E5-5541. Notice of Initiation of Countervailing Duty Investigations: Certain Lined Paper Products from India (C-533-844) and Indonesia (C-560-819)

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Initiation of countervailing duty investigation.

SUMMARY:

The Department of Commerce is initiating countervailing duty investigations to determine whether manufacturers, producers, or exporters of certain lined paper products from India and Indonesia receive countervailable subsidies.

EFFECTIVE DATE:

October 7, 2005.

FOR FURTHER INFORMATION CONTACT:

Maura Jeffords and Eric B. Greynolds (India) or Indonesia, David Layton or David Neubacher (Indonesia) AD/CVD Operations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: [phone] and [phone],[phone] and [phone],(202) or 482-0371 and [phone], respectively.

SUPPLEMENTARY INFORMATION:

Initiation of Investigations

The Petitions

Between September 9 and September 26, 2005, the Department of Commerce (“the Department”) received Petitions, and amendments to the Petitions, (“the Petitions”) filed in proper form by Association of American School Suppliers (“Petitioner”).

In accordance with section 702(b)(1) of the Tariff Act of 1930, as amended by the Uruguay Round Agreements Act (effective January 1, 1995) (“the Act”), Petitioner alleges that manufacturers, producers, or exporters of certain lined paper products (“certain lined CLPP paper” or “subject merchandise”) from India and Indonesia receive countervailable subsidies within the meaning of section 701 of the Act, and that such imports are materially injuring, or threatening material injury, to an industry in the United States. On September 21, 2005, the Department issued a memo clarifying that the official filing date of the Petitions was September 9, 2005. See Memorandum from the Team to Acting Deputy Assistant Secretary Barbara Tillman: Decision Memorandum Concerning Filing Date of Petitions, September 21, 2005, (explaining that the proper file date is September 9, 2005, as it was filed at the ITC after the noon deadline on the previous day).

The Department finds that Petitioner filed the Petitions on behalf of the domestic industry because they are interested parties, as defined in sections 771(9)(E) and (F) of the Act, and have demonstrated sufficient industry support in accordance with section 702(c)(4)(A) of the Act. See infra, “Determination of Industry Support for the Petitions.”

Scope of Investigation

S ee Appendix I.

Comments on Scope of Investigations

During our review of the Petitions, we discussed the scope with Petitioner to ensure that it accurately reflects the product for which the domestic industry is seeking relief. Moreover, as discussed in the preamble to the Department's regulations, we are setting aside a period for interested parties to raise issues regarding product coverage. See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27295, 27323 (1997). The Department encourages all interested parties to submit such comments within 20 calendar days of publication of this initiation notice. Comments should be addressed to Import Administration's Central Records Unit (“CRU”) in Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230 - Attn: James Terpstra. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and consult with interested parties prior to the issuance of the preliminary determinations.

Consultations

Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department invited representatives of the Governments of India and Indonesia for consultations with respect to the Petitions. The Department held consultations with the Government of Indonesia on September 23, 2005. The points raised in the consultations are described in the consultation memorandum to the file dated September 26, 2005, and in the Government of Indonesia's September 22, 2005, and September 26, 2005, submissions to the Department, both of which are on file in the CRU. The Government of India declined the Department's invitation for consultations.^[1]

Determination of Industry Support for the Petitions

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. Moreover, section 702(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department shall: (1) poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A), or (2) determine industry support using a statistically valid sample.

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 Act directs the Department to look to producers and workers who account for production of the domestic like product. The 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 (see 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 domestic like product, such differences do not render the decision of either agency contrary to the law. See USEC, Inc. v. United States, 132 F. Supp. 2d 1 (CIT 2001) (citing Algoma Steel Corp. Ltd. v. United States, 688 F. Supp. 639, 642-44 (CIT 1988)).

Section 771(10) of the Act defines the domestic like product as “a product that 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).

With regard to the domestic like product, Petitioner does not offer a definition of domestic like product distinct from the scope of the investigation. See Indonesia Initiation Checklist, India Initiation Checklist at Attachment II (Industry Support). Based on our analysis of the information submitted in the Petitions we have determined that there is a single domestic like product, certain lined paper products, which is defined further in the “Scope of the Investigations” section in Appendix I, and we have analyzed industry support in terms of that domestic like product.

