[Federal Register Volume 73, Number 208 (Monday, October 27, 2008)]
[Notices]
[Pages 63688-63692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25584]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-894]


Certain Tissue Paper Products From the People's Republic of 
China: Notice of Initiation of Anti-circumvention Inquiry

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

SUMMARY: In response to a request from Seaman Paper Company of 
Massachusetts, Inc. (the petitioner), the Department of Commerce (the 
Department) is initiating an anti-circumvention inquiry to determine 
whether certain imports of tissue paper from Thailand are circumventing 
the antidumping duty order on certain tissue paper products (tissue 
paper) from the People's Republic of China (PRC). See Notice of Amended 
Final Determination of Sales at Less than Fair Value and Antidumping 
Duty Order: Certain Tissue Paper Products from the People's Republic of 
China, 70 FR 16223 (March 30, 2005) (Tissue Paper Order).

DATES: Effective Date: October 27, 2008.

FOR FURTHER INFORMATION CONTACT: Brian Smith or Gemal Brangman, AD/CVD 
Operations, Office 2, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
1766 or (202) 482-3773, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On September 10, 2008, the petitioner submitted a letter requesting 
that the Department initiate and conduct an anti-circumvention inquiry, 
pursuant to section 781(b) of the Tariff Act of 1930, as amended (the 
Act), and 19 CFR 351.225(h), to determine whether imports of tissue 
paper from Thailand which Sunlake D[eacute]cor Co., Ltd. (Sunlake) \1\ 
made from jumbo rolls and cut sheets of tissue paper produced in the 
PRC are circumventing the antidumping duty order on tissue paper from 
the PRC. Specifically, the petitioner alleges that PRC-produced jumbo 
rolls and cut sheets of tissue paper sent to Thailand for completion or 
assembly into merchandise of the same class or kind as that covered by 
the antidumping duty order on tissue paper from the PRC are 
circumventing that order.
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    \1\ Sunlake is a company located in Thailand.
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    On September 19, 2008, Department officials met with the 
petitioner's counsel to discuss the petitioner's September 10, 2008, 
anti-circumvention inquiry request. See memorandum to the file 
entitled, ``Meeting with Counsel for the Petitioner,'' dated September 
24, 2008.
    On September 25, 2008, Department officials spoke with the foreign 
market researcher who provided certain information contained in the 
anti-circumvention inquiry request. See memorandum to the file 
entitled, ``Telephone Conversation with Foreign Market Researcher,'' 
dated September 29, 2008.
    To date, we have received no comments from Sunlake on this matter.

Scope of the Order

    The tissue paper products subject to order are cut-to-length sheets 
of tissue paper having a basis weight not exceeding 29 grams per square 
meter. Tissue paper products subject to this order may or may not be 
bleached, dye-colored, surface-colored, glazed, surface decorated or 
printed, sequined, crinkled, embossed, and/or die cut. The tissue paper 
subject to this order is in the form of cut-to-length sheets of tissue 
paper with a width equal to or greater than one-half (0.5) inch. 
Subject tissue paper may be flat or folded, and may be packaged by 
banding or wrapping with paper or film, by placing in plastic or film 
bags, and/or by placing in boxes for distribution and use by the 
ultimate consumer. Packages of tissue paper subject to this order may 
consist solely of tissue paper of one color and/or style, or may 
contain multiple colors and/or styles.
    Tissue paper products subject to this order do not have specific 
classification numbers assigned to them under the Harmonized Tariff 
Schedule of the United States (HTSUS) and appear to be imported under 
one or more of the several different ``basket'' categories, including 
but not necessarily limited to the following subheadings: HTSUS 
4802.30, HTSUS 4802.54, HTSUS 4802.61, HTSUS 4802.62, HTSUS 4802.69, 
HTSUS 4804.39, HTSUS 4806.40, HTSUS 4808.30, HTSUS 4808.90, HTSUS 
4811.90, HTSUS 4823.90, HTSUS 9505.90.40.
    Although the HTSUS subheadings are provided for convenience and 
customs purposes, the written description of the scope of the 
investigation is dispositive.
    Excluded from the scope of the order are the following tissue paper 
products: (1) Tissue paper products that are coated in wax, paraffin, 
or polymers, of a kind used in floral and food service applications; 
(2) tissue paper products that have been perforated, embossed, or die-
cut to the shape of a toilet seat, i.e., disposable sanitary covers for 
toilet seats; and (3) toilet or facial tissue stock, towel or napkin 
stock, paper of a kind used for household or sanitary purposes, 
cellulose wadding, and webs of cellulose fibers (HTSUS 4803.00.20.00 
and 4803.00.40.00).

