E5-6370. Initiation of Antidumping Duty Investigation: Liquid Sulfur Dioxide from Canada

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

November 17, 2005.

FOR FURTHER INFORMATION CONTACT:

Kate Johnson or Rebecca Trainor, AD/CVD Operations, Office 2, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: [phone] and [phone], respectively.

SUPPLEMENTARY INFORMATION:

INITIATION OF INVESTIGATION

The Petition

On September 30, 2005, the Department of Commerce (Department) received a petition on imports of liquid sulfur dioxide from Canada filed in proper form by Calabrian Corporation (the petitioner) on behalf of the domestic industry producing liquid sulfur dioxide¹ (Liquid Sulfur Dioxide from Canada: Antidumping Duty Petition dated September 30, 2005 (Petition)). The period of investigation (POI) is July 1, 2004, through June 30, 2005.

In accordance with section 732(b) of the Tariff Act of 1930, as amended (the Act), the petitioner alleged that imports of liquid sulfur dioxide from Canada 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 materially injuring or threaten to injure an industry in the United States.

Scope of Investigation

The product covered by this investigation is technical or commercial grade and refrigeration grade liquid sulfur dioxide of a minimum 99.98 percent assay. Sulfur dioxide is identified by the chemical formula SO2. The Chemical Abstract Service (CAS) No. for sulfur dioxide is 7446-09-5. Liquid sulfur dioxide is pure sulfur dioxide gas compressed through refrigeration and stored under pressure. Sulfur dioxide in its gaseous state is excluded from the petition.

Liquid sulfur dioxide subject to this investigation is currently classifiable under subheading 2811.23.00 of the Harmonized Tariff Schedule of the United States (HTSUS). While the HTSUS subheading is provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.

Comments on Scope of Investigation

During our review of the petition, we discussed the scope with the 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 (May 19, 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, Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230 - Attn: Irene Darzenta Tzafolias. 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 determination.

Determination of Industry Support for the Petition

Section 732(b)(1) of the Act requires that a petition be filed by or on behalf of the domestic industry. In order to determine whether a petition has been filed by or on behalf of the industry, the Department, pursuant to section 732(c)(4)(A) of the Act, determines whether a minimum percentage of the relevant industry supports the petition. A petition meets this requirement if the domestic producers or workers who support the petition account for: (i) at least 25 percent of the total production of the domestic like product; and (ii) 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 732(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: (i) 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 (ii) determine industry support using any statistically valid sampling method.

Section 771(4)(A) of the Act defines the “industry” as the producers of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce 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 (section 771(10) of the Act), they do so for different purposes and pursuant to a 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 render the decision of either agency contrary to law. See Algoma Steel Corp. Ltd. v. United States, 688 F. Supp. 639, 642-44 (CIT 1988); see also 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).

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 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, the petitioner does not offer a definition of domestic like product distinct from the scope of the investigation. Based on our analysis of the information submitted in the petition, we have determined there is a single domestic like product, liquid sulfur dioxide, which is defined further in the “Scope of the Investigation” section above, and we have analyzed industry support in terms of that domestic like product. See Initiation Checklist at Attachment 1.

Based on information provided in the petition, the share of total estimated U.S. production of the domestic like product in calendar year 2004 represented by the petitioner did not account for more than 50 percent of the total production of the domestic like product. Therefore, in accordance with 732(c)(4)(D) of the Act, we polled the industry. See Notice of Extension of the Deadline for Determining the Adequacy of the Petition: Liquid Sulfur Dioxide from Canada, 70 FR 61937 (October 27, 2005).

On October 7, 2005, we issued polling questionnaires to all known domestic producers of liquid sulfur dioxide identified in the petition. On October 12, 2005, we sent a letter to the domestic producers transmitting revised scope language provided by the petitioner on October 11, 2005, as well as a clarification regarding the reporting of liquid sulfur dioxide that was produced and consumed internally. The questionnaires are on file in the Central Records Unit (CRU) in room B-099 of the main Department of Commerce building. We requested that each company complete the polling questionnaire and certify their responses by faxing their responses to the Department by the due date. For a detailed discussion of the responses received, please see the Initiation Checklist at Attachment I.

