Certain Coated Paper From Indonesia: Initiation of Countervailing Duty Investigation

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

DATES:

Effective Date: October 20, 2009.

FOR FURTHER INFORMATION CONTACT:

Gene Calvert or Dana Mermelstein, AD/CVD Operations, Office 6, Import Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-3586 or (202) 482-1391, respectively.

SUPPLEMENTARY INFORMATION:

The Petition

On September 23, 2009, the Department of Commerce (“the Department”) received a countervailing duty (“CVD”) petition concerning imports of certain coated paper suitable for high-quality print graphics using sheet-fed presses (“certain coated paper”) from Indonesia filed in proper form by Appleton Coated LLC, NewPage Corporation, Sappi Fine Paper North America, and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (collectively, “Petitioners”). See “Petition for the Imposition of Countervailing Duties: Certain Coated Paper Suitable for High-Quality Print Graphics Using Sheet-Fed Presses from Indonesia,” dated September 23, 2009 (Indonesia CVD Petition). On September 29, October 5, and October 7, 2009, the Department issued additional requests for information and clarification of certain areas of the Indonesia CVD Petition. Based on the Department's requests, Petitioners timely filed additional information pertaining to the Indonesia CVD Petition on October 2, October 6, and October 9, 2009 (hereinafter, “Supplement to the Indonesia CVD Petition,” dated October 2, 2009, “Second Supplement to the Indonesia CVD Petition,” dated October 6, 2009, and “Third Supplement to the Indonesia CVD Petition,” dated October 9, 2009).

In accordance with section 702(b)(1) of the Tariff Act of 1930, as amended, (“the Act”), Petitioners allege that producers/exporters of certain coated paper in Indonesia received countervailable subsidies within the meaning of sections 701 and 771(5) of the Act, and that imports from these producers/exporters materially injure, or threaten material injury to, an industry in the United States.

The Department finds that Petitioners have filed this CVD petition on behalf of the domestic industry because they are interested parties as defined in sections 771(9)(C) and 771(9)(D) of the Act, and Petitioners have demonstrated sufficient industry support with respect to the CVD investigation that they are requesting the Department to initiate (see “Determination of Industry Support for the CVD Petition,” below).

Period of Investigation

The anticipated period of investigation (“POI”) is calendar year 2008. See 19 CFR 351.204(b)(2).

Scope of Investigation

The products covered by this investigation are certain coated paper from Indonesia. For a full description of the scope of this investigation, please see the “Scope of Investigation” in the Appendix to this notice.

Comments on Scope of Investigation

During our review of the Indonesia CVD Petition, we discussed the scope with Petitioners to ensure that it is an accurate reflection of the products for which the domestic industry is seeking relief. Moreover, as discussed in the preamble to the regulations (See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), we are setting aside a period for interested parties to raise issues regarding product coverage. The Department encourages all interested parties to submit such comments by November 2, 2009. Comments should be addressed to Import Administration's APO/Dockets Unit, Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and to consult with parties prior to the issuance of the preliminary determinations.

Consultations

Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department held consultations with the Government of Indonesia (“GOI”) with respect to the Indonesia CVD Petition on October 7, 2009. See Memorandum to The File, “Consultations with the Government of Indonesia Regarding the Countervailing Duty Petition on Certain Coated Paper from Indonesia,” dated October 9, 2009, a public document on file in the Central Records Unit (“CRU”), Room 1117 of the main Department of Commerce building.

Determination of Industry Support for the Petition

Section 702(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 702(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (i) At least 25 percent of the total production of the domestic like product; and (ii) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 702(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department shall: (i) poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A); or (ii) determine industry support using a statistically valid sampling method.

Section 771(4)(A) of the Act defines the “industry” as the producers as a whole of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The United States International Trade Commission (“ITC”), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (see section 771(10) of the Act), they do so for different purposes and pursuant to a separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the like product, such differences do not render the decision of either agency contrary to law. See USEC, Inc. v. United States, 132 F. Supp. 2d 1, 8 (Ct. Int'l Trade 2001), citing Algoma Steel Corp., Ltd. v. United States, 688 F. Supp. 639, 644 (Ct. Int'l Trade 1988), aff'd 865 F.2d 240 (Fed. Cir. 1989), cert. denied 492 U.S. 919 (1989).

Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation” (i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition).

With regard to the domestic like product, Petitioners offer a definition of domestic like product that includes sheeter rolls (rolls of certain coated paper intended to be slit and used in sheet-fed presses) and, therefore, is broader than the scope of the investigation, which does not include sheeter rolls. Based on our analysis of the information submitted on the record, we have determined that certain coated paper described in the scope of the investigations and sheeter rolls constitute a single domestic like product and we have analyzed industry support in terms of that domestic like product. For a discussion of the domestic like product analysis in this case, see Countervailing Duty Investigation Initiation Checklist: Certain Coated Paper from Indonesia (“Indonesia CVD Initiation Checklist”) at Attachment II, Analysis of Industry Support for the Petitions Covering Certain Coated Paper from the People's Republic of China and Indonesia, dated concurrently with this notice and on file in the CRU, Room 1117 of the main Department of Commerce building.

