[Federal Register Volume 79, Number 250 (Wednesday, December 31, 2014)]
[Notices]
[Pages 78792-78795]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30658]
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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 on Antidumping Duty Order
AGENCY: Enforcement and Compliance, 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 pursuant to section 781(b) of
the Tariff Act of 1930, as amended (``the Act''), to determine whether
certain imports are circumventing the antidumping duty order on
uncovered innerspring units (``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: December 31, 2014.
FOR FURTHER INFORMATION CONTACT: Steven Hampton, AD/CVD Operations,
Office V, Enforcement and Compliance, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-
0116.
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 an antidumping
duty order on subject merchandise.\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 fourth administrative review of the Order,\4\ Petitioner
requested that the
[[Page 78793]]
Department review Goldon Bedding Manufacturing (M) Sdn. Bhd
(``Goldon'').\5\ The Department initiated the review on March 29, 2013
\6\ and sent questionnaires to the named respondents, including Goldon.
On August 19, 2013, in response to the Department's supplemental
questionnaire, Goldon acknowledged that it imports innerspring unit
components from the PRC for use in the production of innerspring units
in Malaysia.\7\ On September 19, 2014, the Department applied adverse
facts available to all of Goldon's PRC-origin subject merchandise upon
determining that Goldon did not cooperate to the best of its ability in
the review.\8\
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\4\ The fourth administrative review covered the period of
review (``POR'') February 1, 2012, through January 31, 2013. See
Initiation of Antidumping and Countervailing Duty Administrative
Reviews and Request for Revocation in Part, 78 FR 19197 (March 29,
2013) (``Initiation Notice'').
\5\ The Department notes that Petitioner requested an
administrative review and anticircumvention inquiry of ``Goldon
Bedding Manufacturing Sdn Bhd.'' However, during the 2012-2013
administrative review, Goldon provided its business license which
indicated that the company's official name is ``Goldon Bedding
Manufacturing (M) Sdn Bhd.'' See Uncovered Innerspring Units from
the People's Republic of China: Final Results of Antidumping Duty
Administrative Review; 2012-2013, 79 FR 56338, 56339 (September 19,
2014) and accompanying Issues and Decision Memorandum (``Final
Results''), at 1.
\6\ See Initiation Notice, 78 FR at 19208.
\7\ See Uncovered Innerspring Units from China: Request for a
Circumvention Inquiry, dated November 7, 2014, at 3 (``Circumvention
Request'').
\8\ See Final Results, 79 FR at 56339.
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On November 7, 2014, pursuant to section 781(b) of 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 Goldon to determine whether Goldon's innerspring units
completed and assembled in Malaysia from PRC-origin components
constitute circumvention of the Order.\9\ In its request, Petitioner
contends that Goldon, by its own admission, 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.\10\
Petitioner argues that Goldon's operations constitute minor further
assembly in a third country, i.e., Malaysia.
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\9\ See generally Circumvention Request.
\10\ Id., at 3.
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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 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 the innerspring units that Goldon completes
or assembles in Malaysia and subsequently ships to the United States
are of the same class or kind as that subject to the Order. Petitioner
contends that there is no question that the uncovered innerspring units
that Goldon exports to the United States meet the physical
characteristics that define the scope of the order.\11\ Goldon
acknowledged this fact in the fourth administrative review when it
stated: ``{y{time} es, merchandise as stated in the database are the
subject merchandise that {sic{time} comprised from locally source
{sic{time} material and imported material from PRC.'' \12\
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\11\ Id., at 7-8.
\12\ Id., at 8; and Exhibit 1, at 2.
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B. Completion of Merchandise in a Foreign Country
Petitioner observes 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.\13\ Petitioner
argues that Goldon admitted that it imports the key inputs used in the
production of innerspring units and provided invoices describing the
components as ``spring mattress coils,'' ``wire,'' ``steel frame,'' and
``steel strips.'' \14\ Furthermore, Petitioner contends that Goldon
indicated that 70 percent of its materials used in the production of
innerspring units are sourced from the PRC, the country with respect to
which the Order applies, and that it ``shipped the completed
merchandise into the U.S.'' \15\
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\13\ See Circumvention Request at 8. 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).
\14\ See Circumvention Request, at 9; and Exhibit 2, at
Attachment 2.
\15\ Id., at 9, 15 and Exhibit 2, at Attachment 2.
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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 of
[[Page 78794]]
merchandise in a foreign country is minor or insignificant. Petitioner
believes that an examination of these factors indicates that Goldon'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.\16\ 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)
\17\ are hand-loaded, then hand-laced with helical wire and finished by
clipping the border rods to the unit.\18\ Petitioner posits that the
cost of a new wooden (or steel) jig is approximately $200-$400.\19\
Petitioner argues that the level of investment would also be low if
Goldon relies on a semi-automated assembly operation where a machine is
used to assemble the rows of coils.\20\
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\16\ See Circumvention Request, at 10.
\17\ 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.
\18\ See Circumvention Request, at 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.
\19\ Id.
\20\ Id.
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(2) Level of Research and Development
Petitioner is not aware that Goldon performs any research and
development related to the assembly and/or production of innerspring
units.\21\ Moreover, Petitioner states that it would not expect Goldon
to incur any research and development expenses related to its
innerspring assembly operations.\22\
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\21\ Id., at 11.
