Notice of Final Determination of Sales at Less Than Fair Value: Wax and Wax/Resin Thermal Transfer Ribbons from France

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

March 8, 2004.

SUMMARY:

We determine that wax and wax/resin thermal transfer ribbons (TTR) from France are being sold, or are likely to be sold, in the United States at less than fair value (LTFV), as provided in section 735 of the Tariff Act of 1930, as amended (the Act). The estimated margins of sales at LTFV are shown in the Continuation of Suspension of Liquidation section of this notice.

FOR FURTHER INFORMATION CONTACT:

Mark Hoadley or Sally Gannon at (202) 482-3148 and (202) 482-0162, respectively; Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Case History

The preliminary determination in this investigation was issued on December 16, 2003. See Notice of Preliminary Determination of Sales at Less Than Fair Value: Wax and Wax/Resin Thermal Transfer Ribbons From France, 68 FR 71068 (December 22, 2003) (Preliminary Determination). Since the publication of the preliminary determination, the following events have occurred. On January 5 and January 16, 2004, petitioner, International Imaging Materials, Inc. (IIMAK), submitted additional comments regarding (1) its allegation that respondents in the three concurrent investigations of TTR (France, Japan, and South Korea) would attempt to circumvent the order by slitting jumbo rolls in third countries, and (2) its request that the Department therefore determine that slitting does not change the country of origin of TTR for antidumping purposes. On January 9, 2004, Armor, S.A. (Armor), the sole respondent in the French investigation, submitted additional comments on the country-of-origin issue. DigiPrint International (DigiPrint), a U.S. importer of TTR slit in India, submitted comments on January 2, 2004, on the country-of-origin issue. Refer to Preliminary Determination for a history of all previous comments submitted on this issue.

Scope of Investigation

This investigation covers wax and wax/resin thermal transfer ribbons (TTR), in slit or unslit (“jumbo”) form originating from France with a total wax (natural or synthetic) content of all the image side layers, that transfer in whole or in part, of equal to or greater than 20 percent by weight and a wax content of the colorant layer of equal to or greater than 10 percent by weight, and a black color as defined by industry standards by the CIELAB (International Commission on Illumination) color specification such that L*<35, -20<a*<35, and -40<b*<31, and black and near-black TTR. TTR is typically used in printers generating alphanumeric and machine-readable characters, such as bar codes and facsimile machines.

The petition does not cover resin TTR, and finished thermal transfer ribbons with a width greater than 212 millimeters (mm), but not greater than 220 mm (or 8.35 to 8.66 inches) and a length of 230 meters (m) or less (i.e., slit fax TTR, including cassetted TTR), and ribbons with a magnetic content of greater than or equal to 45 percent, by weight, in the colorant layer.

The merchandise subject to this investigation may be classified in the Harmonized Tariff Schedule of the United States (HTSUS) at heading 3702 and subheadings 3921.90.40.25, 9612.10.90.30, 3204.90, 3506.99, 3919.90, 3920.62, 3920.99 and 3926.90. The tariff classifications are provided for convenience and Customs and Border Protection (CBP) purposes; however, the written description of the scope of the investigation is dispositive.

Country of Origin

As noted above, petitioner has requested that the Department determine that TTR produced in France (in jumbo roll, i.e., unslit form) that is slit in a third country does not change the country of origin for antidumping purposes. According to petitioner, because slitting does not constitute a “substantial transformation,” French jumbo rolls slit in a third country should be classified as French TTR for antidumping purposes, and, therefore, within the scope of this investigation and any resulting order. Petitioner submitted comments on this request on October 28, 2003, December 5, 2003, January 5 and January 16, 2004. According to petitioner, substantial transformation does not take place because: 1) both slit and jumbo rolls have the same essential physical characteristics (e.g., both have the same chemical properties that make them suitable for thermal transfer printing); 2) large capital investments are required for coating and ink-making (production stages prior to slitting), but not for slitting; 3) coating and ink-making require significantly more skill, expertise, and research and development; and, 4) the majority of costs and value comes from coating and ink-making. Petitioner states that, for purposes of this issue, slitting and packaging do not account for a substantial amount of the total cost of finished TTR (depending on the degree of automation and whether new or secondhand equipment is involved); and that a slitting operation requires a small amount of capital, compared with a large amount of capital required for a coating and ink-making operation.

