.'' 
Id., at Exhibit 14. In reviewing the evidence submitted by Respondents, 
the Department finds that the evidence, while tending to support their 
argument, is not at this time accompanied with adequate corroborative 
support for the Department to accord sufficient weight to conclude on 
balance that the expectation of the ultimate consumer is discernibly 
different for mixed-wax candles. Therefore, the Department finds that 
the limited available record evidence does not indicate that the 
ultimate purchaser of mixed-wax candles necessarily has different 
expectations than the ultimate purchaser of in-scope petroleum wax 
candles.

Ultimate Use

    Concerning whether the ultimate uses of mixed-wax candles as 
compared with petroleum wax candles are similar, Petitioners maintain 
that these candles share the same uses: 1) providing light, heat, or 
scent; and, 2) decorative purposes. The Department observes that 
Petitioners provided scientific evidence demonstrating that these 
candles are used for the same purposes. Specifically, Petitioners 
submitted an analysis of wax compositions conducted

[[Page 32042]]

by IGI, which found there is no substantial difference in the fragrance 
throw or burn properties of mixed-wax candles in comparison to 
petroleum wax candles in similar wax proportions. See Petitioners' LDM 
Supplemental Response, at Exhibit B. Although IGI is a member of 
Petitioners, the study is persuasive because the study, which was 
presented at conference held by Petitioners in Spring 2004, which was 
not requested until October 2004. While Respondents did provide some 
scientific evidence to show that there was a difference in the 
fragrance throw and burn properties of mixed-wax candles in comparison 
to petroleum wax candles, the submitted scientific evidence was 
conducted specifically for this inquiry. See CCA's February 15, 2006, 
Comments, at 38-43. Similarly, Petitioners submitted argument that by 
employing varying processing conditions and other factors, mixed-wax 
candles and petroleum wax candles can have similar chemical properties. 
Citing the IGI study, they note that not only the wax composition but 
numerous other factors (i.e., fragrance composition, wick shape and 
size, and dye used) contribute to the burn properties of a candle. See 
Petitioners' February 27, 2006, Rebuttal Comments, at Exhibit 8, p. 4; 
Petitioners' LDM Supplemental Response, at Exhibit B.
    The Department recognizes that parties provided information showing 
that some retailers have tried to create a market for mixed-wax candles 
by advertising their health benefits.\26\ However, while this 
information is intriguing, there is currently insufficient data to link 
these observations and claims to the ultimate use of mixed-wax candles.
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    \26\ See CCA's February 15, 2006, Comments, at Exhibits 20-24 
(Exhibit 20 contains a news article that states that estheticians 
are using mixed wax candles because ``paraffin, a by-product of 
petroleum, is known to be harmful,'' Exhibit 21 is an advertisement 
from Sephora for a scented candle that says ``this soy-based candle 
... helps promote a cleaner, healthier environment,'' Exhibit 22 is 
a CW Group catalogue for CleanWax, which is ``patent pending 
alternative to paraffin with a lower propensity to soot,'' Exhibit 
23 is an Aroma Naturals catalogue that offers 100[percnt] Vegetable 
wax pillars that are ``the cleanest burning candles on our planet, 
Exhibit 24 is a Nirvana Candles webpage that offers soybean wax 
aromatherapy candles that are ``soot-free and longer burning than 
paraffin, and biodegradable,''); MVP Group's February 15, 2006, 
Comments, at Exhibit 5 (CFTC's February 7, 2005, Minor Alterations 
Rebuttal Comments, at Exhibit 1, p.2 (which states that the EPA 
report finds ``sooting associated with burning candles can cause 
property damage by blackening walls, ceilings, and carpets).
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    Moreover, contrary to arguments made by Respondents, there is 
little independently supported evidence that the strong demand within 
the aromatherapy market is limited solely to mixed-wax candles. The 
1999 Home Fragrances USA Report (``Report'') indicates that there was 
an increase in demand for candles within the aromatherapy market. 
However, the Report did not state that the demand was solely for mixed-
wax candles. See Petitioners' LDM Supplemental Response, at Exhibit C. 
Specifically, the Report discusses a growth in demand for candles, 
particularly scented candles, but does not identify a specific demand 
for candles containing palm and/or vegetable-based waxes. Therefore, 
based on the information available on the record the Department finds 
that mixed-wax candles and in-scope petroleum wax candles have similar 
uses.

