[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Notices]
[Pages 28269-28272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12841]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-028]


Hydrofluorocarbon Blends From the People's Republic of China: 
Initiation of Anti-Circumvention Inquiry of Antidumping Duty Order; 
Third-Country Blends Containing Chinese Components

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.
SUMMARY: In response to allegations of circumvention from the American 
HFC Coalition (the petitioners), the Department of Commerce (Commerce) 
is initiating an anti-circumvention inquiry to determine whether 
certain hydrofluorocarbon (HFC) blends, containing HFC components from 
India and the People's Republic of China (China), that are blended in 
India prior to importation into the United States, are circumventing 
the antidumping duty (AD) order on HFC blends from China.

DATES: Applicable June 18, 2019.

FOR FURTHER INFORMATION CONTACT: Andrew Medley or Manuel Rey, AD/CVD 
Operations, Office II, Enforcement and Compliance, International Trade 
Administration, U.S. Department of Commerce, 1401 Constitution Avenue 
NW, Washington, DC 20230; telephone:

[[Page 28270]]

(202) 482-4987 and (202) 482-5518, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On June 12, 2017, Gujarat Fluorochemicals Ltd. (GFL) filed a scope 
ruling request asking Commerce to confirm that its blend of R-410A, 
containing a 50-50 blend of the Chinese manufactured HFC component, R-
32, and the Indian-produced HFC component, R-125, blended in India, is 
excluded from the Order.\1\ On July 3, 2017, the petitioners filed a 
submission, in opposition to GFL's request, arguing that HFC blends, 
containing Chinese HFC components, are included in the scope of the 
Order regardless of whether the blending occurs in India.\2\ On October 
13, 2017, Commerce initiated a formal scope inquiry.\3\
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    \1\ See GFL's Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Request of Gujarat Fluorochemicals Ltd. 
for a Scope Ruling Confirming the Exclusion of Hydrofluorocarbon 
Blends Which are Blended in India from the AD Order,'' dated June 
12, 2017 (GFL Scope Ruling Request); see also Hydrofluorocarbon 
Blends from the People's Republic of China: Antidumping Duty Order, 
81 FR 55436 (August 19, 2016) (Order).
    \2\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Opposition of the American HFC Coalition 
to the Request by Gujarat Fluorochemicals Ltd. for a Scope Ruling,'' 
dated July 3, 2017.
    \3\ See Memorandum, ``Hydrofluorocarbon Blends from the People's 
Republic of China: Initiation of Scope Inquiry on Gujarat 
Fluorochemicals Ltd.'s R-410A Blend,'' dated October 13, 2017.
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    On August 6, 2018, the petitioners alleged that GFL was 
circumventing the Order by: (1) importing HFC component, R-32, from 
China into India; (2) performing a minor blending process in India with 
Indian-produced HFC component, R-125; and (3) exporting the HFC blend, 
R-410A, to the United States, as Indian origin.\4\ Therefore, the 
petitioners requested that Commerce conduct an anti-circumvention 
analysis of the scope ruling request filed by GFL, pursuant to section 
781(b) of the Tariff Act of 1930, as amended (the Act), and 19 CFR 
351.225(h) to determine whether GFL's exports of R-410A are 
circumventing the Order.\5\
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    \4\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Request to Apply Section 781(b) of the 
Act,'' dated August 6, 2018 (Initiation Request).
    \5\ Id. at 4-5.
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    On August 27, 2018, GFL filed a letter opposing the petitioners' 
request that Commerce apply section 781(b) of the Act to GFL's scope 
ruling request.\6\ In its submission, GFL argued, among other things, 
that its R-410A HFC blend is already excluded from the Order because 
the International Trade Commission (ITC) reached a negative 
determination with respect to Chinese HFC components (i.e., R-32), 
blended in third countries.\7\
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    \6\ See GFL's Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Objection to Application of Section 781 
to GFL's Scope Ruling,'' dated August 27, 2018.
    \7\ See Hydrofluorocarbon Blends and Components from China, Inv. 
731-TA-1279 (Final), USITC Pub. 4629, dated August 2016 (Final ITC 
Determination).
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Scope of the Order

