[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]


-----------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \6\ See Order.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \9\ Id. at 9-12, Exhibit 2 (proprietary information), Exhibit 7 
(Respondent Selection Memo), Exhibit 8 (Census Data), Exhibit 9 
(proprietary information).
    \10\ Id.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \11\ Id. at 13-14, Exhibit 10 (ITC Staff Conference transcript), 
and Exhibit 11 (ITC Hearing transcript).
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \12\ Id.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \15\ Id.
    \16\ Id.
---------------------------------------------------------------------------

(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.
---------------------------------------------------------------------------

    \17\ Id. at 15, Exhibit 8 (Census Data), Exhibit 14 (proprietary 
declaration), Exhibit 15 (proprietary information), and Exhibit 16 
(proprietary information).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \18\ Id. at 15-16 and Exhibit 8 (Census Data).
    \19\ Id.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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