[Federal Register Volume 77, Number 122 (Monday, June 25, 2012)]
[Notices]
[Pages 37873-37877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15439]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-929]


Small Diameter Graphite Electrodes From the People's Republic of 
China: Initiation of Anticircumvention Inquiry

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

SUMMARY: In response to a request from SGL Carbon LLC and Superior 
Graphite Co. (the petitioners), the Department of Commerce (the 
Department) is initiating an anticircumvention inquiry pursuant to 
section 781(c) of the Tariff Act of 1930, as amended (the Act), to 
determine under the minor alterations provision whether graphite 
electrodes with diameters larger than 16 inches but less than 18 inches 
are products that are ``altered in form or appearance in minor 
respects'' from in-scope merchandise such that they may be considered 
subject to the antidumping duty order on small diameter graphite 
electrodes (SDGEs) from the People's Republic of China (PRC).\1\
---------------------------------------------------------------------------

    \1\ See Antidumping Duty Order: Small Diameter Graphite 
Electrodes from the People's Republic of China, 74 FR 8775 (February 
26, 2009) (SDGE Order).
---------------------------------------------------------------------------

    In addition, in response to a request from the petitioners, the 
Department is also initiating an anticircumvention inquiry pursuant to 
section 781(d) of the Act to determine whether graphite electrodes with 
diameters larger than 16 inches but less than 18 inches may be 
considered subject to the SDGE Order under the later-developed 
merchandise provision.

[[Page 37874]]


DATES: Effective Date: June 25, 2012.

FOR FURTHER INFORMATION CONTACT: Thomas Schauer, AD/CVD Operations, 
Office 1, Import Administration, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue NW., 
Washington, DC 20230; telephone: (202) 482-0410.

SUPPLEMENTARY INFORMATION: 

Background

    On April 5, 2012, the petitioners alleged that Chinese producers of 
graphite electrodes are engaged in circumvention of the SDGE Order by 
exporting graphite electrodes that have diameters that are larger than 
16 inches but less than 18 inches (alleged SDGEs) to the United 
States.\2\ The petitioners requested that the Department initiate an 
anticircumvention proceeding, pursuant to 19 CFR 351.225(i), to 
determine whether the importation from the PRC of alleged SDGEs 
constitutes circumvention of the SDGE Order, as defined in section 
781(c) of the Act. The petitioners additionally requested that the 
Department initiate an anticircumvention proceeding, pursuant to 19 CFR 
351.225(j), to determine whether the importation of alleged SDGEs from 
the PRC constitutes circumvention of the SDGE Order, as defined in 
section 781(d) of the Act.
---------------------------------------------------------------------------

    \2\ See Letter from the petitioners entitled, ``Small Diameter 
Graphite Electrodes: Request for Scope/Circumvention Ruling,'' dated 
April 5, 2012 (Initiation Request). As indicated in the ``Scope of 
the Order'' section, below, the maximum diameter specific in the 
scope of the SDGE Order is 16 inches.
---------------------------------------------------------------------------

    On April 24, 2012, the Department requested additional information 
from the petitioners.\3\ On May 4, 2012, we received the petitioners' 
response.\4\ On May 10, 2012, the petitioners submitted further 
evidence in support of their claims.\5\
---------------------------------------------------------------------------

    \3\ See the Department's Letter to the petitioners dated April 
24, 2012.
    \4\ See Letter from the petitioners dated May 4, 2012 (SQR).
    \5\ See Letter from the petitioners dated May 10, 2012 (SQR2).
---------------------------------------------------------------------------

