03-7687. Notice of Initiation of Countervailing Duty Investigation: Allura Red from India

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

March 31, 2003.

FOR FURTHER INFORMATION CONTACT:

Sean Carey 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, March 18, 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 Department's Supplemental Questions Regarding the Subsidy Portion of the Petition Regarding Allura Red from India (March 18, 2003) (CVD Supplemental); 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 702(b)(1) of the Act, petitioner alleges that manufacturers, producers, or exporters of Allura Red in India receive countervailable subsidies within the meaning of section 701 of the Act.

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)(2), 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, NW., Washington, DC 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.

Consultations

In accordance with Article 13.1 of the Agreement on Subsidies and Countervailing Measures and section 702(b)(4)(A)(ii) of the Act, on March 5, 2003, we invited the Government of India (GOI) to hold consultations with us regarding the countervailing duty petition. The GOI declined our offer for consultations. See Memorandum to the File from Dana S. Mermelstein: Allura Red from India: Petition for the Imposition of Countervailing Duties; Contacts with the Indian Embassy Regarding Consultations, dated March 24, 2003.

Determination of Industry Support for the Petition

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 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 702(c)(4)(A). 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 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, and the information obtained and received independently by the Department, 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 702(c)(4)(A) of the Act, the petition contains adequate evidence of industry support and, therefore, polling is unnecessary. See Countervailing Duties Investigation Initiation Checklist: Allura Red from India, Industry Support section, March 24, 2003 (CVD 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 702(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 702(b)(1) of the Act. See CVD Initiation Checklist.

Injury Test

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

Allegations of Subsidies

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), and (2) is accompanied by information reasonably available to petitioners supporting the allegations.

We are initiating an investigation of the following programs alleged in the petition to have provided countervailable subsidies to manufacturers, producers and exporters of the subject merchandise in India (a full description of each program is provided in the CVD Initiation Checklist):

A. Government of India (GOI) Programs

1. Pre-Shipment and Post-Shipment Export Financing

2. Income Tax Exemption Scheme

3. Advance Licenses

4. GOI Loan Guarantees

5. Export Promotion Capital Goods Scheme (EPCGS)

6. Market Access Initiative (MAI)

7. The Duty Entitlement Passbook Scheme (DEPB)/ Post-Export Credits

8. Exemption of Export Credit from Interest Taxes

9. Re-discounting of Export Bills Abroad (EBR)

10. Special Imprest Licenses

B. Programs in the State of Maharashtra

1. Sales Tax Incentives

2. Capital Incentive Scheme

3. Electricity Duty Exemption Scheme

4. Waiving of Loan Interest by SICOM Limited

C. Program in the State of Uttar Pradesh

Capital Incentive Scheme

We are not including in our investigation the following programs alleged to be benefitting producers and exporters of the subject merchandise in India. The full discussion of our bases for not initiating on these programs is set forth in the CVD Initiation Checklist:

A. Government of India (GOI) Programs

1. Special Import Licenses (SILs)

2. Export Processing Zones/Export-Oriented Units Program

3. Income Tax Exemption Scheme (Sections 10A and 10B)

4. Duty Drawback on Excise Taxes

5. Import Duty Exemptions on Capital Equipment Purchases

6. Programs Operated by the Small Industries Development Bank of India

7. Supply of Raw Materials at Subsidized Prices

B. Program in the State of Gujarat

Infrastructure Assistance Scheme

C. Program in the State of Orissa

Subsidies Provided by the State of Orissa

D. Program in the State of Madhya Pradesh

Regional Benefits to New Facilities in Madhya Pradesh

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 subsidized imports from India of the subject merchandise. 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 CVD Initiation Checklist.

Initiation of Countervailing Duty 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 702(b) of the Act. Therefore, in accordance with section 702(b) of the Act, we are initiating a countervailing duty investigation to determine whether manufacturers, producers, or exporters of Allura Red from India receive countervailable subsidies. Unless the deadline is extended, we will make our preliminary determination no later than 65 days after the date of this initiation.

Distribution of Copies of the Petition

In accordance with section 702(b)(4)(A)(i) 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 702(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).