[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Notices]
[Pages 28276-28278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12848]


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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; 
Unfinished Blends

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.

SUMMARY: In response to information from U.S. Customs and Border 
Protection (CBP) and allegations of circumvention from the American HFC 
Coalition (the petitioners), the Department of Commerce (Commerce) is 
initiating an anti-circumvention inquiry to determine whether imports 
of unfinished blends of hydrofluorocarbon (HFC) components R-32 and R-
125 from the People's Republic of China (China) that are further 
processed into finished HFC blends in 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: (202) 482-4987 and (202) 482-5518, 
respectively.

SUPPLEMENTARY INFORMATION:

Background

    Commerce received information from CBP relating to the Order on HFC 
blends from China regarding certain blends comprised of HFC components 
R-32 and R-125, which closely resemble subject HFC blends from 
China.\1\ On April 2, 2018, Commerce published a notice that it was 
opening a scope segment of the proceeding and provided an opportunity 
for interested parties to comment.\2\ On June 12, 2018, the petitioners 
filed comments on the CBP entry packages; \3\ on June 18, 2018, 
Weitron, Inc. and Weitron International Refrigeration Equipment 
(Kunshan) Co., Ltd. (collectively, Weitron) filed rebuttal comments.\4\
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    \1\ See Hydrofluorocarbon Blends from the People's Republic of 
China: Antidumping Duty Order, 81 FR 55436 (August 19, 2016) 
(Order).
    \2\ See 1-Hydroxyethylidene-1, 1-Diphosphonic Acid from the 
People's Republic of China; Cold-Rolled Steel Flat Products from 
Japan; Hydrofluorocarbon Blends from the People's Republic of China; 
Light-Walled Rectangular Pipe and Tube from the People's Republic of 
China: Opening of Scope Segments and Opportunity to Comment, 83 FR 
13952 (April 2, 2018) (Opening of Scope Segments).
    \3\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Comments on Scope Segment for Certain R-
32/R-125 Blends,'' dated June 12, 2018.
    \4\ See Petitioners' Letter, ``Weitron's Response to American 
HFC Coalition's Comments on Scope Segment, Antidumping Duty Order on 
Hydrofluorocarbon Blends from the People's Republic of China,'' 
dated June 18, 2018.
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    On August 14, 2018, the petitioners filed a request that, pursuant 
to section 781(a) of the Tariff Act of 1930, as amended (the Act), 
Commerce initiate an anti-circumvention inquiry regarding imports of 
unfinished blends of HFC components R-32 and R-125 from China that are 
further processed into finished HFC blends in the United States, which 
the petitioners allege are circumventing the Order.\5\ On August 23, 
2018, Weitron submitted rebuttal comments.\6\
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    \5\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Scope Investigation Regarding Certain R-
32/R-125 Blends: Request to Apply Section 781(a) to Prevent 
Circumvention,'' dated August 14, 2018 (Initiation Request).
    \6\ See Weitron's Letter, ``Weitron's Response to Anti-
Circumvention Allegation; Request to Reject, or Alternatively, 
Request for Extension of Time to Reply: Antidumping Duty Order on 
Hydrofluorocarbon Blends from the People's Republic of China,'' 
dated August 23, 2018 (Weitron's August 23, 2018 Response to Anti-
Circumvention Allegation).
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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.\7\
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    \7\ 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.\8\
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    \8\ See Order.
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Merchandise Subject to the Anti-Circumvention Inquiry

    This anti-circumvention inquiry covers imports of partially 
finished blends of HFC components R-32 and R-125 from China that are 
further processed in the United States to create

[[Page 28277]]

an HFC blend that would be subject to the Order.

Initiation of Anti-Circumvention Proceeding

    Section 781(a) of the Act and 19 CFR 351.225(g) provide that 
Commerce may find circumvention of an AD order when merchandise of the 
same class or kind as merchandise that is subject to the order is 
completed or assembled in the United States. In conducting anti-
circumvention inquiries under section 781(a)(1) of the Act, Commerce 
relies upon the following criteria: (A) Merchandise sold in the United 
States is of the same class or kind as other merchandise that is 
subject to an AD order; (B) such merchandise sold in the United States 
is completed or assembled in the United States from parts or components 
produced in the foreign country with respect to which the AD order 
applies; (C) the process of assembly or completion in the United States 
is minor or insignificant; and (D) the value of the parts or components 
is a significant portion of the total value of the merchandise.