Our review of the data provided in the petition and other information readily available to the Department indicates that Petitioner has established industry support representing at least 25 percent of the total production of the domestic like product, and more than 50 percent of the production of the domestic like product produced by that portion of the industry, requiring no further action by the Department pursuant to section 702(c)(4)(D) of the Act. In addition, the Department received no opposition to the Petitions from domestic producers of the like product. Therefore, the domestic producers (or workers) who support the Petitions account for at least 25 percent of the total production of the domestic like product, and the requirements of section 702(c)(4)(A)(i) of the Act are met. Furthermore, the domestic producers who support the Petitions account for 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 Petitions. Thus, the requirements of section 702(c)(4)(A)(ii) of the Act also are met. Accordingly, the Department determines that the Petitions were filed on behalf of the domestic industry within the meaning of section 702(b)(1) of the Act. See Indonesia Initiation Checklist and India Initiation Checklist at Attachment II (Industry Support).

The Department finds that Petitioner filed these petitions on behalf of the domestic industry because it is an interested party as defined in sections 771(9)(E) and (F) of the Act and it has demonstrated sufficient industry support with respect to the countervailing duty investigations that it is requesting the Department initiate. See Indonesia Initiation Checklist and India Initiation Checklist.

Injury Test

Because India and Indonesia are each a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, section 701(a)(2) of the Act applies to these investigations. Accordingly, the ITC must determine whether imports of the subject merchandise from India and Indonesia materially injure, or threaten material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causations

With regard to India and Indonesia, Petitioner 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 individual and cumulative imports of the subject merchandise. Petitioner contends that the industry's injured condition is illustrated by the decline in its customer base, market share, domestic shipments, prices and profit. We have assessed the allegations and supporting evidence regarding material injury and causation, and we have determined that these allegations are properly supported by adequate evidence and meet the statutory requirements for initiation. See Indonesia Initiation Checklist, India Initiation Checklist at Attachment III (Injury).

Initiation of Countervailing Duty Investigations

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) of the Act and (2) is accompanied by information reasonably available to Petitioner supporting the allegations.

The Department has examined the countervailing duty petitions on certain lined paper products from India and Indonesia and found that they comply with the requirements of section 702(b) of the Act. Therefore, in accordance with section 702(b) of the Act, we are initiating countervailing duty investigations to determine whether manufacturers, producers, or exporters of certain lined paper products from India and Indonesia receive countervailable subsidies. For a discussion of evidence supporting our initiation determination, see Indonesia Initiation Checklist and India Initiation Checklist.

We are including in our investigations the following programs alleged in the Petitions to have provided countervailable subsidies to producers and exporters of the subject merchandise in India and Indonesia:

I. India:

A. Duty Entitlement Passbook Scheme (“DEPS”)

B. Export Processing Zones and Export Oriented Units

1. Duty Free Import of Capital Goods and Raw Materials

2. Reimbursement of Central Sales Tax Paid on Domestically-Sourced Materials

3. Duty Drawback on Furnace Oil Sourced from Domestic Companies

C. Pre-Shipment and Post Shipment Export Financing

D. Income Tax Exemption Schemes under Sections 10A, 10B and 80 HHC

E. Export Promotion Capital Goods Scheme (“EPCGS”)

G. Market Access Initiative

H. Market Development Assistance

I. Status Certificate Program

J. State Programs

1. State of Gujarat Sales Tax Program

2. State of Maharashtra Sales Tax Program

II. Indonesia

A. Provision of Logs at Less Than Adequate Remuneration

1. Provision of Fiber at Preferential Rates

2. Government Ban on Log Exports

B. Subsidized Funding for Reforestation (Hutan Tanaman Industria or HTI Program)

C. Accelerated Depreciation

We are not including in our investigation the following programs alleged to benefit producers and exporters of the subject merchandise in Indonesia:

A. Non-Enforcement of Banking Regulations at Conglomerate-Owned Financial Institutions

Petitioner alleges that the Government of Indonesia's non-enforcement of its laws intended to ensure prudent lending and the solvency of lending institutions permitted financial institutions controlled by forest industry conglomerates to provide credit to producers of the subject merchandise which would not have otherwise been available. In particular, Petitioner asserts that Sinar Mas/APP's affiliated bank, Bank Internasional Indonesia (BII), made loans to its affiliates that exceeded the legal loan exposure limit of the bank to any one affiliated company.

