03-7686. Notice of Initiation of Antidumping Duty Investigation: Allura Red from India

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

March 31, 2003.

FOR FURTHER INFORMATION CONTACT:

Scott Lindsay at [phone], or Adina Teodorescu at [phone]; Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.

Initiation of Investigation

The Petition

On March 4, 2003, the Department of Commerce (the Department) received a petition filed in proper form by Sensient Technologies Corporation (petitioner). See Allura Red from India: Petition for the Imposition of Antidumping and Countervailing Duties (Petition). The Department received information supplementing the petition on March 17, 2003, and March 19, 2003. See Response to the Department's Supplemental Questions Regarding the Antidumping and Injury Portions of the Petition Regarding Allura Red from India (March 17, 2003) (AD/Injury Supplemental #1); Response to the Department's Supplemental Questions Regarding the Antidumping and Injury Portions of the Petition Regarding Allura Red from India (March 19, 2003) (AD/Injury Supplemental #2).

In accordance with section 732(b) of the Act, petitioner alleges that imports of Allura Red from India 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 are threatening material injury to, an industry in the United States.

The Department finds that petitioner filed this petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(C) of the Act and has demonstrated sufficient industry support with respect to the antidumping and countervailing duty investigations that it is requesting the Department to initiate. See Determination of Industry Support for the Petition, below.

Period of Investigation

In accordance with 19 CFR 351.204(b)(1), the anticipated period of investigation (POI) is January 1, 2002, through December 31, 2002.

Scope of Investigation

This investigation covers Allura Red coloring, also known as Food, Drug and Cosmetic (FD&C) Red No. 40, defined as synthetic red coloring containing not less than 85 percent of the disodium salt of 6-hydroxy-5-{(2-methoxy-5-methyl-4-sulfophenyl)azo}-2-naphthalenesulfonic acid, whether or not certified for human consumption at the time of entry into the United States. The product definition covers all forms and variations of Allura Red, such as powders, press cakes, extrudates, liquid, or granules, but excludes lake pigments formed from Allura Red. This investigation does not cover colors of animal, vegetable, or mineral origin, also known as “natural colors.”

Allura Red is currently classifiable in the Harmonized Tariff Schedule United States (HTSUS) under subheading 3204.12.5000, a basket category. The tariff classification is provided for convenience and Customs purposes. The written description of the scope of this proceeding is dispositive.

As discussed in the preamble to the Department's regulations, we are setting aside a time period for parties to raise issues regarding product coverage. See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997). 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, 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 the 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 the Department's industry support determination, which is to be made before the initiation of the investigation, be based on 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: (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. See section 732(c)(4)(A). 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 either poll the industry or rely on other information in order to determine if there is support for the petition.

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 statute directs the Department to look to producers and workers who produce the domestic like product. The United States 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 domestic like product (see section 771(10) of the Act), they do so for different purposes and pursuant to their 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 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 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.

In this petition, petitioner does not offer a definition of domestic like product distinct from the scope of the investigation. Thus, based on our analysis of the information presented to the Department by petitioner, we have determined that there is a single domestic like product, which is defined in the Scope of Investigation section above, and have analyzed industry support in terms of this domestic like product.

Finally, the Department has determined that, pursuant to section 732(c)(4)(A) of the Act, the petition contains adequate evidence of industry support and, therefore, polling is unnecessary. See Antidumping Investigation Initiation Checklist: Allura Red from India, Industry Support section, March 24, 2003 (AD Initiation Checklist), on file in the Central Records Unit, Room B-099 of the main Department of Commerce building.

We determine, based on information provided in the petition, that petitioner has demonstrated industry support representing over 50 percent of total production of the domestic like product, consisting of petitioner and another U.S. producer of Allura Red, Noveon, Inc. 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 732(c)(4)(A)(i) of the Act are met. Furthermore, because the Department received no opposition to the petition, the domestic producers or workers who support the petition 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 petition. Thus, the requirements of section 732(c)(4)(A)(ii) are also met. Accordingly, the Department determines that the petition was filed on behalf of the domestic industry within the meaning of section 732(b)(1) of the Act. See AD Initiation Checklist.

United States Price and Normal Value

The following are descriptions of the allegations of sales at less than fair value upon which the Department has based its decision to initiate this investigation.