Armor, the sole respondent in this investigation, argues that slitting does constitute substantial transformation, and, therefore, that the Department should determine that French jumbo rolls slit in a third country should be considered to have originated in that third country for antidumping purposes. Armor submitted comments on November 26, 2003, December 12, 2003, and January 9, 2004. Armor argues that substantial transformation does take place because: 1) slitting, and the repackaging that necessarily goes along with it, involves transforming the product into its final end-use dimensions, the insertion of one or two cores (for loading the ribbons into printers), and the addition of leaders, bridges, and trailers, which result in a new product, with a new name, new character, and new purpose; 2) petitioner excluded TTR slit to fax proportions, acknowledging the importance of slitting; and, 3) U.S. Customs and Border Protection (CBP) and the Court of International Trade (CIT) have determined that slitting and repackaging amount to substantial transformation. DigiPrint, in comments received on January 2, 2004, argues that the record of this investigation indicates that slitting and packaging account for a large amount (34%) of total cost, indicating substantial transformation.

The Department has considered several factors in determining whether a substantial transformation has taken place, thereby changing a product's country of origin. These have included: the value added to the product; the sophistication of the third-country processing; the possibility of using the third-country processing as a low cost means of circumvention; and, most prominently, whether the processed product falls into a different class or kind of product when compared to the downstream product. While all of these factors have been considered by the Department in the past, it is the last factor which is consistently examined and emphasized.¹ When the upstream and processed products fall into different classes or kinds of merchandise, the Department generally finds that this is indicative of substantial transformation. See, e.g., Cold-Rolled 1993, 58 FR at 37066.

Accordingly, the Department has generally found that substantial transformation has taken place when the upstream and downstream products fall within two different “classes or kinds” of merchandise: (see, e.g., steel slabs converted to hot-rolled band; wire rod converted through cold-drawing to wire; cold-rolled steel converted to corrosion resistant steel; flowers arranged into bouquets; automobile chassis converted to limousines). Conversely, the Department almost invariably determines substantial transformation has not taken place when both products are within the same “class or kind” of merchandise: (see, e.g., computer memory components assembled and tested; hot-rolled coils pickled and trimmed; cold-rolled coils converted into cold-rolled strip coils; rusty pipe fittings converted to rust free, painted pipe fittings; green rod cleaned, coated, and heat treated into wire rod).³ In this case, both jumbo and slit TTR are within the same class or kind of merchandise, as defined in the Department's initiation and as defined for this final determination.

While slitting and packaging might account for 34 percent of the total cost of production, the processes and equipment involved do not amount to substantial transformation of the jumbo TTR for antidumping purposes. According to information submitted by petitioner, and not rebutted by any party to this investigation, a slitting operation requires only a fraction of the capital investment required for a coating and ink-making operation.⁵ Moreover, the ITC noted in this investigation that the “slitting and packaging process is not particularly complex, especially as compared to the jumbo TTR production process.” ITC Report, at 7. The ITC also noted that the primary cost involved in a slitting and packaging operation is not capital cost, but direct labor cost, which, we note, might be hired cheaply in a third country. Id. at 14. Thus, it appears that a slitting operation could be established in a third country for circumvention purposes with far greater ease than a coating and ink-making operation.

Finally, the ITC concluded that, while slit and jumbo TTR are like products, U.S. slitting and packaging operations (or “converters”) were not part of the domestic industry for purposes of this investigation, “for lack of sufficient production related activities.” Id. at 13. The implication of the ITC's conclusion, based on its extensive multi-pronged analysis, is that TTR is the product of coating and ink-making, not slitting and packaging: “The production related activities of converters are insufficient for such firms to be deemed producers of the domestic like product.” Id. While we are not bound by the ITC's decisions, the ITC's determination is important to consider in this particular instance because it is based on the full participation of respondents and petitioner, whereas respondent withdrew its information from our investigation.

As the Department has stated on numerous occasions, CBP decisions regarding substantial transformation and customs regulations, referred to by respondent, are not binding on the Department, because we make these decisions with different aims in mind (e.g., anticircumvention). See, e.g., DRAMs, 67 FR at 70928. The Department's independent authority to determine the scope of its investigations has been upheld by the CIT. Diversified Products Corp. v. United States, 572 F. Supp. 883, 887 (CIT 1983). Presumably, a CIT decision interpreting substantial transformation in the context of CBP regulations, also cited by respondent, also is not binding on the Department.

