[Federal Register Volume 63, Number 197 (Tuesday, October 13, 1998)]
[Notices]
[Pages 54672-54676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27403]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-475-818]
Anti-Circumvention Inquiry of the Antidumping Duty Order on
Certain Pasta From Italy: Affirmative Final Determination of
Circumvention of the Antidumping Duty Order
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Affirmative Final Determination of Circumvention of
Antidumping Duty Order.
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EFFECTIVE DATE: October 13, 1998.
FOR FURTHER INFORMATION CONTACT: John Brinkmann, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue NW, Washington, D.C. 20230; telephone:
(202) 482-5288.
SUPPLEMENTARY INFORMATION:
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 regulations of the Department
of Commerce (``the Department'') are to the regulations as codified at
19 CFR part 351, 62 FR 27295 (May 19, 1997).
Affirmative Final Determination of Circumvention
Pursuant to section 781(a) of the Act, we determine that
circumvention of the antidumping duty order on certain pasta from Italy
is occurring by reason of exports of bulk pasta from Italy produced by
Barilla S.r.L. (``Barilla'') which subsequently are repackaged in the
United States into packages of five pounds or less for sale in the
United States. However, as discussed in the ``Continuation of
Suspension of Liquidation'' section, below, for this final
determination we are implementing a certification scheme to distinguish
between Barilla's bulk imports for repackaging and any bulk imports
which may have been exempt from the scope of the antidumping duty
order, i.e., bulk imports that are sold in the United States in bulk
packaging.
Case History
Since the preliminary determination in this anti-circumvention
inquiry on April 7, 1998 (63 FR 18364, April 15, 1998) (``Notice of
Preliminary Determination''), the following events have occurred:
On April 14, 1998, the Department formally notified the
International Trade Commission (``ITC'') of the preliminary
determination in this inquiry. Section 781(c)(2) of the Act permits the
ITC to request consultations with the Department, when the Department
proposes to include merchandise in an antidumping order. On May 12,
1998, the ITC informed the Department that consultations were not
necessary in this case (see Memorandum to the File, dated May 15,
1998).
Barilla submitted a case brief on May 5, 1998. Borden, Inc.,
Hershey Foods Corp., and Gooch Foods, Inc. (collectively,
``petitioners'') submitted a rebuttal brief on May 12, 1998. The
Department also received comments from the European Union's Delegation
of the European Commission (``EU'') on May 29, 1998.
On May 7, 1998, Barilla submitted a revised proposal for certifying
that certain pasta which is imported into the United States in packages
of greater than five pounds will not be repackaged into packages of
five pounds or less after entry into the United States.
Scope of Antidumping Duty Order
The merchandise currently subject to the antidumping order is
certain non-egg dry pasta in packages of five pounds (2.27 kilograms)
or less, whether or not enriched or fortified or containing milk or
other optional ingredients such as chopped vegetables, vegetable
purees, milk, gluten, diastases, vitamins, coloring and flavorings, and
up to two percent egg white. The pasta covered by this scope is
typically sold in the retail market, in fiberboard or cardboard cartons
or polyethylene or polypropylene bags, of varying dimensions.
Excluded from the scope of the order are refrigerated, frozen, or
canned pastas, as well as all forms of egg pasta, with the exception of
non-egg dry pasta containing up to two percent egg white. Also excluded
are imports of organic pasta from Italy that are accompanied by the
appropriate certificate issued by the Instituto Mediterraneo Di
Certificazione (IMC), by Bioagricoop Scrl, or by QC&I International
Services.
The merchandise under order is currently classifiable under item
1902.19.20 of the Harmonized Tariff Schedule of the United States
(HTSUS). Although the HTSUS subheading is provided for convenience and
customs purposes, the written description of the merchandise under
order is dispositive.
