[Federal Register Volume 77, Number 100 (Wednesday, May 23, 2012)]
[Notices]
[Pages 30501-30504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12508]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-928]
Uncovered Innerspring Units From the People's Republic of China:
Initiation of Anticircumvention Inquiry
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: In response to a request from Leggett & Platt Incorporated
(``Petitioner''), the Department of Commerce (``the Department'') is
initiating an anticircumvention inquiry to determine whether certain
imports are circumventing the antidumping duty order on uncovered
innerspring units from the People's Republic of China (``PRC'').\1\
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\1\ See Uncovered Innerspring Units From the People's Republic
of China: Notice of Antidumping Duty Order, 74 FR 7661 (February 19,
2009) (``Order'').
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DATES: Effective Date: May 23, 2012.
FOR FURTHER INFORMATION CONTACT: Susan Pulongbarit or Steven Hampton,
AD/CVD Operations, Office 9, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-
4031, or (202) 482-0116 respectively.
SUPPLEMENTARY INFORMATION:
Background
On December 31, 2007, Petitioner filed a petition seeking
imposition of antidumping duties on imports of uncovered innerspring
units from, among other countries, the PRC.\2\ Following completion of
an investigation by the Department and the U.S. International Trade
Commission (``the Commission''), the Department imposed antidumping
duties in the amounts of 234.51 percent on the mandatory respondent,
Foshan Jingxin Steel & Wire Spring Co., Ltd., and 164.75 percent on
seven companies that qualified for separate rates.\3\
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\2\ The petition also included imports of uncovered innerspring
units from South Africa and the Socialist Republic of Vietnam. See
Uncovered Innerspring Units From the People's Republic of China,
South Africa, and the Socialist Republic of Vietnam: Initiation of
Antidumping Duty Investigations, 73 FR 4817 (January 28, 2008).
\3\ Order, 74 FR at 7662.
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In the second administrative review of the Order,\4\ Petitioner
requested that the Department review Reztec Industries Sdn Bhd
(``Reztec'').\5\ The Department initiated the review on March 31, 2011
\6\ and sent questionnaires to the named respondents, including Reztec.
On May 19, 2011, in response to the Department's questionnaire, Reztec
submitted a no-shipment letter to the Department and certified that it
did not export PRC-origin uncovered innerspring units to the United
States during the POR.\7\ However, in its no-shipment letter, Reztec
stated that it, ``does purchase some raw materials from China, some of
which is {sic{time} used to produce innerspring units in Malaysia''
and that ``{t{time} hese Chinese raw materials are further processed in
Malaysia and combined with other materials into finished innerspring
units and mattresses, for sale within Malaysia and for export.'' \8\ On
April 12, 2012, the Department determined that Reztec did not sell
subject merchandise during the POR and rescinded the review with
respect to Reztec.\9\
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\4\ The second administrative review covered the period of
review (``POR'') February 1, 2010, through January 31, 2011. See
Initiation of Antidumping Duty Administrative Reviews, Requests for
Revocation in Part, and Deferral of Administrative Review, 76 FR
17825 (March 31, 2011).
\5\ See also Memorandum to the File from Steven Hampton,
regarding Placing Supporting Documentation on the Record of the
Anticircumvention Inquiry: Petitioner's Request from Second
Administrative Review of Uncovered Innerspring Units from the
People's Republic of China, dated April 13, 2012 at Attachment
1.
\6\ See Initiation of Antidumping Duty Administrative Reviews,
Requests for Revocation in Part, and Deferral of Administrative
Review, 76 FR 17825 (March 31, 2011).
\7\ See also Memorandum to the File from Steven Hampton,
regarding Placing Supporting Documentation on the Record of the
Anticircumvention Inquiry: Reztec's No Shipment Letter from the
Second Administrative Review of Uncovered Innerspring Units from the
People's Republic of China, dated April 13, 2012 at Attachment
1 (``No Shipment Letter'').
\8\ See No Shipment Letter at 2.
