01-18666. Notice of Initiation of Antidumping Duty Investigations: Certain Blast Furnace Coke Products From the People's Republic of China and Japan

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Initiation of antidumping duty investigations.

EFFECTIVE DATE:

July 26, 2001.

FOR FURTHER INFORMATION CONTACT:

Alex Villanueva (China) and Julio Fernandez (Japan) at [phone] and [phone], respectively, or Donna Kinsella at [phone]; Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.

Initiation of Investigations

The 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, as amended (“the Act”), by the Uruguay Round Agreements Act (“URAA”). In addition, unless otherwise indicated, all citations to the Department's regulations are references to the provisions codified at 19 CFR Part 351 (2000).

The Petition

On June 29, 2001, the Department of Commerce (the Department) received a petition filed in proper form by the following parties: Shenango Incorporated, Koppers Industries, Inc., DTE Energy Services Inc., Acme Steel Company, and United Steelworkers of America, AFL-CIO (collectively, the petitioners). The Department received information supplementing the petition, on July 6, 2001, July 9, 2001, July 11, 2001, July 17, 2001, July 18, 2001, and July 19, 2001. On July 19, 2001, we received a challenge to industry support for these petitions from Defurco SA. See the Import Administration AD Investigation Checklist, July 19, 2001 (“Initiation Checklist”) (public version on file in the Central Records Unit of the Department of Commerce, Room B-099) at Attachment I-3.

In accordance with section 732(b) of the Act, the petitioners allege that imports of certain blast furnace coke from the People's Republic of China (“PRC”) and Japan 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 to materially injure, an industry in the United States.

The Department finds that the petitioners filed this petition on behalf of the domestic industry because they are interested parties as defined in sections 771(9)(C) and 771(9)(D) of the Act and have demonstrated sufficient industry support with respect to each of the antidumping investigations that they are requesting the Department to initiate (see the Determination of Industry Support for the Petition section below).

Scope of Investigations

The scope of these investigations covers blast furnace coke made from coal or mostly coal, and other carbon materials, with a majority of individual pieces less than 100 MM (4 inches) of a kind capable of being used in blast furnace operations, whether or not mixed with coke breeze. Blast furnace coke is generally ^[1] classified under Harmonized Tariff Schedule United States (“HTSUS”) subheading 2704.00.0025. The tariff classification is provided for descriptive purposes; the scope of the investigation, not the tariff classification of the import, is dispositive.

Determination of Industry 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 ^[1] 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.^[2]

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, petitioners do 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 petitioners, 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 Investigations section above, and have analyzed industry support in terms of this domestic like product.

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 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. Information contained in the petition demonstrates that the domestic producers or workers who support the petition account for at least 25 percent of total production of the domestic like product. We have received no opposition from domestic producers or workers. As a result, we find that the domestic producers or workers who support the petition also account for more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for the petition. See Initiation Checklist at Attachment II. Thus, the requirements of section 732(c)(4)(A)(i)(ii) are 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 Initiation Checklist.

Export Price and Normal Value

Where the petitioners obtained data from foreign market research, we contacted the researcher to establish its credentials and to confirm the validity of the information provided. See Memorandum to the File from Julio A. Fernandez through Donna Kinsella, Telephone Conversation with Foreign Market Researcher for Antidumping Petition Regarding Imports of Blast Furnace Coke from Japan, July 20, 2001 (Market Research for Japan). 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.

The following are descriptions of the allegations of sales at less than fair value upon which the Department has based its decision to initiate these investigations. The sources of data for the deductions and adjustments relating to home market price, U.S. price, constructed value (CV) and factors of production (FOP) are detailed in the Initiation Checklist.

The anticipated period of investigation (POI) for Japan, a market economy country is April 1, 2000, through March 31, 2001, while the anticipated POI for the PRC, a non-market economy (NME) country is October 1, 2000, through March 31, 2001.

Regarding an investigation involving a NME, the Department presumes, based on the extent of central government control in a NME, that a single dumping margin, should there be one, is appropriate for all NME exporters in the given country. See, e.g., Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the PRC, 59 FR 22585 (May 2, 1994). In the course of these investigations, all parties will have the opportunity to provide relevant information related to the issue of the PRC's status and the granting of separate rates to individual exporters.

China

Export Price

To calculate export price (“EP”), petitioners screened U.S. Census import data, and selected from this data certain imports which they believed were of blast furnace coke to arrive at an estimate for imports of such coke for the period April 2000 through March 2001, falling under the Harmonized Tariff Schedules (“HTSUS”) classification 2704.00.^[3] The selected data was broken down by import quantity, customs value, and CIF value. See Petition at 14.