    The products subject to the Order are HFC blends. HFC blends 
covered by the scope are R-404A, a zeotropic mixture consisting of 52 
percent 1,1,1 Trifluoroethane, 44 percent Pentafluoroethane, and 4 
percent 1,1,1,2-Tetrafluoroethane; R-407A, a zeotropic mixture of 20 
percent Difluoromethane, 40 percent Pentafluoroethane, and 40 percent 
1,1,1,2-Tetrafluoroethane; R-407C, a zeotropic mixture of 23 percent 
Difluoromethane, 25 percent Pentafluoroethane, and 52 percent 1,1,1,2-
Tetrafluoroethane; R-410A, a zeotropic mixture of 50 percent 
Difluoromethane and 50 percent Pentafluoroethane; and R-507A, an 
azeotropic mixture of 50 percent Pentafluoroethane and 50 percent 
1,1,1-Trifluoroethane also known as R-507. The foregoing percentages 
are nominal percentages by weight. Actual percentages of single 
component refrigerants by weight may vary by plus or minus two percent 
points from the nominal percentage identified above.\8\
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    \8\ R-404A is sold under various trade names, including 
Forane[supreg] 404A, Genetron[supreg] 404A, Solkane[supreg] 404A, 
Klea[supreg] 404A, and Suva[supreg]404A. R-407A is sold under 
various trade names, including Forane[supreg] 407A, Solkane[supreg] 
407A, Klea[supreg]407A, and Suva[supreg]407A. R-407C is sold under 
various trade names, including Forane[supreg] 407C, Genetron[supreg] 
407C, Solkane[supreg] 407C, Klea[supreg] 407C and Suva[supreg] 407C. 
R-410A is sold under various trade names, including EcoFluor R410, 
Forane[supreg] 410A, Genetron[supreg] R410A and AZ-20, 
Solkane[supreg] 410A, Klea[supreg] 410A, Suva[supreg] 410A, and 
Puron[supreg]. R-507A is sold under various trade names, including 
Forane[supreg] 507, Solkane[supreg] 507, Klea[supreg]507, 
Genetron[supreg]AZ-50, and Suva[supreg]507. R-32 is sold under 
various trade names, including Solkane[supreg]32, Forane[supreg]32, 
and Klea[supreg]32. R-125 is sold under various trade names, 
including Solkane[supreg]125, Klea[supreg]125, Genetron[supreg]125, 
and Forane[supreg]125. R-143a is sold under various trade names, 
including Solkane[supreg]143a, Genetron[supreg]143a, and 
Forane[supreg]125.
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    Any blend that includes an HFC component other than R-32, R-125, R-
143a, or R-134a is excluded from the scope of the Order.
    Excluded from the Order are blends of refrigerant chemicals that 
include products other than HFCs, such as blends including 
chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs), 
hydrocarbons (HCs), or hydrofluoroolefins (HFOs).
    Also excluded from the Order are patented HFC blends, including, 
but not limited to, ISCEON[supreg] blends, including MO99TM 
(R-438A), MO79 (R-422A), MO59 (R-417A), MO49PlusTM (R-437A) 
and MO29TM (R-4 22D), Genetron[supreg] 
PerformaxTM LT (R-407F), Choice[supreg] R-421A, and 
Choice[supreg] R-421B.
    HFC blends covered by the scope of the Order are currently 
classified in the Harmonized Tariff Schedule of the United States 
(HTSUS) at subheadings 3824.78.0020 and 3824.78.0050. Although the 
HTSUS subheadings are provided for convenience and customs purposes, 
the written description of the scope is dispositive.\9\
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    \9\ See Order.
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Merchandise Subject to the Anti-Circumvention Inquiry

    This anti-circumvention inquiry covers HFC blend R-410A, comprised 
of Chinese manufactured HFC components and Indian manufactured HFC 
components, blended in India to produce R-410A, prior to importation 
into the United States. This inquiry will also examine HFC blends R-
404A, R-407A, R-407C, and R-507A produced in India using one or more 
HFC components of Chinese origin, as appropriate.

Initiation of Anti-Circumvention Proceeding

    Section 781(b) of the Act and 19 CFR 351.225(h) provide that 
Commerce may find circumvention of an AD order when merchandise that 
would be subject to the AD order is completed or assembled in another 
foreign country before being exported to the United States. In 
conducting anti-circumvention inquiries under section 781(b)(1) of the 
Act, Commerce relies upon the following criteria: (A) Merchandise 
imported into the United States is of the same class or kind as 
merchandise produced in a foreign country that is the subject of an AD 
order; (B) before importation to the United States, such imported 
merchandise is completed or assembled in another foreign country from 
merchandise which is produced in the foreign country with respect to 
which such order applies; (C) the process of assembly or completion in 
the foreign country is minor or insignificant; (D) the value of the 
merchandise produced in the foreign country to which the AD order 
applies is a significant portion of the total value of the merchandise 
exported to the United States; and (E) Commerce determines that action 
is appropriate to prevent evasion of the AD order.