\9\ See Uncovered Innerspring Units From the People's Republic
of China: Final Results and Final Rescission, in Part, of the
Antidumping Duty Administrative Review, 77 FR 21961, 21962 (April
12, 2012).
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On February 29, 2012, pursuant to section 781(b) of the Tariff Act
of 1930, as amended (``the Act''), and section 351.225(h) of the
Department's regulations, Petitioner submitted a request for the
Department to initiate an anticircumvention inquiry of Reztec to
determine whether Reztec's innerspring units completed and assembled in
Malaysia from PRC-origin components constitute circumvention of the
Order.\10\ In its request, Petitioner contends that Reztec, by its own
admission in its no-shipment letter, imports innerspring unit
components from the PRC to Malaysia, further assembles these components
into uncovered innerspring units, and exports the assembled innerspring
units to the United States in the form of subject merchandise.\11\
Petitioner argues that Reztec's operations constitute minor further
assembly in a third country, i.e. Malaysia. On April 2, 2012, the
Department extended the deadline to initiate a circumvention inquiry by
45 days, pursuant to section 351.302(b) of the Department's
regulations.\12\
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\10\ See Petitioner's February 29, 2012 submission
(``Circumvention Request'') at 3.
\11\ See id. at 2-3.
\12\ See Letter from Paul Walker, Acting Program Manager, to
Leggett & Platt Incorporated April 2, 2012.
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Scope of the Order
The merchandise subject to the order is uncovered innerspring units
composed of a series of individual metal springs joined together in
sizes corresponding to the sizes of adult
[[Page 30502]]
mattresses (e.g., twin, twin long, full, full long, queen, California
king, and king) and units used in smaller constructions, such as crib
and youth mattresses. All uncovered innerspring units are included in
the scope regardless of width and length. Included within this
definition are innersprings typically ranging from 30.5 inches to 76
inches in width and 68 inches to 84 inches in length. Innersprings for
crib mattresses typically range from 25 inches to 27 inches in width
and 50 inches to 52 inches in length.
Uncovered innerspring units are suitable for use as the innerspring
component in the manufacture of innerspring mattresses, including
mattresses that incorporate a foam encasement around the innerspring.
Pocketed and non-pocketed innerspring units are included in this
definition. Non-pocketed innersprings are typically joined together
with helical wire and border rods. Non-pocketed innersprings are
included in this definition regardless of whether they have border rods
attached to the perimeter of the innerspring. Pocketed innersprings are
individual coils covered by a ``pocket'' or ``sock'' of a nonwoven
synthetic material or woven material and then glued together in a
linear fashion.
Uncovered innersprings are classified under subheading 9404.29.9010
and have also been classified under subheadings 9404.10.0000,
7326.20.0070, 7320.20.5010, or 7320.90.5010 of the Harmonized Tariff
Schedule of the United States (``HTSUS''). The HTSUS subheadings are
provided for convenience and customs purposes only; the written
description of the scope of the order is dispositive.
Initiation of Circumvention Proceeding
Section 781(b)(1) of the Act provides that the Department may find
circumvention of an antidumping duty order when merchandise of the same
class or kind subject to the order is completed or assembled in a
foreign country other than the country to which the order applies. In
conducting circumvention inquiries, under section 781(b)(1) of the Act,
the Department will also evaluate whether: (1) The process of assembly
or completion in the other foreign country is minor or insignificant;
(2) the value of the merchandise produced in the foreign country to
which the antidumping duty order applies is a significant portion of
the total value of the merchandise exported to the United States; and
(3) action is appropriate to prevent evasion of such an order or
finding. As discussed below, Petitioner has provided evidence with
respect to these criteria.
