Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Initiation of Countervailing Duty Investigation, 44122-44126 [07-3833]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 72, Number 151 (Tuesday, August 7, 2007)]
[Notices]
[Pages 44122-44126]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-3833]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-913]


Certain New Pneumatic Off-the-Road Tires From the People's 
Republic of China: Initiation of Countervailing Duty Investigation

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

EFFECTIVE DATES: August 7, 2007.

FOR FURTHER INFORMATION CONTACT: Mark Hoadley or Toni Page, AD/CVD 
Operations, Office 6, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
3148 and (202) 482-1398, respectively.

Initiation of Investigation

The Petition

    On June 18, 2007, the Department of Commerce (the Department) 
received a petition filed in proper form by Titan Tire Corporation and 
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy Allied 
Industrial and Service Workers International Union, ALF-CIO-CLC 
(petitioners). On June 22, 2007 and July 3, 2007, the Department issued 
requests for additional information and clarification of certain areas 
of the petition involving general issues concerning the countervailing 
duty (CVD) allegations. Based on the Department's requests, the 
petitioners filed additional information concerning the petition on 
June 27, 2007 and July 5, 2007.
    In accordance with section 702(b)(1) of the Tariff Act of 1930, as 
amended (the Act), petitioners allege that manufacturers, producers, or 
exporters of certain new pneumatic off-the-road tires (OTR tires) in 
the People's Republic of China (the PRC) received countervailable 
subsidies within the meaning of section 701 of the Act and that such 
imports are materially injuring an industry in the United States.
    The Department finds that petitioners filed this petition on behalf 
of the domestic industry because they are interested parties as defined 
in sections 771(9)(C) and (D) of the Act and petitioners have 
demonstrated sufficient industry support with respect to the 
countervailing duty investigation that they are requesting the 
Department to initiate (see, infra, ``Determination of Industry Support 
for the Petition'').

Scope of Investigation

    The merchandise covered by this investigation is certain new 
pneumatic off-the-road tires from the PRC. See Attachment to this 
notice for a complete description of the merchandise covered by this 
investigation.

Comments on Scope of Investigation

    During our review of the petition, we discussed the scope with 
petitioners to ensure that it is an accurate reflection of the products 
for which the domestic industry is seeking relief. Moreover, as 
discussed in the preamble to the regulations (Antidumping Duties: 
Countervailing Duties: Final Rule, 62 FR 27296, 27323 (May 19, 1997)), 
we are setting aside a period for interested parties to raise issues 
regarding product coverage. The Department encourages all interested 
parties to submit such comments within 20 calendar days of the 
publication of this notice. Comments should be addressed to

[[Page 44123]]

Import Administration's Central Records Unit (CRU), Room 1870, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. The period of scope is intended to provide the 
Department with ample opportunity to consider all comments and to 
consult with parties prior to the issuance of the preliminary 
determination.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Government of the People's Republic of 
China (hereinafter, the GOC) for consultations with respect to the 
countervailing duty petition. The Department held these consultations 
in Beijing, China with representatives of the GOC on July 16, 2007. See 
the Memorandum to The File, entitled, ``Consultations with Officials 
from the Government of the People's Republic of China'' (July 16, 2007) 
(public document on file in the CRU of the Department of Commerce, Room 
B-099).

