[Federal Register Volume 71, Number 227 (Monday, November 27, 2006)]
[Notices]
[Pages 68546-68549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20025]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-907, C-560-821, C-580-857]


Notice of Initiation of Countervailing Duty Investigations: 
Coated Free Sheet Paper From the People's Republic of China, Indonesia, 
and the Republic of Korea

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

DATES: Effective Date: November 27, 2006.

FOR FURTHER INFORMATION CONTACT: David Layton or David Neubacher (the 
PRC), Dana Mermelstein or Sean Carey (Indonesia), and Eric Greynolds or 
Darla Brown (Korea), AD/CVD Operations, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230; telephone: 
(202) 482-0371 and (202) 482-5823, (202) 482-1391 and (202) 482-3964, 
and (202) 482-6071 and (202) 482-2849, respectively.
    Initiation of Investigations:

SUPPLEMENTARY INFORMATION:

The Petitions

    On October 31, 2006, the Department of Commerce (the Department) 
received petitions filed in proper form by NewPage Corporation 
(petitioner). The Department received from petitioner information 
supplementing the petitions throughout the 20-day initiation period.
    In accordance with section 702(b)(1) of the Tariff Act of 1930, as 
amended (``the Act''), petitioner alleges that manufacturers, 
producers, or exporters of coated free sheet paper (CFS) in the 
People's Republic of China ( the PRC), Indonesia, and the Republic of 
Korea (Korea) received countervailable subsidies within the meaning of 
section 701 of the Act and that such imports are materially injuring, 
or threatening material injury to, an industry in the United States.
    The Department finds that petitioner filed these petitions on 
behalf of the domestic industry because it is an interested party as 
defined in sections 771(9)(C) of the Act and petitioner has 
demonstrated sufficient industry support with respect to each of the 
countervailing duty investigations that it is requesting the Department 
to initiate (see ``Determination of Industry Support for the 
Petitions'' section below).

Scope of Investigations

    The merchandise covered by each of these investigations includes 
coated free sheet paper and paperboard of a kind used for writing, 
printing or other graphic purposes. Coated free sheet paper is produced 
from not-more-than 10 percent by weight mechanical or combined 
chemical/mechanical fibers. Coated free sheet paper is coated with 
kaolin (China clay) or other inorganic substances, with or without a 
binder, and with no other coating. Coated free sheet paper may be 
surface-colored, surface-decorated, printed (except as described 
below), embossed, or perforated. The subject merchandise includes 
single- and double-side-coated free sheet paper; coated free sheet 
paper in both sheet or roll form; and is inclusive of all weights, 
brightness levels, and finishes. The terms ``wood free'' or ``art'' 
paper may also be used to describe the imported product.
    Excluded from the scope are: (1) Coated free sheet paper that is 
imported printed with final content printed text or graphics; (2) base 
paper to be sensitized for use in photography; and (3) paper containing 
by weight 25 percent or more cotton fiber.
    Coated free sheet paper is classifiable under subheadings 
4810.13.1900, 4810.13.2010, 4810.13.2090, 4810.13.5000, 4810.13.7040, 
4810.14.1900, 4810.14.2010, 4810.14.2090, 4810.14.5000, 4810.14.7040, 
4810.19.1900, 4810.19.2010, and 4810.19.2090 of the Harmonized Tariff 
Schedule of the United States (HTSUS). While HTSUS subheadings are 
provided for convenience and customs purposes, our written description 
of the scope of these investigations is dispositive.

Comments on Scope of Investigations

    During our review of the petitions, we discussed the scope with 
petitioner to ensure that it is an accurate reflection of the products 
for which the domestic industry is seeking relief. Moreover, as 
discussed in the preamble to the regulations (Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), 
we are setting aside a period for interested parties to raise issues 
regarding product coverage. The Department encourages all interested 
parties to submit such comments within 20 calendar days of the 
publication of this notice. Comments should be addressed to Import 
Administration's Central Records Unit (CRU), Room 1870, U.S. Department 
of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230. The period of scope consultations is intended to provide the 
Department with ample opportunity to consider all comments and to 
consult with parties prior to the issuance of the preliminary 
determinations.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the relevant foreign governments for 
consultations with respect to the countervailing duty petitions. The 
Department held consultations with representatives of the government of 
the PRC on November 9 and November 20, 2006. See the November 9 and 
November 20, 2006, memoranda to the file regarding the consultations 
with officials from the PRC (public documents on file in the CRU of the 
Department of Commerce, Room B-099). The Department held consultations 
with representatives of the governments of Indonesia and Korea on 
November 16, 2006. See the November 16, 2006, memoranda to the file 
regarding the consultations with officials from Indonesia and Korea 
(public documents on file in the CRU). On November 20, 2006, the 
Government of Indonesia (GOI) filed a letter reiterating their concerns 
regarding one of the issues the GOI raised at consultations.

