[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Notices]
[Pages 83801-83804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28087]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-928]


Uncovered Innerspring Units From the People's Republic of China: 
Initiation of Anticircumvention Inquiry on Antidumping Duty Order

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.
SUMMARY: Based on available information, the Department of Commerce 
(Department) is self-initiating an anticircumvention inquiry to 
determine whether certain imports are circumventing the antidumping 
duty order on uncovered innerspring units (innerspring units) from the 
People's Republic of China (PRC).

DATES: Effective November 22, 2016.

FOR FURTHER INFORMATION CONTACT: Matthew Renkey, AD/CVD Operations, 
Office V, Enforcement and Compliance, International Trade 
Administration, U.S. Department of Commerce, 1401 Constitution Avenue 
NW., Washington, DC 20230; telephone: (202) 482-2312.

SUPPLEMENTARY INFORMATION: 

Background

    On December 31, 2007, Petitioner \1\ filed a petition seeking 
imposition of antidumping duties on imports of uncovered innerspring 
units from,

[[Page 83802]]

among other countries, the PRC.\2\ Following the completion of 
investigations by the Department and the U.S. International Trade 
Commission, the Department imposed an antidumping duty order on subject 
merchandise.\3\
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    \1\ Leggett and Platt, Incorporated.
    \2\ The petition also included imports of uncovered innerspring 
units from South Africa and the Socialist Republic of Vietnam. See 
Uncovered Innerspring Units From the People's Republic of China, 
South Africa, and the Socialist Republic of Vietnam: Initiation of 
Antidumping Duty Investigations, 73 FR 4817 (January 28, 2008).
    \3\ See Uncovered Innerspring Units From the People's Republic 
of China: Notice of Antidumping Duty Order, 74 FR 7661 (February 19, 
2009) (``Order'').
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    In the sixth administrative review of the Order,\4\ Petitioner 
requested that the Department review Macao Commercial and Industrial 
Spring Mattress Manufacturer (Macao Commercial) and East Grace 
Corporation. The Department initiated the review on April 3, 2015,\5\ 
and sent questionnaires to the named respondents, including Macao 
Commercial. During the course of the sixth administrative review, and 
in response to the Department's original and supplemental 
questionnaires, Macao Commercial acknowledged that it imports 
innerspring unit components from the PRC for use in the production of 
innerspring units in Macau.\6\ In the final results, the Department 
found that Macao Commercial failed to demonstrate that it had no 
shipments of PRC-origin innersprings, and assigned a rate to Macao 
Commercial using adverse facts available. The Department stated that 
this determination applied only with respect to Macao Commercial's PRC-
origin subject merchandise, but explained that it intended to evaluate 
whether self-initiation of a circumvention inquiry would be warranted 
based upon information submitted during the review and in light of the 
Department's prior circumvention findings in this proceeding.\7\
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    \4\ The sixth administrative review covered the period of review 
(``POR'') February 1, 2014, through January 31, 2015. See Initiation 
of Antidumping and Countervailing Duty Administrative Reviews, 80 FR 
18202 (April 3, 2015).
    \5\ Id.
    \6\ See, e.g., Memorandum to the File ``Factual Information from 
the Sixth Administrative Review,'' dated concurrently with this 
initiation notice (AR6 Factual Information Memo), at Attachment 1. 
In the AR6 Final Results, we found that ``Macao Commercial submitted 
this inventory report in two different exhibits within its July 21, 
2016 QR response and that within Exhibit 5 is an invoice for not 
just raw materials but PRC-origin innerspring components from 
Company X.'' See Uncovered Innerspring Units From the People's 
Republic of China: Final Results of Antidumping Duty Administrative 
Review; 2014-2015, 81 FR 62729 (September 12, 2016) (AR6 Final 
Results) and accompanying Issues and Decision Memorandum at Comment 
1.
    \7\ See AR6 Final Results.
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Scope of the Order