For purposes of initiation, the Department has decided to rely instead on average unit values during the POI as reported under HTSUS 2704.00.0025. The Department believes that this HTS number represents a clean category under which all imports of subject coke must enter. The possibility of a misclassification by the U.S. Customs Service is not sufficient to warrant the methodology utilized by petitioners as described above. In particular, the Department does not believe that port and volume-specific import data is representative of U.S. prices of subject merchandise. As a result, as indicated above, we have relied on AUVs to calculate EP.

We obtained from the ITC's Dataweb, U.S. import values for HTS 2704.00.0025. We used the free alongside ship (“FAS”) customs values as the F.O.B. price of merchandise. For purposes of initiation, we have found this to be an appropriate estimate. We deducted estimated foreign inland freight costs from the customs value to arrive at an estimated ex-factory price for use in the comparison of EP and normal values for China.

Petitioners used the selected Customs Values as the free on board (“F.O.B.”) price of the merchandise, packaged and ready for delivery at the foreign port. To approximate ex-factory prices, petitioners deducted foreign inland freight from the selected Customs Value. See Petition at 14. Petitioners calculated average foreign inland freight charges using estimated atlas distances and Indian freight rates as a surrogate value.

Normal Value

The petitioners assert that the PRC is an NME country and no determination to the contrary has yet been made by the Department. In previous investigations, the Department has determined that the PRC is an NME. See Steel Concrete Reinforcing Bars from the People's Republic of China; Notice of Final Determination of Sales at Less Than Fair Value (“Re-Bars from China”), 66 FR 33522 (June 22, 2001), and Foundry Coke Products from the People's Republic of China; Notice of Preliminary Determination of Sales at Less Than Fair Value (“Foundry Coke from China”), 66 FR 13885 (March 8, 2001). In accordance with section 771(18)(C)(i) of the Act, the presumption of NME status remains in effect until revoked by the Department. The presumption of NME status for the PRC has not been revoked by the Department and, therefore, remains in effect for purposes of the initiation of this investigation.

Petitioners stated that the current domestic coke industry in China consists of both an integrated (recovery process) and an independent sector (beehive oven process) of blast furnace coke. Consequently, petitioners calculated a margin for the recovery process and for the beehive oven process. For NV for the recovery process, the petitioners based the factors of production (FOP), as defined by section 773(c)(3) of the Act, on the consumption rates of two U.S. blast furnace coke producers utilizing the mechanical (recovery) oven production process. The petitioners assert that information regarding Chinese producers' recovery oven consumption rates is not available, and that the U.S. producer employs a production process which is similar to the production processes employed by producers of blast furnace coke in the PRC. Thus, the petitioners have assumed, for purposes of the petition, that producers in the PRC use similar inputs in similar quantities as the U.S. producer and have adjusted these inputs for known differences.

For the beehive oven production process, petitioners based the blast furnace coke FOP on two publicly available sources. The first source is the ITC Section 332 Report. See Foundry Coke: A Review of the Industries in the United States and China, (“332 Report”) Inv. No. 332-407, ITC Pub. 3323 (July 2000). The second source is the Chinese Coke 1999 Directory (“Directory”), published by the TEX Report.

Based on the information provided by the petitioners, we believe that the petitioners' FOP methodology represents information reasonably available to the petitioners and is appropriate for purposes of initiating this investigation.

Pursuant to section 773(c) of the Act, the petitioners assert that India is the most appropriate surrogate country for the PRC, claiming that India is: (1) A market economy; (2) a significant producer of comparable merchandise; and (3) at a level of economic development comparable to the PRC in terms of per capita gross national product (“GNP”). Based on the information provided by the petitioners, we believe that the petitioners' use of India as a surrogate country is appropriate for purposes of initiating this investigation.

In accordance with section 773(c)(4) of the Act, petitioners valued FOP, where possible, on reasonably available, public surrogate data from India. Materials, with the exception of ammonium sulphate, were valued based on Indian import values, as published in the 1998 and 1999 Monthly Statistics of Foreign Trade of India, and inflated based on the Indian Wholesale Price Index. Surrogate value data from India for ammonium sulphate was not available. Instead, petitioners used a value from Chemical Weekly, an Indian chemical industry publication. Labor was valued using the regression-based wage rate for the PRC provided by the Department, in accordance with 19 CFR 351.408(c)(3). Electricity was valued using Energy Prices and Taxes, First Quarter 2001, published by, the Organization for Economic Cooperation and Development (“OECD”) International Energy Agency.