United States Price

Petitioner established U.S. price based on constructed export price (CEP) and export price (EP). For its CEP allegations, petitioner used actual and estimated prices of Allura Red from an Indian producer, through its U.S. affiliate, to unaffiliated U.S. purchasers. In its March 17, 2003, and March 19, 2003, supplemental submissions, petitioner calculated CEP for three actual prices reflecting Free on Board (FOB) warehouse sales of the subject merchandise. See AD/Injury Supplemental #1 at 1-4 and Attachment B; AD/Injury Supplemental #2 at 4 and Attachment A. Petitioner also calculated CEP for several prices which were estimated based on the circumstances of lost sales known to petitioner. For each one of these prices, petitioner deducted movement expenses, FDA certification fees, duties, imputed credit, selling expenses, and inventory carrying cost. Since the actual sale prices are sufficient for calculating U.S. price for purposes of initiation, it is not necessary at this time to address whether it is appropriate to include margins based on estimated prices resulting from lost sales.

For EP prices, petitioner calculated U.S. price based on Indian export statistics. Petitioners reported that the HTSUS for Allura Red is in a basket category. Based on our research, we requested clarification regarding the Indian export statistics and whether they are specific to Allura Red, but were unable to determine that the export statistics are specific to the merchandise for which petitioner is alleging dumping. See AD/Injury Supplemental #1 at 5; AD/Injury Supplemental #2 at 1-2. Further, petitioner has stated that all imports of the subject merchandise may have been CEP transactions, as it is not aware of any specific EP sales transactions. See AD/Injury Supplemental #2 at 2. Since questions remain with regard to the EP provided by petitioner and since the actual sale prices provided in the petition are sufficient for calculating U.S. price for purposes of initiation, it is not necessary at this time to address whether it is appropriate to include margins based on EP.

Normal Value

With respect to normal value (NV), petitioner provided a home market price from a domestic price list from Roha Dyechem Pvt., Ltd., an Indian producer of Allura Red. To calculate the NV, petitioner deducted a quantity discount that is noted on the price list. In addition, petitioner adjusted the home market price for imputed credit by deducting home market credit expenses. Petitioner also deducted home market indirect selling expenses as a CEP offset to NV. Finally, for comparison to CEP, petitioner converted the net home market price to U.S. dollars based on the average Federal Reserve exchange rate for the POI.

We are initiating this investigation based on actual U.S. prices of Allura Red from India obtained by petitioners. Based on the comparison of actual U.S. prices to NV, the estimated dumping margins range from 137.69 percent to 226.21 percent. To the extent necessary, we will consider the appropriateness of petitioner's alternative bases for determining U.S. price during the course of this proceeding. Should the need arise to use any of this information as facts available, under section 776 of the Act, in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate.

Fair Value Comparisons

Based on the data provided by petitioner, there is reason to believe that imports of Allura Red from India are being, or are likely to be, sold at less than fair value. See Petition.

Allegations and Evidence of Material Injury and Causation

Petitioner alleges that the U.S. industry producing the domestic like product is being materially injured, or threatened with material injury, by reason of imports from India of the subject merchandise sold at less than NV. Petitioner contends that the industry's injured condition is evident in the reduced levels of production and capacity utilization, decline in profits, decline in research and development, decreased U.S. market share, lost sales and revenue, and price suppression and depression. The allegations of injury and causation are supported by relevant evidence including lost sales and pricing information. We have assessed the allegations and supporting evidence regarding material injury and causation, and have determined that these allegations are properly supported by accurate and adequate evidence and meet the statutory requirements for initiation. See AD Initiation Checklist.

Initiation of Antidumping Investigation

Based on our examination of the petition on Allura Red, and petitioner's responses to our requests for supplemental information clarifying the petition, we have found that the petition meets the requirements of section 732 of the Act. See AD Initiation Checklist. Therefore, we are initiating an antidumping duty investigation to determine whether imports of Allura Red from India are being, or are likely to be, sold in the United States at less than fair value. Unless the deadline is extended, 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 representatives of the government of India. 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).

International Trade Commission Notification

Pursuant to section 732(d) of the Act, we have notified the ITC of our initiation.

Preliminary Determination by the ITC

The ITC will determine, no later than April 18, 2003, whether there is a reasonable indication that imports of Allura Red from India are materially injuring, or threatening material injury to, a U.S. industry. 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: March 24, 2003.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

Footnotes

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 Therefore from Japan: Final Determination; Rescission of Investigation and Partial Dismissal of Petition, 56 FR 32376, 32380-81 (July 16, 1991).