Scope of the Order

    The merchandise covered by the order includes all small diameter 
graphite electrodes of any length, whether or not finished, of a kind 
used in furnaces, with a nominal or actual diameter of 400 millimeters 
(16 inches) or less, and whether or not attached to a graphite pin 
joining system or any other type of joining system or hardware. The 
merchandise covered by the order also includes graphite pin joining 
systems for small diameter graphite electrodes, of any length, whether 
or not finished, of a kind used in furnaces, and whether or not the 
graphite pin joining system is attached to, sold with, or sold 
separately from, the small diameter graphite electrode. Small diameter 
graphite electrodes and graphite pin joining systems for small diameter 
graphite electrodes are most commonly used in primary melting, ladle 
metallurgy, and specialty furnace applications in industries including 
foundries, smelters, and steel refining operations. Small diameter 
graphite electrodes and graphite pin joining systems for small diameter 
graphite electrodes that are subject to the order are currently 
classified under the Harmonized Tariff Schedule of the United States 
(HTSUS) subheading 8545.11.0010.\6\ The HTSUS number is provided for 
convenience and customs purposes, but the written description of the 
scope is dispositive.
---------------------------------------------------------------------------

    \6\ The scope described in the SDGE Order refers to the HTSUS 
subheading 8545.11.0000. In their Initiation Request, the 
petitioners have informed the Department that, starting in 2010, 
imports of SDGEs are classified in the HTSUS under subheading 
8545.11.0010 and imports of large diameter graphite electrodes are 
classified under subheading 8545.11.0020. See Initiation Request at 
5.
---------------------------------------------------------------------------

Initiation of Minor Alterations Anticircumvention Proceeding

Statutory Criteria for Initiation of Anticircumvention Proceeding Under 
Section 781(c) of the Act

    Section 781(c) of the Act provides that the Department may find 
circumvention of an antidumping duty (AD) order when products which are 
of the class or kind of merchandise subject to an AD order have been 
``altered in form or appearance in minor respects * * * whether or not 
included in the same tariff classification.'' While the statute is 
silent as to what factors to consider in determining whether 
alterations are properly considered ``minor,'' the legislative history 
of this provision indicates that there are certain factors which should 
be considered before reaching a circumvention determination. In 
conducting a circumvention inquiry under section 781(c) of the Act, the 
Department has generally relied upon ``such criteria as the overall 
physical characteristics of the merchandise, the expectations of the 
ultimate users, the use of the merchandise, the channels of marketing 
and the cost of any modification relative to the total value of the 
imported products.'' See S. Rep. No.71, 100th Cong., 1st Sess. 100 
(1987) (``In applying this provision, the Commerce Department should 
apply practical measurements regarding minor alterations, so that 
circumvention can be dealt with effectively, even where such 
alterations to an article technically transform it into a differently 
designated article.'').

The Petitioners' Request for Initiation of an Anticircumvention 
Proceeding Under Section 781(c) of the Act

    The petitioners claim that prior to imposition of the SDGE Order, 
no U.S. or Chinese producer manufactured 17-inch SDGEs or other non-
even sizes (e.g., 16\1/2\ inch); rather, standard sizes of SDGEs above 
10 inches were produced only in even inch sizes (i.e., 10, 12, 14, 16). 
Thus, according to the petitioners, SDGEs with a nominal or actual 
diameter of 16 inches or less represented the complete range of all 
SDGE production in both the United States and the PRC at the time of 
the imposition of the SDGE Order. The petitioners assert that certain 
Chinese producers are now exporting to the United States SDGEs with 
diameters that are slightly larger in diameter than the 16-inch maximum 
specified in the scope of the SDGE Order in order to evade payment of 
ADs.\7\ The petitioners provide import data to support their claim that 
the alleged SDGEs from the PRC spiked significantly during calendar 
years 2010 and 2011 after imposition of the SDGE Order.\8\ According to 
the petitioners, there is no significant commercial or technological 
reason for this alteration by the Chinese producers other than to 
circumvent ADs. The petitioners provide declarations from members of 
the U.S. SDGE industry to support these allegations.\9\
---------------------------------------------------------------------------

    \7\ Specifically, the petitioners identified Sinosteel Jilin 
Carbon Co., Ltd. and its exporting affiliate Jilin Carbon Import and 
Export Company (collectively, Jilin Carbon), as companies engaging 
in this practice. See SQR at 2. The petitioners also asserted that 
Beijing Fangda Carbon-Tech Co., Ltd., Fangda Carbon New Material 
Co., Ltd., and Fushun Jinly Petrochemical Carbon may be exporting 
alleged SDGEs to the United States. Id. at 3-4.
    \8\ See Initiation Request at Exhibit 2 and SQR at Exhibit 6.
    \9\ See Initiation Request at Exhibit 1, SQR at Exhibit 2, and 
SQR2 at Exhibit 1.
---------------------------------------------------------------------------