Scope Rulings
On August 25, 1997, the Department issued a scope ruling that
multicolored pasta, imported in kitchen display bottles of decorative
glass that are sealed with cork or paraffin and bound with raffia, is
excluded from the scope of this proceeding. In addition, the Department
issued a scope ruling on July 30, 1998, that multipacks consisting of
six one-pound packages of pasta that are shrink wrapped into a single
package are within the scope of the antidumping and countervailing duty
orders. (See July 30, 1998 letter from Susan H. Kuhbach, Acting Deputy
Assistant Secretary for Import Administration to Barbara P. Sidari,
Vice President, Joseph A. Sidari Company, Inc.)
Scope of the Anti-Circumvention Inquiry
The product subject to this anti-circumvention inquiry is certain
pasta produced in Italy, by Barilla, and exported to the United States
in packages of greater than five pounds
[[Page 54673]]
(2.27 kilograms) that meets all the requirements for the merchandise
subject to the antidumping duty order, with the exception of packaging
size, and which is repackaged into packages of five pounds (2.27
kilograms) or less after entry into the United States.
Facts Available
Section 776(a)(2) of the Act provides that if an interested party
(1) withholds information that has been requested by the Department,
(2) fails to provide such information in a timely manner or in the form
or manner requested, (3) significantly impedes an antidumping
investigation, or (4) provides such information but the information
cannot be verified, the Department is required to use facts otherwise
available (subject to subsections 782(c)(1) and (e) of the Act) to make
its determination. Section 776(b) of the Act provides that adverse
inferences may be used if an interested party fails to cooperate by not
acting to the best of its ability to comply with requests for
information. See also, ``Statement of Administrative Action''
accompanying the URAA, H.R. Rep. No. 316, 103d Cong., 2d Sess. 870
(SAA).
As discussed in the Notice of Preliminary Determination, the
Department found that Barilla ``failed to cooperate by not acting to
the best of its ability to comply with the Department's request'' for
information in its refusal to respond to the Department's
questionnaire. Accordingly, the Department based the preliminary
determination on adverse facts otherwise available (``facts
available''). For this final determination, and in accordance with
section 776(b) of the Act, we will continue to rely on the adverse
inference that Barilla has been exporting pasta in bulk packages to the
United States, where it has been repackaged into what would have been
subject merchandise had it been imported directly.
Interested Party Comments
Comment 1 (Scope Language is Dispositive)
Barilla claims that the scope language is dispositive and the
Department has ignored prior determinations during the antidumping
investigation that excluded pasta in packages greater than five pounds.
Barilla argues that the Department's use of facts available is
unwarranted because the Department has ignored its prior rulings and it
was not economically feasible for Barilla to respond to the
Department's questionnaire.
The petitioners argue that the purpose of the anti-circumvention
provisions of the Act is to authorize the Department to include within
the scope of an antidumping order articles not expressly included
within the scope language but that are imported in a manner to
circumvent and evade the coverage of antidumping orders. The
petitioners also contend that Barilla's explanations as to why it did
not respond to the Department's anti-circumvention questionnaire do not
negate the fact that Barilla failed to provide any of the information
that the Department requested. Finally, the petitioners cite Barilla's
February 9, 1998 letter to the Department, wherein Barilla stated that
it had ``little to gain from responding [to the Department's
questionnaire]'' as a demonstration of Barilla's failure ``to cooperate
to the best of its ability,'' within the meaning of section 776(b) of
the Act, which authorizes the Department to make adverse inferences in
applying facts available.
Department's Position
During the investigation, the petitioners proposed to define the
scope as all pasta sold in retail channels. However, in order to cover
only retail sales, an ``end use'' certification or similar
documentation would have been required at importation to determine
whether imports of pasta, regardless of packaging, were intended for
sale in the retail segment of the market. This type of documentation is
often burdensome for the U.S. Customs Service to administer. The ``five
pounds or less'' packaging limitation in the scope language was a
pragmatic way of limiting the order to pasta imported for retail sale,
while attempting to avoid the burden of administering an ``end use''
certification program. Accordingly, the scope language also provided
that ``[t]he pasta covered by this scope is typically sold in the
retail market * * *.''
