Initiation of Antidumping Duty Investigations: Chlorinated Isocyanurates From the People's Republic of China and Spain

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Initiation of antidumping duty investigation.

DATES:

Effective Date: June 10, 2004.

FOR FURTHER INFORMATION CONTACT:

Paige Rivas (Spain) or Sochieta Moth (PRC), Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-0651 or (202) 482-0168, respectively.

Initiation of Investigations

The Petitions

On May 14, 2004, the Department of Commerce (the Department) received petitions on imports of chlorinated isocyanurates (chlorinated isos) from the People's Republic of China (PRC), and Spain, filed in proper form by Clearon Corporation and Occidental Chemical Corporation (referred to hereafter as “the petitioners”). On May 19, May 20, May 25, and May 26, 2004 the Department requested additional information and clarification of certain areas of the petitions. The petitioners filed supplements to the petitions on May 24, 2004, and May 28, 2004. On June 2, 2004, Arch Chemicals, Inc., a U.S. importer of chlorinated isos from the PRC and Spain, submitted a letter challenging the assertion made by the petitioners that they represent more than 50 percent of the domestic production of chlorinated isos. The petitioners rebutted this challenge to their industry support on June 3, 2004.

In accordance with section 732(b)(i) of the Tariff Act of 1930, as amended (the Act), the petitioners allege that imports of chlorinated isos from the PRC and Spain are being, or are likely to be, sold in the United States at less than fair value within the meaning of section 731 of the Act and that such imports are materially injuring and threaten to injure an industry in the United States.

The Department finds that the petitioners filed these petitions on behalf of the domestic industry because they are interested parties as defined in section 771(9)(c) of the Act and the petitioners have demonstrated sufficient industry support with respect to the antidumping investigations that the petitioners are requesting the Department to initiate.

Period of Investigations

The period of investigation (POI) for the PRC is October 1, 2003, through March 31, 2004. The POI for Spain is April 1, 2003, through March 31, 2004.

Scope of Investigations

The products covered by these investigations are chlorinated isos. Chlorinated isos are derivatives of cyanuric acid, described as chlorinated s-triazine triones. There are three primary chemical compositions of chlorinated isos: (1) Trichloroisocyanuric acid (Cl₃ (NCO)₃), (2) sodium dichloroisocyanurate (dihydrate) (NaCl₂ (NCO)₃ • 2H₂ O), and (3) sodium dichloroisocyanurate (anhydrous) (NaCl₂ (NCO)₃). Chlorinated isos are available in powder, granular, and tabletted forms. These investigations cover all chlorinated isos.

Chlorinated isos are currently classifiable under subheading 2933.69.6050 of the Harmonized Tariff Schedule of the United States (HTSUS). This tariff classification represents a basket category that includes chlorinated isos and other compounds including an unfused triazine ring. Although the HTSUS subheading is provided for convenience and customs purposes, the written description of the merchandise remains dispositive.

During our review of the petitions, we discussed the scope with the 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 (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 within 20 calendar days of publication of this notice. Comments should be addressed to Import Administration's Central Records Unit at 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 consult with parties prior to the issuance of the preliminary determinations.

Determination of Industry Support for the Petitions

Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(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: (1) At least 25 percent of the total production of the domestic like product; and (2) 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.

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 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 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 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 domestic like product, such differences do not render the decision of either agency contrary to law.

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 subtitle.” 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.

In this case, the petitions cover a single class or kind of merchandise, chlorinated isos, as defined in the “Scope of Investigations” section, above. The petitioners do not offer a definition of domestic like product distinct from the scope of the investigations. Further, based on our analysis of the information presented by the petitioners, we have determined that there is a single domestic like product, chlorinated isos, which is defined in the “Scope of Investigations” section above, and we have analyzed industry support in terms of the domestic like product.

The Department has determinated that the petitioners established industry support representing over 50 percent of total production of the domestic like product, requiring no further action by the Department pursuant to section 732(c)(4)(D) of the Act. In addition, the Department received no opposition to the petitions from domestic producers of the like product. The Department received opposition to the petitions from an importer of the domestic like product (see Industry Support Attachment to the Initiation Checklists for the PRC and Spain, dated June 3, 2004, on file in the Central Records Unit, Room B-099 of the Department of Commerce (“Industry Support Attachment”)). Therefore, the domestic producers or workers who support the petitions account for at least 25 percent of the total production of the domestic like product, and the requirements of section 732(c)(4)(A)(i) are met. Furthermore, the domestic producers or workers who support the petitions 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 petitions. Thus, the requirements of section 732(c)(4)(A)(ii) are also met.