Determination of Industry Support for the Petitions

    Section 702(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 702(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for (1) At least 
25 percent of the total production of the domestic like product and (2) 
more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for or 
opposition to the petition. Moreover, section 702(c)(4)(D) of the Act 
provides that, if the petition does not establish support of domestic 
producers or workers accounting for

[[Page 68547]]

more than 50 percent of the total production of the domestic like 
product, the Department shall: (i) Poll the industry or rely on other 
information in order to determine if there is support for the petition, 
as required by subparagraph (A), or (ii) determine industry support 
using a statistically valid sampling method.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers as a whole of a domestic like product. Thus, to determine 
whether the petition has the requisite industry support, the statute 
directs the Department to look to producers and workers who produce the 
domestic like product. The International Trade Commission (ITC) is 
responsible for determining whether ``the domestic industry'' has been 
injured and must also determine what constitutes a domestic like 
product in order to define the industry. While the Department and the 
ITC must apply the same statutory definition regarding the domestic 
like product, they do so for different purposes and pursuant to 
separate and distinct authority. See Section 771(10) of the Act. In 
addition, the Department's determination is subject to limitations of 
time and information. Although this may result in different definitions 
of the domestic like product, such differences do not render the 
decision of either agency contrary to law.\1\
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    \1\ See USEC, Inc. v. United States, 25 CIT 49, 55-56, 132 F. 
Supp. 2d 1, 7-8 (Jan. 24, 2001) (citing Algoma Steel Corp. v. United 
States, 12 CIT 518, 523, 688 F. Supp. 639, 642-44 (June 8, 1988)).
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    Section 771(10) of the Act defines the domestic like product as ``a 
product which is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this subtitle.'' Thus, the reference point from which the 
domestic like product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition.
    With regard to domestic like product, petitioner does not offer a 
definition of domestic like product distinct from the scope of the 
investigations. Based on our analysis of the information presented by 
petitioner, we have determined that there is a single domestic like 
product, coated free sheet paper, which is defined in the ``Scope of 
Investigations'' section above, and we have analyzed industry support 
in terms of the domestic like product.
    On November 15 and 16, 2006, we received submissions on behalf of 
Chinese and Indonesian producers of CFS questioning the industry 
support calculation. See ``Office of AD/CVD Operations Initiation 
Checklist for the Countervailing Duty Petition on Coated Free Sheet 
Paper from Indonesia,'' at Attachment II (Nov. 20, 2006) (Indonesia CVD 
Initiation Checklist), ``Office of AD/CVD Operations Initiation 
Checklist for the Countervailing Duty Petition on Coated Free Sheet 
Paper from the Republic of Korea,'' at Attachment II (Nov. 20, 2006) 
(Korea CVD Initiation Checklist), and ``Office of AD/CVD Operations 
Initiation Checklist for the Countervailing Duty Petition on Coated 
Free Sheet Paper from the People's Republic of the PRC,'' at Attachment 
II (Nov. 20, 2006) (PRC CVD Initiation Checklist), on file in the CRU. 
Our review of the data provided in the petition, supplemental 
submissions, and other information readily available to the Department 
indicate that petitioner has established industry support representing 
at least 25 percent of the total production of the domestic like 
product; and more than 50 percent of the production of the domestic 
like product produced by that portion of the industry expressing 
support for or opposition to the petition, requiring no further action 
by the Department pursuant to section 702(c)(4)(D) of the Act. 
Therefore, the domestic producers (or workers) who support the petition 
account for at least 25 percent of the total production of the domestic 
like product, and the requirements of section 702(c)(4)(A)(i) of the 
Act are met. Furthermore, the domestic producers who support the 
petition account for more than 50 percent of the production of the 
domestic like product produced by that portion of the industry 
expressing support for, or opposition to, the petition. Thus, the 
requirements of section 702(c)(4)(A)(ii) of the Act also are met. 
Accordingly, the Department determines that the petition was filed on 
behalf of the domestic industry within the meaning of section 702(b)(1) 
of the Act. See Indonesia CVD Initiation Checklist at Attachment II, 
Korea CVD Initiation Checklist at Attachment II, and PRC CVD Initiation 
Checklist at Attachment II.

