Initiation of Antidumping Duty Investigation: Acrylonitrile Butadiene Rubber From the Republic of Korea

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-840]

Initiation of Antidumping Duty Investigation: Acrylonitrile

Butadiene Rubber From the Republic of Korea

AGENCY: Import Administration, International Trade Administration,

Department of Commerce

EFFECTIVE DATE: June 23, 1999.

FOR FURTHER INFORMATION CONTACT: Marian Wells, Annika O'Hara, or Ryan

Langan, Office One, AD/CVD Enforcement, Import Administration,

International Trade Administration, U.S. Department of Commerce, Room

3099, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230; telephone: (202) 482-6309, 482-3798, and 482-1279, respectively.

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 as amended (``the

Act'') by the Uruguay Round Agreements Act (``URAA''). In addition,

unless otherwise indicated, all citations to the Department's

regulations are to the provisions codified at 19 CFR Part 351 (1998).

The Petition

On May 27, 1999, the Department of Commerce (``the Department'')

received a petition filed in proper form by Zeon Chemicals L.P. and

Uniroyal Chemical Company, Inc., hereinafter collectively referred to

as ``the petitioners.''

In accordance with section 732(b) of the Act, the petitioners

allege that imports of acrylonitrile butadiene rubber from the Republic

of Korea (``Korea'') 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 both materially injuring and threatening

material injury to an industry in the United States.

The Department finds that the petitioners filed this petition on

behalf of the domestic industry because they are interested parties as

defined in section 771(9)(C) of the Act and because the petitioners

have demonstrated that they represent, at a minimum, the required

proportion of the United States industry (see ``Determination of

Industry Support for the Petition'' section, below).

Scope of the Investigation

The product covered by this investigation is commonly referred to

as acrylonitrile butadiene rubber or nitrile rubber (``NBR''). NBR is a

synthetic rubber produced by the copolymerization of butadiene and

acrylonitrile. NBR is sold in bale, slab, crumb, powder and latex form.

NBR in the latex form is excluded from the scope of this investigation.

Also excluded from the scope of this investigation is NBR containing

additives, NBR containing rubber processing chemicals, and NBR

containing other materials used for further processing beyond the

copolymerization process. The merchandise subject to this investigation

is classified in the Harmonized Tariff Schedule of the United States

(``HTSUS'') at subheading 4002.59.00. 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 the scope of the

investigation with the petitioners to ensure that the scope language

accurately reflects the product for which the domestic industry is

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 within 20 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, N.W., Washington, D.C. 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 its preliminary determination.

Determination of Industry Support for the Petition

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 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 regarding the domestic like product, 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 the law. 1 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 analysis

of the domestic like product 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.

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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 from Japan: Final Determination; Rescission of

Investigation and Partial Dismissal of Petition, 56 FR 32376, 32380-

81 (July 16, 1991).

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The domestic like product identified 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 this

definition of the domestic like product to be inaccurate. Therefore,

the Department has adopted this definition of the domestic like

product.

In this case, the Department has determined that the petition

contains evidence of sufficient industry support. Therefore, polling

was not necessary. See Initiation Checklist dated June 16, 1999 (the

public version is on file in the Central Records Unit of the Department

of Commerce, Room B-099). Based on the record evidence, the producers

who

[[Page 33462]]

support the petition account for more than 50 percent of the production

of the domestic like product. Additionally, no person who would qualify

as an interested party pursuant to section 771(9)(C), (D), (E) or (F)

of the Act has expressed opposition on the record to the petition.

Accordingly, the Department determines that this petition is filed on

behalf of the domestic industry within the meaning of section 732(b)(1)

of the Act.

On June 15, 1999, the Department received a letter from counsel for

the potential respondents who argued that the Department should not

initiate this investigation unless it determines, through polling, that

the petition is supported by the U.S. industry. The basis for this

request was the potential respondents' claim that one of the

petitioners, Uniroyal, will cease its production of the subject

merchandise in the United States in mid-1999 and move all of its

production to Mexico. Thereby, Uniroyal would not be a U.S. producer,

according to respondents. This fact was argued as outcome determinative

that there was no industry support.

The Department has decided to continue to treat Uniroyal as a

petitioner and interested party in this investigation. First, Uniroyal

was producing the subject merchandise in the United States at the time

the petition was filed and, to the best of our knowledge, the planned

move to Mexico had not yet taken place at the time of this initiation

of the investigation. Second, if we were to exclude Uniroyal, the

companies supporting the petition would still exceed the required 25

percent of total production and more than 50 percent of the production

produced by that portion of the industry expressing support for, or

opposition to, the petition. If we were to accept the argument that

Uniroyal no longer is a U.S. producer, we would exclude its production

from both the numerator and the denominator in our calculation of

industry support. Thus, it would not change industry support

substantially and the Department's determination regarding industry

support, mentioned above, would stand.