    Concerning the allegation of minor alteration under section 781(c) 
of the Act and 19 CFR 351.225(i), the Department examines such factors 
as: (1) Overall physical characteristics; (2) expectations of ultimate 
users; (3) use of merchandise; (4) channels of marketing; and (5) cost 
of any modification relative to the value of the imported products.\10\

[[Page 37875]]

Each case is highly dependent on the facts on the record, and must be 
analyzed in light of those specific facts. Thus, although not specified 
in the Act, the Department has also included additional factors in its 
analysis, such as commercial availability of the product at issue prior 
to the issuance of the order as well as the circumstances under which 
the products at issue entered the United States, the timing and 
quantity of said entries during the circumvention review period, and 
the input of consumers in the design phase of the product at issue. 
See, e.g., CTL Plate from the PRC, 74 FR at 33992-33993.
---------------------------------------------------------------------------

    \10\ See, e.g., Affirmative Preliminary Determination of 
Circumvention of the Antidumping Duty Order on Certain Cut-to-Length 
Steel Plate from the People's Republic of China, 74 FR 33991, 33992 
(July 14, 2009) (CTL Plate from the PRC) (unchanged in Affirmative 
Final Determination of Circumvention of the Antidumping Duty Order 
on Certain Cut-to-Length Carbon Steel Plate From the People's 
Republic of China; 74 FR 40565 (August 12, 2009)).
---------------------------------------------------------------------------

    In the Initiation Request, the petitioners presented the following 
evidence with respect to each of the aforementioned criteria:

A. Overall Physical Characteristics

    The petitioners contend that alleged SDGEs exported to the United 
States have the same physical characteristics as those subject to the 
SDGE Order with the exception of the diameter. According to the 
petitioners, alleged SDGEs are produced in the same process as subject 
SDGEs and the slight increase of the diameter does not significantly 
change the SDGE's bulk density, specific electrical resistance, 
coefficient of thermal expansion, or flexural strength.\11\ Moreover, 
the petitioners contend that alleged SDGEs are sold and purchased as 
SDGEs as direct substitutes for, and are interchangeable with, 16-inch 
SDGEs.\12\ In support, the petitioners provide declarations from 
members of the U.S. industry and a sales call report.\13\
---------------------------------------------------------------------------

    \11\ See Initiation Request at 7.
    \12\ Id.
    \13\ Id. at Exhibit 1.
---------------------------------------------------------------------------

B. Expectations of the Ultimate Users

    The petitioners assert that the ultimate purchasers of alleged 
SDGEs and in-scope 16-inch SDGEs expect that they are interchangeable. 
In support, the petitioners provide declarations from members of the 
U.S. SDGE industry stating that they are unaware of any instances in 
which customers expected any significantly different characteristics or 
uses by purchasing alleged SDGEs other than to avoid payment of 
ADs.\14\ The petitioners claim that, to the best of their knowledge, 
the customers purchasing alleged SDGEs all used 16-inch SDGEs before 
the introduction of alleged SDGEs and that the diameter increase 
provides no significant added commercial or industrial improvement.\15\
---------------------------------------------------------------------------

    \14\ Id. at 10 and Exhibit 1.
    \15\ Id.
---------------------------------------------------------------------------

C. Use of the Merchandise

    The petitioners assert that the alleged SDGEs are sold to the same 
customers for the same end uses as the subject merchandise (i.e., to be 
used as conductors of electricity in furnaces that heat or melt scrap 
metal or other material used to produce steel) and that the alleged 
SDGEs are a direct substitute for in-scope SDGEs that were previously 
purchased by the same end-users. In support, the petitioners provide 
declarations to this effect from members of the U.S. industry.\16\
---------------------------------------------------------------------------