Initiation of Anti-Circumvention Proceeding

Applicable Statute

    Section 781(b) of the Act provides that the Department may find 
circumvention of an antidumping duty order when merchandise of the same 
class or kind subject to the order is completed or assembled in a 
foreign country other than the country to which the order applies. In 
conducting anti-circumvention inquiries under section 781(b) of the 
Act, the Department relies upon the following criteria: (A) Merchandise 
imported into the United States is of the same class or kind as any 
merchandise produced in a foreign country that is subject to an 
antidumping duty order; (B) before importation into the United States, 
such imported merchandise is completed or

[[Page 63689]]

assembled in another foreign country from merchandise which is subject 
to the order or produced in the foreign country that is subject to the 
order; (C) the process of assembly or completion in the foreign country 
referred to in (B) is minor or insignificant; (D) the value of the 
merchandise produced in the foreign country to which the antidumping 
duty order applies is a significant portion of the total value of the 
merchandise exported to the United States; and (E) the administering 
authority determines that action is appropriate to prevent evasion of 
such order or finding. As discussed below, the petitioner presented 
evidence with respect to these criteria.

A. Merchandise of the Same Class or Kind

    The petitioner argues that the tissue paper from Thailand, which it 
alleges Sunlake D[eacute]cor Co., Ltd. (Sunlake) completes or assembles 
(e.g., such as cutting to length, possibly folding, and packaging) in 
Thailand before exporting it to the United States, is produced from 
jumbo rolls and sheets of PRC-origin tissue paper obtained from its 
affiliate, Zhangzhou MagicPro G.M. Arts and Crafts Co., Ltd. (ZMGM), 
and is physically identical to the subject merchandise cut-to-length 
tissue paper from the PRC. Accordingly, pursuant to section 
781(b)(1)(A)(i) of the Act, the petitioner claims this tissue paper is 
of the same class or kind as the tissue paper produced in the PRC, 
which is subject to the antidumping duty order.

B. Completion of Merchandise in a Foreign Country

    The petitioner states that the tissue paper that is the subject of 
the anti-circumvention inquiry request is made from jumbo rolls and 
sheets of tissue paper produced in the PRC and converted (i.e., cut-to-
length, possibly folded, and packaged) into cut-to-length sheets of 
tissue paper in Thailand for export to the United States. The 
petitioner argues that unlike Sunlake's PRC affiliate (i.e., ZMGM), 
which has a production facility capable of producing tissue paper, 
Sunlake's facility in Thailand only has the ability to convert jumbo 
rolls and/or sheets of tissue paper into cut-to-length tissue paper and 
package it for exportation. The petitioner therefore concludes that, 
pursuant to section 781(b)(1)(B)(ii) of the Act, Sunlake's cut-to-
length tissue paper is merchandise completed in another foreign country 
(Thailand) from merchandise that is produced in a country (the PRC) 
subject to an antidumping order which includes cut-to-length tissue 
paper in its scope.