Accordingly, the Department determines that the petitions were filed on behalf of the domestic industry within the meaning of section 732(b)(1) of the Act. See Industry Support Attachment.

Export Price and Normal Value

The following are descriptions of the allegations of sales at less than fair value upon which the Department based its decision to initiate these investigations. The sources of data for the deductions and adjustments relating to export price (EP) and normal value (NV) are discussed in greater detail in the Initiation Checklists. Should the need arise to use any of this information as facts available under section 776 of the Act in our preliminary or final determination, we may reexamine the information and revise the margin calculations, if appropriate.

The petitions identified 19 producers of chlorinated isos in the PRC (see May 14, 2004, petition, Exhibit 5-G) and 2 producers in Spain (see May 14, 2004, petition, Exhibit 5-I).

Export Price—The PRC

The petitioners based EP on ten contemporaneous quotations of PRC-manufactured chlorinated isos from two PRC exporters. For prices quoted on an free-on-board PRC port basis, the petitioners deducted inland freight from the manufacturer's plant to the port of exportation. For prices quoted as delivered, the petitioners deducted ocean freight, brokerage and handling, and inland freight. We have examined the information provided regarding EP and have determined that it represents information reasonably available to the petitioners and have reviewed it for adequacy and accuracy. See Initiation Checklist.

Normal Value—The PRC

The petitioners assert that the Department considers the PRC to be a non-market-economy (NME) country and, therefore, they constructed NV based on the factors-of-production methodology pursuant to section 773(c) of the Act. In previous cases, the Department has determined that the PRC is an NME country. See e.g., Notice of Final Determination of Sales at Less Than Fair Value and Negative Final Determination of Critical Circumstances: Certain Color Television Receivers From the People's Republic of China, 69 FR 20594 (April 16, 2004). In accordance with section 771(18)(c)(i) of the Act, the NME status remains in effect until revoked by the Department. The NME status of the PRC has not been revoked by the Department and, therefore, remains in effect for purposes of the initiation of this investigation. Accordingly, the NV of the product is based on factors of production valued in a surrogate market-economy country in accordance with section 773(c) of the Act. In the course of this investigation, all parties will have the opportunity to provide relevant information related to the issues of the PRC's NME status and the granting of separate rates to individual exporters. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585, 22586-87 (May 2, 1994).

As required by 19 CFR 351.202(b)(7)(i)(c), the petitioners provided dumping margin calculations using the Department's NME methodology described in 19 CFR 351.408. For the calculation of NV, the petitioners based the factors of production, as defined by section 773(c)(3) of the Act (raw materials, labor, and overhead), for chlorinated isos on the quantities of inputs used by a U.S. producer of chlorinated isos. The petitioners adjusted the per-unit consumption values of certain inputs to reflect known differences in the production of trichlor and dichlor in the PRC. See Initiation Checklist.

The petitioners selected India as their surrogate country. The petitioners stated that India is comparable to the PRC in its level of economic development and is a significant producer of comparable merchandise. The petitioners selected calcium hypochlorite as the comparable merchandise for surrogate country selection since both products are used in swimming pools primarily because of their available chlorine content. Based on the information provided by the petitioners, we believe that the petitioners' use of India as a surrogate country is reasonable for purposes of initiation of this investigation. See Initiation Checklist.

The petitioners valued the factors of production for chlorinated isos using publically available data from India for all production inputs except cyanuric acid and chlorine. Where Indian data is not contemporaneous to the POI, the petitioners have adjusted the Indian price to account for inflation using wholesale price indices. The petitioners converted Indian values to U.S. dollars at the POI exchange rate.

The petitioners valued cyanuric acid using the average unit values of imports of this commodity into the United States from Taiwan. The petitioners outlined their unsuccessful efforts to identify a value for cyanuric acid in the countries which the Department has typically used as surrogates for the PRC in the past: India, Pakistan, Sri Lanka, Philippines, and Indonesia. The petitioners state that to their knowledge none of the aforementioned countries produce cyanuric acid. The petitioners also stated that there were no imports of cyanuric acid into the United States from Pakistan, Sri Lanka, the Philippines, or Indonesia.

