Initiation of Antidumping Duty Investigation: Certain Artist Canvas From the People's Republic of China, 21996-21999 [E5-2047]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 70, Number 81 (Thursday, April 28, 2005)]
[Notices]
[Pages 21996-21999]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2047]



[[Page 21996]]

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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-899]


Initiation of Antidumping Duty Investigation: Certain Artist 
Canvas From the People's Republic of China

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: April 28, 2005.

FOR FURTHER INFORMATION CONTACT: Jon Freed or Michael Holton, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230; telephone: (202) 482-3818 and (202) 482-1324, respectively.

Initiation of Investigation

The Petition

    On March 31, 2005, the Department of Commerce (``Department'') 
received a Petition on imports of certain artist canvas from the 
People's Republic of China (``PRC'') (``Petition'') filed in proper 
form by Tara Materials Inc. (``Tara'' or ``Petitioner'') on behalf of 
the domestic industry and workers producing certain artist canvas. On 
April 7, 2005, the Department clarified that the official filing date 
for the Petition was April 1, 2005, and that the proper period of 
investigation (``POI'') is July 1, 2004, through December 31, 2004. See 
Memorandum from Edward Yang to Barbara Tillman: Decision Memo 
Concerning Petition Filing Date and Period of Investigation, April 7, 
2005. On April 7, 2005, and April 14, 2005, the Department requested 
clarification of certain areas of the Petition and received responses 
to those requests on April 12, 2005, April 15, 2005, and April 18, 
2005.
    In accordance with section 732(b) of the Tariff Act of 1930, as 
amended (``the Act''), Petitioner alleged that imports of certain 
artist canvas from the PRC 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 and threaten 
to injure an industry in the United States.

Scope of Investigation

    The products covered by this investigation are artist canvases 
regardless of dimension and/or size, whether assembled or unassembled 
(i.e., kits that include artist canvas and other items, such as a wood 
frame), that have been primed/coated, whether or not made from cotton, 
whether or not archival, whether bleached or unbleached, and whether or 
not containing an ink receptive top coat. Priming/coating includes the 
application of a solution, designed to promote the adherence of artist 
materials, such as paint or ink, to the fabric. Artist canvases (i.e., 
pre-stretched canvases, canvas panels, canvas pads, canvas rolls 
(including bulk rolls that have been primed), printable canvases, floor 
cloths, and placemats) are tightly woven prepared painting and/or 
printing surfaces.
    Artist canvases subject to this investigation are currently 
classifiable under subheadings 5901.90.20.00 and 5901.90.40.00 of the 
Harmonized Tariff Schedule of the United States (HTSUS). Specifically 
excluded from the scope of this investigation are tracing cloths and 
stretcher strips, whether or not made from wood, so long as they are 
not incorporated into artist canvases or sold as part of an artist 
canvas kit. While HTSUS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding is dispositive.

Comments on Scope of Investigation

    During our review of the Petition, we discussed the scope with 
Petitioner to ensure that it accurately reflects the product for which 
the domestic industry is seeking relief. Moreover, as discussed in the 
preamble to the Department's regulations, we are setting aside a period 
for interested parties to raise issues regarding product coverage. See 
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27295, 
27323 (1997). The Department encourages all interested parties to 
submit such comments within 20 calendar days of publication of this 
initiation notice.
    Comments should be addressed to Import Administration's Central 
Records Unit in Room 1870, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230--Attn: Michael Holton. 
The period of scope consultations is intended to provide the Department 
with ample opportunity to consider all comments and consult with 
interested parties prior to the issuance of the preliminary 
determination.

Determination of Industry Support for the Petition

    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 the Department's industry support determination, which is 
to be made before the initiation of the investigation, be based on 
whether a minimum percentage of the relevant industry supports the 
Petition. A Petition meets this requirement if the domestic producers 
or workers who support the Petition account for: (i) At least 25 
percent of the total production of the domestic like product; and (ii) 
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. Moreover, section 732(c)(4)(D) of the Act 
provides that, if the Petition does not establish support of domestic 
producers or workers accounting for more than 50 percent of the total 
production of the domestic like product, the Department shall: (i) Poll 
the industry or rely on other information in order to determine if 
there is support for the Petition, as required by subparagraph (A), or 
(ii) determine industry support using a statistically valid sampling 
method.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, to determine whether a 
Petition has the requisite industry support, the statute directs the 
Department to look to producers and workers who produce the domestic 
like product. The International Trade Commission (``ITC''), which is 
responsible for determining whether ``the domestic industry'' has been 
injured, must also determine what constitutes a domestic like product 
in order to define the industry. While both the Department and the ITC 
must apply the same statutory definition regarding the domestic like 
product (section 771(10) of the Act), they do so for different purposes 
and pursuant to a 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 law. See USEC, Inc. v. United States, 132 F. Supp. 
2d 1, 8 (Ct. Int'l Trade 2001), citing Algoma Steel Corp. Ltd. v. 
United States, 688 F. Supp. 639, 642-44 (Ct. Int'l Trade 1988).
    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.
    With regard to the domestic like product, Petitioner does not offer 
a