C. Minor or Insignificant Process

    The petitioner argues that for the purpose of section 781(b)(1)(C) 
of the Act, conversion of jumbo rolls and/or sheets of tissue paper 
produced in the PRC into cut-to-length tissue paper in Thailand is a 
``minor or insignificant process'' as defined by the Act. According to 
the petitioner, the record of this proceeding contains substantial and 
detailed evidence demonstrating that converting jumbo rolls and sheets 
of tissue paper is a minor or insignificant process. The petitioner 
states that cutting and packaging tissue paper are operations that 
merely impart the final sheet size and form in which the product is 
delivered to the ultimate customer. The petitioner also states that the 
most fundamental aspects of the merchandise, such as the basis weight, 
texture, quality, and other special characteristics that may be 
required if the paper is intended for printing, are irrevocably 
established when the paper is produced. Furthermore, the petitioner 
claims that the types of minor assembly operations described above with 
respect to converting jumbo rolls and sheets of tissue paper are 
consistent with the information its market researcher obtained from 
Sunlake's facility in Thailand. See September 10, 2008, anti-
circumvention inquiry request at Exhibit 6.
    The petitioner states that converting the tissue involves two to 
three minor processes typically performed by hand in Thailand: cutting 
the tissue to a specific size, folding it (by hand) and packaging it 
for export (by hand). The petitioner contends that, based on the 
information obtained from its market researcher, Sunlake only has 
converting operations in Thailand. The petitioner cites to an affidavit 
in its anti-circumvention inquiry request (at Exhibit 6), wherein its 
market researcher reported first-hand knowledge of the operations at 
the Sunlake facility based on a site visit during which the market 
researcher observed only converting operations. Therefore, the 
petitioner argues, the statements made by the market researcher in its 
affidavit confirm that Sunlake's converting operations involve cutting, 
hand-folding and hand-packaging, rather than highly capital-intensive 
and automated activities relevant to tissue paper production, and are 
therefore ``minor or insignificant'' processes.
    The petitioner argues that an analysis of the relevant statutory 
factors of section 781(b)(2) of the Act further supports its conclusion 
that the processing in Thailand is ``minor or insignificant.'' These 
factors include: (1) Level of investment in the foreign country; (2) 
level of research and development in the foreign country; (3) nature of 
the production process in the foreign country; (4) extent of production 
facilities in the foreign country; and (5) whether the value of the 
processing in the foreign country represents a small proportion of the 
value of the merchandise imported into the United States.
    The petitioner argues that the processing in Thailand is ``minor 
and insignificant'' as the term is defined in section 781(b)(2) of the 
Act when compared to the complex, highly capital-intensive, skilled 
operations required to produce lightweight tissue paper from pulp, 
chemicals, and dyes. The petitioner's analysis of the statutory factors 
follows below.
(1) Level of Investment
    The petitioner claims that available information concerning 
Sunlake's operations indicates that little investment has been or is 
being made in Thailand. The petitioner argues that Sunlake's business 
model indicates that Sunlake only serves as a converting operation and 
an export platform for Magicpro companies to the PRC (including ZMGM) 
and is not an integrated production operation (see page 41 of the anti-
circumvention inquiry request). This assessment is consistent with the 
fact that Sunlake rents but does not own its own facilities, and that 
its converting operations are much less capital-intensive and more 
susceptible to relocation than papermaking operations. The petitioner 
further argues that ZMGM would have no desire to set up an operation in 
Thailand that would compete with its own production operations. The 
petitioner concludes that the level of investment in the Thailand 
processing facility is low.
(2) Level of Research and Development
    The petitioner maintains that the evidence reasonably available 
indicates that no research and development (R&D) is taking place in 
Thailand. The petitioner states that because Sunlake is affiliated with 
ZMGM, it is reasonable to presume that any R&D efforts would originate 
at ZMGM in the PRC. Furthermore, the petitioner states that tissue 
paper production is a mature industry and any technical developments 
are refinements rather than new technologies. Converting operations 
also reflect mature technologies, according to the petitioner, and the 
Thai converting operations involve hand-folding and packaging, which 
are less automated