[[Page 28271]]

A. Merchandise of the Same Class or Kind

    The petitioners maintain that, pursuant to section 781(b)(1)(A) of 
the Act, the HFC blend R-410A sold in the United States is of the same 
class or kind as merchandise subject to the Order.\10\
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    \10\ See Initiation Request at 5-6; see also GFL's Letter, 
``Hydrofluorocarbon Blends from the People's Republic of China: 
Comments of Gujarat Fluorochemicals Ltd. on Scope Inquiry of GFL's 
Indian Origin R-410A,'' dated November 2, 2017.
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B. Completion of Merchandise in Another Foreign Country

    The petitioners contend that section 781(b)(1)(B)(ii) of the Act, 
as described above, covers the manufacture of R-410A in India, because 
R-32, a component of R-410A which makes up 50 percent of the blend, is 
manufactured in China, the country to which the Order applies.\11\
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    \11\ See Initiation Request at 6-7.
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C. Minor or Insignificant Process

    Under sections 781(b)(1)(C) and 781(b)(2) of the Act, Commerce will 
take into account five factors to determine whether the process of 
assembly or completion of merchandise in the United States is minor or 
insignificant. Specifically, Commerce will consider: (A) The level of 
investment in the foreign country; (B) the level of research and 
development in the foreign country; (C) the nature of the production 
process in the foreign country; (D) the extent of production facilities 
in the foreign country; and (E) whether the value of processing 
performed in the foreign country represents a small proportion of the 
value of the merchandise imported into the United States.
(1) Level of Investment in the Foreign Country
    The petitioners point to a blender's testimony at an ITC staff 
conference that blending requires less than a $1 million investment, 
and state that GFL did not submit any evidence regarding its 
investments in India on holding tanks, pipes, valves, and other 
equipment used to blend R-32 and R-125.\12\ Petitioners further argue 
that, because GFL manufactures other chemicals, it has vessels and 
equipment needed to store, transfer, and blend HFC components, and, 
therefore, it is likely that GFL's blending operations require no 
additional investment.\13\
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    \12\ Id. at 8 (citing the petitioners' submission ``Response to 
GFL's Initial Scope Comments,'' dated November 13, 2017 
(Petitioners' November 13, 2017 Submission) at Exhibit 5 (ITC Staff 
Conference testimony)).
    \13\ Id.
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(2) Level of Research and Development in the Foreign Country
    The petitioners state that no research and development is required 
for blending operations and note that GFL did not submit any evidence 
regarding research and development.\14\
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    \14\ Id.
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(3) Nature of the Production Process in the Foreign Country
    The petitioners state that the production process only requires a 
holding tank for the finished R-410A blend, some pipes, and valves and 
is a very simple mixing operation with no chemical reaction and no 
temperature change involved.\15\ Petitioners state that the blending 
process simply combines the components together according to the 
recipe, and then packages the finished blend into containers.\16\ To 
produce R-410A to AHRI specifications, the blend must be a ``nominal'' 
composition of 50 percent R-32 and 50 percent R-125.\17\ Further, the 
petitioners state that the blender may also use equipment to test the 
finished blend to ensure it meets the requisite specification, and 
additionally may use equipment to package the finished blends.\18\
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    \15\ Id. at 7 (citing Petitioners' November 13, 2017 Submission 
at Exhibit 2 (ITC Hearing Transcript) and Exhibit 3 (Dongyue Section 
D Response and TTI Section D Response)).
    \16\ Id. at 7 (citing Dongyue Section D Response and TTI Section 
D Response).
    \17\ Id. at 7 (citing Petitioners' November 13, 2017 Submission 
at Exhibit 4 (Petition)).
    \18\ Id. at 7 (citing Final ITC Determination at I-15).
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(4) Extent of Production Facilities in the Foreign Country
    The petitioners provide evidence showing that blending is a simple 
operation that requires minimal personnel and very basic production 
facilities.\19\
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    \19\ Id. at 7-8 (citing ITC Hearing Transcript).
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(5) Value of Processing Performed in the Foreign Country
    The petitioners point to proprietary information from GFL's scope 
ruling request and subsequent submission showing that the blending 
process represents a very small cost relative to the value of the 
components,\20\ and that Commerce found, in the original investigation, 
that third-country blending would not substantially transform or change 
the country of origin of the single components.\21\
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    \20\ Id. at 8 (citing GFL's Scope Request at Attachment 4; GFL's 
Supplemental Response at Exhibit 4).
    \21\ Id. at 8-9; see also Hydrofluorocarbon Blends and 
Components Thereof from the People's Republic of China: Final 
Determination of Sales at Less Than Fair Value and Final Affirmative 
Determination of Critical Circumstances, 81 FR 42314 (June 29, 
2016), and accompanying Issues and Decision Memorandum at Comment 4.
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D. Value of Merchandise Produced in the Foreign Country Is a 
Significant Portion of the Value of the Merchandise