    The merchandise subject to the Order is uncovered innerspring units 
composed of a series of individual metal springs joined together in 
sizes corresponding to the sizes of adult mattresses (e.g., twin, twin 
long, full, full long, queen, California king, and king) and units used 
in smaller constructions, such as crib and youth mattresses. All 
uncovered innerspring units are included in the scope regardless of 
width and length. Included within this definition are innersprings 
typically ranging from 30.5 inches to 76 inches in width and 68 inches 
to 84 inches in length. Innersprings for crib mattresses typically 
range from 25 inches to 27 inches in width and 50 inches to 52 inches 
in length.
    Uncovered innerspring units are suitable for use as the innerspring 
component in the manufacture of innerspring mattresses, including 
mattresses that incorporate a foam encasement around the innerspring. 
Pocketed and non-pocketed innerspring units are included in this 
definition. Non-pocketed innersprings are typically joined together 
with helical wire and border rods. Non-pocketed innersprings are 
included in this definition regardless of whether they have border rods 
attached to the perimeter of the innerspring. Pocketed innersprings are 
individual coils covered by a ``pocket'' or ``sock'' of a nonwoven 
synthetic material or woven material and then glued together in a 
linear fashion.
    Uncovered innersprings are classified under subheading 9404.29.9010 
and have also been classified under subheadings 9404.10.0000, 
7326.20.0070, 7320.20.5010, or 7320.90.5010 of the Harmonized Tariff 
Schedule of the United States (HTSUS). The HTSUS subheadings are 
provided for convenience and customs purposes only; the written 
description of the scope of the Order is dispositive.

Initiation of Circumvention Proceeding

    Section 781(b)(1) of the Tariff Act of 1930, as amended (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 anticircumvention 
inquiries, under section 781(b)(1) of the Act, the Department will also 
evaluate whether: (1) The process of assembly or completion in the 
other foreign country is minor or insignificant; (2) 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 (3) action is 
appropriate to prevent evasion of such an order or finding.

A. Merchandise of the Same Class or Kind

    Available information shows that the innerspring units that Macao 
Commercial completes or assembles in Macau and subsequently ships to 
the United States are of the same class or kind as that subject to the 
Order.\8\ Macao Commercial acknowledged this fact in the sixth 
administrative review when it stated: ``With respect to the 
Department's request for documentation demonstrating `the production 
process of Macao Commercial and all affiliates in Macao that 
manufactured subject merchandise that was shipped to the United States 
during the POR,' as previously advised, Macao Commercial is the only 
entity which manufactures innersprings sold and shipped to the U.S.'' 
\9\
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    \8\ See AR6 Factual Information Memo at Attachment 2, page 6.
    \9\ Id.
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B. Completion of Merchandise in a Foreign Country

    The Order indicates that innerspring units are assembled from three 
key components: Steel wire coils, helical wires, and in certain cases 
border rods.\10\ Information from the sixth administrative review 
indicates that Macao Commercial sources components used in the 
production of innerspring units from the PRC, the country with respect 
to which the Order applies, and that Macao Commercial then sells 
innerspring units to the United States.\11\
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    \10\ The United States International Trade Commission also noted 
that innerspring coils and border rods are major components of an 
innerspring unit. See Uncovered Innerspring Units from South Africa 
and Vietnam, USITC Pub. 4051, Inv. Nos. 731-TA-1141-1142 at I-11 
(December 2008) (hereinafter, ``USITC Uncovered Innersprings 
Report''). In its final determination regarding imports of uncovered 
innersprings from the PRC, the Commission adopted the findings and 
analyses in its determinations and views regarding subject imports 
from South Africa and Vietnam with respect to the domestic like 
product, the domestic industry, cumulation, and material injury. 
Uncovered Innerspring Units from China, USITC Pub. 4061, Inv. No. 
731-TA-1140 at 3 and I-1 (February 2009).
    \11\ See AR6 Factual Information Memo at Attachment 2, pages 6-8 
and Exhibit 1, and Attachment 1, at page 10; see also AR6 Final 
Results, and accompanying Issues and Decision Memorandum at 6-9.
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C. Minor or Insignificant Process