Determination of Industry Support for the Petition

    Section 702(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 702(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for: (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 702(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 as a whole 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 (CIT 2001), citing Algoma Steel Corp. Ltd. v. United 
States, 688 F. Supp. 639, 644 (1988), aff'd 865 F.2d 240 (Fed. Cir. 
1989), cert. denied 492 U.S. 919 (1989).
    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 subtitle.'' 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, the petitioners do not 
offer a definition of domestic like product distinct from the scope of 
the investigation. Based on our analysis of the information submitted 
on the record, we have determined that certain OTR tires constitute a 
single domestic like product and we have analyzed industry support in 
terms of that domestic like product. For a discussion of the domestic 
like product analysis in this case, see the Countervailing Duty 
Investigation Initiation Checklist: Certain New Pneumatic Off-The-Road 
Tires from the People's Republic of China (PRC) (OTR Tires CVD 
Initiation Checklist), Industry Support at Attachment II, on file in 
the Central Records Unit (CRU), Room B-099 of the main Department of 
Commerce building.
    On July 6, 2007, the Department extended the initiation deadline by 
20 days to poll the domestic industry in accordance with section 
702(c)(4)D) of the Act, because it was ``not clear from the petitions 
whether the industry support criteria have been met * * *'' See 
Extension of the Deadline for Determining the Adequacy of the 
Antidumping Duty and Countervailing Duty Petitions: New Pneumatic Off-
the-Road Tires from the People's Republic of China, 72 FR 38816 (July 
16, 2007). On July 16, 2007, we issued polling questionnaires to all 
known domestic producers of certain OTR tires identified in the 
petition and by the Department's research. The questionnaires are on 
file in the CRU. For a detailed discussion of the responses received, 
see OTR Tires CVD Initiation Checklist at Attachment II.
    Based on an analysis of the data collected, we determine that the 
petitioners have demonstrated industry support representing over 50 
percent of the total production of the domestic 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 702(c)(4)(A)(i) of the 
Act are met. Furthermore, given that the petitioners represent more 
than 50 percent of the total production of the domestic like product, 
the requirements of section 702(c)(4)(A)(ii) of the Act are also met. 
Accordingly, we determine that this petition is filed on behalf of the 
domestic industry within the meaning of section 702(b)(1) of the Act. 
See OTR Tires CVD Initiation Checklist at Attachment II.
    The Department finds that the petitioners filed the petition on 
behalf of the domestic industry because they are interested parties as 
defined in sections 771(9)(C) and (D) of the Act and they have 
demonstrated sufficient industry support with respect to the 
countervailing duty investigation that they are requesting the 
Department initiate. See OTR Tires CVD Initiation Checklist at 
Attachment II.

Injury Test

    Because the PRC is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of 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 the PRC materially 
injure, or threaten material injury to, a U.S. industry.

Allegations and Evidence of Material Iniury and Causation

    Petitioners allege that the U.S. industry producing the domestic 
like product is being materially injured by reason of the imports of 
the subject merchandise sold at less than NV. Petitioners contend that 
the industry's injured condition is illustrated by the reduced market 
share, lost sales, reduced production and capacity utilization rate, 
reduced shipments, underselling and price depressing and suppressing 
effects, lost revenue and sales, reduced employment, decline in 
financial performance, decrease in capital expenditure, and increase in 
import penetration. We have assessed

[[Page 44124]]

the allegations and supporting evidence regarding material injury and 
causation, and we have determined that these allegations are properly 
supported by adequate evidence and meet the statutory requirements for 
initiation. See OTR Tires CVD Initiation Checklist at Attachment III.

