Notice of Initiation of Countervailing Duty Investigation: Elastic Rubber Tape from India

DEPARTMENT OF COMMERCE

International Trade Administration

[C-533-816]

Notice of Initiation of Countervailing Duty Investigation:

Elastic Rubber Tape from India

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: September 16, 1998.

FOR FURTHER INFORMATION CONTACT: Todd Hansen or Javier Barrientos at

(202) 482-1276 and (202) 482-4207, respectively, Import Administration,

U.S. Department of Commerce, Room 1870, 14th Street and Constitution

Avenue, NW., Washington, DC 20230.

Initiation of Investigation

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations are to 19 CFR

Part 351 (1998).

The Petition

On August 18, 1998, the Department of Commerce (the Department)

received a petition filed in proper form by or on behalf of Fulflex,

Inc., Elastomer Technologies Group, Inc. (Elastomer), and RM Engineered

Products, Inc. (RM) (collectively referred to hereinafter as ``the

petitioners''). Elastomer and RM are both wholly owned subsidiaries of

M-Tec Corporation. A supplement to the petition was filed on September

1, 1998.

In accordance with section 702(b)(1) of the Act, the petitioners

allege that manufacturers, producers, or exporters of the subject

merchandise in India receive countervailable subsidies within the

meaning of section 701 of the Act, and that such imports are materially

injuring an industry in the United States. The petitioners estimate the

countervailing duty rate for Garware to be 50 percent. This figure is

based on the findings of the EU in its Imposition of Provisional

Countervailing Duty on Imports of Certain Broad Spectrum Antibiotics

Originating in India (OJ L 166/17, Commission Regulation (EC) No. 1204/

98, June 11, 1998) and the Department's determination in Certain Iron-

Metal Castings from India: Preliminary Results of Countervailing Duty

Administrative Review (63 FR 37534, July 13, 1998).

The petitioners state that they have standing to file the petition

because they are interested parties, as defined under sections

771(9)(C) and (D) of the Act, and they have demonstrated that they are

the only producers of ERT in the United States (see ``Determination of

Industry Support for the Petition'' section below).

Scope of the Investigation

For purposes of this investigation, the product covered is elastic

rubber tape. Elastic rubber tape is defined as vulcanized, non-cellular

rubber strips, of either natural or synthetic rubber, 0.006 inches to

0.100 inches (0.15 mm to 2.54 mm) in thickness, and \1/8\ inches to

1\5/8\ inches (3 mm to 42 mm) in width. Such product is generally used

in swimwear and underwear.

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (``HTSUS'') at

subheading 4008.21.00. Although the HTSUS subheading is provided for

convenience and customs purposes, the written description of the

merchandise under investigation is dispositive.

During our review of the petition, we discussed scope with the

petitioners to insure that the scope in the petitions accurately

reflects the product for which they are seeking relief. Moreover, as

discussed in the preamble to our regulations (62 FR 27323), we are

setting aside a period for parties to raise issues regarding product

coverage. The Department encourages all parties to submit such comments

by September 29, 1998. 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 us with

ample opportunity to consider all comments and consult with parties

prior to the issuance of our preliminary determinations.

Consultations

Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department

invited representatives of the Government of India (GOI) for

consultations with respect to the petition. On September 1, 1998, the

GOI submitted written comments regarding the programs alleged in the

petition. Consultations were held on September 4, 1998. See memorandum

to the file regarding the consultations with the GOI, dated September

4, 1998 (public document on file in the Central Records Unit of the

Department of Commerce, Room B-099).

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: (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 of a domestic like product. Thus, to determine whether the

petition has the requisite industry support, the statute directs the

Department to look to producers and workers who account for production

of 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 both the Department and

the ITC must apply the same statutory definition of domestic like

product (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

like product, such differences do not

[[Page 49550]]

render the decision of either agency contrary to the law. 1

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\1\ See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp.

639, 642-44 (CIT 1988); High Information Content Flat Panel Displays

and Display Glass Therefor from Japan: Final Determination;

Rescission of Investigation and Partial Dismissal of Petition, 56 FR

32376, 32380-81 (July 16, 1991).

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Section 771(10) of the Act defines 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.

The domestic like product referred to in the petition is the single

domestic like product defined in the ``Scope of Investigation''

section, above. The Department has no basis on the record to find the

petition's definition of the domestic like product to be inaccurate.

The Department has therefore adopted the domestic like product

definition set forth in the petition.

In this case, the Department has determined that the petition and

supplemental information contained adequate evidence of sufficient

industry support and, therefore, polling is unnecessary. See the

Initiation Checklist prepared for this case, dated September 8, 1998

(public documents on file in the Central Records Unit of the Department

of Commerce, Room B-099). The petitioners established industry support

representing 100 percent of total production of the domestic like

product.

Additionally, no person who would qualify as an interested party

pursuant to sections 771(9)(A)(B)(C)(D)(E) or (F) has expressed

opposition on the record to the petition. Therefore, to the best of the

Department's knowledge, the producers who support this petition account

for 100 percent of the production of the domestic like product produced

by the portion of the industry expressing an opinion regarding the

petition. Accordingly, the Department determines that this petition is

filed on behalf of the domestic industry within the meaning of section

702(b)(1) of the Act.