    Under section 781(b)(2) of the Act, the Department will take into 
account five

[[Page 83803]]

factors to determine whether the process of assembly or completion of 
merchandise in a foreign country is minor or insignificant. An 
examination of these factors indicates that Macao Commercial's process 
of assembly and completion of innerspring units in Macau is likely not 
significant.
(1) Level of Investment in Macau
    The level of investment to assemble innerspring components into 
innerspring units appears to be limited. In initiating a prior 
circumvention inquiry under the Order, we cited evidence that the 
process employed to assemble innerspring components into innerspring 
units is relatively simple and requires only limited investment and 
labor. Petitioner explained that the start-up investment costs and the 
barriers to entry into manual and semi-automatic assembly operation are 
low.\12\ In particular, Petitioner provided evidence that in the most 
basic, fully-manual operation, coils are assembled manually using a 
wooden or steel jig in which the coils (continuous or bonnell) \13\ are 
hand-loaded, then hand-laced with helical wire and finished by clipping 
the border rods to the unit.\14\ Petitioner estimated that the cost of 
a new wooden (or steel) jig is approximately $200-$400.\15\ The 
information provided by Petitioner in that inquiry indicated that the 
level of investment would also be low for companies that rely on a 
semi-automated assembly operation where a machine is used to assemble 
the rows of coils. Macao Commercial's production process does not 
appear to be markedly different than the assembly operations described 
above.\16\
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    \12\ See Uncovered Innerspring Units From the People's Republic 
of China: Initiation of Anticircumvention Inquiry on Antidumping 
Duty Order, 79 FR 78792 (December 31, 2014) (Goldon Initiation) and 
Memorandum to the File ``Factual Information from the Goldon 
Circumvention Inquiry,'' dated concurrently with this initiation 
notice (Goldon Factual Information Memo), at Attachment at page 10.
    \13\ Bonnell coils, the most commonly used type of coils in 
innerspring units, have an hour-glass shape which tapers inward from 
top to center and then outward from the center to bottom. Bonnell 
coils are generally the lowest priced units and the type of coil 
generally used in imported innerspring units. Continuous coils have 
entire rows of continuous coils formed from a single piece of wire. 
For a more detailed description of the types of innerspring coils, 
see USITC Uncovered Innersprings Report at I-8 to I-10.
    \14\ See Goldon Factual Information Memo at Attachment at pages 
10-11. A somewhat more advanced assembly operation may involve 
manual assembly using a wooden or steel jig in which the coils are 
hand-set, and a lacing machine is used to feed the helical to join 
the rows, and then the borders are manually clipped to the unit. Id.
    \15\ Id.
    \16\ See AR6 Factual Information Memo at Attachment 2, Exhibit 
1.
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(2) Level of Research and Development in Macau
    In the sixth administrative review, there was no evidence of Macao 
Commercial performing any research and development related to the 
assembly and/or production of innerspring units. Moreover, we would not 
expect Macao Commercial to incur significant (if any) research and 
development expenses related to its innerspring assembly operations, 
given that in a prior circumvention inquiry, the respondent 
affirmatively stated that innerspring units are a ``mature'' product 
and that its research and development activities were limited to 
``trial and error'' type manufacturing improvements.\17\ The Department 
found this level of research and development to be minor, and did not 
change this finding in the final determination.\18\
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    \17\ See Uncovered Innerspring Units From the People's Republic 
of China: Affirmative Preliminary Determination of Circumvention of 
the Antidumping Duty Order, 78 FR 41784 (July 11, 2013), and 
accompanying Preliminary Decision Memorandum at 6.
    \18\ See Uncovered Innerspring Units From the People's Republic 
of China: Affirmative Final Determination of Circumvention of the 
Antidumping Duty Order, 79 FR 3345 (January 21, 2014), and 
accompanying Issues and Decision Memorandum (Reztec Final 
Determination).
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(3) Nature of the Production Process in Macau
    In the sixth administrative review, Macao Commercial indicated that 
its manufacturing process for assembling innerspring units from 
imported components appears to be relatively simple and does not 
require significant start-up costs, sophisticated machinery and inputs, 
or substantial labor.\19\ This process, as described by Macao 
Commercial, is similar to the process found to be insignificant by the 
Department in a prior circumvention inquiry under this Order.\20\
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    \19\ See AR6 Factual Information Memo at Attachment 2, Exhibit 
1.
    \20\ See Uncovered Innerspring Units From the People's Republic 
of China: Affirmative Preliminary Determination of Circumvention of 
the Antidumping Duty Order, 78 FR 41784 (Goldon Prelim), and 
accompanying Preliminary Decision Memorandum (unchanged in final).
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(4) Extent of Production Facilities in Macau
    In initiating a prior circumvention inquiry under this Order, we 
relied upon evidence that the company in question had one production 
facility with only six to seven workers involved in assembly of 
innersprings units, with another one or two workers devoted to 
packing.\21\ Macao Commercial's information from the sixth 
administrative review shows that its production facilities are 
similarly limited in nature. It has one modestly-sized facility devoted 
to the assembly and packing of innersprings, the production machinery 
required is not extensive,\22\ and the amount of labor involved appears 
minimal.\23\
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    \21\ See Goldon Initiation.
    \22\ See AR6 Factual Information Memo at Attachment 2, Exhibit 
1.
    \23\ See AR6 Factual Information Memo at Attachment 1, Exhibit 3 
(Macao Commercial's financial statement showing a minimal amount of 
direct labor expenses).
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(5) Value of Processing in Macau as Compared to Uncovered Innerspring 
Units Imported Into the United States
    We do not have information showing whether the value of assembling 
the innerspring components into finished units by Macao Commercial 
represents a small portion of the total value of the unit imported into 
the United States. Nonetheless, in initiating a prior circumvention 
inquiry under this Order, we cited evidence provided by the Petitioner 
that the value of assembly processing performed in another third 
country (Malaysia) likely represented a small portion of the total 
value of the innerspring units imported into the United States.\24\ We 
find that this information is relevant here. This information indicates 
that similar assembly operations in Macau would likely represent an 
insignificant portion of the total value.
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    \24\ See Goldon Initiation and Goldon Factual Information Memo 
Attachment at pages 12-13.
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D. Value of Merchandise Produced in the PRC