[[Page 21997]]

definition of domestic like product distinct from the scope of the 
investigation. Based on our analysis of the information submitted in 
the Petition, we have determined there is a single domestic like 
product, certain artist canvas, which is defined further in the ``Scope 
of the Investigation'' section above, and we have analyzed industry 
support in terms of that domestic like product.
    Our review of the data provided in the petition and other 
information readily available to the Department indicates that 
Petitioner has established industry support representing at least 25 
percent of the total production of the domestic like product; and more 
than 50 percent of the production of the domestic like product produced 
by that portion of the industry, requiring no further action by the 
Department pursuant to section 732(c)(4)(D) of the Act. In addition, 
the Department received no opposition to the petition from domestic 
producers of the like product. Therefore, the domestic producers (or 
workers) who support the petition account for at least 25 percent of 
the total production of the domestic like product, and the requirements 
of section 732(c)(4)(A)(i) of the Act are met. Furthermore, the 
domestic producers who support the petition account for more than 50 
percent of the production of the domestic like product produced by that 
portion of the industry expressing support for or opposition to the 
petition. Thus, the requirements of section 732(c)(4)(A)(ii) of the Act 
also 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 Import Administration: Antidumping 
Duty Investigation Initiation Checklist of Certain Artist Canvas from 
the PRC (``Initiation Checklist''), dated April 21, 2005, at Attachment 
II (Industry Support).
    The Department finds that Petitioner filed this petition on behalf 
of the domestic industry because it is an interested party as defined 
in section 771(9)(G) of the Act and it has demonstrated sufficient 
industry support with respect to the antidumping investigation that it 
is requesting the Department initiate. See Initiation Checklist at 
Attachment II (Industry Support).

Export Price and Normal Value

    The following is a description of the allegation of sales at less 
than fair value upon which the Department based its decision to 
initiate this investigation. The sources of data for the deductions and 
adjustments relating to the U.S. price and the factors of production 
are also discussed in the Initiation Checklist. Petitioner submits that 
the particular export prices and normal values chosen represent 
equivalent forms of artist canvas. Petitioner identified the proper 
products for comparison by matching the dimensions of the artist 
canvas, the type and depth of stretcher strip, the weight of the cotton 
canvas, the number of coating applications, and the number and 
locations of staples in the artist canvas. See Petition Exhibit 34, 
April 12, 2005, Supplement to the Petition at pages 19-20, and April 
15, 2005, Supplement to Petition at Exhibit 4. Should the need arise to 
use any of this information as facts available under section 776 of the 
Act in our preliminary or final determination, we may reexamine the 
information and revise the margin calculations, if appropriate.

Export Price

    Petitioner based export price on a price list for artist canvas 
offered for sale by a producer and exporter of artist canvas located in 
the PRC. See Petition at page 26 and Exhibit 34. Petitioner also 
submitted promotional materials. Petitioner made no adjustments or 
deductions to the export price. Because, for the reasons discussed in 
the Initiation Checklist, this resulted in a conservative estimate of 
the export price, we relied on the data in the Petition.
    Using the product codes contained in the price list provided to the 
U.S. buyer, Petitioner chose four of the most common types of artist 
canvas sold in the U.S. to be used for the dumping margin calculation. 
See Petition Exhibit 34, April 12, 2005, Supplement to the Petition at 
pages 19-20, and April 15, 2005, Supplement to Petition at Exhibit 4.