Export Price and Normal Value

The following is a description of the allegation of sales at less

than fair value upon which our decision to initiate this investigation

is based. Should the need arise to use any of this information in our

preliminary or final determinations for purposes of facts available

under section 776 of the Act, we may re-examine the information and

revise the margin calculations, if appropriate.

The petitioners identified Korea Kumho Petrochemical (``Kumho'')

and Hyundai Petrochemical Co., Ltd. (``Hyundai'') as producers and

exporters of NBR to the United States. According to the petitioners,

Korean producers sold NBR to unaffiliated imports/distributors in the

United States and, therefore, U.S. price is calculated using the export

price (``EP'') methodology.

For their EP calculation, the petitioners have used multiple offers

for sale of the subject merchandise by unaffiliated U.S. importer/

distributors to unaffiliated purchasers in the United States between

March 1998 and February 1999. In order to approximate the price paid by

the U.S. importers/distributors to Korean exporters, the petitioners

subtracted the importers/distributors' estimated profit, selling,

general, and administrative expenses, and imputed credit expenses. The

petitioners also deducted movement charges incurred in bringing the

merchandise to the United States.

The Department has made several adjustments to the petitioners'

calculation of net U.S. price. First, only two of the several U.S.

prices presented by the petitioners are supported by source

documentation in the petition. Of these two prices, one is from the

anticipated period of investigation (``POI'') whereas the other price

dates to a period prior to the POI. Therefore Department has

recalculated the U.S. price based on the price which pertained to the

POI and for which the petitioners have submitted supporting

documentation. Second, based on our understanding of the distribution

process of the Korean product in the United States, the price paid by

the unaffiliated importer/distributor in the United States can be

computed by simply deducting the importers/distributors' markup (as

reported in the petition) from the price charged by the importers/

distributors to their unaffiliated customers. Therefore, we deducted

this markup rather than the alleged expenses and profit of the

importers/distributors. In addition, we subtracted Korean inland

freight, ocean freight, U.S. inland freight, U.S. warehousing expenses,

U.S. merchandise processing fees, and U.S. harbor maintenance fees. The

resulting amount is the net U.S. export price which we have compared to

normal value. See Initiation Checklist.

On June 16, the petitioners submitted to the Department unit import

values based on U.S. import statistics for January through March 1999.

As an alternative calculation of U.S. price, we have used the import

values adjusted for the movement expenses above.

The petitioners have used quoted sales prices in the home market to

calculate normal value. They obtained gross unit prices and multiple

offers for sale in May and October of 1998 for products which were

either identical or similar to those sold to the United States. The

petitioners subtracted from the gross unit home market prices the

estimated transportation costs to home market customers. They made

adjustments for differences in circumstances of sale in the U.S. and

home markets (for credit and technical services), and they applied a

commission offset (corresponding to their deduction of importers/

distributors' expenses and profits in calculating EP). Finally, they

deducted estimated home market packing costs and added estimated U.S.

(international) packing costs.

The Department has also made several adjustments to the

petitioners' calculation of normal value. First, we converted the home

market prices to U.S. dollars using exchange rates contemporaneous with

the U.S. sales. We then computed an average home market price. Second,

we did not include the commission offset computed by the petitioners

because, as discussed above, no commission was reflected in the U.S.

price. Following the petitioners' methodology, we made the

circumstance-of-sale adjustment and adjusted for packing and freight.

See Initiation Checklist.

Fair Value Comparison

Based on the data provided by the petitioners, there is reason to

believe that imports of NBR from Korea are being, or are likely to be,

sold at less than fair value. Based on the Department's recalculations

of export price and normal value, the comparisons yield dumping margins

ranging from 83.81 percent to 102.20 percent.

Allegation 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 imports of the subject merchandise

sold at less than normal value. The petitioners explained that the

industry's injured condition is evident in the declining trends in net

operating income, net sales volumes, net selling prices, and U.S.,

production. The allegation 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

[[Page 33463]]

supporting evidence regarding material injury and causation and

determined that these allegations are supported by accurate and

adequate evidence and meet the statutory requirements for initiation.

See Initiation Checklist.

Initiation of Antidumping Investigation

Based upon our examination of the petition, we have found that the

petition meets the requirements of section 732 of the Act. Therefore,

we are initiating an antidumping duty investigation to determine

whether imports of NBR from Korea are being, or are likely to be, sold

in the United States at less than fair value. Unless this deadline is

extended, we will make our preliminary determination by November 3,

1999.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the

public version of the petition has been provided to representatives of

the Government of Korea. We will attempt to provide a copy of the

public version of the petition to the Korean exporters named in the

petition.

International Trade Commission Notification

We have notified the ITC of our initiation of this investigation,

as required by section 732(d) of the Act.

Preliminary Determination by the ITC

The ITC will determine by July 12, 1999, 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 NBR from Korea. A negative ITC determination will result in

the investigation being terminated; otherwise, this investigation will

proceed according to statutory and regulatory time limits.

This notice is published in accordance with section 777(i) of the

Act.

Dated: June 16, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-15997 Filed 6-22-99; 8:45 am]

BILLING CODE 3510-DS-P