    In initiating a prior circumvention inquiry under this Order, we 
cited evidence that the value of the components that the respondent 
imported from the PRC for further assembly in Malaysia into subject 
merchandise was a significant portion of the total value of the 
innerspring units exported to the United States.\25\ As noted 
previously, innerspring coils, helical wires, and border rods are key 
components of an innerspring unit. Petitioner explained that these 
components also constitute a significant portion of the overall costs 
of an innerspring unit.\26\ Because Petitioner did not have access to 
other PRC innerspring unit producer/exporter costs, it conducted an 
analysis related to the production costs of various

[[Page 83804]]

innerspring unit models at its own facility in Guangzhou, PRC. 
Petitioner believed that its operation (and costs) in the PRC are 
representative of the operations (and costs) of other PRC innerspring 
unit producers/exporters, as it is the largest producer of innersprings 
in the PRC.\27\ According to Petitioner's analysis of its own 
production costs in the PRC, the total value of these innerspring 
components compose a significant portion of the total value of an 
innerspring unit.\28\ Similarly, based on the limited information 
available from the sixth administrative review, we find that the value 
of production in the PRC appears to comprise a significant portion of 
the value of Macao Commercial's innersprings units.\29\
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    \25\ Goldon Factual Information Memo Attachment at 14-15.
    \26\ Id.
    \27\ Id. at 14-15 and Exhibit 6.
    \28\ Id.
    \29\ See AR6 Factual Information Memo at Attachment 1, Exhibit 
3.
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E. Additional Factors for Consideration