Subsidy Allegations

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition on behalf of an industry that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a) of the Act 
and (2) is accompanied by information reasonably available to 
petitioners supporting the allegations. The Department has examined the 
countervailing duty petition on OTR tires from the PRC and found that 
it complies with the requirements of section 702(b) of the Act. 
Therefore, in accordance with section 702(b) of the Act, we are 
initiating a countervailing duty investigation to determine whether 
manufacturers, producers, or exporters of OTR tires in the PRC receive 
countervailable subsidies. For a discussion of evidence supporting our 
initiation determination, see OTR Tires CVD Initiation Checklist.
    We are including in our investigation the following programs 
alleged in the petition to have provided countervailable subsidies to 
producers and exporters of the subject merchandise:
GOC Loan Programs
1. Discounted Loans for Export-Oriented Enterprises
2. Loan Forgiveness for State Owned Enterprises (SOEs)
3. Preferential Lending to SOEs
GOC Currency Program
4. Foreign Currency Retention Scheme
GOC Grant Programs
5. Grants to the Tire Industry for Electricity
6. The State Key Technologies Renovation Project Fund
GOC Provision of Goods or Services for Less Than Adequate Remuneration
7. Provision of Land and Utilities to SOEs for Less than Adequate 
Remuneration
8. Provision of Land and Utilities to Foreign Invested Enterprises 
(FIEs) for Less than Adequate Remuneration
GOC Income Tax Programs
9. Preferential Tax Policies for Enterprises with Foreign Investment 
(Two Free, Three Half Income Program)
10. Preferential Tax Policies for Export-Oriented FIEs
11. Corporate Income Tax Refund Program for Reinvestment of FIE Profits 
in Export-Oriented Enterprises
12. Tax Benefits for FIEs in Encouraged Industries that Purchase 
Domestic Origin Machinery
13. Tax Subsidies to FIEs Based in Specially Designated Geographic 
Areas
GOC Indirect Tax Programs and Import Tariff Programs
14. Value Added Tax (VAT) Rebate for FIE Purchases of Domestically 
Produced Equipment
15. VAT and Tariff Exemptions for FIEs and Certain Domestic Enterprises 
Using Imported Equipment in Encouraged Industries
16. VAT Export Rebates
17. Exemption from Payment of Staff and Worker Benefit Taxes for 
Export-Oriented Enterprises
Provincial Grant Programs
18. Funds for Outward Expansion of Industries in Guangdong Province
19. Export Interest Subsidy Funds for Enterprises Located in Guangdong 
and Zhejiang Provinces
Provincial Provision of Goods and Services for Less Than Adequate 
Remuneration
20. Provision of Land and Utilities at Less Than Adequate Remuneration 
to Export-Oriented Enterprises and FIEs by Provincial Governments
Provincial and Local Tax Programs for FIEs
21. Local Income Tax Exemption and Reduction Programs for 
``Productive'' FIEs

    For further information explaining why the Department is 
investigating these programs, see the OTR Tires CVD Initiation 
Checklist.
    We are not including in our investigation the following programs 
alleged to benefit producers and exporters of the subject merchandise 
in the PRC:
1. Managed Exchange Rate Export Subsidy (Currency Manipulation)
    Petitioners allege that the GOC's manipulates its currency to 
maintain an undervalued RMB. According to petitioners, the undervalued 
RMB benefits PRC exporters. Petitioners have not sufficiently alleged 
the elements necessary for the imposition of a countervailing duty and 
did not support the allegation with reasonably available information. 
Therefore, we do not plan to investigate the currency manipulation 
program.
2. Preferential Lending to the Tire Industry
    Petitioners allege that state-owned commercial banks must be under 
directives from the GOC to give preferential loans to the tire 
industry. Petitioners failed to demonstrate that such loans could be 
specific to the tire industry.
3. Grants to the Tire Industry for Land-Usage Fees
    Petitioners allege that the GOC offers grants to Chinese tire 
manufacturers to cover land-usage fees. Petitioners did not provide any 
evidence of grants to cover land usage fees specific to the tire 
industry.
4. VAT Export Rebate of Prior-Stage, Cumulative Taxes
    Petitioners allege that the VAT levied on capital goods in the PRC 
actually constitutes a prior stage cumulative tax. Paragraph (h) of the 
Illustrative List of Export Subsidies in Annex I to the WTO Subsidies 
and Countervailing Measures Agreement applies to prior stage indirect 
taxes and VAT systems are expressly excluded from consideration under 
paragraph (h).
5. Lower VAT Rebates for Downstream Products
    Petitioners allege that the GOC provides lower rebates for exports 
of major inputs to tire production than it provides to exports of 
tires; thus, benefitting tire production by suppressing the market for 
inputs. Petitioners were unable to demonstrate that the price of inputs 
(e.g., rubber) had been affected by the alleged lower export rebate.

Application of the Countervailing Duty Law to the PRC

    The Department has treated the PRC as an NME country in all past 
antidumping duty investigations and administrative reviews. In 
accordance with section 771(18)(C)(i) of the Act, any determination 
that a country is an NME country shall remain in effect until revoked 
by the administering authority. See e.g., Tapered Roller Bearings and 
Parts Thereof, Finished and 10 Unfinished, (TRBs) From the People's 
Republic of China: Preliminary Results of 2001-2002 Administrative 
Review and Partial Rescission of Review, 68 FR 7500, 7500-1 (February 
14, 2003), unchanged in TRBs from the People's Republic of China: Final 
Results of 2001-2002 Administrative Review, 68

