E6-13472. Final Affirmative Countervailing Duty Determination and Final Negative Critical Circumstances Determination: Certain Lined Paper Products from Indonesia

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

The Department of Commerce (Department) has made a final determination that countervailable subsidies are being provided to producers and exporters of certain lined paper products (CLPP) from Indonesia. For information on the estimated countervailing duty rates, please see the “Suspension of Liquidation” section, below.

EFFECTIVE DATE:

August 16, 2006.

FOR FURTHER INFORMATION CONTACT:

David Layton or David Neubacher, AD/CVD Operations, Office 1, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: [phone] or [phone], respectively.

SUPPLEMENTARY INFORMATION:

Petitioner

The petitioner in this investigation is the Association of American School Paper Suppliers and its individual members (MeadWestvaco Corporation; Norcom, Inc.; and Top Flight, Inc.) (petitioner).

Period of Investigation

The period for which we are measuring subsidies, or period of investigation, is January 1, 2004 through December 31, 2004.

Case History

The following events have occurred since the announcement of the preliminary

determination on February 7, 2006, and subsequent publication in the Federal Register on February 13, 2006. See Notice of Preliminary Affirmative Countervailing Duty Determination: Certain Lined Paper Products from Indonesia, 71 FR 7524 (February 13, 2006) (Preliminary Determination).

Prior to the Preliminary Determination, the petitioner submitted comments alleging that the Government of Indonesia (GOI) provided partial forgiveness of the debt owed by the Sinar Mas Group (SMG)/Asia Pulp & Paper (APP) to the Indonesian Bank Restructuring Agency (IBRA) and entrusted and directed creditors of APP to agree to a Master Restructuring Agreement (MRA), which resulted in preferential repayment terms and possible debt forgiveness. The Department did not include these alleged subsidies in its investigation. See Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, entitled New Subsidy Allegation, dated February 10, 2006, which is on file in the Department's Central Records Unit in Room B-099 of the main Department building (CRU).

Also on February 10, 2006,¹ PT. Pabrik Kertas Tjiwi Kimia Tbk (TK) submitted comments on the Department's release of proprietary information to the counsel of an ineligible interested party and TK withdrew from the investigation as an active participant, but reserved its right as an interested party² to participate in briefings or hearings. The Department spoke with TK's counsel and confirmed the company would not answer further questionnaires and did not expect verification of its information on the record.³ Following TK's withdrawal from the investigation, TK and the GOI submitted further comments on the record concerning the Department's APO procedures. The petitioner submitted comments on TK's and the GOI's filings on April 21, 2006. We addressed TK's and the GOI's concerns in a letter to the parties on April 26, 2006.⁴

On February 15, 2006, TK submitted ministerial error allegations relating to the Preliminary Determination. We addressed these ministerial error allegations in an March 8, 2006 memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, entitled Ministerial Error Allegations, which is on file in the CRU.

We issued a supplemental questionnaire to the GOI on February 16, 2006. On February 24, 2006,⁵ the GOI submitted a letter to the Department in which it stated that it would not provide a response to the Department's questionnaire. The GOI reiterated TK's concerns over the Department's APO procedures (see above) and stated that the GOI would not respond to any request from the Department that would involve the release of proprietary information. However, the GOI did state that it would respond to any requests by the Department for “understanding Indonesian government laws and regulations and policies on the broader level.”⁶ On March 28, 2006, we sent a letter to the GOI requesting that it clarify statements in its March 27, 2006 letter and also reissued the February 16, 2006 supplemental questionnaire to the government. We received a response to our clarification letter and partial response to our February 16, 2006 supplemental questionnaire on April 7, 2006. As the GOI refused to provide a complete response to our questionnaire and refused to allow the Department to conduct a comprehensive verification of its information on the record, we did not conduct verification.⁷

On March 7, 2006, the Department published notification of alignment of the final determinations in the antidumping and countervailing duty investigations of CLPP from Indonesia. See Certain Lined Paper Products From India and Indonesia: Alignment of First Countervailing Duty Determination With Antidumping Duty Determination, 71 FR 11379 (March 7, 2006). The Department subsequently postponed the final determinations for the antidumping and countervailing investigations of CLPP from Indonesia. See Notice of Postponement of Final Determination of Antidumping and Countervailing Duty Investigations and Extension of Provisional Measures: Certain Lined Paper Products from Indonesia, 71 FR 26925 (May 9, 2006).