A. Merchandise of the Same Class or Kind

    The petitioners claim that, because the imported R-32/R-125 blend 
produced in China may be further processed into an HFC blend covered by 
the Order and sold in the United States it meets the requirements of 
section 781(a)(1)(A)(i) of the Act.\9\ Additionally, Commerce received 
information from CBP showing U.S. entries of merchandise similar to the 
HFC blends covered by the scope of the Order.\10\ Therefore, Commerce 
opened up a segment entitled ``Certain R-32/R-125 Blends,'' to place 
the information received from CBP on the record of the proceeding.\11\
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    \9\ See Initiation Request at 7-9, where the petitioners 
identify subject blends R-407A, R-407C, and R-410A as being composed 
of R-32 and R-125 (R-407A and R-407C also include the additional HFC 
component R-134a).
    \10\ The information received from CBP is business proprietary. 
See Memorandum, ``Hydrofluorocarbon Blends from the People's 
Republic of China: Placing Entry Documentation on the Record,'' 
dated April 11, 2018 (HFCs CBP Memo) at Attachments; see also 
Petitioners' Letter, ``Hydrofluorocarbon Blends from the People's 
Republic of China: Comments on Scope Segment for Certain R-32/R-125 
Blends,'' dated June 12, 2018 (Petitioners' June 12, 2018 Scope 
Comments) at 8-9.
    \11\ See Opening of Scope Segments, 83 FR at 13953.
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B. Completion of Merchandise in the United States

    The petitioners contend that, in order to be sold in the United 
States, the imported R-32/R-125 blend, produced in China, must be 
further processed in accordance with regulations of the Environmental 
Protection Agency and AHRI Standard 700-2012 before sale in the United 
States.\12\ Specifically, the petitioners argue that the chemical 
composition of the unfinished R-32/R-125 blend can be further processed 
into R-407A, R-407C, and R-410A.\13\ However, the semi-finished blends 
are imported in a composition that cannot be sold in the U.S. market 
and, therefore, must be adjusted after importation to be sold in the 
United States.\14\ Therefore, the requirements of section 781(a)(1)(B) 
of the Act are satisfied.
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    \12\ See Petitioners' June 12, 2018 Scope Comments at 4 (stating 
``the imported blend would have to be adjusted to a 50/50 ratio. To 
accomplish this, an importer could add R-32 or R-125 after entry to 
arrive at the correct ratio prescribed by the AHRI 
specifications.''); see also Weitron's Letter, ``Weitron's Response 
to American HFC Coalition's Comments on Scope Segment, Antidumping 
Duty Order on Hydrofluorocarbon Blends from the People's Republic of 
China,'' dated June 18, 2018 at 3 (``the semi-finished blends 
require further processing before they can be sold in the United 
States.'').
    \13\ See Initiation Request at 7-9.
    \14\ Id. at 8-9.
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C. Minor or Insignificant Process

    Under sections 781(a)(1)(C) and 781(a)(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 United States; (B) the level of research and 
development in the United States; (C) the nature of the production 
process in the United States; (D) the extent of production facilities 
in the United States; and (E) whether the value of processing performed 
in the United States represents a small proportion of the value of the 
merchandise sold in the United States.
(1) Level of Investment in the United States
    Relying on evidence presented during the investigation to the 
International Trade Commission (ITC), the petitioners state that a 
relatively small investment is required for blending (approximately $1 
million), compared to an order of magnitude larger investment of 25 to 
one or even 50 to one larger investment for the manufacture of HFC 
components.\15\ Further, even accepting Weitron's statement that it has 
announced an investment of approximately $14 million to construct a new 
refrigerant plant, the petitioners argue that such an investment is not 
significant in comparison to the investment required to manufacture HFC 
components.\16\
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    \15\ Id. at 14-15 and Exhibits 1 and 3 (ITC Hearing and ITC 
Conference transcripts).
    \16\ Id. at 14-15 (citing Weitron's Scope Comments).
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(2) Level of Research and Development in the United States
    The petitioners state that no research and development is required 
for blending operations and rely on evidence provided during the ITC's 
investigation to demonstrate that blending can be performed by 
relatively unskilled workers with little training.\17\
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    \17\ Id. at 14-15 and Exhibit 1 (ITC Hearing transcript).
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(3) Nature of the Production Process in the United States
    Relying on evidence provided during the ITC's investigation and 
evidence from Commerce's investigation, the petitioners state that the 
production process to blend HFC components only requires a holding tank 
for the finished HFC blend, some pipes, and a valve and is a very 
simple mixing operation with no chemical reaction and no temperature 
change involved.\18\ To add a single HFC component to a R-32/R-125 
blend only requires a holding tank into which the component would be 
introduced. Additionally, the petitioners point to evidence from the 
ITC's investigation that there are numerous ``re-claimers'' that are 
capable of re-creating the subject HFC blends using recycled components 
that have been recovered from existing equipment, ``cleaning'' those 
components, and adding R-32, R-125 or R-143a, as necessary, to bring 
the blend back to its original specifications.\19\ The petitioners also 
point to statements from CBP on the record of the underlying 
investigation that HFC blends are easy and require little equipment to 
mix, and that it would be possible to import HFC mixtures outside the 
scope of the Order which could be re-blended into subject 
merchandise.\20\
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    \18\ Id. at 11 and Exhibit 1 and Exhibit 2 (ITC Hearing 
transcript and TTI Section D Response).
    \19\ Id. at 12-13 and Exhibit 3 (ITC Conference transcript).
    \20\ Id. at 13 and Exhibit 4 (Memorandum regarding Commerce's 
conference call with Customs).
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(4) Extent of Production Facilities in the United States
    Relying on evidence from the ITC's investigation, the petitioners 
state that blending is a simple operation that requires minimal 
personnel and very basic production facilities, especially as