The petitioners also note that the harmonized tariff systems of the aforementioned countries classify imports of cyanuric acid and chlorinated isos under a single tariff subheading. The petitioners note that imports of this tariff subheading for cyanuric acid into any of these countries would overstate its value because chlorinated isos have greater monetary value. Similarly, the HTSUS classifies imports of cyanuric acid in a basket category. The petitioners demonstrated with Port Import-Export Reporting Service (PIERS) data that all imports from Taiwan within subheading 2933.69.60.50 into the United States consist of only cyanuric acid. Based on the explanations provided, we find petitioners' use of this factor value to be adequate for purposes of initiation as its use meets their burden of data reasonably available to them.

The petitioners valued sulfuric acid and caustic soda using pricing data in the Indian publication Chemical Weekly. The petitioners point out that prices of liquid chlorine, a significant input in the production of dichlor and triclor, are not listed in Chemical Weekly. Therefore, the petitioners valued chlorine using Indonesian import statistics compiled in World Trade Atlas for 2002. Packing inputs include supersacks, plastic drums, and pallets. The petitioners used Monthly Statistics of the Foreign Trade of India and data from the Monthly Times of India to value these inputs. They valued water using information that they obtained from the Second Water Utilities Data Book: Asian and Pacific Region for 1997. The price of electricity was valued based on the most recent statistics available for India which were published by the U.S. Department of Energy in 2003.

The petitioners stated that they are not aware of any producers of trichlor and dichlor in India or any other country commonly used. Therefore, the petitioners calculated factory overhead, selling, general, and administrative (SG&A) expenses, and profit ratios based on the 2002-2003 Annual Report of DSM Shriram Consolidated, Ltd., an Indian producer of sodium hypochlorite, chlorine, and caustic soda. Based on our analysis of the data in the petition, we believe that the petitioners' calculations of NV are reasonable and accurate.

Based on comparisons of EP to NV, calculated in accordance with section 773(c) of the Act, the estimated dumping margins range from 109.14 percent to 157.82 percent for trichlor and dichlor from the PRC.

Export Price—Spain

To calculate EP, the petitioners started with three price quotes: Two price quotes for Spanish manufactured trichlor and one price quote for Spanish manufactured dichlor. The petitioners calculated net U.S. prices by deducting foreign inland freight, U.S. import duties, U.S. inland freight, insurance, ocean freight, and commission. We reviewed the information provided regarding EP and have determined that it represents information reasonably available to the petitioners. We have also reviewed the adequacy and accuracy of the petitioners' information and calculation. See Initiation Checklist.

Normal Value—Spain

To calculate NV, the petitioners obtained through foreign market research, three price quotes for dichlor and three price quotes for trichlor. The petitioners calculated net Spanish prices by deducting the inland freight from the producer to the port of export. We reviewed the NV information provided and have determined that it represents information reasonably available to the petitioners. We have also reviewed the adequacy and accuracy of the petitioners' information and calculation. See Initiation Checklist.

Although the petitioners provided margins based on price-to-price comparisons, the petitioners also provided information demonstrating reasonable grounds to believe or suspect that sales of trichlor and dichlor in the home market were made at prices below the fully absorbed cost of production (COP), within the meaning of section 773(b) of the Act, and requested that the Department conduct a country-wide sales-below-cost investigation. See Initiation of Cost Investigation section infra for further discussion.

Pursuant to section 773 (b)(3) of the Act, COP consists of the cost of manufacture (COM), SG&A, financial expenses and packing. The petitioners calculated COP based on the experience of a U.S. trichlor and dichlor producer during 2003, adjusted for known differences between costs incurred to manufacture trichlor and dichlor products in the United States and in Spain using publicly available data which the petitioners stated is the most specific and recent cost data reasonably available. Based upon a comparison of the prices of the foreign like product to the calculated COP of the product, we find reasonable grounds to believe or suspect that sales of the foreign like product were made below the COP, within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating a country-wide cost investigation.

Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, the petitioners also calculated NV based on constructed value (CV). The petitioners calculated CV using the same COM, SG&A and financial expense figures used to compute the COP. Consistent with 773(e)(2) of the Act, the petitioners included in CV an amount for profit. For profit, the petitioners relied upon amounts reported in Uralita Group's 2002 financial statements.