Injury Test

    Because the PRC, Indonesia and Korea are each a ``Subsidies 
Agreement Country'' within the meaning of section 701(b) of the Act, 
section 701(a)(2) of the Act applies to these investigations. 
Accordingly, the ITC must determine whether imports of the subject 
merchandise from the PRC, Indonesia and Korea materially injure, or 
threaten material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causation

    Petitioner alleges that the U.S. industry producing the domestic 
like product is being materially injured, or is threatened with 
material injury, by reason of the individual and cumulated allegedly 
subsidized imports of the subject merchandise from Indonesia, the PRC, 
and Korea. With regard to the PRC and Korea, the allegedly subsidized 
imports exceed the negligibility threshold provided for under section 
771(24)(A) of the Act. With respect to Indonesia, while the allegedly 
subsidized imports from Indonesia do not meet the statutory requirement 
of four percent over the most recent 12-month period for which import 
data are available, in its analysis for threat (see section 771(24)(B) 
of the Act), petitioner alleges and provides supporting evidence that 
these imports will imminently account for more than four percent of all 
CFS imports of the subject merchandise and, therefore, are not 
negligible. See section 771(24)(A)(iv) of the Act.
    Petitioner contends that the industry's injury is evidenced by 
reduced market share, increased inventories, reduced shipments, lost 
sales, reduced production, lower capacity and capacity utilization 
rates, decline in prices, lost revenue, reduced employment, and a 
decline in financial performance. The allegations of injury and 
causation are supported by relevant evidence including U.S. Customs 
import data, lost sales, and pricing information. We have assessed the 
allegations and supporting evidence regarding material injury and 
causation and have determined that these allegations are properly 
supported by adequate evidence and meet the statutory requirements for 
initiation. See PRC CVD Initiation Checklist, Indonesia CVD Initiation 
Checklist, and Korea CVD Initiation Checklist.

Initiation of Countervailing Duty Investigations

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition on behalf of an industry that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a) of the Act 
and (2) is accompanied by information reasonably available to 
petitioner supporting the allegations. The Department has examined the 
countervailing duty petitions on CFS from the PRC, Indonesia, and Korea 
and found that they comply with the requirements of section 702(b) of 
the

[[Page 68548]]

Act. Therefore, in accordance with section 702(b) of the Act, we are 
initiating countervailing duty investigations to determine whether 
manufacturers, producers, or exporters of CFS in the PRC, Indonesia, 
and Korea receive countervailable subsidies. For a discussion of 
evidence supporting our initiation determination, see PRC CVD 
Initiation Checklist, Indonesia CVD Initiation Checklist, and Korea CVD 
Initiation Checklist.
    We are including in our investigations the following programs 
alleged in the petitions to have provided countervailable subsidies to 
producers and exporters of the subject merchandise in the PRC, 
Indonesia, and Korea:
I. The PRC
    A. Grant Programs
    B. Policy Loans
    Uncreditworthiness--Petitioner has provided a reasonable basis 
to believe or suspect that, in accordance with 351.505(a)(6) of the 
Department's regulations, that Shandong Chenming Paper Holdings Ltd. 
was uncreditworthy in 2004 and 2005 and Ningxia Meili Paper Industry 
Co., Ltd. was uncreditworthy from 2003 through 2005. See Memorandum 
from Susan Kuhbach, Director, to Stephen J. Claeys, Deputy Assistant 
Secretary regarding Initiation of Countervailing Duty Investigation: 
Coated Free Sheet Paper from the People's Republic of China; 
Shandong Chenming and Ningxia Meili Uncreditworthiness Allegation 
(November 20, 2006).
    C. Preferential Tax Programs for Encouraged Industries Including 
the Paper Industry
    1. Tax Incentives for Foreign Investment Enterprises (FIEs)
    2. Tax & Tariff Incentives for Select Industries
    D. The ``Two Free, Three Half'' Program
    E. Income Tax Exemptions Program for FIEs Located in Certain 
Geographic Locations
    F. Local income tax exemption and reduction program for 
``productive'' FIEs
    G. Income tax exemption program for export-oriented FIEs
    H. Corporate Income Tax Refund Program for Reinvestment of Fie 
Profits in Export-oriented Enterprises
    I. Debt-to-equity Infusion for APP China
Equity Infusion/Debt-for-Equity Swap-Petitioner has provided a 
reasonable basis to believe or suspect that, in accordance with 
section 351.507(a)(7) of the Department's regulations, Asia Pulp and 
Paper's (APP's) subsidiary, APP China, was equityworthiness from 
March 2001 through the year of the debt-to-equity swap. See PRC CVD 
Initiation Checklist.
    J. Subsidies to Input Suppliers
    1. Preferential Tax Policies for FIEs Engaged in Forestry and 
Established in Remote Underdeveloped Areas
    2. Preferential Tax Policies for Enterprises Engaged in Forestry
    3. Special Fund for Projects for the Protection of Natural 
Forestry
    4. Compensation Fund for Forestry Ecological Benefits
II. Indonesia
    A. Provision of Standing Timber For Less Than Adequate 
Remuneration
    B. Government Ban on Log Exports
    C. Subsidized Funding for Reforestation (Hutan Tanaman Industria 
or HTI Program)
    1. ``Zero-Interest'' Rate Loans
    2. ``Commercial Rate'' Loans--Petitioner has provided a 
reasonable basis to believe or suspect that, in accordance with 
351.505(a)(6) of the Department's regulations, that Asia Pulp & 
Paper (APP), a member of the Sinar Mas Group (SMG) and a cross-owned 
supplier of logs to PT. Pabrik Kertas Tjiwi Kimia Tbk. (TK) has been 
uncreditworthy since 2001. See Indonesia CVD Initiation Checklist.
III. Korea