[[Page 63690]]

and less R&D-intensive activities than those found in the United 
States. See September 10, 2008, anti-circumvention inquiry request at 
page 43.
(3) Nature of the Production Process in Thailand
    The petitioner argues that the data obtained from its market 
researcher indicate that Sunlake's operations in Thailand are limited 
to PRC-origin jumbo rolls and sheets being cut to size (if necessary) 
and packed by hand prior to export. They involve unskilled manual labor 
in contrast to skilled labor required for papermaking. Therefore, the 
petitioner contends that Sunlake's ``production process'' reflects 
operations that are designed to assemble or complete the merchandise in 
a minor or insignificant fashion. See September 10, 2008, anti-
circumvention inquiry request at page 44. The petitioner notes that all 
of the operations observed and documented by its market researcher are 
designed and intended to convert (cut and/or package) the tissue paper 
imported into Thailand without altering its fundamental and critical 
characteristics of basis weight, quality, and texture that are 
established during the papermaking stage of production.
(4) Extent of Production in Thailand
    The petitioner states that Sunlake's operations are housed in 
rented facilities, a fact which suggests a lower level of investment 
than that which would be required by the capital-intensive nature of 
papermaking operations. The petitioner also states that Sunlake does 
not have papermaking operations. According to the petitioner, the 
capital-intensive nature of papermaking operations requires that the 
necessary machinery be permanently placed and operated, while 
converting and packaging operations can be temporarily housed and are 
easily movable. The petitioner claims that this information supports a 
determination that Sunlake was established as a means for the Magicpro 
companies in the PRC (including ZMGM) to continue using their tissue 
paper production capacity and doing business in the U.S. market without 
paying duties.
(5) Value of Thailand Processing Compared to Tissue Paper Imported Into 
the United States
    The petitioner states that it does not have access to information 
concerning the cost of the jumbo rolls and sheets of tissue paper 
exported from the PRC to Sunlake, or the costs associated with the 
converting operations performed in Thailand; however, it contends that 
data from the record of the anti-circumvention inquiry regarding tissue 
paper exports from Vietnam support a determination that the value of 
processing performed in Thailand represents a small portion of the 
value of the merchandise imported into the United States. Specifically, 
in the Vietnam anti-circumvention inquiry, the Department determined 
that the same type of conversion processes were minor or insignificant 
for purposes of the statute, and that inclusion of the resulting tissue 
paper in the order was appropriate to avoid circumvention of the order. 
See Certain Tissue Paper Products From the People's Republic of China: 
Affirmative Preliminary Determination of Circumvention of the 
Antidumping Duty Order and Extension of Final Determination, 73 FR 
21580 (April 22, 2008) (which was upheld in Certain Tissue Paper 
Products From the People's Republic of China: Affirmative Final 
Determination of Circumvention of the Antidumping Duty Order, 73 FR 
57591 (October 3, 2008)). In fact, the petitioner notes that in the 
anti-circumvention inquiry involving Vietnam, the activities performed 
by the Vietnamese entity at issue included more involved forms of 
processing (e.g., dip-dying) which would add greater amounts of value 
than merely converting jumbo rolls and, particularly, sheets. In 
contrast, the petitioner contends that Sunlake is importing the jumbo 
rolls and sheets and is only converting them without additional 
processing (such as dip-dying).

D. Value of Merchandise Produced in PRC

    The petitioner argues that the evidence as noted in its anti-
circumvention inquiry request clearly supports its position that the 
value of the tissue paper jumbo rolls and sheets produced in the PRC 
and sent to Sunlake represents a significant portion of the total value 
of the merchandise exported to the United States, as measured by the 
prices at which jumbo rolls and cut tissue paper sheets are produced 
and/or sold at market value. The petitioner notes that this conclusion 
is particularly supported by the fact that Sunlake's activities are 
limited to cutting and folding (if necessary), packing, and shipping 
the finished tissue paper product.

E. Factors To Consider in Determining Whether Action Is Necessary

    The petitioner argues that additional factors must be considered in 
the Department's decision whether to issue a finding of circumvention 
regarding importation of Thai tissue paper. These factors are discussed 
below.