    \16\ Id. at 10-11 and Exhibit 1.
---------------------------------------------------------------------------

D. Channels of Marketing

    The petitioners assert that both alleged SDGEs and in-scope SDGEs 
are sold directly to foundries and steel producers, and that they are 
aware of at least one U.S. customer that was previously purchasing the 
subject merchandise who has simply substituted the alleged SDGEs for 
in-scope 16-inch SDGEs. In support, the petitioners provide 
declarations to this effect from members of the U.S. industry.\17\
---------------------------------------------------------------------------

    \17\ Id. at 11-12 and Exhibit 1.
---------------------------------------------------------------------------

E. Cost of Modification Relative to Total Value

    The petitioners assert that the cost of modifying SDGEs to a 
diameter above the 16-inch maximum is minimal. In support, the 
petitioners provide declarations from members of the U.S. industry 
describing the cost of modifying SDGEs to a diameter above the 16-inch 
maximum.\18\
---------------------------------------------------------------------------

    \18\ Id. at 12 and Exhibit 1.
---------------------------------------------------------------------------

Analysis

    As described above, the petitioners included declarations from 
members of the U.S. industry addressing the five factors the Department 
typically examines as part of a minor alterations inquiry under section 
781(c) of the Act and 19 CFR 351.225(i). These declarations attest that 
graphite electrodes with diameters that are larger than 16 inches but 
less than 18 inches do not differ in any meaningful way from and are 
substitutable with SDGEs covered by the scope of the SDGE Order.\19\ 
Specifically, the declarations attest that: (1) With the exception of 
diameter, the overall physical characteristics of the alleged SDGEs and 
subject SDGEs are the same; (2) the expectations of ultimate users of 
the alleged SDGEs and subject SDGEs are the same; (3) the uses of the 
alleged SDGEs and subject SDGEs are the same; (4) the channels of 
marketing the alleged SDGEs and subject SDGEs are the same; and (5) the 
relative cost to modify graphite electrodes to a diameter larger than 
16 inches but less than 18 inches is minimal.\20\ We have examined the 
declarations and found that the persons making them are in a position 
to have knowledge about the facts described in the declarations with 
respect to each of the aforementioned factors. Because these 
declarations are largely business proprietary and cannot be further 
discussed in a public notice, see the Memorandum to the File dated 
concurrently with this notice for a discussion of our analysis with 
respect to these declarations.
---------------------------------------------------------------------------

    \19\ Id. at Exhibit 1.
    \20\ Id.
---------------------------------------------------------------------------

    In addition to the information described above, the petitioners 
provided data to support their claim that imports of the alleged SDGEs 
from the PRC spiked significantly during calendar years 2010 and 2011 
after imposition of the SDGE Order.\21\ Although the import data does 
not segregate the alleged SDGEs from graphite electrodes with diameters 
of 18 inches or larger, the import data does show that imports of 
subject SDGEs decreased substantially (from a monthly average of over 
500 metric tons in the first quarter of 2010 to a monthly average of 
less than 110 metric tons thereafter) while imports of non-subject 
graphite electrodes (i.e., with diameters exceeding the specified 
maximum) increased substantially (from a monthly average of less than 
600 metric tons in the first quarter of 2010 to a monthly average of 
more than 1,600 metric tons thereafter).\22\
---------------------------------------------------------------------------

    \21\ See SQR at Exhibit 6.
    \22\  Id.
---------------------------------------------------------------------------

    We have determined that the evidence submitted by the petitioners 
concerning a surge in imports of the allegedly circumventing 
merchandise in combination with affidavits that this merchandise is now 
being used instead of subject merchandise is sufficient for purposes of 
initiating an anticircumvention inquiry under section 781(c) of the Act 
and 19 CFR 351.225(i). We will consider and address the information and 
arguments raised by all parties, including the respondents, in the 
context of this inquiry.