Channels of Trade

    The Department finds that the same entities, which range from mass 
marketing stores to high-end specialty stores, offer both mixed candles 
and in-scope petroleum wax candles. While Respondents argue that mixed-
wax candles are sold in other channels of trade (i.e., bath and beauty 
stores, spas, specialty stores, natural food retailers, the internet, 
etc.) because these candles are natural products, the Department 
observes that the evidence on the record is conflicting. The Department 
notes that one of the Respondents, CCA, submitted a study on ``Candle 
Marketing Opportunities within the Spa and Salon Industry,'' as 
evidence that these channels of trade often exclusively sell mixed-wax 
candles. See CCA's February 15, 2006, Comments, at Exhibit 26, p. 31. 
However, the Department observes that the submitted study does not, in 
fact, state that spa and salon channels of trade only sell mixed-wax 
candles.\27\ Id. at Exhibit 26, p. 32-35. In actuality, both mixed-wax 
candles and petroleum wax candles are sold within the spa and salon 
industry. See Petitioners' February 27, 2006, Rebuttal Comments, at 25. 
Additionally, the Department observes that Respondents' argument that 
mixed-wax candles are also primarily sold within the Internet does not 
establish this is a separate channel of trade from in-scope petroleum 
wax candles. Both Petitioners and Respondents have submitted Internet 
advertisements offering for sale both in-scope petroleum wax candles 
and mixed-wax candles. See Petitioners' LDM Supplemental Response, at 
Exhibits N (Scentsations web advertisement for paraffin wax candles and 
soy wax candles), P (Crafted Candles web advertisement for taper 
containing blend of waxes); CCA's February 15, 2006, Comments, at 
Attachment 32 (Er'go web advertisement for a soy wax candle). However, 
the Department notes that the evidence on the record, with respect to 
channels of trade, also does not distinguish between candles containing 
wax mixtures in any proportion and the specific range of wax mixtures 
subject to this inquiry.
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    \27\ For further discussion of this study, which is business 
proprietary, please see Memorandum to the File from Julia Hancock, 
Import Compliance Analyst, Subject: Anticircumvention Inquiry on 
Later-Developed Merchandise, Re: CCA's February 15, 2006, Comments, 
Exhibit 26 (May 23, 2006).
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    In addition, the Department finds unsupported by adequate 
corroborative evidence Respondents' assertions that mixed-wax candles, 
which are sold in mass merchandise stores, are marketed under a 
``natural'' strategy that sets these candles apart from petroleum wax 
candles. A review of the record shows that these mass merchandise 
stores, such as Whole Foods and Target, sell both petroleum wax candles 
and mixed-wax candles. See Petitioners' February 27, 2006, Rebuttal 
Comments at 25, and Exhibit 14. Moreover, these mass merchandise stores 
do not differentiate the types of candles for sale primarily based on 
wax content or any alleged ``environmental'' benefit. Id. at Exhibit 
14. Accordingly, the Department finds that the limited record evidence 
of this proceeding indicates that mixed and in-scope petroleum wax 
candles share similar channels of trade.

Advertising/Display

    The Department finds that the record indicates that advertising and 
display appear to be virtually the same for mixed and petroleum wax 
candles. While Respondents provided advertisements as evidence that 
mixed-wax candles, containing palm or soy wax, are marketed based on 
their alleged health benefits, the Department notes that most of these 
advertisements are for one hundred percent vegetable-based wax candles. 
For instance, one Respondent, CCA, submitted an advertisement from Pure 
Impressions for one hundred percent palm wax candles, not subject to 
this inquiry, which states: ``Made from environmentally friendly 
natural palm wax (100[percnt] stearine).'' See CCA's February 15, 2006, 
Comments, at Exhibit 16. In addition, the Department also observes that 
Respondents placed other information from companies on the record as 
evidence that the all-natural and health-related benefits of mixed-wax 
candles are central to these companies' marketing strategy. However, 
the Department again notes that this evidence, such as a webpage from 
Aloha Bay, does not demonstrate that mixed-wax candles, in the specific