Injury Test

Because India is a ``Subsidies Agreement Country'' within the

meaning of section 701(b) of the Act, section 701(a)(2) applies to this

investigation. Accordingly, the U.S. International Trade Commission

(ITC) must determine whether imports of the subject merchandise from

India materially injure, or threaten material injury to, a U.S.

industry.

Allegations and Evidence of Material Injury and Causation

The petition alleges that the U.S. industry producing the domestic

like product is being materially injured, and is threatened with

material injury, by reason of the subsidized imports of the subject

merchandise from India. The petitioners explain that the industry's

injured condition is evident in the declining trends in net operating

profits and income, net sales volumes and values, profit to sales

ratios, and capacity utilization. The allegations of injury and

causation are supported by relevant evidence including U.S. Customs

import data, lost sales, and pricing information. The Department

assessed the allegations and supporting evidence regarding material

injury and causation, and it determined that these allegations are

sufficiently supported by accurate and adequate evidence and meet the

statutory requirements for initiation (see Attachment 2 to the

September 8, 1998, Initiation Checklist entitled ``Analysis of

Allegations and Evidence of Material Injury and Causation'').

Allegation of Critical Circumstances

The petitioners allege that critical circumstances exist with

respect to imports of ERT from India. To support this allegation, the

petitioners have provided evidence in the petition of a trend of

increasing imports recently and the potential for even greater

increases in the near future. The petitioners also have asserted that

the alleged subsidies are inconsistent with the Subsidies Agreement,

based on the fact that both the Department and the European Union have

determined several of the alleged subsidies to be countervailable

export or import substitution subsidies in other countervailing duty

proceedings. In taking into consideration the foregoing, we find that

petitioners have alleged the elements of critical circumstances and

supported it with reasonably available information. We, therefore, will

investigate this matter further.

Initiation of Countervailing Duty Investigation

Section 702(b) of the Act requires the Department to initiate a

countervailing duty proceeding whenever an interested party files a

petition, on behalf of an industry, that (1) alleges the elements

necessary for an imposition of a duty under section 701(a), and (2) is

accompanied by information reasonably available to the petitioners

supporting the allegations.

The Department has examined the petition on elastic rubber tape

(ERT) from India and found that it complies with the requirements of

section 702(b) of the Act. Therefore, in accordance with section 702(b)

of the Act, we are initiating a countervailing duty investigation to

determine whether manufacturers, producers, or exporters of ERT from

India receive subsidies. See the September 8, 1998, Initiation

Checklist regarding the initiation of this investigation. We will make

our preliminary determination by November 12, 1998, unless this

deadline is extended.

We are including in our investigation the following programs

alleged in the petition to have provided subsidies to producers and

exporters of the subject merchandise in India:

1. Passbook/Duty Entitlement Passbook Schemes.

2. Export Promotion Capital Goods Scheme.

3. Export Processing Zones/Export Oriented Units Programs.

4. Income Tax Exemption Scheme.

5. Pre-Shipment Export Financing.

6. Post-Shipment Export Financing.

7. Import Mechanism (Sale of Import Licenses).

8. Exemption of the Interest Tax on Export Credits.

9. Rediscounting of Export Bills Abroad.

10. Programs Operated by the Small Industries Development Bank of

India.

11. Special Imprest Licenses.

12. Market Development Assistance.

13. Special Benefits to Export and Trading Houses and Super Star

Trading Houses.

14. Duty Drawback on Excise Taxes.

15. Pre-Shipment Export Financing in Foreign Currency.

We are not including in our investigation the following program

alleged to be benefitting producers and exporters of the subject

merchandise in India:

Location Grants

The petitioners alleged that Garware may have received grants

during the POI for having located its facilities in the ``Maharashtra

Industrial Zone.'' The petitioners did not provide any additional

information such as the name of a particular program, the government

agency administering the program, the eligibility requirements, or the

specific manner in which benefits are provided.

We are not including this alleged subsidy in our investigation

because the petitioners have not provided sufficient information. While

the petitioners have

[[Page 49551]]

asserted that Garware received government grants due to its location in

an industrial zone, they have provided no factual information regarding

a specific program under which these alleged grants may have been

provided. Furthermore, the petitioners have not provided evidence that

companies located in ``industrial zones'' are eligible for certain

benefits. (We note that we are including in our investigation Export

Processing Zones, Falta Free Trade Zones and Other Free Trade Zones.)

Given the lack of information regarding this allegation, we are not

including it in our investigation.

Distribution of Copies of the Petition

In accordance with section 702(b)(4)(A)(i) of the Act, copies of

the public version of the petition have been provided to the

representatives of the Government of India. We will attempt to provide

copies of the public version of the petition to all the exporters named

in the petition, as provided for under section 351.203(c)(2) of our

regulations.

ITC Notification

Pursuant to section 702(d) of the Act, we have notified the ITC of

this initiation.

Preliminary Determination by the ITC

The ITC will determine by October 2, 1998, whether there is a

reasonable indication that an industry in the United States is

materially injured, or is threatened with material injury, by reason of

imports of ERT from India. A negative ITC determination will result in

the investigation being terminated; otherwise, the investigation will

proceed according to statutory and regulatory time limits.

This notice is published pursuant to sections 702(c) and 777(i) of

the Act.

Dated: September 8, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-24749 Filed 9-15-98; 8:45 am]

BILLING CODE 3510-DS-P