[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
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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