A. Merchandise of the Same Class or Kind
Petitioner argues that merchandise imported by Reztec from Malaysia
into the United States is of the same class or kind as that subject to
the Order. Petitioner claims that the uncovered innerspring units that
Reztec completes or assembles in Malaysia, then ships to the United
States, are the same class or kind of merchandise as the uncovered
innerspring units that are subject to the Order.\13\ Petitioner
contends that there is no question that the uncovered innerspring units
that Reztec exports to the United States meet the physical
characteristics that define the scope of the order.\14\ Moreover,
Petitioner states that Reztec even acknowledged this in the second
administrative review, where it stated: ``Reztec's products, including
its uncovered innerspring units sold to the United States, are
manufactured in Malaysia.'' \15\
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\13\ See Circumvention Request at 7-19.
\14\ Id.
\15\ See No Shipment Letter at 4.
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B. Completion of Merchandise in a Foreign Country
Petitioner notes that the Order clearly indicates that innerspring
units are assembled from three key components: Steel wire coils,
helical wires, and in certain cases, border rods.\16\ Petitioner argues
that Reztec admitted that it imports the key inputs used in the
production of innerspring units from the PRC that are then ``further
processed in Malaysia and combined with other materials into finished
innerspring units and mattresses, for sale within Malaysia and for
export.'' \17\ While Reztec asserts that it further processes these
inputs in Malaysia and combines these inputs with other materials into
finished innerspring units, Petitioner believes that Reztec's further
processing is minor and instead involves simple assembly
operations.\18\ Petitioner underscores that there is no dispute that
this requirement has been met: Reztec itself acknowledges that it
completes innerspring units in Malaysia from innerspring components
produced in the PRC.\19\
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\16\ See Circumvention Request at 2. The Commission also noted
that innerspring coils and border rods are major components of an
innerspring unit. See Uncovered Innerspring Units From South Africa
and Vietnam, USITC Pub. 4051, Inv. Nos. 731-TA-1141-1142 at I-11
(December 2008) (hereinafter, ``USITC Uncovered Innersprings
Report''). In its final determination regarding imports of uncovered
innersprings from the PRC, the Commission adopted the findings and
analyses in its determinations and views regarding subject imports
from South Africa and Vietnam with respect to the domestic like
product, the domestic industry, cumulation, and material injury.
Uncovered Innerspring Units from China, USITC Pub. 4061, Inv. No.
731-TA-1140 at 3 and I-1 (February 2009).
\17\ See No Shipment Letter at 2.
\18\ See Circumvention Request at 7-9.
\19\ See Circumvention Request at 7-8.
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C. Minor or Insignificant Process
Under section 781(b)(2) of the Act, the Department is required to
consider five factors to determine whether the process of assembly or
completion is minor or insignificant. Petitioner believes that an
examination of these factors indicates that Reztec's process of
assembly and completion of innerspring units in Malaysia is not
significant.
(1) Level of Investment
Petitioner states that the process employed to assemble innerspring
components into innerspring units is relatively simple and requires
only limited investment and labor, and that the start-up investment
costs and the barriers to entry into this type of assembly operation
(i.e., manual or semi-automated) are low. Petitioner asserts that in
the most basic, fully-manual operation, coils are assembled manually
using a wooden or steel jig in which the coils (continuous or bonnell)
\20\ are hand-loaded, then hand-laced with helical wire and finished by
clipping the border rods to the unit.\21\ Petitioner posits that the
cost of a new wooden (or steel) jig is approximately $200-$400.\22\
Petitioner argues that the level of investment would also be low if
Reztec relies on a semi-automated assembly operation where a machine is
used to assemble the rows of coils.\23\
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\20\ Bonnell coils, the most commonly used type of coils in
innerspring units, have an hour-glass shape which tapers inward from
top to center and then outward from the center to bottom. Bonnell
coils are generally the lowest priced units and the type of coil
generally used in imported innerspring units. Continuous coils have
entire rows of continuous coils formed from a single piece of wire.
For a more detailed description of the types of innerspring coils,
see USITC Uncovered Innersprings Report at I-8 to I-10.
\21\ See Circumvention Request at 9-10. A somewhat more advanced
assembly operation may involve manual assembly using a wooden or
steel jig in which the coils are hand-set, and a lacing machine is
used to feed the helical to join the rows, and then the borders are
manually clipped to the unit. Id.