Normal Value

    Petitioner asserted that the PRC is a non-market economy country 
(``NME'') 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 Notice of Final Determination of Sales at 
Less Than Fair Value: Magnesium Metal from the People's Republic of 
China, 70 FR 9037 (February 24, 2005), Notice of Final Determination of 
Sales at Less Than Fair Value: Certain Tissue Paper Products From the 
People's Republic of China, 70 FR 7475 (February 14, 2005), and Notice 
of Final Determination of Sales at Less Than Fair Value: Certain Frozen 
and Canned Warmwater Shrimp From the People's Republic of China, 69 FR 
70997 (December 8, 2004). 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 remains in effect for purposes of 
the initiation of this investigation. Accordingly, the normal value of 
the product is appropriately based on factors of production valued in a 
surrogate market economy country in accordance with section 773(c) of 
the Act. In the course of this investigation, all parties will have the 
opportunity to provide relevant information related to the issues of 
the PRC's NME status and the granting of separate rates to individual 
exporters.
    Petitioner selected India as the surrogate country. See Petition at 
pages 14-16. Petitioner explained that India was selected as the 
appropriate surrogate for purposes of this Petition because India is 
economically comparable to the PRC and is a significant producer of 
comparable merchandise. See Petition at page 14. Petitioner identified 
three Indian companies that produce artist canvas. See Petition at page 
15, April 12, 2005, Supplement to the Petition at page 13, and April 
15, 2005, Supplement to the Petition at page 2 and Exhibit 1. In 
addition, Petitioner submitted import statistics indicating that India 
exported about 555,000 square meters of artist canvas to the United 
States in 2004. See Petition at page 15.
    Petitioner provided a dumping margin calculation using the 
Department's NME methodology as required by 19 CFR 351.202(b)(7)(i)(C). 
See Petition Exhibits 12-15, see also, April 15, 2005, Supplement to 
the Petition, at Exhibits 6A-7D. To determine the quantities of inputs 
used by the PRC producers to produce each of the selected artist 
canvases, Petitioner relied on the production experience and actual 
consumption rates of Tara during 2004. Petitioner stated that the 
products selected were chosen because they are representative of the 
U.S. production of artist canvas and the artist canvas imported from 
the PRC. See Petition at page 17. For each product selected for 
comparison to export price, Petitioner provided two sets of normal 
value calculations. One set of normal value calculations reported 
consumption based on total material inventory withdrawals and did not 
account for scrap materials that were recovered and used for other 
production purposes. See April 15, 2005, Supplement to the Petition at 
Exhibits 6A-6D and Exhibits 7A-7D, respectively. Petitioner contends 
that the consumption rates

[[Page 21998]]