Industry-Wide Programs

    A. Preferential Lending by the KDB and Other GOK Authorities
    B. Export Industry Facility Loans (``EIFLs'')
    C. Reduction in Taxes for Operating in Regional and National 
Industrial Complexes
    D. Funding for Technology Development and Recycling Program
    E. Export and Import Credit Financing from the Export-Import 
Bank of Korea
    F. Sale of Pulp for less than Adequate Remuneration
    G. Sale of Pulp from Raw Material Reserve for less than Adequate 
Remuneration
    H. Duty Drawback on Non-physically Incorporated Items and Excess 
Loss Rates
    I. Direction of Credit
    J. Tax Programs under Restriction of Special Taxation Act (RSTA)
    1. RSTA Article 71
    2. RSTA Article 60
    3. RSTA Article 63-2

Company-Specific Programs

    A. Shinho Paper (Shinho)-GOK-Led Bailouts in 1998, 2000, and 
2002
    1. Equity Infusion--Petitioner has provided a reasonable basis 
to believe or suspect that, in accordance with 351.507(a)(7) of the 
Department's regulations, that Shinho was unequityworthy in 1998, 
2000, and 2002, the years in which the government-provided equity 
infusions were provided. See Korea CVD Initiation Checklist.
    2. Extension of Debt Maturities and Reduction or Elimination of 
Interest Obligations
    3. Debt Forgiveness
    4. New Loans--Petitioner has provided a reasonable basis to 
believe or suspect that, in accordance with 351.505(a)(6) of the 
Department's regulations, that Shinho was uncreditworthy from 1998 
through 2005. See Korea CVD Initiation Checklist.
    B. Kye Sung Paper (Kye Sung)-GOK-Led Bailout of Subsidiary in 
2004
Equity Infusion/Debt-for-Equity Swap--Petitioner has provided a 
reasonable basis to believe or suspect that, in accordance with 
sections 351.505(a)(6) and 351.507(a)(7) of the Department's 
regulations, Poongman Paper, Kye Sung's CFS producing affiliate, was 
uncreditworthy and unequityworthy in 2004, the year in which the 
debt-for-equity swapped occurred. See Korea CVD Initiation 
Checklist.

    We are not including in our investigation the following programs 
alleged to benefit producers and exporters of the subject merchandise 
in the PRC, Indonesia, and Korea:

I. The PRC

Currency Manipulation

    Petitioner alleges that the GOC-maintained exchange rate 
effectively prevents the appreciation of the Chinese currency (RMB) 
against the U.S. dollar. Therefore, when producers in the PRC sell 
their dollars at official foreign exchange banks, as required by law, 
the producers receive more RMB than they otherwise would if the value 
of the RMB were set by market mechanisms.
    Petitioner has not sufficiently alleged the elements necessary for 
the imposition of a countervailing duty and did not support the 
allegation with reasonably available information. Therefore, we do not 
plan to investigate the currency manipulation program.