[[Page 32043]]

wax proportions subject to this inquiry, are advertised differently 
than petroleum wax candles. See id. at Exhibit 36; Target's February 
15, 2006, Comments, at Exhibit 6.
    Additionally, the Department finds that the majority of the 
evidence on the record does not establish that mixed-wax candles are 
advertised and displayed differently than petroleum wax candles. 
Petitioners submitted advertisements and submitted copies of displays 
for candles as evidence that mixed-wax candles are displayed in the 
same manner as petroleum wax candles. See Petitioners' LDM Supplemental 
Response, at Exhibits L (Illuminations 2004 Holiday catalogue), P 
(internet web page for Crafted Candles), Z (pictures of Target's 
product display). Of note, the submitted pictures of Target's product 
display shows that both in-scope petroleum wax candles and mixed-wax 
candles, which contain more than fifty-two percent palm oil-based wax, 
are displayed without any differentiation between these types of 
candles. Id. at Exhibit Z.
    The Department does note that some Respondents submitted product 
catalogues as evidence that mixed-wax candles are displayed differently 
than petroleum wax candles. However, the Department finds that the 
product catalogues submitted by these Respondents do not indicate 
whether the mixed-wax candles, in the specific wax proportions subject 
to this inquiry, are displayed in a manner different than petroleum wax 
candles. One of the Respondents, CCA, submitted a catalogue from Blyth 
Homescents International that contains pictures of palm and vegetable-
based wax candles. See CCA's February 15, 2006, Comments, at Exhibit 
35. However, the labels on the candles noted within this catalogue only 
indicate that they are made of soy or palm wax, but not the wax 
proportion and, therefore, could be one hundred percent soy or palm wax 
and not subject this inquiry or could be less than fifty percent soy or 
palm wax and already be in the scope of the Order. Id. at 52. Of the 
advertisements and submitted copies of displays that show mixed-wax 
candles, in the specific wax proportion, subject to this inquiry, the 
Department observes that mixed and petroleum wax candles are advertised 
and displayed in mostly the same manner.

Additional Factors

(A) Tariff Classification
    The Department notes that all imports of candles, regardless of the 
majority wax ingredient, into the United States are classified under 
HTSUS 3406.00.00. Therefore, this factor would not impact the 
Department's analysis in determining whether mixed-wax candles should 
be excluded from the Order.
(B) Additional Functions
    As explained in the above analysis, the Department finds the record 
does not indicate that mixed-wax candles perform any additional 
function that would result in a determination that these candles are 
not the same class or kind of merchandise as petroleum wax candles. 
Rather, our analysis has led us to conclude that consumers would not 
derive any significant benefit from using mixed-wax candles instead of 
petroleum wax candles.

Conclusion

    Based on our analysis, on balance the limited evidence available 
shows that the addition of palm and/or other vegetable-oil based waxes 
to a petroleum wax candle that results in a mixed-wax candle does not 
exclude such later-developed mixed-wax candles from the scope of the 
Order. Mixed-wax candles appear to be indistinguishable from petroleum 
wax candles based on physical characteristics, (i.e., appearance, feel, 
and scent), from petroleum wax candles. The ultimate purchasers of 
mixed and petroleum wax candles appear to have the same expectations 
because it does not appear that consumers can always identify the 
candle's wax composition. While some purchasers of mixed-wax candles 
may base their purchase on the expectation that the candle will provide 
health benefits, there is little evidence on the record as it stands to 
support that claim. Moreover, the evidence on the record tends to 
support that most purchasers base their purchasing decision on the 
scent of the candle. Both mixed-wax candles and petroleum wax candles 
are used for the same applications, (i.e., to provide light, scent, and 
for decorative purposes). Additionally, the channels of trade for 
mixed-wax candles and petroleum wax candles appear to be largely 
identical and thus, channels of trade is not dispositive that mixed-wax 
candles are outside the scope of the Order. Similarly, mixed-wax 
candles and petroleum wax candles are generally advertised and 
displayed together; therefore, advertisement and display are not 
dispositive in this case. Finally, mixed-wax candles are neither 
classified under a different tariff classification nor do these candles 
appear to perform any additional function. Therefore, the Department 
finds that the record indicates that mixed-wax candles are of the same 
class or kind of merchandise as petroleum wax candles and thus, are 
within the scope of the Order.