Pattern of Trade

    The petitioner states that section 781(b)(3) of the Act directs the 
Department to take into account patterns of trade when making a 
decision in an anti-circumvention case. The petitioner argues that two 
months after the antidumping duty order was issued, substantial volumes 
of certain tissue paper products began appearing as U.S. imports from 
Thailand through Sunlake, and have continued since then. The petitioner 
bases this claim on an analysis of publicly available U.S. import 
statistics and company-specific information from the Port Import Export 
Reporting Service (PIERS). See September 10, 2008, anti-circumvention 
inquiry request at Exhibits 1 and 2.

Affiliation

    The petitioner states that section 781(b)(3) of the Act directs the 
Department to take into account whether the manufacturer or exporter of 
the merchandise is affiliated with the person who uses the merchandise 
to assemble or complete in the foreign country the merchandise that is 
subsequently imported into the United States when making a decision in 
an anti-circumvention case. The petitioner contends that Sunlake is 
affiliated with multiple Magicpro companies worldwide, including ZMGM, 
which is known to be a tissue paper producer in the PRC. See September 
10, 2008, anti-circumvention inquiry request at pages 51-52 and Exhibit 
6. The petitioner argues that the affiliation, the timing of Sunlake's 
establishment and the nature of the company's operation (i.e., 
importing rolls and/or sheets to be converted and then exporting them) 
suggest a clear intention to shift completion of merchandise under 
order from the PRC to Thailand. See September 10, 2008, anti-
circumvention request at page 52.

Subsequent Import Volume

    The petitioner states that section 781(b)(3) of the Act directs the 
Department to take into account whether imports into the foreign 
country of the merchandise have increased after the initiation of the 
investigation which resulted in the issuance of an order when making a 
decision in an anti-circumvention case. The petitioner claims it does 
not have access to precise data concerning trade flows of jumbo rolls 
and sheets of tissue paper between Magicpro companies in the PRC and 
Sunlake in Thailand; however, it maintains that import data

[[Page 63691]]

from World Trade Atlas show that the volume of tissue paper shipments 
from the PRC to Thailand increased significantly after the original 
investigation was initiated and the antidumping duty order was issued 
in this proceeding. In addition, the petitioner notes that it is 
impossible that Sunlake would have received jumbo rolls before May 17, 
2005, because the company did not exist before then. See September 10, 
2008, anti-circumvention inquiry request at pages 6 and 53.
    The petitioner also points out that the evidence concerning 
Thailand's prior lack of exports of tissue paper to the United States, 
coupled with the emergence of large export volumes of tissue paper from 
Thailand starting four months after the petition was filed, provides a 
reasonable basis for inferring that jumbo roll and large tissue sheet 
imports into Thailand from the PRC increased after the initiation of 
the original investigation in this proceeding. See September 10, 2008, 
anti-circumvention inquiry request at page 53.