    The petitioners argue that HFC component R-32 is sourced from 
China, and R-32 constitutes nominally 50 percent of the total materials 
of R-410A. Additionally, the petitioners point to proprietary 
information from GFL's scope ruling request which the petitioners argue 
demonstrates that the merchandise produced in China is a significant 
portion of the value of the merchandise exported to the United 
States.\22\
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    \22\ See Initiation Request at 9-10 (citing GFL's Scope Request 
at Attachment 4).
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E. Factors To Consider in Determining Whether Action Is Necessary

    Section 781(b)(1)(E) of the Act states that Commerce will determine 
whether action is appropriate to prevent evasion of an AD order, and 
section 781(b)(3) of the Act identifies additional factors that 
Commerce shall consider in determining whether to include parts or 
components in an AD order as part of an anti-circumvention inquiry, 
including: (A) The pattern of trade, including sourcing patterns; (B) 
whether the manufacturer or exporter of the merchandise described in 
section 781(b)(1)(B) is affiliated with the person who uses the 
merchandise described in (1)(B) to assemble or complete in the foreign 
country the merchandise that is subsequently imported into the United 
States; and (C) whether imports into the foreign country of the 
merchandise described in (1)(B) have increased after the initiation of 
the investigation which resulted in the issuance of an AD order.
    While there are no known affiliations between Chinese manufacturers 
of R-32 and GFL, the petitioners argue there has been a change in the 
pattern of trade to avoid AD duties, and an increase in exports of HFC 
components from China to India, since the imposition of the Order in 
2016.\23\ Specifically, based on numerous sources, the petitioners 
contend that the monthly average export volume of HFC components from 
China to India increased by 90.6 percent between 2015 and 2018,\24\ and 
U.S. imports of HFC blends from India have increased from zero 
kilograms in 2016 to over one million kilograms in the first five 
months in 2018.\25\ As such, the

[[Page 28272]]

petitioners argue that the only reason to export R-32 to India to be 
blended, and to not complete the blending in the country of origin, is 
to evade application of AD duties upon importation.
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    \23\ Id. at 12-14.
    \24\ Id. at 12 and Exhibit 2 (Global Trade Atlas statistics).
    \25\ Id. at 13 and Exhibit 3 (Census statistics).
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Conclusion

    Based on the information provided by the petitioners, we determine 
that there is sufficient information to warrant an initiation of an 
anti-circumvention inquiry, pursuant to section 781(b) of the Act and 
19 CFR 351.225(h). Commerce will determine whether the merchandise 
subject to the inquiry (as described in the ``Merchandise Subject to 
the Anti-Circumvention Inquiry'' section above) is circumventing the 
Order such that it should be included with the scope of the Order. 
Additionally, as part of this anti-circumvention inquiry, we will 
address the scope inquiry filed by GFL under 19 CFR 351.225(c),\26\ and 
our final findings in this anti-circumvention inquiry will include a 
final finding with regard to GFL's scope inquiry.
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    \26\ See GFL Scope Ruling Request.
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    In accordance with 19 CFR 351.225(l)(2), if Commerce 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.
    Following consultation with interested parties, Commerce will 
establish a schedule for questionnaires and comments on the issues 
related to the inquiry. Before issuance of any affirmative 
determination, Commerce intends to notify the ITC of any proposed 
inclusion of the inquiry merchandise under the Order in accordance with 
section 781(e)(1)(B) of the Act. Pursuant to section 781(f) of the Act, 
Commerce intends to issue its final determination within 300 days of 
the date of publication of this initiation.

Notification to Interested Parties

    This notice is published in accordance with sections 781(b) of the 
Act and 19 CFR 351.225(h).

    Dated: June 12, 2019.
Jeffrey I. Kessler,
Assistant Secretary for Enforcement and Compliance.
[FR Doc. 2019-12841 Filed 6-17-19; 8:45 am]
 BILLING CODE 3510-DS-P