The Department also rejected a request from the Association of Food
Industries Pasta Group (which was supported by the petitioners) to
amend the scope language by removing the package size limitation of
five pounds or less during the investigation. We rejected the request,
in substantial part, because the petitioners had informed the
Department that importing pasta in bulk and subsequently repackaging it
for retail sale in the United States would be impractical and
inefficient. Thus, the Department's acceptance of the five-pound limit
was premised on the information that it would ensure that the order
covered all retail sales of pasta.
We therefore disagree with Barilla's claim that the product
description in the order is dispositive of the scope issue. Where the
requirements of section 781(a) of the Act for ``minor assembly'' in the
United States are met, the statute regards the components subject to
the finding of circumvention as, in effect, imports of the subject
merchandise, rather than components, per se. As the legislative history
to this section states:
[T]he application of the U.S. finishing or assembly provision
will not require new injury findings as to each part or component.
The anti-circumvention provision is intended to cover efforts to
circumvent an order by importing disassembled or unfinished
merchandise for assembly in the United States. Hence, the ITC would
generally advise as to whether the parts or components ``taken as a
whole'' fall within the injury determination. If more than one part
or component is proposed for inclusion, the ITC would * * *
determine whether the imported parts or components can be
constructively assembled so as to constitute a like product for
purposes of the original order * * *.
The ITC would advise as to whether the inclusion of the parts or
components, taken as a whole, would be inconsistent with its
findings in the prior injury determination.
H.R. Conf. Rep. No. 576, 100th Cong., 2d Sess. 603 (1988). The
repackaging in the United States of Italian pasta imported in bulk is
so insignificant that it easily satisfies the statutory standard.
We also disagree with Barilla that the use of facts available is
unwarranted. By refusing to answer our anti-circumvention
questionnaire, Barilla deprived the Department of any information it
may have possessed necessary for determinations under sections
781(a)(2) and (3) of the Act or which could have rebutted the
information in the anti-circumvention application. Although Barilla
claimed that it was not ``economically feasible'' to respond, it
provided no information, and made no suggestions concerning alternative
reporting. A more detailed discussion of our reasons for resorting to
adverse inferences with respect to Barilla's refusal to answer the
Department's questionnaire is set out in our affirmative preliminary
determination in this proceeding (63 FR 18364, 18365-18366, April 15,
1998). Nothing has changed since the preliminary determination to alter
the reasons or bases for our use of facts available for the final
determination. Therefore, we have continued to rely on adverse facts
available because of Barilla's refusal to answer the Department's
questionnaire, as discussed in the preliminary determination.
[[Page 54674]]
Comment 2 (Scope Expansion is Impermissible)
Barilla argues that the inclusion of bulk pasta constitutes an
impermissible expansion of the scope of the order because bulk pasta
was specifically excluded from the scope of the investigation. Barilla
cites several Court cases in support of this position, including
Wheatland Tube v. US, 973 F. Supp. 149 (July 18, 1997) (Wheatland
Tube).
The EU notes that the Department's notices did not explain why the
original antidumping petition was deliberately limited to pasta
imported in packages of five pounds or less, and more particularly, why
the Department refused to extend the scope during the course of the
antidumping investigation.
Department's Position
We do not agree that the inclusion of Barilla's bulk pasta in this
proceeding is an expansion of the scope of the underlying order, and we
have not ignored our prior scope determinations. The circumstances
surrounding the Department's treatment of bulk pasta at the time of the
investigation are discussed in Comment 1. Subsequent to the
investigation, and in response to a petition filed by U.S. producers,
the Department initiated this anti-circumvention investigation under
section 781(a) of the Act. That provision permits the application of
antidumping duties to components of subject merchandise that are
imported for assembly or completion into subject merchandise before
being sold in the U.S. market. Under section 781(a) of the Act, such
components are treated as constructively the subject merchandise upon
importation. Covering sales of pasta in packages weighing more than
five pounds that are specifically imported for repacking into packages
of less than five pounds for retail sales does not constitute an
expansion of the scope of the order. Only the circumventing shipments--
essentially the same merchandise being shipped from the same producers
to the same customers for ultimate retail sale--are covered. All other
pasta imports in packages exceeding five pounds remain free from
antidumping duties, as before.
