01-603. Notice of Initiation and Preliminary Results of Changed Circumstances Antidumping Duty Review: Certain Polyester Staple Fiber From the Republic of Korea

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

Based on the submissions of the petitioners, E.I. Dupont de Nemours and Co., Arteva Specialities S.a.r.l, d/b/a KoSa, Wellman Inc. and Intercontinental Polymers, Inc., and Samyang Corporation and the Huvis Corporation, Korean polyester staple fiber producers, we are initiating a changed circumstances review to examine the recent formation of the Huvis Corporation through a joint venture merger of Samyang Corporation and SK Chemicals Co., Ltd. Pursuant to this review, the Department of Commerce preliminarily determines that the Huvis Corporation is not the successor-in-interest to either of the pre-merger companies, and is covered by the antidumping duty order on certain polyester staple fiber from Korea. The Department of Commerce is directing that liquidation of the Huvis Corporation's entries of subject merchandise be suspended retroactive to November 1, 2000, the date of the joint venture merger of Samyang Corporation and SK Chemicals Co. Ltd.

EFFECTIVE DATE:

January 9, 2001.

FOR FURTHER INFORMATION CONTACT:

Sally Hastings or Craig Matney, at [phone] or [phone] respectively; AD/CVD Enforcement Group I, Office 1, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street & Constitution Avenue, NW, Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (the Act), are references to the provisions effective January 1, 1995, the effective date of the amendments made to 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 (1999).

Background

On May 25, 2000, the Department of Commerce (the Department) issued an antidumping duty order on certain polyester staple fiber (PSF) from Republic of Korea. See Notice of Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Certain Polyester Staple Fiber from Republic of Korea, 65 FR 33807 (May 25, 2000). The order excluded merchandise produced by Samyang Corporation (Samyang) which had been found to be dumping at a de minimis level in the less-than-fair-value (LTFV) investigation. SK Chemicals Co., Ltd. (SK Chemicals) was not examined in the LTFV investigation and its entries of subject merchandise are currently being suspended at the “all others” cash deposit rate, 11.35 percent.

On September 25 and November 1, 2000, E.I. Dupont de Nemours and Co., Arteva Specialities S.a.r.l, d/b/a KoSa, Wellman Inc. and Intercontinental Polymers, Inc., (the petitioners), requested that the Department forward new antidumping duty deposit instructions to Customs informing that agency that Samyang and SK Chemicals no longer produce subject merchandise and directing that entries of subject merchandise produced or exported by the Huvis Corporation (Huvis) be subject to the “all others” rate. In addition, the petitioners argued that the Department may not conduct a changed circumstances review, claiming that Huvis is a new company and not a “successor” to either SK Chemicals or Samyang, and that “good cause” does not exist to conduct a changed circumstances review.

On November 20, 2000, Samyang and Huvis informed the Department that Samyang and SK Chemicals established Huvis as a 50-50 joint venture, effective November 1, 2000, and requested that the Department conduct a changed circumstances review. Samyang and Huvis argued that Huvis is the successor-in-interest to Samyang and, therefore, entitled to exclusion from the antidumping order. In the alternative, they asked that the Department find Huvis a joint successor to Samyang and SK Chemicals and to calculate a weighted-average cash deposit rate for Huvis.

Scope of the Review

The product covered by this order is certain polyester staple fiber. Certain polyester staple fiber is defined as synthetic staple fibers, not carded, combed or otherwise processed for spinning, of polyesters measuring 3.3 decitex (3 denier, inclusive) or more in diameter. This merchandise is cut to lengths varying from one inch (25 mm) to five inches (127 mm). The merchandise subject to these orders may be coated, usually with a silicon or other finish, or not coated. PSF is generally used as stuffing in sleeping bags, mattresses, ski jackets, comforters, cushions, pillows, and furniture. Merchandise of less than 3.3 decitex (less than 3 denier) classified under the Harmonized Tariff Schedule of the United States (HTSUS) at subheading 5503.20.00.20 is specifically excluded from these orders. Also specifically excluded from these orders are polyester staple fibers of 10 to 18 denier that are cut to lengths of 6 to 8 inches (fibers used in the manufacture of carpeting). In addition, low-melt PSF is excluded from these orders. Low-melt PSF is defined as a bi-component fiber with an outer sheath that melts at a significantly lower temperature than its inner core.

The merchandise subject to this order is classified in the HTSUS at subheadings 5503.20.00.40 and 5503.20.00.60. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of this order is dispositive.

Initiation of Changed Circumstances Antidumping Review

It is undisputed that Samyang and SK Chemicals have merged their operations for the production of the subject merchandise. Accordingly, pursuant to section 351.216(c) of the Department's regulations, we have determined that good cause exists to initiate this changed circumstances review for purposes of determining whether the merged entity, Huvis, is the successor-in-interest to either of the previous entities, neither, or both. Thus, in accordance with section 751(b)(1) of the Act and section 351.216 of the Department's regulations, the Department is initiating a changed circumstances review to determine whether Huvis is the successor-in-interest to Samyang or SK Chemicals, and, based on that determination, whether PSF produced by the entity known as Huvis, is covered by the antidumping duty order on PSF from Korea.