[[Page 28278]]

compared to the operation of a facility that makes the components.\21\
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    \21\ Id. at 15-16 and Exhibit 1 (ITC Hearing transcript).
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(5) Value of Processing Performed in the United States
    The petitioners provide proprietary information as well as import 
data to demonstrate that the blending process represents a very small 
cost--just three percent--relative to the value of the blends imported 
from China.\22\ The petitioners further argue that during the 
investigation Commerce determined that blending costs do not reach the 
level of significance to substantially transform the country of origin 
of the single components.\23\
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    \22\ Id. at 16-17 and Exhibit 5 and Exhibit 6 (a proprietary 
agreement and Census import statistics).
    \23\ Id. at 17; 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 point to proprietary information, including the 
information provided by CBP, as well as import data to demonstrate that 
the unfinished R-32/R-125 blends are sourced from China and, given that 
it is a simple mixing operation, this blending does not require 
significant investment, research and development, or processing.\24\ 
Thus, the petitioners argue that the merchandise produced in China is a 
significant portion of the value of the merchandise sold in the United 
States.\25\
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    \24\ Id. at 17-19 (citing HFCs CBP Memo and Attachments) and 
Exhibit 5 and Exhibit 6 (a proprietary agreement and Census import 
statistics).
    \25\ Id. at 17-19.
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E. Factors To Consider in Determining Whether Action Is Necessary

    Section 781(a)(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. 
Section 781(a)(3)(A) of the Act addresses whether the importation of 
the circumventing merchandise represents a change in the pattern of 
trade. Based on the proprietary information on the record, including 
information provided by CBP, the petitioners argue that certain imports 
of blends made with R-32 and R-125, similar to subject merchandise, 
represent a change in the pattern of trade and,\26\ as such, it appears 
that the only reason not to complete the blending in the country of 
origin is to evade application of AD duties upon importation. Section 
781(a)(3)(C) of the Act addresses whether imports into the United 
States of the parts or components produced in the foreign country 
increased after the initiation of the investigation. The petitioners 
state that published import statistics do not reveal the extent to 
which R-32/R-125 blends are imported from China and completed and sold 
in the United States; however, the petitioners rely on proprietary 
information and information from the ITC's investigation to demonstrate 
that there is a large capability for numerous facilities to adopt this 
approach, which could result in a negation of the effect of the 
Order.\27\
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    \26\ Id. at 19-21 (citing HFCs CBP Memo and Attachments).
    \27\ See Initiation Request at 21 and Exhibit 3 and Exhibit 4 
(ITC Conference transcript and Memorandum regarding Commerce's 
conference call with Customs).
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Conclusion

    Based on the information on the record, we determine that there is 
sufficient information to warrant an initiation of an anti-
circumvention inquiry, pursuant to section 781(a) of the Act and 19 CFR 
351.225(g). 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 within the scope of the Order.
    In accordance with 19 CFR 351.225(l)(2), if Commerce issues a 
preliminary affirmative determination, we will then instruct CBP 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)(A) of the Act. In accordance with section 781(f) of 
the Act and 19 CFR 351.225(f)(5), 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 section 781(a) of the 
Act and 19 CFR 351.225(g).

    Dated: June 12, 2019.
Jeffrey I. Kessler,
Assistant Secretary for Enforcement and Compliance.
[FR Doc. 2019-12848 Filed 6-17-19; 8:45 am]
 BILLING CODE 3510-DS-P