Although the Department does not agree with the CIT's holding in
Wheatland Tube, Barilla's reliance upon Wheatland Tube to argue that
the Department cannot cover bulk pasta is misplaced for several
reasons. First, the Court emphasized that Wheatland involved a product
(line pipe) that was not covered by the ITC's injury determination,
regardless of how it was used. Wheatland at p. 158. The Court stated
that even the small proportion of line pipe imports sold as standard
pipe could not be subject to antidumping duties because they were not
covered by an injury determination on line pipe. By contrast, the
injury determination for this order covers the producers as a whole of
the domestic like product, which the ITC defined as consisting of all
dry pasta. See Certain Pasta From Italy and Turkey, USITC Pub. No.
2977, at 7 (July 17, 1996) (final det.).
Because the domestic like product on which the ITC's injury
determination is based includes bulk pasta, the U.S. producers of the
product comparable to the bulk pasta were included in the Commission's
determination of material injury by reason of subject imports. The ITC
has confirmed that its injury finding applies to the imports of pasta
at issue in this proceeding. See letter to Gary Taverman, Acting Deputy
Assistant Secretary, from Marcia E. Miller, Chairman, ITC, dated May
12, 1998.
Second, Wheatland involved a product (line pipe) that the
Department found had been specifically excluded at the petitioners'
request from the scope of the order regardless of its actual use.
Wheatland, at 156. As explained above, there was no such specific
exclusion in the case of bulk pasta. Quite to the contrary, the
petitioners in this case consistently made clear that they wished to
have pasta sold in the United States for retail covered, and the
Department intended the nominal size restriction to be an appropriate
way of limiting the coverage of the order to pasta imported for retail
sales.
Third, whereas Wheatland involved section 781(c) of the Act,
covering merchandise that has been subject to ``minor alterations,''
this case involves section 781(a) of the Act, which covers merchandise
that has been subject to minor or insignificant assembly or completion
in the United States after importation. Thus, the Court's finding in
Wheatland that the substitution of line pipe for standard pipe in
filling standard pipe contracts did not involve an ``alteration'' of
the merchandise exported to the United States is of no relevance here.
Section 781(a) of the Act was drafted to cover exactly the
situation in this case--merchandise sold in the United States that is
the same class or kind as the merchandise covered by the product
description in the order, which did not fit that product description
exactly when it passed through customs, but was subject to minor or
insignificant assembly or completion after importation that transformed
it into the subject merchandise.
Finally, the Court in Wheatland found (at p. 159) that, although
the Department had received an anti-circumvention petition, it had
elected, with the petitioners' acquiescence, to treat that petition as
a request for a scope ruling (Wheatland, at n. 5). Accordingly, the
Court held that, when the Department held that line pipe was outside
the scope of the order, it correctly disposed of the petition and
Wheatland's only permissible challenge was to the scope ruling. No such
procedural complexities are present in this case. The petitioners have
filed an anti-circumvention petition and the Department has duly ruled
on the issue of circumvention.
Barilla also relies on Smith-Corona v. US, 797 F. Supp. 1532, 1534-
35 (July 10, 1992) (Smith-Corona), and FTC v. US, 716 F. Supp. 1580,
1582, n.2 (July 31, 1989) (FTC), to support its contention that bulk
pasta was specifically excluded from the scope of the investigation.