Merchandise Subject to the Minor Alterations Anticircumvention 
Proceeding

    This minor alterations anticircumvention inquiry covers

[[Page 37876]]

graphite electrodes from the PRC that have diameters larger than 16 
inches but less than 18 inches. Based upon information submitted by the 
petitioners, our inquiry will cover the following producers: Jilin 
Carbon, Beijing Fangda Carbon-Tech Co., Ltd., Fangda Carbon New 
Material Co., Ltd., and Fushun Jinly Petrochemical Carbon.\23\ If the 
Department receives a formal request from an interested party regarding 
potential circumvention of the SDGE Order by other companies in the PRC 
under section 781(c) of the Act within sufficient time, we will 
consider conducting additional inquiries concurrently.
---------------------------------------------------------------------------

    \23\ See SQR at 2-4.
---------------------------------------------------------------------------

Initiation of Later-Developed Merchandise Anticircumvention Proceeding

Statutory Criteria for Initiation of Anticircumvention Proceeding Under 
Section 781(d) of the Act

    Section 781(d) of the Act provides that the Department may find 
circumvention of an AD order with respect to ``merchandise developed 
after an investigation is initiated.'' Section 781(d)(1) of the Act 
provides that the Department ``shall consider whether:
    (A) The later-developed merchandise has the same general physical 
characteristics as the merchandise with respect to which the order was 
originally issued (hereafter in this paragraph referred to as the 
`earlier product'),
    (B) The expectations of the ultimate purchasers of the later-
developed merchandise are the same as for the earlier product,
    (C) The ultimate use of the earlier product and the later-developed 
merchandise are the same,
    (D) The later-developed merchandise is sold through the same 
channels of trade as the earlier product, and
    (E) The later-developed merchandise is advertised and displayed in 
a manner similar to the earlier product.''

Section 781(d)(1) of the Act further provides that the Department 
``shall take into account any advice provided by the Commission under 
subsection (e) {of section 781 of the Act{time}  before making a 
determination under this subparagraph.''

The Petitioners' Request for Initiation of an Anticircumvention 
Proceeding Under Section 781(d) of the Act

    The petitioners requested that, if the Department does not find 
that alleged SDGEs are within the scope of the SDGE Order on the basis 
of section 781(c) of the Act, the Department initiate an 
anticircumvention inquiry under the later-developed merchandise 
provision (i.e., section 781(d) of the Act).
    As described in the ``Initiation of Minor Alterations 
Anticircumvention Proceeding'' section, above, the petitioners claim 
that prior to imposition of the SDGE Order, no U.S. or Chinese producer 
manufactured 17-inch SDGEs or other non-even sizes (e.g., 16\1/2\ 
inch). According to the petitioners, neither the National Electrical 
Manufacturers Association, the International Electrotechnical 
Commission, nor the Japanese Industrial Standard acknowledges that 17-
inch SDGEs were offered in the marketplace.\24\ The petitioners further 
assert that no U.S. or Chinese producer manufactured 17-inch SDGEs 
prior to imposition of the SDGE Order.\25\
---------------------------------------------------------------------------

    \24\ See Initiation request at 15 and Exhibit 3.
    \25\ Id. at 15.
---------------------------------------------------------------------------

    Concerning the allegation of later-developed merchandise under 
section 781(d) of the Act and 19 CFR 351.225(j), the Department 
examines the above-enumerated factors in section 781(d)(1) of the Act. 
Each case is highly dependent on the facts on the record, and must be 
analyzed in light of those specific facts. As indicated above, the 
Department has also considered additional factors in its 
anticircumvention analysis, such as commercial availability of the 
product at issue prior to the issuance of the order as well as the 
circumstances under which the products at issue entered the United 
States, the timing and quantity of said entries during the 
circumvention review period, and the input of consumers in the design 
phase of the product at issue. See, e.g., CTL Plate from the PRC, 74 FR 
at 33992-33993.
    In the Initiation Request, the petitioners presented evidence with 
respect to each of the aforementioned criteria. The evidence the 
petitioners provided with respect to overall physical characteristics, 
expectations of the ultimate users, use of the merchandise, and 
channels of trade is described in the ``Initiation of Minor Alterations 
Anticircumvention Proceeding'' section, above. With respect to the 
final criterion, advertising, the petitioners argue that, given that 
the Chinese producers are selling the alleged SDGEs to the same 
customers and for the same purposes as 16-inch SDGEs, there are no 
significant differences in the manner in which the product is 
advertised.\26\ The petitioners contend that, in fact, none of the 
Chinese producers appears to be advertising this product at all.\27\ 
The petitioners assert that the fact that the Chinese producers do not 
advertise alleged SDGEs to their home market customers is evidence that 
they are not selling them in the home market and that this fact evinces 
that the purpose of producing alleged SDGEs is not to meet customer 
demand for that particular size but to circumvent the SDGE Order.\28\ 
The petitioners provide printouts of Chinese producers' Web pages to 
support these assertions.\29\
---------------------------------------------------------------------------