    Section 781(b)(3) of the Act directs the Department to consider 
additional factors in determining whether to include merchandise 
assembled or completed in a foreign country within the scope of the 
Order.
(1) Pattern of Trade
    Macao Commercial stated that it expressly set up the flow of trade 
of innerspring components from the PRC in order to make Macau the 
country of origin for shipment to countries with antidumping duty 
orders.\30\ Additionally, data from the United States International 
Trade Commission DataWeb show a significant increase of U.S. imports of 
innerspring units from Macau since the imposition of the Order.\31\
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    \30\ See AR6 Factual Information Memo at Attachment 1, page 3.
    \31\ See Memorandum to the File ``Innerspring Units Import 
Data,'' dated concurrently with this initiation notice.
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(2) Affiliation
    Macao Commercial is affiliated with a producer of subject 
merchandise in the PRC and is also affiliated with other Macanese 
companies involved in the innersprings industry.\32\ Generally, the 
Department considers circumvention to be more likely to occur when the 
manufacturer of the PRC-origin merchandise is related to the third 
country assembler and is a critical element in our evaluation of 
circumvention.\33\
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    \32\ See AR6 Factual Information Memo at Attachments 1 and 2.
    \33\ See Goldon Prelim, and accompanying Preliminary Decision 
Memorandum at ``Affiliation.''
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(3) Increase of Subject Imports From the PRC to Macau After the 
Investigation Initiation
    We did not examine any evidence regarding an increase in subject 
imports (i.e., completed uncovered innerspring units) from the PRC to 
Macau after the initiation of the investigation. Further, Macao 
Commercial stated in the sixth administrative review that it does not 
transship PRC-origin innerspring units to the United States.\34\ 
Nonetheless, this factor does not appear particularly relevant in a 
completion/assembly in a third country circumvention inquiry because 
the issue is not subject imports from the PRC to Macau, but rather 
parts for assembly.\35\
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    \34\ See AR6 Factual Information Memo at Attachment 3, page 2.
    \35\ See, e.g., Goldon Initiation.
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F. Whether Action Is Appropriate To Prevent Evasion of the Order

    Based on the factual information placed on the record concurrently 
with this initiation, and for the reasons provided in the analysis 
above, pursuant to section 781(b)(1)(E) of the Act, the Department 
determines that initiating an anticircumvention inquiry is appropriate 
to identify any potential evasion of the Order.

Analysis of the Request

    Based on our analysis of the record information from prior segments 
placed on the record concurrently with this initiation, and our prior 
circumvention findings under this Order, the Department determines that 
this self-initiation of an anticircumvention inquiry is warranted. 
Pursuant to 19 CFR 351.225(b), the Department will notify by mail all 
parties on the Department's scope service list of the initiation of an 
anticircumvention inquiry.
    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. This circumvention 
inquiry covers Macao Commercial. If, within sufficient time, the 
Department receives a formal request from an interested party regarding 
potential circumvention of the Order by other Macanese companies, or if 
the Department determines from available information that an inquiry is 
warranted with respect to other Macanese companies, we will consider 
conducting additional inquiries concurrently.
    The Department will establish a schedule for questionnaires and 
comments on the issues. In accordance with 19 CFR 351.225(f)(5) and 
section 781(f) of the Act, unless extended, the Department intends to 
issue its final determination within 300 days of the date of 
publication of this initiation. This notice is published in accordance 
19 CFR 351.225(f).

    Dated: November 16, 2014.
Christian Marsh,
Deputy Assistant Secretary for Antidumping and Countervailing Duty 
Operations.
[FR Doc. 2016-28087 Filed 11-21-16; 8:45 am]
 BILLING CODE 3510-DS-P