Neither of these cases advances Barilla's position because they
involved only issues of scope contested in the original investigation,
not allegations of circumvention of an outstanding antidumping order by
means of domestic completion or assembly.
With regard to the EU's comment that the Department's published
notices did not explain why the Department had refused to extend the
scope of the original antidumping investigation beyond the packaging
limitation, memoranda prepared by the Department's staff and placed in
the file of the investigation addressed this issue and have been
available to the public at all times since. See, e.g., Memorandum to
Susan G. Esserman, Assistant Secretary, from the Pasta Team, dated
October 10, 1995.
Comment 3 (Bulk Pasta Cannot Constitute Parts or Components)
Barilla argues that inclusion of bulk pasta in the scope of the
order is without statutory authority because bulk pasta, as a finished
product, cannot be considered ``parts or components,'' as defined by
section 781(a) of the Act.
The petitioners argue that the legislative history of section 781
of the Act indicates that the Congress intended that the Department use
section 781 of the Act to close ``loopholes'' whereby antidumping
orders are evaded by making small changes in importation activities
which will bring otherwise subject merchandise outside of the literal
scope of an order. Specifically, the petitioners cite to legislative
history referring to the ability of importers ``to evade the order by
making slight changes in their method of production
[[Page 54675]]
or shipment of the merchandise destined for consumption in the United
States.'' [Emphasis in the reply brief.] S. Rep. No. 71, 100th Cong.,
1st Sess., at 101 (1987).
Department's Position
We disagree with Barilla's interpretation of section 781(a) of the
Act. Although the terms ``parts'' or ``components'' are not defined
specifically, nothing in the statute or the legislative history
suggests Barilla's interpretation. Rather, the legislative history
identifies the types of circumvention that are addressed by section
781(a) of the Act:
(1) the importation of parts or components to be assembled in
the United States into the class or kind of merchandise covered by
the order, such as when picture tubes and printed circuit boards are
shipped by the manufacturer to a related subsidiary in the United
States to be assembled and sold as television receivers; and
(2) the importation of an incomplete or unfinished article to be
completed in the United States, by means other then assembly, into
the class or kind of merchandise covered by the order, such as when
steel pipe is imported by a related party that threads it and sells
it as threaded pipe.
H. Rep. No. 40, 100th Cong., 1st Sess. 100 at 134 (1987).
There are two parts or components to bulk pasta and the subject
merchandise as imported in this case--the pasta and the packaging. The
only and defining difference between the circumventing imports of
Barilla's bulk pasta and the subject merchandise as defined in the
scope is the packaging. As discussed fully above, the package
limitation was specifically designed to capture retail sales of
imported pasta. Therefore, bulk pasta which is assembled into smaller
packages of five pounds or less after importation must constitute
subject merchandise pursuant to section 781(a) of the Act.
Barilla's assertion that the finished pasta it imports is not
subject to assembly or completion in the United States is contradicted
by Barilla's conduct of repackaging bulk imports into packages of five
pounds or less in its Syracuse, New York, facility. Barilla's
repackaging operations are exactly the type of operations section
781(a) of the Act is intended to address.
Comment 4 (Inclusion of Bulk Pasta Violates Antidumping Agreement)
Barilla argues that the Department's preliminary determination in
this proceeding is a violation of the Antidumping Agreement of the
World Trade Organization (``WTO'') because there has been no finding of
dumping or of material injury for imports of bulk pasta, as required by
the agreement. In addition, Barilla contends that the Department's
circumvention finding constitutes discriminatory enforcement of the
antidumping law. In support of this argument, Barilla refers to the
preliminary affirmative determination of the ITC in the antidumping
investigation of Certain Pasta from Italy. The ITC found that, as of
the time the petitioners filed their petition for antidumping relief,
Borden, Inc., a member of the petitioners' group, imported bulk pasta
from an Italian affiliate and repackaged it in the United States.