II. Indonesia

Accelerated Depreciation Program

    We are not including in our investigation the Accelerated 
Depreciation program alleged to benefit producers and exporters of the 
subject merchandise in Indonesia. Petitioner alleges that this program 
allows a few select industries with high fixed capital costs to 
significantly accelerate the depreciation of their capital assets, 
creating a tax advantage for capital intensive industries, such as the 
paper production industry. The Department, however, has recently 
determined that the Accelerated Depreciation program is not 
countervailable because it is non-specific, in accordance with section 
771(5A) of the Act. See Final Affirmative Countervailing Duty 
Determination: Certain Lined Paper Products from Indonesia, 71 FR 47174 
(August 16, 2006), and accompanying Issues and Decision Memorandum at 
10. Although petitioner argues that the Department should reconsider 
its determination of non-countervailability, no new information or 
evidence of changed circumstances was provided to warrant 
reconsideration of our finding of non-specificity.

[[Page 68549]]

III. Korea

Infrastructure Expansions and Improvements for Operating in Regional 
and National Industrial Complexes

    Petitioner alleges that the GOK developed plans to establish an 
exclusive plant complex for the paper industry in the military 
equipment industrial complex in Gunjang, North Cholla province by 2001. 
Petitioner alleges that the complex, known as the Gunjang National 
Industrial Complex and established by the Ministry of Trade, Industry, 
and Economy, is undergoing large-scale infrastructure expansions and 
improvements, including upgrading access roads, railroad connections 
and expanding harbor facilities.
    Petitioner provided insufficient information regarding the 
existence of a benefit or specificity. In particular, we find that 
petitioner did not provide sufficient evidence that any CFS producers 
are operating in the Gunjang National Industrial Complex.

Application of the Countervailing Duty Law to the PRC

    Petitioner contends that there is no statutory bar to applying 
countervailing duties to imports from the PRC or any other non-market 
economy country. Citing Georgetown Steel, petitioner asserts that the 
court deferred to the Department's conclusion that it did not have the 
authority to conduct a CVD investigation, but did not affirm the notion 
that the statute prohibits the Department from applying countervailing 
duties to NME countries. See Petition, Part I, at 8 (citing Georgetown 
Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986) 
(Georgetown Steel)). Petitioner further argues Georgetown Steel is not 
applicable as the countervailing duty law (section 303 of the Tariff 
Act of 1930) involved in the court's decision has since been repealed 
and the statute has been amended to provide an explicit definition of a 
subsidy. See section 777(5) of the Act. In addition, petitioner argues 
that the Chinese economy is entirely different from the economies 
investigated in Georgetown Steel and the Department should not have any 
special difficulties in the identification and valuation of subsidies 
involving a non-market economy, such as the PRC, that would not arise 
in a market economy countervailing proceeding.
    Finally, petitioner contends that the PRC's accession to the World 
Trade Organization (WTO) allows the Department to investigate 
countervailing duties in that country. Petitioner notes that the WTO 
Subsidies and Countervailing Measures Agreement (SCM Agreement), 
similar to U.S. law, permits the imposition of countervailing duties on 
subsidized imports on member countries and nowhere exempts non-market 
economy imports from being subject to the provisions of the SCM 
Agreement. As the PRC agreed to the SCM Agreement and other WTO 
provisions on the use of subsidies, petitioner argues the PRC should be 
subject to the same disciplines as all other WTO members.
    Petitioner has provided sufficient argument and subsidy allegations 
(see ``Initiation of Countervailing Duty Investigations'') to meet the 
statutory criteria for initiating a countervailing duty investigation 
of CFS paper from the PRC. Given the complex legal and policy issues 
involved, and on the basis of the Department's discretion as affirmed 
in Georgetown Steel, the Department intends during the course of this 
investigation to determine whether the countervailing duty law should 
now be applied to imports from the PRC. The Department will invite 
comments from parties on this issue.

Distribution of Copies of the Petitions

    In accordance with section 702(b)(4)(A)(i) of the Act, a copy of 
the public version of the petitions has been provided to the 
Governments of the PRC, Indonesia, and Korea. We will attempt to 
provide a copy of the public version of the petitions to each exporter 
named in the petitions, as provided for under 19 CFR 351.203(c)(2).

ITC Notification

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

Preliminary Determinations by the ITC

    The ITC will preliminarily determine, within 25 days after the date 
on which it receives notice of these initiations, whether there is a 
reasonable indication that imports of subsidized CFS from the PRC, 
Indonesia, and Korea are causing material injury, or threatening to 
cause material injury, to a U.S. industry. See section 703(a)(2) of the 
Act. A negative ITC determination will result in the investigations 
being terminated; otherwise, these investigations will proceed 
according to statutory and regulatory time limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    Dated: November 20, 2006.
David M. Spooner,
Assistant Secretary for Import Administration.
 [FR Doc. E6-20025 Filed 11-24-06; 8:45 am]
BILLING CODE 3510-DS-P