The petitioners revised the COM for trichlor and dichlor in their May 25, 2004, submission based on revised labor rates (i.e., the labor rates in Spain). We recalculated the dumping margin based the revised COM of trichlor and dichlor. Based on comparisons of EP (method derived from price quotes) to CV, calculated in accordance with section 773(a) of the Act, the estimated dumping margins range from 29.68 percent to 42.36 percent for trichlor and dichlor from Spain. We note that these margins are conservative since the petitioners did not include packing in the CV calculation.

Initiation of Cost Investigation

As noted above, pursuant to section 773(b) of the Act, the petitioners provided information demonstrating reasonable grounds to believe or suspect that sales in the home market of Spain were made at prices below the fully absorbed COP and, accordingly, requested that the Department conduct a country-wide sales-below-COP investigation in connection with the requested antidumping investigation for this country. The Statement of Administrative Action (SAA), accompanying the URAA, states that an allegation of sales below COP need not be specific to individual exporters or producers. See SAA, H.R. Doc. No. 103-316 at 833 (1994). The SAA states that “Commerce will consider allegations of below-cost sales in the aggregate for a foreign country, just as Commerce currently considers allegations of sales at less than fair value on a country-wide basis for purposes of initiating an antidumping investigation.” Id.

Further, the SAA provides that the “new section 773(b)(2)(A) retains the current requirement that Commerce have ‘reasonable grounds to believe or suspect’ that below cost sales have occurred before initiating such an investigation. ‘Reasonable grounds’ * * * exist when an interested party provides specific factual information on costs and prices, observed or constructed, indicating that sales in the foreign market in question are at below-cost prices.” Id. Based upon the comparison of the adjusted prices from the petition for the representative foreign like product to its COP, we find the existence of “reasonable grounds to believe or suspect” that sales of these foreign like products in Spain were made below their respective COPs within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating the requested country-wide cost investigation.

Fair-Value Comparison

Based on the data provided by the petitioners, there is reason to believe that imports of chlorinated isos from the PRC and Spain are being, or are likely to be, sold in the United States at less than fair value. As a result of a comparison of EP to NV, based on our recalculations described above, the estimated dumping margins range from 109.14 percent to 157.82 percent for the PRC and from 29.68 percent to 42.36 percent for Spain.

Allegations and Evidence of Material Injury and Causation

The petitioners allege that the U.S. industry producing the domestic like product is being materially injured and is threatened with material injury by reason of the imports of the subject merchandise sold at less than NV. The petitioners contend that the industry's injured condition is evidenced by declining trends in market share, pricing, production levels, profits, sales, utilization of capacity, reduction of labor force, and increasing inventory levels.

These allegations are supported by relevant evidence including import data, lost sales, and pricing information. The Department assessed the allegations and supporting evidence regarding material injury and causation and determined that these allegations are supported by adequate evidence and meet the statutory requirements for initiation (See Initiation Checklists, Re: Material Injury).

Initiation of Antidumping Investigations

Based upon the examination of the petitions on chlorinated isos from the PRC and Spain, and other information reasonably available to the Department, we find that the petitions meet the requirements of section 732 of the Act. Therefore, we are initiating antidumping duty investigations to determine whether imports of chlorinated isos from the PRC and Spain are being, or are likely to be, sold in the United States at less than fair value. Unless postponed, we will make our preliminary determinations no later than 140 days after the date of this initiation.

Distribution of Copies of the Petitions

In accordance with section 732(b)(3)(A) of the Act, copies of the public versions of the petitions have been provided to the representatives of the governments of the PRC and Spain. We will attempt to provide copies of the public versions of the petitions to each producer named in the petitions, as appropriate.

International Trade Commission Notification

We have notified the ITC of our initiations as required by section 732(d) of the Act.

Preliminary Determination by the ITC

The ITC will preliminarily determine, no later than June 28, 2004, whether there is a reasonable indication that imports of chlorinated isos from the PRC and Spain are causing material injury, or threatening to cause material injury, to a U.S. industry. A negative ITC determination for any country will result in the investigation being terminated with respect to that country; otherwise, these investigations will proceed according to statutory and regulatory time limits.

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