[[Page 44125]]

FR 70488, 70488-89 (December 18, 2003).
    In the amended preliminary determination in the investigation of 
coated free sheet paper from the PRC, the Department preliminarily 
determined that the current nature of the PRC economy does not create 
obstacles to applying the necessary criteria in the CVD law. See Coated 
Free Sheet Paper from the People's Republic of China: Amended 
Preliminary Affirmative Countervailing Duty Determination, 72 FR 17484, 
17486 (April 9, 2007) (CFS Preliminary Determination), and Memorandum 
for David M. Spooner, Assistant Secretary for Import Administration, 
``Countervailing Duty Investigation of Coated Free Sheet Paper from The 
People's Republic of China--Whether the Analytic Elements of the 
Georgetown Steel Opinion are Applicable to China's Present-Day 
Economy,'' (March 29,2007), on file in the CRU. Therefore, because the 
petitioners have provided sufficient allegations and support of their 
allegations to meet the statutory criteria for initiating a 
countervailing duty investigation of OTR tires from the PRC, initiation 
of a CVD investigation is warranted in this case.

Distribution of Copies of the Petition

    In accordance with section 702(b)(4)(A)(i) of the Act, a copy of 
the public version of the petition has been provided to the GOC. To the 
extent practicable, we will attempt to provide a copy of the public 
version of the petition to each exporter named in the petition, as 
provided for under 19 CFR 351.203(c)(2).

ITC Notification

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

Preliminary Determination by the ITC

    The ITC will preliminarily determine, within 25 days after the date 
on which it receives notice of this initiation, whether there is a 
reasonable indication that imports of subsidized OTR tires from the PRC 
are materially injuring, or threatening material injury to, a u.s. 
industry. See section 703(a)(2) of the Act. A negative ITC 
determination will result in the investigation being terminated; 
otherwise, the 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: July 30, 2007.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.

Attachment--Scope of the Investigation for the Petitions Covering 
Certain New Pneumatic Off-the-Road Tires From the People's Republic of 
China