III. Other Comments

Adverse Facts Available

    In light of Respondents' allegation that Petitioners should receive 
adverse facts available for providing minimal annual sales data for 
only some of its member companies, the Department must determine 
whether it should apply adverse facts available to Petitioners pursuant 
to section 776(a) and (b) of the Act. The Department finds that there 
is no basis, under sections 776(a)(1) and (2) of the Act to resort to 
facts available. While Petitioners only provided sales data for five 
member companies, the Department notes that there is no evidence on the 
record indicating that Petitioners did not provide all relevant 
information available to them, as stated by Petitioners at the hearing. 
See Hearing Transcript, at 105-106; Petitioners' February 15, 2006, 
Comments, at Exhibit A.\28\ Accordingly, the use of facts available is 
not warranted. As such, there is no basis to conclude that Petitioners 
failed to act to the best of their ability.
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    \28\ The Department also notes that four of the respondents did 
not respond to the same request for annual sales data and other 
supporting sales documentation. See CCA's February 15, 2006, 
Comments at 1; Lava Enterprises Comments at 2; Target's February 15, 
2006, Comments; and MVP Group's February 15, 2006, Comments.
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Summary

    The evidence on the record of this inquiry, taken as a whole, leads 
to our preliminary determination that U.S. imports of mixed-wax candles 
are later-developed products of the subject merchandise, within the 
meaning of section 781(d) of the Act.
    In addition, as a result of our analysis, we have determined that 
exports of mixed-wax candles containing up to 87.80 percent of palm 
and/or other vegetable oil-based waxes mixed with petroleum wax 
candles, are within the scope of the antidumping duty order on 
petroleum wax candles from the PRC.

Suspension Of Liquidation

    Section 351.225(l)(2) of the Department's regulations states: ``If 
liquidation has not been suspended, the Secretary will instruct the 
Customs Service to suspend liquidation and to require a cash deposit of 
estimated duties, at the applicable rate, for each unliquidated entry 
of the product entered, or withdrawn from warehouse, for consumption on 
or after the date of

[[Page 32044]]

initiation of the scope inquiry.'' In accordance with section 
351.225(l)(2) of the Department's regulations, we will instruct U.S. 
Customs and Border Protection (``CBP'') to suspend liquidation of all 
entries of mixed-wax candles containing up to 87.80 percent of palm 
and/or other vegetable oil-based waxes mixed with petroleum wax 
candles, from the People's Republic of China that were entered, or 
withdrawn from warehouse, for consumption on or after February 25, 
2005, the date of initiation of this anticircumvention inquiry. See 
Notice of Affirmative Preliminary Determination of Circumvention of 
Antidumping Duty Order: Anti-Circumvention Inquiry of the Antidumping 
Duty Order on Certain Pasta from Italy, 63 FR 18364, 18366 (April 15, 
1998); Notice of Affirmative Final Determination of Circumvention of 
Antidumping Duty Order: Anti-Circumvention Inquiry of the Antidumping 
Duty Order on Certain Pasta from Italy, 63 FR 54672, 54675-6 (October 
13, 1998).
    The merchandise subject to suspension of liquidation based on this 
determination is limited to mixed-wax candles containing up to 87.80 
percent of palm and/or other vegetable oil-based waxes mixed with 
petroleum wax candles. CBP shall require a cash deposit in the amount 
of 108.30 percent for all such unliquidated entries, which is the most 
recently calculated PRC-wide rate. See Amended Notice of Final Results 
of Antidumping Duty Administrative Review: Petroleum Wax Candles from 
the People's Republic of China, 69 FR 20858, 20859 (April 19, 2004).
    This suspension of liquidation will remain in effect until further 
notice.

International Trade Commission Notification

    In accordance with section 781(d) of the Act, we have notified the 
ITC of the proposed inclusion of mixed-wax candles in the antidumping 
duty order on petroleum wax candles from the PRC. Pursuant to section 
781(e)(2) of the Act, the ITC has determined that consultations are not 
necessary. See May 23, 2006, Additional Information, at Attachment 5.

Public Comment

    The Department will be setting a briefing schedule following the 
publication of this preliminary determination.

Final Determination

    The final determination will be issued not later than ninety days 
from the date of publication of this notice.
    This determination is issued and published in accordance with 
section 781(d) of the Act and section 351.225(j) of the Department's 
regulations.

    Dated: May 23, 2006.
David M. Spooner,
Assistant Secretaryfor Import Administration.
[FR Doc. E6-8629 Filed 6 -1-06; 8:45 am]
BILLING CODE 3510-DS-S