On October 25, 2005, we sent additional questions to Rhodia Inc. (Rhodia) and Chemtrade Logistics (U.S.) Inc. (Chemtrade U.S.), domestic producers expressing opposition to the petition, and received responses on October 31, 2005. Based on the responses received, we determined that Rhodia's opposition should be disregarded in our industry support calculation.

Section 732(c)(4)(B)(i) of the Act states that the Department “shall disregard the position of domestic producers who oppose the petition if such producers are related to foreign producers, as defined in section 771(4)(B)(ii), unless such domestic producers demonstrate that their interests as domestic producers would be adversely affected by the imposition of an antidumping duty order.” In addition, section 351.203(e)(4)(i) of the Department's regulations states that the position of a domestic producer that opposes the petition may be disregarded if such producer is related to a foreign producer or to a foreign exporter under section 771(4)(B)(ii) of the Act, unless such domestic producer demonstrates to the Secretary's satisfaction that its interests as a domestic producer would be adversely affected by the imposition of an antidumping order. Moreover, section 771(4)(B)(ii)(II) contemplates that the Department will consider whether an exporter controls a producer, when determining whether a domestic producer is related to a foreign company for purposes of section 732(c)(4)(B)(i).

In its October 31, 2005, response, Rhodia confirmed that it has a significant relationship with a Canadian exporter of subject merchandise. Specifically, Rhodia, which ceased production of the subject merchandise on December 31, 2004, entered into an asset purchase and sale agreement with Chemtrade Logistics Inc. (Chemtrade Canada) at the end of 2003, whereby it sold all of its domestic manufacturing and sales business to Chemtrade Canada and was obligated not to compete in the liquid sulfur dioxide industry for a period of 5 years. In addition, Rhodia is currently marketing and distributing liquid sulfur dioxide supplied by Chemtrade Canada, and is entitled to a commission on these sales.

In this case, we find that Rhodia and Chemtrade Canada are related, as defined in section 771(4)(B)(ii)(II) of the Act. Section 771(4)(B)(ii)(II) states that a producer and an exporter or importer shall be considered to be related parties if “the exporter or importer directly or indirectly controls the producer.” This subparagraph also states that “a party shall be considered to directly or indirectly control another party if the party is legally or operationally in a position to exercise restraint or direction over the other party.” Because of the nature of the relationship between Rhodia and Chemtrade Canada, Chemtrade Canada is legally and operationally in a position to restrain or direct Rhodia. For further discussion, see Initiation Checklist.

Section 732(c)(4)(B)(i) of the Act also states that the Department will disregard the opposition of related producers “unless such domestic producers demonstrate that their interests as domestic producers would be adversely affected by the imposition of an antidumping duty order.” Rhodia has not demonstrated that its interests as a domestic producer would be adversely affected by the imposition of an antidumping order. Furthermore, it is unclear what “interests as a domestic producer” Rhodia has because it no longer produces the domestic like product pursuant to its business arrangement with Chemtrade Canada. Therefore, we determine that it is appropriate to disregard Rhodia's opposition to the petition under section 732(c)(4)(B)(i) of the Act and section 351.203(e)(4)(i) of the Department's regulations based on the fact that it is related to Chemtrade Canada and failed to demonstrate that its interests as a domestic producer would be adversely affected by the imposition of an antidumping duty order on liquid sulfur dioxide.

Our analysis of the data indicates that the domestic producers of liquid sulfur dioxide who support the petition account for at least 25 percent of the total production of the domestic like product and, once Rhodia's opposition is disregarded, 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. See Initiation Checklist at Attachment I. Accordingly, the Department determines that the industry support requirements of section 732(c)(4)(A) of the Act have been met. The petitioner has suggested that we disregard another party who opposed the petition, Chemtrade U.S., because it is related to Chemtrade Canada and is a significant importer of liquid sulfur dioxide from Canada; however, because the petitioner has met the 50 percent threshold, after disregarding Rhodia's opposition, we have determined that we need not address the opposition of Chemtrade U.S.

