[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Notices]
[Pages 28273-28276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12849]
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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;
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
imports of hydrofluorocarbon (HFC) components R-32, R-125, and R-143a
from the People's Republic of China (China) that are further processed
into 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:
[[Page 28274]]
Background
On April 4, 2019, 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
HFC components R-32, R-125, and R-143a from China that are further
processed into HFC blends in the United States, which the petitioners
allege are circumventing the Order.\1\ On April 26, 2019, National
Refrigerants, Inc. (National Refrigerants) filed comments objecting to
the petitioners' request to initiate an anti-circumvention inquiry
regarding HFC components imported from China.\2\ On May 13, 2019, the
petitioners filed a response to National Refrigerants' comments.\3\ On
May 14, 2018, Zhejiang Quzhou Lianzhou Refrigerants Co., Ltd.
(Lianzhou) also filed comments objecting to the petitioners' request to
initiate an anti-circumvention inquiry regarding HFC components
imported from China.\4\
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\1\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the
People's Republic of China: Request to Initiate Anti-Circumvention
Inquiry Pursuant to Section 781(a) of the Act,'' dated April 4, 2019
(Initiation Request); see also Hydrofluorocarbon Blends from the
People's Republic of China: Antidumping Duty Order, 81 FR 55436
(August 19, 2016) (Order).
\2\ See National Refrigerants' Letter, ``Hydrofluorocarbon
Blends from the People's Republic of China: Objection to
Petitioners' Request for a Sec. 781(a) Anti-Circumvention Inquiry
and Request for a Meeting,'' dated April 26, 2019.
\3\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the
People's Republic of China; Request for Section 781(a) Investigation
Regarding Certain Imported HFC Components: Response to National
Refrigerants, Inc.,'' dated May 13, 2019.
\4\ See Lianzhou's Letter, ``Zhejiang Quzhou Lianzhou
Refrigerants Co., Ltd.'s Response to American HFC Coalition's
Request for a Sec. 781(a) Anti-Circumvention Inquiry and Request
for Meeting, Antidumping Duty Order on Hydrofluorocarbon Blends from
the People's Republic of China,'' dated May 14, 2019.
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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.\5\
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\5\ 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.\6\
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\6\ See Order.
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Merchandise Subject to the Anti-Circumvention Inquiry
This anti-circumvention inquiry covers imports of the HFC
components R-32, R-125, and R-143a from China that are further
processed in the United States to create 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 provide evidence to demonstrate that various
companies subject to the Order are importing R-32, R-125, or R-143a
components from China to be blended into HFC blends covered by the
Order, and, therefore, the requirements of section 781(a)(1)(A)(i) of
the Act are satisfied.\7\ Specifically, the petitioners provide
evidence showing that since the establishment of the Order, Chinese
companies have begun selling Chinese components to U.S. companies,
which are blended in the United States to make the same merchandise
covered by the scope of the Order.\8\
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\7\ See Initiation Request at 6-9, Exhibit 1 (iGas products
website), Exhibit 2 (proprietary information), Exhibit 3 (iGas and
BMP website), Exhibit 4 (proprietary information), Exhibit 5
(Florida Division of Corporations--Xianbin Meng Results), Exhibit 6
(proprietary information), and Exhibit 7 (Memorandum, ``Respondent
Selection for the Antidumping Duty Investigation of
Hydrofluorocarbon Blends and Components Thereof from the People's
Republic of China,'' dated August 17, 2015 (Respondent Selection
Memo)).
\8\ Id.
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B. Completion of Merchandise in the United States
The petitioners provide evidence to demonstrate that certain U.S.
companies are importing Chinese-made HFC components to be further
blended into HFC blends covered by the Order, and, therefore, the
requirements of section 781(a)(1)(B) of the Act are satisfied.\9\ The
petitioners point to evidence to demonstrate that patterns of trade
have shifted from the investigation and show that Chinese companies are
now exporting components, instead of in-
[[Page 28275]]
scope HFC blends, and U.S. companies which previously had imported
blends are now importing these components for the purpose of blending
them in the United States into covered HFC blends.\10\
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\9\ Id. at 9-12, Exhibit 2 (proprietary information), Exhibit 7
(Respondent Selection Memo), Exhibit 8 (Census Data), Exhibit 9
(proprietary information).