Analysis

    Based on our analysis of the petitioner's September 10, 2008, anti-
circumvention inquiry request, the Department determines that a formal 
anti-circumvention inquiry is warranted. In accordance with 19 CFR 
351.225(e), if the Department finds that the issue of whether a product 
is included within the scope of an order cannot be determined based 
solely upon the request and the descriptions of the merchandise, the 
Department will notify by mail all parties on the Department's scope 
service list of the initiation of a scope inquiry, including an anti-
circumvention inquiry. In addition, in accordance with 19 CFR 
351.225(f)(1), a notice of the initiation of an anti-circumvention 
inquiry issued under 19 CFR 351.225(e) will include a description of 
the product that is the subject of the anti-circumvention inquiry--in 
this case, cut-to-length tissue paper that contains the characteristics 
as provided in the scope of the order--and an explanation of the 
reasons for the Department's decision to initiate an anti-circumvention 
inquiry, as provided below.
    With regard to whether the merchandise from Thailand is of the same 
class or kind as the merchandise produced in the PRC, the petitioner 
has presented information indicating that the merchandise being 
imported from Thailand is of the same class or kind as the tissue paper 
produced in the PRC, which is subject to the antidumping duty order. 
The merchandise from Thailand shares physical characteristics with the 
merchandise covered by the antidumping duty order.
    With regard to completion of merchandise in a foreign country, the 
petitioner has also presented information that the tissue paper from 
Thailand is being processed in Thailand using PRC jumbo rolls and/or 
sheets of tissue paper as the input.
    With regard to whether the conversion of PRC jumbo rolls and/or 
sheets of tissue paper into cut-to-length tissue paper from Thailand is 
a ``minor or insignificant process,'' the petitioner addressed the 
relevant statutory factors used to determine whether the processing of 
jumbo rolls and sheets of tissue paper is minor or insignificant with 
the best information available to the petitioner at the time of the 
request. The petitioner relied on information obtained from its market 
researcher for this purpose. See September 10, 2008, anti-circumvention 
inquiry request at Exhibit 6.
    Having established through direct contact the reliability of the 
data presented by the market researcher in Exhibit 6, we find that the 
information presented by the petitioner supports its request to 
initiate an anti-circumvention inquiry. In particular, the petitioner 
provides evidence for each of the criteria provided in the statute, 
including the following: (1) Sunlake's corporate and financial profile 
suggests little investment has been made in Sunlake; (2) because ZMGM 
has a fully integrated production facility and is affiliated with 
Sunlake, it is reasonable to infer that R&D takes place in the PRC; (3) 
cutting, folding and packaging (i.e., the converting process) do not 
alter the fundamental characteristics of the tissue paper; (4) 
Sunlake's rented facilities suggest a lower investment level than that 
required by the capital-intensive nature of the papermaking process; 
and (5) Sunlake's limited operations suggest that converting tissue 
paper adds little value to the merchandise imported into the United 
States.
    With respect to the value of the merchandise produced in the PRC, 
the petitioner relied on the information and arguments in the ``minor 
or insignificant process'' portion of its anti-circumvention request to 
indicate that the value of jumbo rolls and sheets of tissue paper is 
significant relative to the total value of finished merchandise 
exported to the United States. We find that the information adequately 
meets the requirements of this factor, as discussed above.
    Finally, the petitioner argued that the Department should also 
consider the pattern of trade, affiliation, and subsequent import 
volume as factors in determining whether to initiate the anti-
circumvention inquiry. The import information submitted by the 
petitioner indicates that U.S. imports of tissue paper from Thailand 
are rising significantly, and that the volume of tissue paper shipments 
from the PRC to Thailand has increased significantly. In addition, the 
petitioner provides information suggesting that Sunlake's affiliation 
with a known producer of the subject merchandise in the PRC, the timing 
of Sunlake's establishment, and the nature of Sunlake's operations 
reflect an intention to shift completion of merchandise subject to the 
order from the PRC to Thailand.
    Accordingly, we are initiating a formal anti-circumvention inquiry 
concerning the antidumping duty order on certain tissue paper products 
from the PRC, pursuant to section 781(b) of the Act. In accordance with 
19 CFR 351.225(l)(2), if the Department issues a preliminary 
affirmative determination, we will then instruct U.S. Customs and 
Border Protection to suspend liquidation and require a cash deposit of 
estimated duties, at the applicable rate, for each unliquidated entry 
of the merchandise at issue, entered or withdrawn from warehouse for 
consumption on or after the date of initiation of the inquiry.
    The Department is focusing its analysis of the significance of the 
production process in Thailand on the single processor identified by 
the petitioner, namely Sunlake, in its September 10, 2008, anti-
circumvention inquiry request and about which sufficient information to 
initiate an anti-circumvention inquiry has been provided. If the 
Department receives a formal request from an interested party regarding 
potential circumvention by other Thai companies involved in processing 
PRC jumbo rolls and/or sheets for export to the United States within 
sufficient time, we will consider conducting the inquiries 
concurrently.
    The Department will, following consultation with interested 
parties, establish a schedule for questionnaires and comments on the 
issues. The Department intends to issue its final determination within 
300 days of the date of publication of this initiation consistent with 
the language of section 781(f) of the Act.
    This notice is published in accordance with 19 CFR 351.225(f).


[[Page 63692]]


    Dated: October 21, 2008.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
 [FR Doc. E8-25584 Filed 10-24-08; 8:45 am]
BILLING CODE 3510-DS-P