Therefore, the Department determines that petitioner filed this petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(F) of the Act and it has demonstrated sufficient industry support with respect to the antidumping investigation that it is requesting the Department initiate. See Initiation Checklist at Attachment I (Industry Support).

U.S. Price and Normal Value

The following is a description of the allegation of sales at less than fair value upon which the Department based its decision to initiate this investigation. The sources of data for the deductions relating to the U.S. and home market prices are also discussed in the Initiation Checklist. Should the need arise to use any of this information as facts available under section 776 of the Act in our preliminary or final determination, we may reexamine the information and revise the margin calculations, if appropriate.

Export Price

Pursuant to section 772(a) of the Act, the petitioner based export price on two price quotations from a Canadian producer of liquid sulfur dioxide to U.S. customers. See petition at 18-20 and Attachment 15 and amended petition at 9. The Department deducted from these prices freight expenses and merchandise processing fees of 0.21 percent of dutiable value (net of freight). The freight rates are based on the published 2005 freight tariffs of Canadian Pacific Railway. See proprietary Initiation Checklist.

Normal Value

To calculate NV, pursuant to section 773(a) of the Act, the petitioner provided a 2003 published price for liquid sulfur dioxide and June 2005 Canadian prices obtained through foreign market research. See petition at 15-18 and Attachments 10-13 and amended petition at 6-9. For purposes of this initiation, we have relied on the market research by the petitioner of Canadian liquid sulfur dioxide prices because these prices are more contemporaneous. In addition, we disregarded two of these prices and recalculated another price based on source documentation in the petition. See proprietary Initiation Checklist. The petitioner deducted estimated freight expenses to derive ex-factory prices. The freight rates are based on the published 2005 freight tariffs of Canadian Pacific Railway. See proprietary Initiation Checklist.

Fair Value Comparisons

Based on the data provided by the petitioner, there is reason to believe that imports of liquid sulfur dioxide from Canada are being, or are likely to be, sold in the United States at less than fair value. Based upon comparisons of export price to the NV, calculated in accordance with section 773(a) of the Act, the estimated dumping margins for liquid sulfur dioxide from Canada, revised as a result of the Department's recalculations, range from 141.14 percent to 219.99 percent.

Allegations and Evidence of Material Injury and Causation

The petitioner alleges that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the individual and cumulated imports of the subject merchandise sold at less than NV. The petitioner contends that the industry's injured condition is illustrated by the decline in 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 Initiation Checklists.

Initiation of Antidumping Investigation

Based upon our examination of the petition on liquid sulfur dioxide from Canada, we find that this petition meets the requirements of section 732 of the Act. Therefore, we are initiating an antidumping duty investigation to determine whether imports of liquid sulfur dioxide from Canada are being, or are likely to be, sold in the United States at less than fair value. Unless postponed, we will make our preliminary determination no later than 140 days after the date of this initiation.

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 the Government of Canada.

International Trade Commission Notification

We have notified the International Trade Commission (ITC) of our initiation, as required by section 732(d) of the Act.

Preliminary Determination by the ITC

The ITC will preliminarily determine, within 25 days after the date on which it receives notice of this initiation, whether there is a reasonable indication that imports of liquid sulfur dioxide from Canada are causing material injury, or threatening to cause material injury, to a U.S. industry. See section 733(a)(2) of the Act. 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 issued and published pursuant to section 777(i) of the Act.

Dated: November 9, 2005.

Stephen J. Claeys,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  See Memorandum from the Team to Barbara Tillman, Acting Deputy Assistant Secretary: Decision Memorandum Concerning Filing Date of Petition, October 6, 2005, (explaining that the proper filing date is September 30, 2005, as the petition was filed at the ITC after the noon deadline on September 29).