\22\ 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.\23\ This process, as described by
Goldon, is very similar to the process found to be insignificant by the
Department in the prior circumvention inquiry on this Order. \24\
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\23\ Id.
\24\ See Circumvention Request, at 11; see also Uncovered
Innerspring Units from the People's Republic of China: Affirmative
Final Determination of Circumvention of the Antidumping Duty Order,
79 FR 3345 (January 21, 2014) (``Reztec Final Determination'').
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(4) Extent of Production in the Malaysia
Petitioner states that Goldon only has one facility for the
production of innerspring units.\25\ Goldon indicated that six to seven
workers are involved in the assembly of innerspring units, with another
one or two workers devoted to packing.\26\ Petitioner contends that
this indicates that the portion of Goldon's production facility
attributable to assembly operations is small.\27\
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\25\ See Circumvention Inquiry, at 12.
\26\ Id.
\27\ 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.\28\ Petitioner
believes Goldon's assembly operations likely rely on relatively
unskilled, low wage employees.\29\ Thus, these assembly operations
involve minimal additional labor costs.\30\ Petitioner asserts that, by
any standard, the assembly operations represent an insignificant
portion of the total value.\31\
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\28\ Id., at 13.
\29\ Id.
\30\ Id. 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.
\31\ Id.
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D. Value of Merchandise Produced in PRC
Petitioner argues that the value of the components that Goldon
imports from 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.\32\ As Petitioner
noted previously, innerspring coils, helical wires, 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.\33\ 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.\34\ 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.\35\
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\32\ Id., at 14.
\33\ Id.
\34\ Id.
\35\ Id., at 14-15.
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E. Additional Factors for Consideration
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 believes that an examination of these factors
supports finding that Goldon's Malaysian exports of innerspring units
should be within the scope of the Order.\36\
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\36\ Petitioner did not analyze or submit evidence concerning
affiliation under section 781(b)(3)(B) of the Act.
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(1) Pattern of Trade
Goldon has stated that while it was originally set up to supply the
domestic market, in 2011 it changed its business strategy to serve the
United States.\37\ As described by Goldon, this strategy consists of
assembling innersprings from 70 percent PRC-origin components and 30
percent Malaysian components, and exporting the assembled innerspring
units to the United States.\38\
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\37\ Id., at 15.
\38\ Id.
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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.\39\ Petitioner provided a
chart that illustrated the U.S. annual imports from
[[Page 78795]]
Malaysia under the relevant HTSUS subheadings.\40\ Petitioner states
that prior to 2009, there were virtually no imports of uncovered
innerspring units from Malaysia to the United States.\41\ However,
according to the chart, subject imports from Malaysia to the United
States have steadily increased: 185,917 pieces were imported in 2009;
312,317 pieces were imported in 2010; 344,388 pieces were imported in
2011; 132,017 pieces were imported in 2012; and 52,051 pieces were
imported in 2013.\42\ Petitioner claims that the lower overall entry
quantities over the last two years are due to the previous
anticircumvention inquiry filed by Petitioner in 2012.\43\ Petitioner
notes that quantities of imports after 2012, while not as high as the
immediately preceding years, are still significant compared to before
the Order was in place.\44\
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\39\ See Circumvention Inquiry, at 15-16. 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).
\40\ Id., at 17.
\41\ Id., at 16.
\42\ Id., at 17.
\43\ Id.
\44\ Id.
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Furthermore, Petitioner contends that Malaysia's official import
statistics indicated that imports from the PRC of one of the key
components in innerspring units (i.e., coils) have increased
substantially since the Order was imposed.\45\ Petitioner provided a
chart of import data related to Malaysia's imports of coils from the
PRC over the last several years, as well as the current year 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 2,995,519 kgs in 2007 to 11,972,478 kgs in 2011, and a gradual
decrease to 5,218,789 kgs for the current year.\46\ Again, Petitioner
notes that imports have somewhat declined starting in 2012, which may
be due to the Department's determination in the previous
anticircumvention inquiry filed by Petitioner.\47\ Nevertheless,
Petitioner contends that imports of coils from the PRC remain higher
than before the Order was in place.\48\
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\45\ Id.
\46\ Id. Petitioner also provided a description of Malaysia's
relevant HTS numbers. Id., at Exhibit 7.
\47\ Id.; see also Reztec Final Determination, 79 FR 3345 and
accompanying Issues and Decision Memorandum. Petitioner did not
submit any Malaysian import statistics regarding imports of helical
wires and border rods from the PRC.
\48\ Id.
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(2) Increase of Subject Imports From the PRC to Malaysia After the
Investigation Initiation
Petitioner did not provide any evidence regarding an increase in
subject imports (i.e., completed uncovered innerspring units) from the
PRC to Malaysia after the initiation of the investigation. However, as
noted above, Petitioner provided information that imports of one of the
key components of innerspring units from PRC to Malaysia increased
significantly during this time.
F. Whether Action Is Appropriate To Prevent Evasion of the Order
Based on the information provided by Petitioner, and for the
reasons provided in the analysis below, the Department determines that
initiating an anticircumvention inquiry is appropriate to identify any
potential evasion of the Order.
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.\49\ 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.
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\49\ Id., at 7-17.
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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 Goldon. 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: December 22, 2014.
Christian Marsh,
Deputy Assistant Secretary for Antidumping and Countervailing Duty
Operations.
[FR Doc. 2014-30658 Filed 12-30-14; 8:45 am]
BILLING CODE 3510-DS-P