While the other facts noted by respondent are not necessarily irrelevant to this determination, they do not overcome the conclusion indicated by the fact that the slitting and packaging of jumbo rolls into slit TTR does not create a “new and different article.” In other words, the totality of the circumstances indicates that slitting does not constitute substantial transformation for antidumping purposes. Even accepting, arguendo, DigiPrint's statement regarding the amount of total cost accounted for by slitting and packaging, and respondent's statements regarding how slitting and packaging transform the product into its final end-use form, the product still has not changed sufficiently to fall outside the class or kind of merchandise defined in this investigation. Jumbo rolls are intermediate products, and slit rolls are final, end-use products, but the transformation of an upstream product into a downstream product does not necessarily constitute “substantial transformation” and, in this case, does not, given the considerations listed above.

Similarly, in DRAMs, we decided that wafers shipped to a third country to be used in the assembly of DRAMs (subject merchandise) did not amount to substantial transformation because the wafers were the “essential” component in the product. In this case, the ITC report notes petitioner's statement, unrefuted by respondents, that “the essential characteristic of finished TTR, like that of jumbo TTR, is that of a strip of PET film coated with ink.” We agree and note that the essential characteristic is contained in the jumbo TTR imported into the third country.

Therefore, in light of this fact and the facts discussed below, we determine that slitting jumbo rolls does not constitute substantial transformation. Jumbo rolls originating in France but slit in a third country will be subject to any antidumping duties imposed on French TTR, if an antidumping duty order on such products is issued.

Period of Investigation

The period of investigation (POI) is April 1, 2002, through March 31, 2003.

Facts Available

In the preliminary determination, we based the dumping margin for the mandatory respondent, Armor, on adverse facts available pursuant to sections 776(a) and 776(b) of the Act. The use of adverse facts available was warranted in this investigation because Armor withdrew its questionnaire responses from the record. See Preliminary Determination, 68 FR at 71069. The withdrawal of such information significantly impeded this proceeding because the Department cannot determine a margin without responses to our questionnaires. In addition, we found that Armor failed to cooperate to the best of its ability. We assigned Armor the highest margin listed in the notice of initiation. See Notice of Initiation of Antidumping Duty Investigation: Thermal Transfer Ribbons From France, Japan and the Republic of Korea, 68 FR 38305 (June 27, 2003). A complete explanation of the selection, corroboration, and application of adverse facts available can be found in the preliminary determination. See Preliminary Determination, 68 FR at 71070-71.Nothing has changed since the preliminary determination was issued that would affect the Department's selection and application of facts available. No interested parties commented on any aspect of our application of adverse facts available. Accordingly, for the final determination, we continue to use the highest margin stated in the notice of initiation for Armor. The “All Others” rate remains unchanged as well.

Analysis of Comments Received

We received no comments from interested parties in response to our preliminary determination in this investigation, except for the comments on the country-of-origin issue, which are fully addressed above. We received no case briefs or rebuttal briefs. We did not hold a hearing because none was requested.

Continuation of Suspension of Liquidation

In accordance with section 735(c)(1)(B) of the Act, we are directing CBP to continue to suspend liquidation of all entries of TTR exported from France that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of the preliminary determination. CBP shall continue to require a cash deposit or the posting of a bond based on the estimated dumping margins shown below. The suspension of liquidation instructions will remain in effect until further notice.We determine that the following dumping margins exist:

International Trade Commission Notification

In accordance with section 735(d) of the Act, we have notified the ITC of our determination. The ITC will determine, within 45 days, whether imports of subject merchandise from France are materially injuring, or threatening material injury to, an industry in the United States. If the ITC determines that material injury or threat of injury does not exist, this proceeding will be terminated and all securities posted will be refunded or canceled. If the ITC determines that such injury does exist, the Department will issue an antidumping duty order directing CBP officials to assess antidumping duties on all imports of the subject merchandise entered, or withdrawn from warehouse for consumption on or after the effective date of the suspension of liquidation.

This notice also serves as a reminder to parties subject to APO of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305. Timely notification of return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.

This determination is issued and published in accordance with sections 735(d) and 777(i)(1) of the Act.