Petitioner provided insufficient information regarding the existence of a financial contribution or specificity.

B. Government Protection from Bankruptcy

Sinar Mas/APP had amassed an estimated debt of $13.4 to $13.9 billion in high yield bonds and loans from several domestic and international financial institutions and Export Credit Agencies (ECAs). In March 2001, Sinar Mas/APP unilaterally ceased all of its debt payments. Of this estimated debt, $1.3 billion was owed to BII. In May 2001, the BII and the Sinar Mas/APP debt owed to the bank were placed under the control of the Indonesian Bank Restructuring Agency (IBRA), a government entity created under the Indonesian Ministry of Finance. In assuming the Sinar Mas/APP debt, IBRA received a lien on all Sinar Mas/APP assets, which gave the agency first rights to Sinar Mas/APP assets. Because IBRA never attempted to exercise its liens, Petitioner alleges that IBRA provided a shield for Sinar Mas/APP preventing foreign creditors from collecting on the estimated $12.6 billion or forcing Sinar Mas/APP into bankruptcy. Sinar Mas/APP continued to operate without any changes to ownership.

Petitioner provided insufficient information regarding the existence of a financial contribution or specificity.

C. Invalidation of Bonds Through Court Action

Sinar Mas/APP sued in Indonesian court to invalidate bonds it had issued with an estimated value of $550 million. The bonds were registered with the U.S. Securities and Exchange commission, underwritten by Morgan Stanley, and held by international investors. The District Court of Kuala Tungkal ruled that the bonds were invalid on the grounds that they were concocted by the foreign institutions to earn excessive fees. Therefore, the court ruled that Sinar Mas/APP did not have to repay the $550 million in bonds or the accrued interest to its creditors.

Petitioner provided insufficient information regarding the financial contribution or specificity. Moreover, according to the information provided by Petitioner, the financial institutions still have the option of appealing the Indonesian court decision. Therefore, the judicial process in this claim has not finished its course.

D. Tax Holidays, Import Duty Exemption and Other Tax Benefits

The Department found in Indonesian Textiles^[2] that the Indonesian Ministry of Finance may grant industries a variety of tax benefits, such as tax holidays, exemption from capital stamp duties and different levels of exemption from corporate taxes. The industries approved for the tax benefits are deemed “priority” industries by the Ministry of Finance and also are listed on two priority lists called Daftar Skala Priorities (DSP).

We do not plan to investigate these alleged subsidies because they were recurring subsidies which occurred in 1983, 22 years ago, and there has been no new information provided by Petitioner to indicate that these programs are still in existence.

E. Working Capital Export Credits

Beginning in June 1983, Indonesian state and private banks offered working capital export credits to domestic companies exporting goods other than gas and oil. The banks decided which companies could borrow and the interest rate to charge. The Department preliminarily found this to be a countervailable subsidy.

We do not plan to investigate these alleged subsidies because they were recurring subsidies which occurred in 1983, 22 years ago, and there has been no new information provided by Petitioner to indicate that these programs are still in existence.

Other

A. Provision of Capital on Preferential Terms Prior to the Indonesian Financial Crisis

In its September 9th filing, Petitioner alleged that preferential financing was provided to the forest industry during the 1990's and included information regarding loans to Bob Hasan's Kalimanis Group. In its September 22nd submission, Petitioner stated that it did not know whether any members of the Bob Hasan Group produced or exporter subject merchandise, and reserved the right to provide additional information. Therefore, we are not including this allegation in our investigation at this time.

Distribution of Copies of the Petitions

In accordance with section 702(b)(4)(A)(i) of the Act, a copy of the public version of the Petitions has been provided to the Government of India and Government of Indonesia. We will attempt to provide a copy of the public version of the Petition to each exporter named in the Petition, as provided for under 19 CFR 351.203(c)(2).