Barilla argues that by excluding bulk pasta from the scope of the
original antidumping investigation and then enforcing the circumvention
provision against Barilla for the same apparent repackaging activities
that Borden was engaged in, the Department is discriminating against
Barilla.
The petitioners argue that their original draft petition would have
covered Borden's imports of bulk pasta but that the Department insisted
on language that limited the scope of the investigation to pasta
imported in packages of five pounds or less.
The EU notes that the Department had not explained how Barilla can
be circumventing an antidumping order by merely following a repackaging
process which, at times, is not only being followed by the petitioners
themselves but which had been identified by both the petitioners and
the Department and which led to imports in bulk being deliberately
excluded from the original antidumping investigation.
Department's Position
The Department disagrees that the provisions of the WTO Antidumping
Agreement require additional determinations of dumping and of material
injury with respect to Barilla's imports of bulk pasta from Italy. The
scope of the antidumping duty order on pasta from Italy covers certain
of Barilla's imports of bulk pasta from Italy. This is so specifically
because Barilla's U.S. activities--minor or insignificant assembly or
completion after importation of components of the same class or kind of
merchandise--render such imports subject merchandise pursuant to
section 781 of the Act. Accordingly, these imports are already covered
by the antidumping duty order on pasta from Italy, including both the
material injury determination and the determination of dumping. See the
Department's position on Comment 1.
Contrary to Barilla's allegations, the Department's affirmative
preliminary determination of circumvention in this proceeding does not
violate the Antidumping Agreement but furthers its ultimate purpose,
which is to ensure the efficacy of the antidumping laws. The
Ministerial Decision on Anti-Circumvention formed an integral part of
the Final Act Embodying the Results of the Uruguay Round Multilateral
Trade Negotiations, and that Decision acknowledged the problem of
circumvention. It recognized the need to apply ``uniform rules in this
area as soon as possible'' to prevent the evasion of antidumping
measures resulting from circumvention. The Department believes it is
imperative that its laws proscribing circumvention be enforced in order
to preserve the credibility of the WTO Agreement, which establishes the
right of WTO Members to impose antidumping duties to remedy the
injurious effects of dumped imports.
Continuation of Suspension of Liquidation
In accordance with section 735(b) of the Act, we are directing the
Customs Service to continue to suspend liquidation of all entries of
bulk pasta from Italy produced by Barilla that were entered, or
withdrawn from warehouse, for consumption on or after December 8, 1997,
the date of initiation of this anti-circumvention inquiry, and are not
accompanied by the certificate described below.
The merchandise subject to suspension of liquidation is pasta in
packages of greater than five pounds as defined in the ``Scope of the
Anti-circumvention Inquiry'' section of this notice. The Customs
Service shall continue to require a cash deposit in the amount of 11.26
percent for all unliquidated entries that are not accompanied by the
certificate described below. This suspension of liquidation shall
remain in effect until further notice.
Excluded from these suspension of liquidation instructions are
entries of bulk pasta produced in Italy, by Barilla, where the entry
summaries covering the bulk pasta are accompanied by a certification
provided by Barilla America, Inc., the sole U.S. importer of Barilla
pasta, which describes the merchandise entered by entry number, port of
entry, date of entry, the product, the size of the packaging for the
entered product, the Harmonized Tariff Number, the vessel, and which
includes the importer's certification that the merchandise will not be
repackaged into containers of five pounds or less after entry into the
United States. This certification may be made for entries from the
original date of the suspension
[[Page 54676]]
of liquidation, December 8, 1997. This certification proposal has been
reviewed by the Customs Service, which has agreed that it is
administrable (see Memorandum to the File, dated June 10, 1998).
After examining this certification for consistency with the entry
summary, the Customs Service will forward the certification to the
Department of Commerce, Import Administration.
This affirmative final circumvention determination is in accordance
with section 781(a) of the Act and 19 CFR 351.225.
Dated: October 5, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-27403 Filed 10-9-98; 8:45 am]
BILLING CODE 3510-DS-P