\22\ Id.
\23\ Id.
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(2) Level of Research and Development
Petitioner is not aware that Reztec performs any research and
development related to the assembly and/or production of innerspring
units.\24\ Moreover, Petitioner states that it would not expect Reztec
to incur any research
[[Page 30503]]
and development expenses related to its innerspring assembly
operations.\25\
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\24\ Id. at 11.
\25\ Id,
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(3) Nature of the Production Process
According to Petitioner, the manufacturing process for assembling
innerspring units from imported components is relatively simple and
does not require significant start-up costs, sophisticated machinery
and inputs, or substantial labor.\26\
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\26\ Id.
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(4) Extent of Production in the Malaysia
Petitioner notes that Reztec's Web site indicates that it
``manufacturers in a 60,000 sq. foot plant with a 100,000 sq. foot
capacity.\27\ Petitioner also claims that only a portion of that
facility is likely dedicated to assembly operations as Reztec claims to
also produce other products such as finished mattresses.\28\
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\27\ Id. (citing http://www.reztec.com.my); see also id. at
Exhibit 4.
\28\ Id.
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(5) Value of Processing in Malaysia as Compared to Uncovered
Innerspring Units Imported Into the United States
Petitioner asserts that the value of assembly processing performed
in Malaysia represents a small portion of the total value of the
innerspring units imported into the United States.\29\ Petitioner
believes Reztec's assembly operations likely rely on relatively
unskilled, low wage employees.\30\ Thus, these assembly operations
involve minimal additional labor costs.\31\ Petitioner asserts that by
any standard, the assembly operations represent an insignificant
portion of the total value.\32\
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\29\ Id.
\30\ Id. at 12-13.
\31\ Id. at 13. There are virtually no additional energy costs
given that the machines, if utilized, are quite basic. The only
additional material inputs (besides the coils, which represent the
single largest cost of an innerspring unit) are steel wire for
lacing and border clips. Id. at 13 n.28.
\32\ Id. at 13.
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D. Value of Merchandise Produced in PRC
Petitioner argues that the value of the components that Reztec
sources in the PRC for further assembly in Malaysia into subject
merchandise is a significant portion of the total value of the
innerspring units exported to the United States.\33\ As Petitioner
noted previously, innerspring coils, helical and border rods are the
key components of an innerspring unit. Petitioner explains that they
also constitute a significant portion of the overall costs of an
innerspring unit.\34\ Petitioner does not have access to other PRC
innerspring unit producer/exporter costs. Therefore, it conducted an
analysis related to the production costs of various innerspring unit
models at its own facility in Guangzhou, PRC. Petitioner believes that
its operation (and costs) in the PRC are representative of the
operations (and costs) of other PRC innerspring unit producers/
exporters, as it is the largest producer of innersprings in the
PRC.\35\ According to Petitioner's analysis of its own production costs
in the PRC, the total value of these innerspring components compose a
significant portion of the total value of an innerspring unit.\36\
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\33\ Id. at 13-14.
\34\ Id. at 14.
\35\ Id.
\36\ Id.
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E. Additional Factors To Consider in Determining Whether Action Is
Necessary
Section 781(b)(3) of the Act directs the Department to consider
additional factors in determining whether to include merchandise
assembled or completed in a foreign country within the scope of the
Order. Petitioner argues that since the Order was imposed, imports into
the United States from Malaysia of uncovered innerspring units have
spiked. Malaysia's imports from the PRC of key inputs have also
increased. Moreover, Petitioner believes that Reztec has close
relationships with several PRC producers/exporters named in the
underlying investigation.