that are based on actual inventory withdrawals are the more appropriate 
basis for calculating normal value because the scrap is a ``dead loss'' 
with no further application in the manufacturing process. 
Notwithstanding this argument, an employee of Petitioner provided an 
affidavit that indicates that Tara's re-use of scrap material reduces 
its manufacturing costs. See April 15, 2005, Supplement to the Petition 
at Exhibit 2. However, Petitioner did not incorporate an offset for 
recovered scrap in its normal value calculations. As a result, 
Petitioner's calculation of normal value could be overstated because it 
did not account for scrap materials that are recovered and used for 
other production purposes. Therefore, for the purposes of initiation, 
the Department has conservatively determined to analyze the normal 
value calculations submitted by Petitioner that accounted for materials 
consumed (net of scrap). See April 15, 2005, Supplement to the Petition 
at Exhibits 6A-6D.
    For the normal value calculation, Petitioner valued the factors of 
production for artist canvas using surrogate values derived from 
official Indian government import statistics. See Petition at Exhibits 
16-31, see also April 15, 2005, Supplement to the Petition at Exhibit 
3. Petitioner explained that, when surrogate values were not 
contemporaneous, it calculated the surrogate values using the best data 
available and relied on wholesale price indices in India as published 
in the International Financial Statistics of the International Monetary 
Fund to determine the appropriate adjustments for inflation. See 
Petition at Exhibit 32 and the April 12, 2005, Supplement to the 
Petition at Exhibit 32. Using the foreign currency exchange rates 
posted on the Department's Web site, Petitioner converted the surrogate 
values from rupees to U.S. dollars based on the average exchange rate 
for the POI. See April 12, 2005, Supplement to the Petition at Exhibit 
K. Additionally, in calculating the surrogate values, Petitioner 
excluded those values reflecting imports from countries previously 
determined by the Department to be NME countries and imports into India 
from Indonesia, Korea and Thailand, because the Department has 
previously excluded prices from these countries because they maintain 
broadly-available, non-industry specific export subsidies. See 
Automotive Replacement Glass Windshields From the People's Republic of 
China: Final Results of Administrative Review, 69 FR 61790 (October 21, 
2004), and accompanying Issues and Decision Memorandum at Comment 5.
    For each of the inputs detailed in the normal value calculations, 
Petitioner provided surrogate values based on Indian Import Statistics. 
See April 15, 2005, Supplement to the Petition at Exhibit 3. The 
surrogate values submitted for the material and packing inputs consist 
of information reasonably available, and are therefore acceptable for 
purposes of initiation. However, the Department has recalculated the 
surrogate value for raw canvas and expressed it in U.S. dollars per 
square yard to be consistent with the unit of measure in which the 
consumption of raw canvas is reported. See Initiation Checklist at 
Attachment V.
    The Department calculates and publishes the surrogate values for 
labor to be used in NME cases. Therefore, to value labor, Petitioner 
used a labor rate of $0.93 per hour, in accordance with the 
Department's regulations. See 19 CFR 351.408(c)(3) and Petition at 
Exhibits 6A-6D.
    Petitioner did not include amounts for energy consumption as a 
separate factor of production in its calculation of normal value. Since 
Petitioner did not directly value energy consumption in its normal 
value calculation and because the Department does not normally include 
energy costs in the numerator of its factory overhead ratio, the 
Department has not included an amount for energy in its recalculation 
of Petitioner's normal values. See Initiation Checklist at pages 7-8.
    Factory overhead, selling, general and administrative expenses, 
interest, and profit were derived from the 2003-2004 financial 
statements of Arvind Mills Limited, an Indian fabric producer. See 
Petition at pages 15-16, and Exhibit 33. Petitioner stated it was 
unable to obtain financial data from any Indian producers that 
specifically produce artist canvas. See Petition at page 15. The 
Department agrees with Petitioner's contention that, in the absence of 
surrogate financial data for the specific subject merchandise, the 
Department may consider financial data for surrogate companies with 
similar characteristics and production processes. See Petition at page 
16, see also, Notice of Initiation of Antidumping Duty Investigations: 
4,4'- Diamino-2,2'-Stilbenedisulfonic Acid (DAS) and Stilbenic 
Fluorescent Whitening Agents (SFWA) from Germany, India, and the 
People's Republic of China, 68 FR 34579, 34581 (June 10, 2003). In this 
case, the Department has accepted the financial information for the 
Indian fabric producer for the purposes of initiation, because these 
data appear to be the best information on such expenses currently 
available to Petitioner. Petitioner submitted calculations of the 
surrogate financial ratios in Exhibit 33 of the Petition and revised 
calculations in Exhibit 8 of the April 15, 2005, Supplement to the 
Petition. However, the Department has recalculated the surrogate 
financial ratios to be consistent with its normal practice with regard 
to the treatment of energy, purchase of traded goods, taxes, duties, 
and movement expenses. See Initiation Checklist at Attachment VII.
    In addition to the changes discussed above, the Department has 
adjusted Petitioner's normal value calculations with regard to how 
amounts for packing materials are incorporated into the normal value 
calculation. Petitioner stated that it had excluded the packing 
material amounts from the components of the normal value calculation to 
which the surrogate financial ratios were applied in the normal value 
calculations. However, Petitioner's calculation of normal value for the 
16x20 stretched canvas and the 18x24 stretched canvas applied the 
surrogate financial ratios to the packing materials as well as to the 
material and labor amounts, which Petitioner valued directly. As a 
result, Petitioner's calculation overstated normal value to a certain 
extent for those two products. In light of this, the Department has 
recalculated the normal values for the 16x20 stretched canvas and the 
18x24 stretched canvas so that packing costs are added to normal value 
after application of the surrogate financial ratios to the cost of 
manufacturing. See Initiation Checklist at Attachment VI.

Fair Value Comparisons

    Based on the data provided by Petitioner, there is reason to 
believe that imports of certain artist canvas from the PRC are being, 
or are likely to be, sold in the United States at less than fair value. 
Based upon comparisons of export price to the normal value, calculated 
in accordance with section 773(c) of the Act, the estimated 
recalculated dumping margins for certain artist canvas range from 
242.09 percent to 264.09 percent.

Allegations and Evidence of Material Injury and Causation

    The Petition alleges that the U.S. industry producing the domestic 
like product is being materially injured and is threatened with 
material injury, by reason of the imports of the subject merchandise 
sold at less than normal value. The petitioner contends that the

[[Page 21999]]

industry's injured condition is evident in: (1) Declining market share; 
(2) declining domestic prices and lost sales; (3) declining production 
and sales; (4) reductions in employment levels; and (5) declining 
profitability. See Initiation Checklist at Attachment IV (Injury).
    The Department has assessed the allegations and supporting evidence 
(e.g., import statistics, etc) regarding material injury and causation 
and determined that these allegations are supported by accurate and 
adequate evidence and meet the statutory requirements for initiation.