    \26\ Id. at 17.
    \27\ Id. at 17 and Exhibit 4.
    \28\ Id. at 17.
    \29\ Id. at Exhibit 4.
---------------------------------------------------------------------------

Analysis

    Based in part on our analysis of the petitioners' minor alterations 
anticircumvention inquiry request, summarized above, the Department 
determines that the petitioners have also satisfied the criteria to 
warrant an initiation of a formal anticircumvention inquiry pursuant to 
section 781(d) of the Act and 19 CFR 351.225(j).
    The first four statutory criteria are (1) the later-developed 
merchandise has the same general physical characteristics as the 
merchandise with respect to which the order was originally issued 
(hereafter in this paragraph referred to as the ``earlier product,'' 
(2) the expectations of the ultimate purchasers of the later-developed 
merchandise are the same as for the earlier product, (3) the ultimate 
use of the earlier product and the later-developed merchandise are the 
same, and (4) the later-developed merchandise is sold through the same 
channels of trade as the earlier product. These are the same as the 
first four criteria we examined with respect to the minor alteration 
allegation and our analysis with respect to these criteria is described 
in the ``Initiation of Minor Alterations Anticircumvention Proceeding'' 
section, above.
    Concerning the fifth factor, advertising, the Web page printouts 
submitted by the petitioners indicate that Chinese producers minimally 
advertise graphite electrodes with diameters larger than 16 inches but 
less than 18 inches, if at all.\30\ This suggests that the purpose of 
producing alleged SDGEs is not to meet customer demand for that 
particular size but may be to circumvent the SDGE Order.
---------------------------------------------------------------------------

    \30\ Id. at Exhibit 4.
---------------------------------------------------------------------------

    As described in the ``Initiation of Minor Alterations 
Anticircumvention Proceeding'' section, above, the petitioners 
additionally provided data to support their claim that imports of the 
alleged SDGEs from the PRC spiked

[[Page 37877]]

significantly during calendar years 2010 and 2011 after imposition of 
the SDGE Order.\31\
---------------------------------------------------------------------------

    \31\ See SQR at Exhibit 6.
---------------------------------------------------------------------------

    We have determined that the evidence submitted by the petitioners 
concerning a surge in imports of the allegedly circumventing 
merchandise in combination with affidavits that this merchandise is now 
being used instead of subject merchandise is sufficient for purposes of 
initiating an anticircumvention inquiry under section 781(d) of the Act 
and 19 CFR 351.225(j). We will consider and address the information and 
arguments raised by all parties, including the respondents, in the 
context of this inquiry.
    The Department will not order the suspension of liquidation of 
entries of any additional merchandise at this time. However, 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 on the merchandise.
    Following consultation with interested parties, the Department will 
establish a schedule for questionnaires and comments on the issues. In 
accordance with section 781(e)(1) of the Act and 19 CFR 
351.225(f)(7)(i)(C), we intend to notify the International Trade 
Commission in the event of an affirmative preliminary determination of 
circumvention under section 781(d) of the Act. The Department intends 
to issue its final determinations within 300 days of the date of 
publication of this initiation.
    This notice is published in accordance with sections 781(c) and 
781(d) of the Act and 19 CFR 351.225(i) and (j).

    Dated: June 18, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-15439 Filed 6-22-12; 8:45 am]
BILLING CODE 3510-DS-P