ITC Notification

We have notified the ITC of our initiations, as required by section 702(d) of the Act.

Preliminary Determinations by the ITC

The ITC will preliminarily determine, within 25 days after the date on which it receives notice of these initiations, whether there is a reasonable indication that imports of certain lined paper products from India and Indonesia are causing material injury, or threatening to cause material injury, to a U.S. industry. See section 703(a)(2) of the Act. A negative ITC determination will result in the investigations being terminated; otherwise, these investigations will proceed according to statutory and regulatory time limits.

This notice is issued and published pursuant to section 777(I) of the Act.

Dated: September 29, 2005.

Barbara E. Tillman,

Acting Assistant Secretary for Import Administration.

Appendix I

Scope of the Investigation

The scope of this investigation includes certain lined paper products, typically school supplies,^[1] composed of or including paper that incorporates straight horizontal and/or vertical lines on ten or more paper sheets,^[2] including but not limited to such products as single- and multi-subject notebooks, composition books, wireless notebooks, looseleaf or glued filler paper, graph paper, and laboratory notebooks, and with the smaller dimension of the paper measuring 6 inches to 15 inches (inclusive) and the larger dimension of the paper measuring 8-3/4 inches to 15 inches (inclusive). Page dimensions are measured size (not advertised, stated, or “tear-out” size), and are measured as they appear in the product (i.e., stitched and folded pages in a notebook are measured by the size of the page as it appears in the notebook page, not the size of the unfolded paper). However, for measurement purposes, pages with tapered or rounded edges shall be measured at their longest and widest points. Subject lined paper products may be loose, packaged or bound using any binding method (other than case bound through the inclusion of binders board, a spine strip, and cover wrap). Subject merchandise may or may not contain any combination of a front cover, a rear cover, and/or backing of any composition, regardless of the inclusion of images or graphics on the cover, backing, or paper. Subject merchandise is within the scope of this petition whether or not the lined paper and/or cover are hole punched, drilled, perforated, and/or reinforced. Subject merchandise may contain accessory or informational items including but not limited to pockets, tabs, dividers, closure devices, index cards, stencils, protractors, writing implements, reference materials such as mathematical tables, or printed items such as sticker sheets or miniature calendars, if such items are physically incorporated , included with, or attached to the product, cover and/or backing thereto.

Specifically excluded from the scope of this petition are:

• unlined copy machine paper;
• writing pads with a backing (including but not limited to products commonly known as “tablets,” “note pads,” “legal pads,” and “quadrille pads”), provided that they do not have a front cover (whether permanent or removable). This exclusion does not apply to such writing pads if they consist of hole-punched or drilled filler paper;
• three-ring or multiple-ring binders, or notebook organizers incorporating such a ring binder provided that they do not include subject paper;
• index cards;
• printed books and other books that are case bound through the inclusion of binders board, a spine strip, and cover wrap;
• newspapers;
• pictures and photographs;
• desk and wall calendars and organizers (including but not limited to such products generally known as “office planners,” “time books,” and “appointment books”);
• telephone logs;
• address books;
• columnar pads & tablets, with or without covers, primarily suited for the recording of written numerical business data;
• lined business or office forms, including but not limited to: preprinted business forms, lined invoice pads and paper, mailing and address labels, manifests, and shipping log books;
• lined continuous computer paper;
• boxed or packaged writing stationary (including but not limited to products commonly known as “fine business paper,” “parchment paper, “ and “letterhead”), whether or not containing a lined header or decorative lines;
• Stenographic pads (“steno pads”), Gregg ruled,^[3] measuring 6 inches by 9 inches;

Also excluded from the scope of these investigations are the following trademarked products:

• Fly^[TM] lined paper products: A notebook, notebook organizer, loose or glued note paper, with papers that are printed with infrared reflective inks and readable only by a Fly^[TM] pen-top computer. The product must bear the valid trademark Fly^[TM] .^[4]