Separate Rates and Quantity and Value Questionnaire

    The Department recently modified the process by which exporters and 
producers may obtain separate-rate status in NME investigations. This 
change is described in Policy Bulletin 05.1: Separate-Rates Practice 
and Application of Combination Rates in Antidumping Investigations 
involving Non-Market Economy Countries, (April 5, 2005), (``Policy 
Bulletin 05.1'') available at https://ia.ita.doc.gov/. Although the 
process has changed, now requiring submission of a separate-rate status 
application, the standard for eligibility for a separate rate (which is 
whether a firm can demonstrate an absence of both de jure and de facto 
governmental control over its export activities) has not changed.
    The specific requirements for submitting a separate-rates 
application are outlined in detail in the application itself, and in 
Policy Bulletin 05.1, which is also available on the Department's Web 
site at https://ia.ita.doc.gov/policy/bull05-1.pdf. Regarding deadlines, 
Policy Bulletin 05.1 explains that ``[a]ll applications are due sixty 
calendar days after publication of the initiation notice. This deadline 
applies equally to NME-owned and wholly foreign-owned firms for 
completing the applicable provisions of the application and for 
submitting the required supporting documentation.'' See Policy Bulletin 
05.1 at page 5.
    The deadline for submitting a separate-rates application applies 
equally to NME-owned firms, wholly foreign-owned firms, and foreign 
sellers who purchase the subject merchandise and export it to the 
United States. Therefore, this notice constitutes public notification 
to all firms eligible to seek separate-rate status in the investigation 
of artist canvas from the PRC that they must submit a separate-rates 
application within 60 calendar days of the date of publication of this 
initiation notice in the Federal Register. All potential respondents 
should also bear in mind that firms to which the Department issues a 
Quantity and Value (``Q&V'') questionnaire must respond both to this 
questionnaire and to the separate-rates application by the respective 
deadlines in order to receive consideration for a separate-rate status. 
In other words, the Department will not give consideration to any 
separate rate-status application made by parties that were issued a Q&V 
questionnaire by the Department but failed to respond to that 
questionnaire within the established deadline. The particular separate-
rate status application for this investigation is available on the 
Department's Web site https://ia.ita.doc.gov/ia-highlights-and-
news.html.

Combination Rates

    The Department will calculate combination rates for certain 
respondents that are eligible for a separate rate in this 
investigation. The Separate Rates and Combination Rates Bulletin, 
states:

[w]hile continuing the practice of assigning separate rates only to 
exporters, all separate rates that the Department will now assign in 
its NME investigations will be specific to those producers that 
supplied the exporter during the period of investigation. Note, 
however, that one rate is calculated for the exporter and all of the 
producers which supplied subject merchandise to it during the period 
of investigation. This practice applies both to mandatory 
respondents receiving an individually calculated separate rate as 
well as the pool of non-investigated firms receiving the weighted-
average of the individually calculated rates. This practice is 
referred to as the application of ``combination rates'' because such 
rates apply to specific combinations of exporters and one or more 
producers. The cash-deposit rate assigned to an exporter will apply 
only to merchandise both exported by the firm in question and 
produced by a firm that supplied the exporter during the period of 
investigation.

Separate Rates and Combination Rates Bulletin, at page 6.

Initiation of Antidumping Investigation

    Based upon our examination of the Petition on certain artist canvas 
from the PRC, we find that the Petition meets the requirements of 
section 732 of the Act. Therefore, we are initiating an antidumping 
duty investigation to determine whether imports of certain artist 
canvas from the PRC are being, or are likely to be, sold in the United 
States at less than fair value. Unless it is postponed, we will make 
our preliminary determination no later than 140 days after the date of 
this initiation.

Distribution of Copies of the Petition

    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 Government of 
the PRC.

ITC Notification

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

Preliminary Determination By the ITC

    The ITC will preliminarily determine, no later than May 16, 2005, 
whether there is a reasonable indication that imports of certain artist 
canvas from the PRC are causing material injury, or are threatening to 
cause material injury, to a U.S. industry. A negative ITC determination 
will result in this investigation being terminated; otherwise, this 
investigation will proceed according to statutory and regulatory time 
limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    Dated: April 21, 2005.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. E5-2047 Filed 4-27-05; 8:45 am]
BILLING CODE 3510-DS-P