\10\ Id.
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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
The petitioners provide evidence, including information presented
to the International Trade Commission (ITC) during its investigation,
to demonstrate that blending is a simple and straightforward process
that requires relatively small investment (less than one million
dollars), as compared to an order of magnitude of 25 to one, or even 50
to one, larger investment for the manufacture of HFC components.\11\
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\11\ Id. at 13-14, Exhibit 10 (ITC Staff Conference transcript),
and Exhibit 11 (ITC Hearing transcript).
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(2) Level of Research and Development in the United States
The petitioners provide evidence to demonstrate that blending
operations do not require significant research and development.\12\
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\12\ Id.
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(3) Nature of the Production Process in the United States
The petitioners provide evidence to demonstrate that the blending
production process in the United States is a relatively simple process
which only requires a holding tank for the finished HFC blend, some
pipes, and a valve.\13\ Further, the petitioners contend that there is
no chemical reaction and no temperature change involved in blending HFC
components, and simply involves combining the components in accordance
with the blending recipe, then packaging the blend into various
containers.\14\
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\13\ Id. at 14-15, Exhibit 11 (ITC Hearing transcript), Exhibit
12 (TTI Response to Section D QR), and Exhibit 13 (BMP Parking Lot
Picture).
\14\ Id.
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(4) Extent of Production Facilities in the United States
The petitioners provide record evidence to demonstrate that
blending is a simple operation that requires minimal personnel and very
basic production facilities.\15\ The petitioners assert that the
blending process simply combines the components together according to
the recipe, and then packages the finished blend into containers.\16\
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\15\ Id.
\16\ Id.
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(5) Value of Processing Performed in the United States
The petitioners provide an analysis based on proprietary
information to demonstrate that the blending process represents a very
small percent of the total value of the imported components from
China.\17\ Thus, the petitioners contend that such a small percentage
of value-added represents a very small proportion of the value of the
merchandise sold in the United States.
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\17\ Id. at 15, Exhibit 8 (Census Data), Exhibit 14 (proprietary
declaration), Exhibit 15 (proprietary information), and Exhibit 16
(proprietary information).
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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 provide record evidence to demonstrate that the
components sourced from China are the primary inputs in the finished
HFC blends and account for a significant portion of the total value of
the merchandise, in accordance with section 781(a)(1)(D) of the
Act.\18\ For example, the petitioners point to evidence that the
average unit value of R-32, R-125, and R-143a was $4.90 per-kilogram
(kg) in 2018, while the average unit value of the in-scope HFC blends
was $6.71 per-kg.\19\
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\18\ Id. at 15-16 and Exhibit 8 (Census Data).
\19\ Id.
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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,
such as patterns of trade, including sourcing patterns, and
affiliations. The petitioners contend that based on the proprietary
information and other evidence on the record, certain imports of
components used to produce blends subject to the Order represent a
change in the pattern of trade.\20\ In particular, the petitioners
contend that there has been a surge of Chinese HFC components from
various companies since the issuance of the Order, and this surge
occurred at the same time HFC blends imported from China dramatically
decreased from these same companies.\21\ Further, given the large
disparity between the production facilities, investment, and amount of
production-related workers needed to produce HFC components as compared
to blending such components, there is a significant incentive for
companies to evade application of AD duties upon importation by
shifting their blending operations to the United States.\22\ The
petitioners contend that this evidence points to a pattern of trade
intended to be addressed by section 781(a) of the Act, which, if
allowed to continue, will negate the effectiveness of the Order.
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\20\ Id. at 16-19, Exhibit 2 (proprietary information), Exhibit
8 (Census Data), Exhibit 13 (BMP Parking Lot Picture), and Exhibit
17 (BMP Employees).
\21\ Id.
\22\ Id.
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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(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 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)(A) of the Act. Pursuant to section 781(f) of the
[[Page 28276]]
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. 2019-12849 Filed 6-17-19; 8:45 am]
BILLING CODE 3510-DS-P