• Zwipes^[TM] : A notebook or notebook organizer made with a blended polyolefin writing surface as the cover and pocket surfaces of the notebook, suitable for writing using a specially-developed permanent marker and erase system (known as a Zwipes^[TM] pen). This system allows the marker portion to mark the writing surface with a permanent ink. The eraser portion of the marker dispenses a solvent capable of solubilizing the permanent ink allowing the ink to be removed. The product must bear the valid trademark Zwipes^[TM] .^[5]

• FiveStar®Advance^[TM] : A notebook or notebook organizer bound by a continuous spiral, or helical, wire and with plastic front and rear covers made of a blended polyolefin plastic material joined by 300 denier polyester, coated on the backside with PVC (poly vinyl chloride) coating, and extending the entire length of the spiral or helical wire. The polyolefin plastic covers are of specific thickness; front cover is .019 inches (within normal manufacturing tolerances) and rear cover is .028 inches (within normal manufacturing tolerances). Integral with the stitching that attaches the polyester spine covering, is captured both ends of a 1” wide elastic fabric band. This band is located 2-3/8” from the top of the front plastic cover and provides pen or pencil storage. Both ends of the spiral wire are cut and then bent backwards to overlap with the previous coil but specifically outside the coil diameter but inside the polyester covering. During construction, the polyester covering is sewn to the front and rear covers face to face (outside to outside) so that when the book is closed, the stitching is concealed from the outside. Both free ends (the ends not sewn to the cover and back) are stitched with a turned edge construction. The flexible polyester material forms a covering over the spiral wire to protect it and provide a comfortable grip on the product. The product must bear the valid trademarks FiveStar®Advance^[TM] .^[6]

• FiveStar Flex^[TM] : A notebook, a notebook organizer, or binder with plastic polyolefin front and rear covers joined by 300 denier polyester spine cover extending the entire length of the spine and bound by a 3-ring plastic fixture. The polyolefin plastic covers are of a specific thickness; front cover is .019 inches (within normal manufacturing tolerances) and rear cover is .028 inches (within normal manufacturing tolerances). During construction, the polyester covering is sewn to the front cover face to face (outside to outside) so that when the book is closed, the stitching is concealed from the outside. During construction, the polyester cover is sewn to the back cover with the outside of the polyester spine cover to the inside back cover. Both free ends (the ends not sewn to the cover and back) are stitched with a turned edge construction. Each ring within the fixture is comprised of a flexible strap portion that snaps into a stationary post which forms a closed binding ring. The ring fixture is riveted with six metal rivets and sewn to the back plastic cover and is specifically positioned on the outside back cover. The product must bear the valid trademark FiveStar Flex^[TM] .^[7]

Merchandise subject to this investigation is typically imported under headings 4820.10.2050, 4810.22.5044, 4811.90.9090 of the Harmonized Tariff Schedule of the United States (HTSUS).^[8] The tariff classifications are provided for convenience and U.S. Customs and Border Protection purposes; however, the written description of the scope of the investigation is dispositive.

Footnotes

1.  See Memorandum to the File from Maura Jeffords Regarding Subject Consultations and the Government of India (GOI), Sept. 22, 2005.

2.  See Preliminary Affirmative Countervailing Duty Determinations; Certain Textile Mills Products and Apparel from Indonesia, 49 FR 49672 (December 12, 1984) (Indonesian Textiles).

1.  For purposes of this scope definition, the actual use of or labeling these products as school supplies or non-school supplies is not a defining characteristic.

2.  There shall be no minimum page requirement for looseleaf filler paper.

3.  “Gregg ruling” consists of single- or double-margin vertical ruling line down the center of the page. For a six-inch by nine-inch stenographic pad, the ruling would be located approximately three inches from the left of the book.

4.  Products found to be bearing an invalidly licensed or used trademark are not excluded from the scope.

5.  Products found to be bearing an invalidly licensed or used trademark are not excluded from the scope.

6.  Products found to be bearing an invalidly licensed or used trademark are not excluded from the scope.

7.  Products found to be bearing an invalidly licensed or used trademark are not excluded from the scope.

8.  During the investigation additional HTS codes may be identified.