(1) Pattern of Trade
Based on official U.S. import data, Petitioner contends that
imports of uncovered innerspring units from Malaysia have increased
dramatically since the Order was imposed.\37\ Petitioner provided a
chart that illustrated the U.S. annual imports from Malaysia under the
relevant HTSUS subheadings.\38\ Petitioner states that prior to 2009,
there were virtually no imports of uncovered innerspring units from
Malaysia to the U.S.\39\ However, according to the table, subject
imports from Malaysia to the U.S. have steadily increased: 185,917
pieces were imported in 2009, 312,181 pieces were imported in 2010, and
316,687 pieces were imported from January 2011 to November 2011 under
HTSUS 9404.29.9011.\40\ Petitioner claims that the actual level of
imports is likely higher as innerspring units are often erroneously
classified under various other classifications.\41\
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\37\ Id. at 14-15. Petitioner states that until 2011, U.S.
imports of uncovered innerspring units were properly classified and
entered the United States under harmonized tariff schedule (``HTS'')
9404.29.9010 (``uncovered innerspring units''). In 2011, the HTS
classification for uncovered innerspring units was refined and
further broken out to provide a separate ten-digit classification
for innerspring units used in cribs and toddler beds. Thus, HTS
9409.29.9010 was eliminated and replaced with 9404.29.9005
(Uncovered innerspring units: For use in a crib or toddler bed) and
9404.29.9011 (Uncovered innerspring units: Other). Petitioner notes
that the Order covers innerspring units in both of these HTS
classifications. Id. at 15.
\38\ Id. at 15 n. 31. Petitioner notes that there were no U.S.
imports from Malaysia in YTD 2011 under HTS 9404.29.9005.
\39\ Id. at 15.
\40\ Id.
\41\ Id. at 15 n.32 (citing USITC Uncovered Innerspring Report
at I-6, I-7 and IV-1, IV-2).
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Petitioner argues that in its No Shipment Letter, Reztec identified
certain companies in the PRC as its suppliers of innerspring unit
inputs.\42\ Petitioner believes that this constitutes circumvention of
the Order, and suggests that Reztec's operations and activities warrant
additional investigation.
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\42\ Id. at 16 (citing No Shipment Letter at 2).
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(2) Increase of Subject Imports From the PRC to Malaysia After the
Investigation Initiation
Petitioner contends that Malaysia's official import statistics
indicated that imports from the PRC of the key component in innerspring
units, i.e., coils, have increased substantially since the Order was
imposed.\43\ Petitioner provided a chart of import data related to
Malaysia's imports of coils from the PRC over the last several years
and year-to-date 2011 under HTS 7320.99.000 (other springs and leaves
for springs, of iron/steel, kilograms (``kgs'')). This chart shows an
increase of imported coils from 2,619,670 kgs in 2007 to 9,518.181 kgs
in 2010, and 8,634,757 kgs year-to-date for 2011.\44\
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\43\ Id. at 16.
\44\ Id. at 16. Petitioner also provided a description of
Malaysia's relevant HTS numbers. Id. at Exhibit 8.
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Analysis of the Request
Based on our analysis of Petitioner's circumvention inquiry
request, the Department determines that Petitioner has satisfied the
criteria under section 781(b)(1) of the Act to warrant an initiation of
a formal circumvention inquiry. In accordance with section 351.225(e)
of the Department's regulations, the Department finds that the issue of
whether a product is included within the scope of an order cannot be
determined based solely upon the application and the descriptions of
the merchandise. Accordingly, the Department will notify by mail all
parties on the Department's scope service list of the initiation of a
circumvention inquiry. In addition, in accordance with section
351.225(f)(1)(ii)
[[Page 30504]]
of the Department's regulations, a notice of the initiation of a
circumvention inquiry issued under section 351.225(e) of the
Department's regulations includes a description of the product that is
the subject of the circumvention inquiry--uncovered innerspring units
that contain the characteristics as provided in the scope of the Order,
and an explanation of the reasons for the Department's decision to
initiate a circumvention inquiry, as provided below.