In determining whether Petitioners have standing under section 702(c)(4)(A) of the Act, we considered the industry support data contained in the Indonesia CVD Petition with reference to the domestic like product as defined in the Indonesia CVD Petition. To establish industry support, Petitioners provided their own 2008 shipments of the domestic like product, as well as one supporting company's (SMART Papers) 2008 shipments, and compared the total to the 2008 shipments of the entire domestic industry. See Volume I of the Indonesia CVD Petition, at 2-3, Exhibits I-3, I-4, and I-19, and Supplement to the Indonesia CVD Petition, dated October 2, 2009, at 19-22 and Exhibit 4. Petitioners estimated total 2008 shipments of the domestic like product based on the American Forest & Paper Association annual Coated Printing Papers Survey. See Volume I of the Indonesia CVD Petition, at 3 and Exhibits I-3 and I-4, and Supplement to the Indonesia CVD Petition, dated October 2, 2009, at 22 and Exhibit 4; see also Indonesia CVD Initiation Checklist at Attachment II.

Our review of the data provided in the Indonesia CVD Petition, supplemental submissions, and other information readily available to the Department indicates that Petitioners have established industry support. First, the Indonesia CVD Petition established support from domestic producers (or workers) accounting for more than 50 percent of the total production of the domestic like product and, as such, the Department is not required to take further action in order to evaluate industry support (e.g., polling). See section 702(c)(4)(D) of the Act; see also Indonesia CVD Initiation Checklist at Attachment II. Second, the domestic producers (or workers) have met the statutory criteria for industry support under section 702(c)(4)(A)(i) of the Act because the domestic producers (or workers) who support the Indonesia CVD Petition account for at least 25 percent of the total production of the domestic like product. See Indonesia CVD Initiation Checklist at Attachment II. Finally, the domestic producers (or workers) have met the statutory criteria for industry support under section 702(c)(4)(A)(ii) of the Act because the domestic producers (or workers) who support the Indonesia CVD Petition account for more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the Indonesia CVD Petition. Accordingly, the Department determines that the Indonesia CVD Petition was filed on behalf of the domestic industry within the meaning of section 702(b)(1) of the Act. See id.

The Department finds that Petitioners filed the Indonesia CVD Petition on behalf of the domestic industry because they are interested parties as defined in sections 771(9)(C) and 771(9)(D) of the Act and they have demonstrated sufficient industry support with respect to the countervailing duty investigation that they are requesting the Department initiate. See id.

Injury Test

Because Indonesia is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, section 701(a)(2) of the Act applies to this investigation. Accordingly, the ITC must determine whether imports of the subject merchandise from Indonesia materially injure, or threaten material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causation

Petitioners allege that imports of certain coated paper from Indonesia are benefitting from countervailable subsidies and that such imports are causing, or threaten to cause, material injury to the domestic industry producing certain coated paper. In addition, Petitioners allege that subsidized imports exceed the negligibility threshold provided for under section 771(24)(A) of the Act.

Petitioners contend that the industry's injured condition is illustrated by reduced market share, underselling and price depressing and suppressing effects, increased import penetration, lost sales and revenue, reduced production, capacity, and capacity utilization, reduced shipments and inventories, reduced employment, and reduced financial performance. We have assessed the allegations and supporting evidence regarding material injury, threat of material injury, and causation, and we have determined that these allegations are properly supported by adequate evidence and meet the statutory requirements for initiation. See Indonesia CVD Initiation Checklist at Attachment III, “Analysis of Allegations and Evidence of Material Injury and Causation” for the Petitions Covering Certain Coated Paper from the People's Republic of China and Indonesia.

Initiation of Countervailing Duty Investigation

Section 702(b)(1) of the Act requires the Department to initiate a CVD investigation whenever an interested party files a CVD petition on behalf of an industry that: (1) alleges the elements necessary for an imposition of a duty under section 701(a) of the Act; and (2) is accompanied by information reasonably available to the petitioners supporting the allegations.

The Department has examined the countervailing duty petition on certain coated paper from Indonesia and finds that it complies with the requirements of section 702(b)(1) of the Act. Therefore, in accordance with section 702(b)(1) of the Act, we are initiating a CVD investigation to determine whether producers/exporters of certain coated paper from Indonesia receive countervailable subsidies. For a discussion of evidence supporting our initiation determination, see Indonesia CVD Initiation Checklist.