For overhead, depreciation, selling, general, and administrative (“SG&A”) expenses, and profit, the petitioners applied rates derived from the financial statements of Gujarat NRE Coke, Ltd., an Indian coke producer.

Based on the information provided by the petitioners, we believe that the surrogate values represent information reasonably available to the petitioners and are acceptable for purposes of initiating this investigation.

Based on comparisons of EP to CV, the estimated dumping margins range from 132.2 to 207.2 percent. See Initiation Checklist at 11.

Japan

Export Price

To calculate EP, petitioners screened U.S. Census import data, and selected from this data certain imports which they believed were of blast furnace coke to arrive at an estimate for imports of such coke for the period April 2000 through March 2001, falling under the Harmonized Tariff Schedules (“HTSUS”) classification 2704.00.^[4] The selected data was broken down by import quantity, customs value, and CIF value. See Petition at 14.

For purposes of initiation, the Department has decided to rely instead on average unit values during the POI as reported under HTSUS 2704.00.0025. The Department believes that this HTS number represents a clean category under which all imports of subject coke must enter. The possibility of a misclassification by the U.S. Customs Service is not sufficient to warrant the methodology utilized by petitioners as described above. In particular, the Department does not believe that port and volume-specific import data is representative of U.S. prices of subject merchandise. As a result, as indicated above, we have relied on AUVs to calculate EP.

We obtained from the ITC's Dataweb, U.S. import values for HTS 2704.00.0025. We used the free alongside ship (“FAS”) customs values as the F.O.B. price of merchandise. For purposes of initiation, we have found this to be an appropriate estimate. We deducted estimated foreign inland freight costs from the customs value to arrive at an estimated ex-factory price for use in the comparison of EP and normal values for Japan.

Petitioners used the selected Customs Values as the FOB price of the merchandise, packaged and ready for delivery at the foreign port. To approximate ex-factory prices, petitioners deducted foreign inland freight from the selected Customs Value. See Petition at 14. Petitioners conservatively calculated average foreign inland freight charges using estimated atlas distances and Indian freight rates as a surrogate value.

Normal Value

Petitioners submitted price information regarding five Japanese domestic sales of blast furnace coke, obtained through foreign market research. In a telephone conversation with the foreign market researcher, the researcher indicated that two of the five home market transactions involved affiliated parties. See Market Research for Japan. We are excluding these two sales in our determination of NV because we can not determine, for purposes of initiation, whether these transactions are at “arms-length.” See Statement of Administrative Action at 827 and 19 CFR 351.403(c) of the Department's regulations.

With respect to NV, petitioners assert that sales of the subject merchandise in the Japanese home market are below the cost of production within the meaning of section 773(b) of the Act.^[5] See Petition Exhibits 7 and 53. Petitioners therefore provided constructed value (“CV”) pursuant to section 773(c) of the Act. Petitioners provided information demonstrating reasonable grounds to believe or suspect that sales of blast furnace coke in the home market were made at prices below the fully absorbed COP, within the meaning of section 773(b) of the Act, and requested that the Department conduct a country-wide sales-below-cost investigation. As noted above, petitioners obtained information regarding home market sales prices from a foreign market research company. This information demonstrates sales below COP based on petitioners' calculation as described below.

In accordance with section 773(b)(3) of the Act, the petitioner calculated the COP for the subject merchandise based on the sum of the cost of manufacturing (“COM”) and SG&A. To arrive at CV, petitioners averaged the consumption rates of two U.S. producers of subject merchandise, and adjusted for known differences based on information available regarding Japanese production processes and costs, and conservatively assumed that all Japanese coke oven gas is sold to third party consumers. With respect to the domestic price for coke oven gas in Japan, petitioners submitted information obtained from foreign market research, which included sales of coke oven gas between affiliated parties. For purposes of this initiation, we have excluded such sales from our calculation of the domestic price for coke oven gas in accordance with Department practice regarding affiliated transactions.

Petitioners calculated direct labor costs using the cost and processing times for the two U.S. producers, adjusted for known differences. Specifically, the petitioners obtained public statistical information from the Japan Iron and Steel Federation (“JISF”) (see Petition Exhibit 36) to adjust the U.S. producer's direct labor costs to the equivalent Japanese cost. The 1999 average monthly earnings of a Japanese worker in iron and steel industries (fringe benefits included) was divided by the average monthly hours worked. The consumer price index was used to adjust the 1999 wage rate for the POI.