On March 30, 2006, the GOI requested that the Department provide clarification on its possible use of adverse facts available. We addressed the GOI's concerns in a letter to the GOI on April 5, 2006.⁸

On April 19, 2006, we issued a deadline for the receipt of factual information. The GOI, TK and the petitioner submitted factual information on April 24, 2006. The GOI and TK filed responses to the petitioner's factual information on April 26 and 28, 2006, respectively.

We received case briefs from the GOI, TK, and the petitioner on May 1, 2006. The same parties submitted rebuttal briefs on May 8, 2006. No public hearing was held.

On August 4, 2006, we placed publicly available data on the record of the investigation and requested comments from parties on the information. The petitioner, TK and the GOI provided comments and rebuttal comments to the information on August 7 and 8, 2006, respectively.

Scope of the Investigation

The scope of this investigation includes certain lined paper products, typically school supplies,⁹ composed of or including paper that incorporates straight horizontal and/or vertical lines on ten or more paper sheets,¹⁰ 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,¹¹ 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.¹²

• 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.¹³

• 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.¹⁴

• 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.¹⁵

Merchandise subject to this investigation is typically imported under headings 4820.10.2010, 4820.102020, 4820.10.2050, 4810.22.5044, 4811.90.9090 of the Harmonized Tariff Schedule of the United States (HTSUS). The tariff classifications are provided for convenience and U.S. Customs and Border Protection (CBP) purposes; however, the written description of the scope of the investigation is dispositive.

Scope Comments

On October 25, 2005, Continental Accessory Corporation (Continental) filed a request to exclude its fashion notebooks from the scope of the investigation of CLPP from India, Indonesia and the People's Republic of China. The petitioner submitted comments on Continental's request on November 16, 2005.

The Department has analyzed both parties' comments and denied Continental's request to have its fashion notebooks excluded from the scope of the investigation. See Memorandum from Damian Felton, International Trade Compliance Analyst, to Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, regarding Scope Exclusion/Clarification Request: Continental Accessory Corporation, dated March 20, 2006, which is on file in the CRU.

Injury Test

Because Indonesia is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Tariff Act of 1930, as amended, (the Act), section 701(a)(2) of the Act applies to this investigation. Accordingly, the ITC must determine whether imports of the subject merchandise from Indonesia materially injure, or threaten material injury to, a U.S. industry. On October 31, 2005, the ITC published its preliminary determination that there is a reasonable indication that an industry in the United States is materially injured by reason of imports from China, India, and Indonesia. See Certain Lined Paper School Supplies From China, India and Indonesia, 70 FR 62329 (October 31, 2005).

Critical Circumstances

In the Preliminary Determination, the Department preliminary determined that critical circumstances did not exist with respect to imports of CLPP from Indonesia, in accordance with 703(e)(1) of the Act, because there was no indication that the respondent in this investigation received subsidies inconsistent with the WTO Subsidies Agreement, i.e., export subsidies.

Since the Preliminary Determination, the Department has not received or found additional information on the record that would contradict our preliminary decision that TK does not receive subsidies inconsistent with the WTO Subsidies Agreement. Therefore, in accordance with 705(a)(2) of the Act, we continue to find that critical circumstances do not exist with respect to imports of subject merchandise from Indonesia.

Analysis of Comments Received

All issues raised in the case and rebuttal briefs by parties to this investigation are addressed in the “Issues and Decision Memorandum” from Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, to Joseph A. Spetrini, Acting Assistant Secretary for Import Administration, dated August 9, 2006 (Decision Memorandum), which is hereby adopted by this notice. Attached to this notice as an Appendix is a list of the issues which parties have raised and to which we have responded in the Decision Memorandum. Parties can find a complete discussion of all issues raised in this investigation and the corresponding recommendations in this public memorandum which is on file in the CRU. In addition, a complete version of the Decision Memorandum can be accessed directly on the Internet at http://ia.ita.doc.gov/​frn/​index.html. The paper copy and electronic version of the Decision Memorandum are identical in content.