Preliminary Results of Changed Circumstances Antidumping Review

Section 351.221(c)(3)(ii) of the Department's regulations provides that the preliminary results of a changed circumstances review may be issued concurrently with the initiation of the review if the Department determines that expedited action is warranted. In this instance, because Samyang is excluded from the order, an expedited action is warranted to determine whether merchandise produced by the joint venture company Huvis should be included in the order. As explained below, the Department preliminarily finds that Huvis, formed by a 50-50 joint venture of Samyang and SK Chemicals, is not a successor-in-interest to either Samyang or SK Chemicals, or to Samyang and SK Chemicals jointly. As such, the Department is directing the suspension of liquidation of Huvis' entries of the subject merchandise at the “all others” rate.

In determining successor-in-interest questions in past cases, the Department typically has examined several factors including, but not limited to, changes in: (1) Management; (2) production facilities; (3) supplier relationships; and (4) customer base. See, e.g., Brass Sheet and Strip from Canada: Final Results of Antidumping Duty Administrative Review, 57 FR 20460 (May 13, 1992). Such determinations are made based on consideration of the totality of the circumstances. If the evidence demonstrates that, with respect to the production and sale of the subject merchandise, the new company operates as the same business entity as the former company, the Department will accord the new company the same antidumping and countervailing duty treatment as its predecessor.

In this case, the evidence on the record indicates that Huvis is substantially different from the pre-merger Samyang and SK Chemicals. While Huvis claims that there have been no significant changes in the operations of the production facilities and there has not been a significant crossover of personnel at the production facilities since the merger, the overall Huvis management and organizational structure reflects the new, 50-50, equal nature of the joint venture between Samyang and SK Chemicals. The president of Huvis is a former employee of SK Chemicals, while a former Samyang official is Huvis' vice-president. The heads of Huvis' eight managerial departments are equally divided among SK Chemicals and Samyang personnel. Concerning Huvis' statements that the Chunju factory continues to produce merchandise under the Samyang brand name while the Ulsan factory continues to produce merchandise under the SK Chemicals brand name, the Department does not conduct its dumping analyses with respect to brands, but rather on a company-specific basis.

With respect to supplier relationships and customer bases, Huvis claims that the production operations of the pre-merger entities have not been integrated and that each of the production facilities has maintained its supplier relationships and customer bases. Despite Huvis' claim, however, Samyang and SK Chemical's PSF production facilities are now integrated by virtue of their operations as part of the Huvis Corporation. While the post-merger operations of the PSF production facilities may resemble the pre-merger Samyang and SK Chemical factories respectively, the management of each of the production facilities is now answerable to the management of Huvis.

The evidence on the record thus far indicates that Samyang and SK Chemicals entered into a joint venture as equal partners to form a new company, Huvis. By its nature, this joint venture is sufficiently distinct from each of the pre-merger entities such that it is not a successor-in-interest to either Samyang or SK Chemicals. Concerning Huvis' assertion that the Department must determine whether Huvis is a successor-in-interest to Samyang and SK Chemicals jointly, even if it were possible to conclude that an entity could be a successor to two entities jointly, given the recent occurrence of the merger, there is insufficient evidence concerning the post-merger operations of Huvis to make such a determination. Therefore, the Department preliminarily finds that the entity currently doing business as Huvis is covered by the antidumping order on polyester staple fiber from the Republic of Korea. We will request additional information from Huvis in the context of this changed circumstances review before making a final determination.

Accordingly, the Department will instruct the Customs Service to suspend liquidation of all entries of PSF from the Republic of Korea produced and exported by Huvis that are entered, or withdrawn from warehouse, for consumption, effective retroactive to November 1, 2000, the effective date of the joint venture merger between Samyang and SK Chemicals.

In determining the appropriate cash deposit rate to assign to Huvis for this purpose, based on our preliminary finding that Huvis is not a successor-in-interest to the pre-merger entities, we will instruct the Customs Service to require a cash deposit based on the “all others” rate from the LTFV investigation, 11.35 percent. This requirement for a cash deposit of estimated antidumping duties on imports of subject merchandise produced by Huvis will continue unless and until it is modified pursuant to the final results of this changed circumstances review.

Public Comment

Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of these preliminary results. Rebuttal briefs or comments, limited to issues raised in the briefs or comments, may be filed no later than five days after the deadline for case briefs. Parties who submit arguments are requested to submit with the argument (1) a statement of the issue, (2) a brief summary of the argument and (3) a table of authorities. Consistent with section 351.216(e) of the Department's regulations, we will issue the final results of this changed circumstances review no later than 270 days after the date on which this review was initiated, or within 45 days if all parties agree to our preliminary finding.

This notice is in accordance with section 751(b) of the Act.

Dated: January 3, 2001.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.