We are including in our investigation the following programs alleged in the Indonesia CVD Petition to provide countervailable subsidies to producers/exporters of the subject merchandise:

1. Provision of Standing Timber for Less Than Adequate Remuneration.

2. Government Prohibition of Log Exports.

3. Government Provision of Interest-Free Reforestation Loans.

4. Debt Forgiveness through the Indonesian Government's Acceptance of Financial Instruments with No Market Value.

5. Debt Forgiveness through APP/SMG's Buyback of its Own Debt from the Indonesian Government.

6. Government Forgiveness of Stumpage Obligations.

7. Tax Incentives for Investment in Priority Business Lines and Designated Regions:

a. Corporate Income Tax Deduction;

b. Accelerated Depreciation and Amortization;

c. Extension of Loss Carryforward;

d. Reduced Withholding Tax on Dividends.

Respondent Selection

The petition identifies the Asia Pulp & Paper/Sinar Mas Group (APP/SMG), through the two Indonesian coated paper mills it operates, PT. Pabrik Kertas Tjiwi Kimia Tbk. (“Tjiwi Kimia”) and PT Pindo Deli Pulp and Paper (“Pindo Deli”), as the one major producer of coated paper in Indonesia. We have placed on the record import data from U.S. Customs and Border Protection (“CBP”) which supports Petitioners' contention. We note that in a recent countervailing duty investigation covering coated free sheet paper from Indonesia, the Department found that the APP/Sinar Mas Group produced almost all exports of coated paper from Indonesia and that Tjiwi Kimia and Pindo Deli are cross-owned companies within the APP/SMG family of companies, which operates together as a vertically integrated paper production company. See Coated Free Sheet Paper from Indonesia: Final Affirmative Countervailing Duty Determination, 72 FR 60642 (October 25, 2007), and accompanying Issues and Decision Memorandum.

Because record information indicates that APP/SMG is the producer of nearly all of the coated paper produced in Indonesia, we are selecting APP/SMG as a mandatory respondent in this investigation, pursuant to section 777A(c)(2)(B) of the Act. We will release the CBP data under APO to the parties covered by APO on the day this initiation is announced. We will consider comments from interested parties on respondent selection. Parties wishing to comment must do so within five days of the publication of this notice in the Federal Register.

Distribution of Copies of the CVD Petition

In accordance with section 702(b)(4)(A)(i) of the Act, copies of the public versions of the Indonesia CVD Petition and amendments thereto have been provided to the GOI. To the extent practicable, we will attempt to provide a copy of the public version of the Indonesia CVD Petition to each exporter named in the petition, as provided under 19 CFR 351.203(c)(2).

ITC Notification

We have notified the ITC of our initiation, as required by section 702(d) of the Act.

Preliminary Determination by the ITC

The ITC will preliminarily determine, within 45 days after the date on which the petition was filed, whether there is a reasonable indication that imports of subsidized certain coated paper from Indonesia materially injure, or threaten material injury to, a U.S. industry. See section 703(a)(2) of the Act. A negative ITC determination will result in the investigation being terminated; see section 703(a)(1) of the Act. Otherwise, the investigation will proceed according to statutory and regulatory time limits.

This notice is issued and published pursuant to section 777(i) of the Act.

Appendix I—Scope of the Investigation

The merchandise covered by this investigation includes certain coated paper and paperboard in sheets suitable for high quality print graphics using sheet-fed presses; coated on one or both sides with kaolin (China or other clay), calcium carbonate, titanium dioxide, and/or other inorganic substances; with or without a binder; having a GE brightness level of 80 or higher ; weighing not more than 340 grams per square meter; whether gloss grade, satin grade, matte grade, dull grade, or any other grade of finish; whether or not surface-colored, surface-decorated, printed (except as described below), embossed, or perforated; and irrespective of dimensions (“Certain Coated Paper”).

Certain Coated Paper includes (a) coated free sheet paper and paperboard that meets this scope definition; (b) coated groundwood paper and paperboard produced from bleached chemi-thermo-mechanical pulp (“BCTMP”) that meets this scope definition; and (c) any other coated paper that meets this scope definition.

Certain Coated Paper is typically (but not exclusively) used for printing multi-colored graphics for catalogues, books, magazines, envelopes, labels and wraps, greeting cards, and other commercial printing applications requiring high quality print graphics.

Specifically excluded from the scope are imports of paper and paperboard printed with final content printed text or graphics.

As of 2009, imports of the subject merchandise are provided for under the following categories of the Harmonized Tariff Schedule of the United States (“HTSUS”): 4810.14.11, 4810.14.1900, 4810.14.2010, 4810.14.2090, 4810.14.5000, 4810.14.6000, 4810.14.70, 4810.19.1100, 4810.19.1900, 4810.19.2010, 4810.19.2090, 4810.22.1000, 4810.22.50, 4810.22.6000, 4810.22.70, 4810.29.1000, 4810.29.5000, 4810.29.6000, 4810.29.70. While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of the investigation is dispositive.