Suspension of Liquidation

In accordance with section 705(c)(1)(B)(i)(I) of the Act, we have calculated an individual rate for the company under investigation, TK. With respect to the “all others” rate, section 705(c)(5)(A)(ii) of the Act provides that if the countervailable subsidy rates established for all exporters and producers individually investigated are determined entirely under section 776 of the Act, the Department may use any reasonable method to establish an “all others” rate for exporters and producers not individually investigated. In this case, although the rate for the only investigated company is based entirely on facts available under section 776 of the Act, there is no other information on the record upon which we could determine an “all others” rate. As a result, we have used the rate for TK as the “all others” rate.

Exporter/Manufacturer	Net Subsidy Rate
PT. Pabrik Kertas Tjiwi Kimia Tbk	40.55 percent
All Others	40.55 percent

As a result of our Preliminary Determination and pursuant to section 703(d) of the Act, we instructed the CBP to suspend liquidation of all entries of certain lined paper products from Indonesia which were entered or withdrawn from warehouse, for consumption on or after February 13, 2006, the date of the publication of the Preliminary Determination in the Federal Register. In accordance with section 703(d) of the Act, we instructed CBP to discontinue the suspension of liquidation for subject merchandise for countervailing duty purposes entered on or after June 13, 2006, but to continue the suspension of liquidation of entries made from February 13, 2006, through June 12, 2006.

We will issue a countervailing duty order and reinstate the suspension of liquidation under section 706(a) of the Act if the ITC issues a final affirmative injury determination, and will require a cash deposit of estimated countervailing duties for such entries of merchandise in the amounts indicated above. If the ITC determines that material injury, or threat of material injury, does not exist, this proceeding will be terminated and all estimated duties deposited or securities posted as a result of the suspension of liquidation will be refunded or canceled.

ITC Notification

In accordance with section 705(d) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non-privileged and non-proprietary information related to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an Administrative Protective Order (APO), without the written consent of the Assistant Secretary for Import Administration.

Return or Destruction of Proprietary Information

In the event that the ITC issues a final negative injury determination, this notice will serve as the only reminder to parties subject to an APO of their responsibility concerning the destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Failure to comply is a violation of the APO.

This determination is published pursuant to sections 703(f) and 777(i) of the Act.

Dated: August 9, 2006.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

APPENDIX

List of Comments and Issues in the Decision Memorandum

Comment 1: Application of Adverse Facts Available

Comment 2: Attribution of Subsidies Received by Cross-owned Companies on Input Products

Comment 3: Are Subsidized Logs “Primarily Dedicated” to Certain Lined Paper Products?

Comment 4: Provision of Standing Timber at Preferential Rates

Comment 5: Government Ban on Log Exports

Comment 6: Subsidized Funding of Reforestation (Hutan Tanaman Industria (HTI) Program)

Comment 7: Loan Guarantee

Comment 8: Calculation of Subsidy Denominator

Footnotes

1.  Per the Department's request, the submission was refiled on March 22, 2006.

2.  Upon learning of this possibility, we immediately contacted counsel for the company to determine its status on the case. The law firm promptly withdrew its application under the Administrative Protective Order (APO) in the cases involving Indonesia and certified destruction of all APO material it had received related to the Indonesia cases. This was done before February 10, 2006. The respondents did not express concern about any other party with APO access.

3.  See Memorandum from Susan Kuhbach, Director, to the File regarding Conversation with Counsel for PT. Pabrik Kertas Tjiwi Kimia Tbk.: Respondent's Withdrawal from Active Participation (March 17, 2006, replacing memo placed on the record on February 17, 2006).

4.  See Letter from Stephen J. Claeys, Deputy Assistant Secretary for Import Administration to Claire Reade, Arnold & Porter LLP regarding Countervailing Duty Investigation: Certain Lined Paper Products from Indonesia (April 26, 2006).

5.  Per the Department's request, the submission was refiled on March 27, 2006.

6.  See id. at 6.

7.  See Memorandum from Constance Handley, Program Manager, to Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, regarding Verification of Government of Indonesia Information (April 19, 2006).

8.  See Letter from Stephen J. Claeys, Deputy Assistant Secretary for Import Administration to Claire Reade, Arnold & Porter LLP regarding Countervailing Duty Investigation: Certain Lined Paper Products from Indonesia (April 5, 2006).

9.  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.

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

11.  “Gregg ruling“ consists of a 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.

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

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

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

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