With regard to whether the merchandise from the Malaysia is of the
same class or kind as the merchandise produced in the PRC, Petitioner
has presented information to the Department indicating that, pursuant
to section 781(b)(1)(A) of the Act, the merchandise being produced in
and/or exported from Malaysia by Reztec may be of the same class or
kind as uncovered innerspring units produced in the PRC, which is
subject to the Order. Consequently, the Department finds that
Petitioner has provided sufficient information in its request regarding
the class of kind of merchandise to support the initiation of a
circumvention inquiry.
With regard to completion or assembly of merchandise in a foreign
country, pursuant to section 781(b)(1)(B) of the Act, Petitioner has
also presented information to the Department indicating that the
uncovered innerspring units exported from Malaysia to the United States
are assembled by Reztec in Malaysia using key components from the PRC
that account for a significant portion of the total costs related to
the production of uncovered innerspring units. We find that the
information presented by Petitioner regarding this criterion supports
its request to initiate a circumvention inquiry.
The Department finds that Petitioner sufficiently addressed the
factors described in section 781(b)(1)(C) and 781(b)(2) of the Act
regarding whether the assembly or completion of uncovered innerspring
units in the Malaysia is minor or insignificant. Specifically, in
support of its argument, Petitioner relied on its own experience and
surrogate values from the less-than-fair-value investigation. Thus, we
find that the information presented by Petitioner supports their
request to initiate a circumvention inquiry. In particular, we find
that Petitioner's submission asserts that: (1) Little investment has
been made by Reztec in its uncovered innerspring unit operations in
Malaysia; (2) Reztec has fully integrated production facilities in the
PRC, and therefore, research and development presumably takes place in
the PRC rather than the Malaysia; (3) the assembly or completion of key
uncovered innerspring unit components in Malaysia does not alter the
fundamental characteristics of the uncovered innerspring unit, nor does
it remove it from the scope of the Order; (4) Reztec has a lower
investment level than other companies that produce uncovered
innerspring units; and (5) further assembly or completion of key
uncovered innerspring unit components in Malaysia adds little value to
the merchandise imported to the United States. Our analysis will focus
on Reztec's assembly operations in the Malaysia and, in the context of
this proceeding, we will closely examine the manner in which this
company's processing materials are obtained, whether those materials
are considered subject to the scope of the Order, and the extent of
processing in Malaysia, as well as the manner in which production and
sales relationships are conducted with the alleged PRC suppliers.
With respect to the value of the merchandise produced in the PRC,
pursuant to section 781(b)(1)(D) of the Act, Petitioner relied on its
own production experience in the PRC and arguments in the ``minor or
insignificant process'' portion of its circumvention request to
indicate that the value of the key components produced in the PRC may
be significant relative to the total value of the finished uncovered
innerspring units exported to the United States. We find that this
information adequately meets the requirements of this factor, as
discussed above, for the purposes of initiating a circumvention
inquiry.
Finally, with respect to the additional factors listed under
section 781(b)(3) of the Act, we find that imports of uncovered
innerspring units from Malaysia has increased steadily since the
imposition of the Order and that imports of uncovered innerspring units
and key components from the PRC to Malaysia also have increased since
the Order took effect.
In accordance with section 351.225(l)(2) of the Department's
regulations, if the Department issues a preliminary affirmative
determination, we will then instruct U.S. Customs and Border Protection
to suspend liquidation and require a cash deposit of estimated duties
on the merchandise. This circumvention inquiry covers Reztec. If,
within sufficient time, the Department receives a formal request from
an interested party regarding potential circumvention of the Order by
other Malaysian companies, we will consider conducting additional
inquiries concurrently.
The Department will establish a schedule for questionnaires and
comments on the issues. In accordance with section 351.225(f)(5) of the
Department's regulations, the Department intends to issue its final
determination within 300 days of the date of publication of this
initiation, in accordance with section 781(f) of the Act. This notice
is published in accordance with section 351.225(f) of the Department's
regulations.
Dated: May 17, 2012.
Christian Marsh,
Deputy Assistant Secretary for Antidumping and Countervailing Duty
Operations.
[FR Doc. 2012-12508 Filed 5-22-12; 8:45 am]
BILLING CODE 3510-DS-P