Petitioners obtained public statistics from Energy Prices & Taxes to adjust the U.S. producers' electricity, natural gas, and steam costs to equivalent Japanese costs. Petitioners conservatively estimated the Japanese price for water to be approximately $1 per 1,000 gallons.

Petitioners used two U.S. producers' variable and fixed factory overhead costs to estimate these costs as borne by Japanese producers. Petitioner based SG&A and profit expenses on the information contained in the financial statements of six integrated Japanese steel producers with coke producing facilities. The SG&A ratio was calculated using the ratio of SG&A expenses to costs of sales. Profit was calculated using the ratio of income before taxes to the total of cost of sales and SG&A expenses. Petitioners used an average of the financial expenses of two U.S. producers' as reported in financial statements to estimate this expense as incurred by Japanese producers.

Based on the comparison of the prices of the foreign like product in the home market to the calculated COP of the product, we find reasonable grounds to believe or suspect that sales of the foreign like product were made below the COP within the meaning of section 773(b)(2)(A)(I) of the Act. Accordingly, the Department is initiating a country-wide cost investigation. Pursuant to section 773(a)(4), 773(b), and 773(e) of the Act, petitioners based normal value for sales in Japan on CV because sales of the subject merchandise in the home market were found to be below the cost of production. Therefore, based on these facts, for this initiation, we are accepting CV as the appropriate basis for normal value. Petitioners calculated CV using the same COM and SG&A expense figures used to calculate Japanese home market costs. Consistent with section 773(e)(2) of the Act, the petitioners also added an amount for profit to arrive at CV.

Based on the data provided by the petitioners, there is reason to believe imports of blast furnace coke from Japan are being, or are likely to be, sold at less than normal value.

Based on comparisons of NV to EP, the estimated dumping margin is 71.66 percent.

Fair Value Comparisons

Based on the data provided by the petitioners, there is reason to believe that imports of certain blast furnace coke from the PRC and Japan are being, or are likely to be, sold at less than fair value.

Allegations and Evidence of Material Injury and Causation

The petitioners allege 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. Individually, the volume of imports from China and Japan, using the latest available data, exceeded the statutory threshold of seven percent for a negligibility exclusion. Therefore, when cumulated, the volumes for these two countries also exceed the threshold. See section 771(24)(A)(ii) of the Act. Petitioners contend that the industry's injured condition is evidenced in the declining trends in operating profits, decreased U.S. market share, and price suppression and depression. The allegations of injury and causation are supported by relevant evidence including U.S. Customs import data, domestic consumption, 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 Initiation Checklist.

Initiation of Antidumping Investigations

Based on our examination of the petition on certain blast furnace coke, and the petitioners' responses to our supplemental questionnaires clarifying the petition, we have found that the petition meets the requirements of section 732 of the Act. See Initiation Checklist. Therefore, we are initiating antidumping duty investigations to determine whether imports of certain blast furnace coke from the PRC and Japan are being, or are likely to be, sold in the United States at less than fair value. Unless this deadline is extended, we will make our preliminary determinations no later than 140 days after the date of this initiation.

Distribution of Copies of the Petitions

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 governments of the PRC and Japan. We will attempt to provide a copy of the public version of the petition to each exporter named in the petition, as appropriate.

International Trade Commission Notification

We have notified the ITC of our initiations, as required by section 732(d) of the Act.

Preliminary Determinations by the ITC

The ITC will determine, no later than August 7, 2001, whether there is a reasonable indication that imports of certain blast furnace coke products from the PRC and Japan are causing material injury, or threatening to cause material injury, to a U.S. industry. A negative ITC determination for any country will result in the investigation being terminated with respect to that country; 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: July 19, 2001.

Faryar Shirzad,

Assistant Secretary for Import Administration.

Footnotes

1.  In response to the July 6, 2001, deficiency questionnaire, petitioners agreed to change “may be classified” to “are generally classified.”

2.  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).

3.  Petitioners indicate this data was obtained from the American Coal and Coke Chemicals Institute.

4.  Petitioners indicate this data was obtained from the American Coal and Coke Chemicals Institute.

5.  In their July 11, 2001 submission, petitioners make a formal below cost of production allegation with respect to Japanese sales of subject merchandise in the home market, and also assert that exports of blast furnace coke to third countries are sold at less than the cost of production. See July 11, 2001 submission, at 1-2.