    The products covered by the scope are new pneumatic tires designed 
for off-the-road (OTR) and off-highway use, subject to exceptions 
identified below. Certain OTR tires are generally designed, 
manufactured and offered for sale for use on off-road or off-highway 
surfaces, including but not limited to, agricultural fields, forests, 
construction sites, factory and warehouse interiors, airport tarmacs, 
ports and harbors, mines, quarries, gravel yards, and steel mills. The 
vehicles and equipment for which certain OTR tires are designed for use 
include, but are not limited to: (1) Agricultural and forestry vehicles 
and equipment, including agricultural tractors,\1\ combine 
harvesters,\2\ agricultural high clearance sprayers,\3\ industrial 
tractors,\4\ log-skidders,\5\ agricultural implements, highway-towed 
implements, agricultural logging, and agricultural, industrial, skid-
steers/mini-loaders; \6\ (2) construction vehicles and equipment, 
including earthmover articulated dump products, rigid frame haul 
trucks,\7\ front end loaders,\8\ dozers,\9\ lift trucks, straddle 
carriers,\10\ graders,\11\ mobile cranes, compactors; and (3) 
industrial vehicles and equipment, including smooth floor, industrial, 
mining, counterbalanced lift trucks, industrial and mining vehicles 
other than smooth floor, skid-steers/mini-loaders, and smooth floor 
off-the-road counterbalanced lift trucks.\12\ The foregoing list of 
vehicles and equipment generally have in common that they are used for 
hauling, towing, lifting, and/or loading a wide variety of equipment 
and materials in agricultural, construction and industrial settings. 
The foregoing descriptions are illustrative of the types of vehicles 
and equipment that use certain OTR tires, but are not necessarily all-
inclusive. While the physical characteristics of certain OTR tires will 
vary depending on the specific applications and conditions for which 
the tires are designed (e.g., tread pattern and depth), all of the 
tires within the scope have in common that they are designed for off-
road and off-highway use. Except as discussed below, OTR tires included 
in the scope of the petitions range in size (rim diameter) generally 
but not exclusively from 8 inches to 54 inches. The tires may be either 
tube-type or tubeless, radial or non-radial, and intended for sale 
either to original equipment manufacturers or the replacement market. 
The subject merchandise is currently classifiable under Harmonized 
Tariff Schedule of the United States (``HTSUS'') subheadings: 
4011.20.10.25, 4011.20.10.35, 4011.20.50.30, 4011.20.50.50, 
4011.61.00.00, 4011.62.00.00, 4011.63.00.00, 4011.69.00.00, 
4011.92.00.00, 4011.93.40.00, 4011.93.80.00, 4011.94.40.00, and 
4011.94.80.00. While HTSUS subheadings are provided for convenience and 
Customs purposes, our written description of the scope is dispositive.
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    \1\ Agricultural tractors are four-wheeled vehicles usually with 
large rear tires and small front tires that are used to tow farming 
equipment.
    \2\ Combine harvesters are used to harvest crops such as corn or 
wheat.
    \3\ Agricultural sprayers are used to irrigate agricultural 
fields.
    \4\ Industrial tractors are four-wheeled vehicles usually with 
large rear tires and small front tires that are used to tow 
industrial equipment.
    \5\ A log skidder has a grappling lift arm that is used to 
grasp, lift and move trees that have been cut down to a truck or 
trailer for transport to a mill or other destination.
    \6\ Skid-steer loaders are four-wheel drive vehicles with the 
left-side drive wheels irIdependent of the right-side drive wheels 
and lift arms that lie alongside the driver with the major pivot 
points behind the driver's shoulders. Skid-steer loaders are used in 
agricultural, construction and industrial settings.
    \7\ Haul trucks, which may be either rigid frame or articulated 
(i.e., able to bend in the middle) are typically used in mines, 
quarries and construction sites to haul soil, aggregate, mined ore, 
or debris.
    \8\ Front loaders have lift arms in front of the vehicle. It can 
scrape material from one location to another, carry material in its 
bucket or load material into a truck or trailer.
    \9\ A dozer is a large four-wheeled vehicle with a dozer blade 
that is used to push large quantities of soil, sand, rubble, etc., 
typically around construction sites. They can also be used to 
perform ``rough grading'' in road construction.
    \10\ A straddle carrier is a rigid frame, engine-powered machine 
that is used to load and offload containers from container vessels 
and load them onto (or off of) tractor trailers.
    \11\ A grader is a vehicle with a large blade used to create a 
flat surface. Graders are typically used to perform ``finish 
grading.'' Graders are commonly used in maintenance of unpaved roads 
and road construction to prepare the base course onto which asphalt 
or other paving material will be laid.
    \12\ A counterbalanced lift truck is a rigid frame, engine-
powered machine with lift arms that has additional weight 
incorporated into the back of the machine to offset or 
counterbalance the weight of loads that it lifts so as to prevent 
the vehicle from overturning. An example of a counterbalanced lift 
truck is a counterbalanced fork lift truck. Counterbalanced lift 
trucks may be designed for use on smooth floor surfaces, such as a 
factory or warehouse, or other surfaces, such as construction sites, 
mines, etc.
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    Specifically excluded from the scope are new pneumatic tires 
designed,

[[Page 44126]]

manufactured and offered for sale primarily for on-highway or on-road 
use, including passenger cars, race cars, station wagons, sport utility 
vehicles, minivans, mobile homes, motorcycles, bicycles, on-road or on-
highway trailers, light trucks, and trucks and buses. Such tires 
generally have in common that the symbol ``DOT'' must appear on the 
sidewall, certifying that the tire conforms to applicable motor vehicle 
safety standards. Such excluded tires may also have the following 
designations that are used by the Tire and Rim Association:
    Prefix letter designations:
     P--Identifies a tire intended primarily for service on 
passenger cars;
     LT--Identifies a tire intended primarily for service on 
light trucks; and,
     ST--Identifies a special tire for trailers in highway 
service.
    Suffix letter designations:
     TR--Identifies a tire for service on trucks, buses, and 
other vehicles with rims having specified rim diameter of nominal plus 
0.156'' or plus 0.250'';
     MH--Identifies tires for Mobile Homes;
     HC--Identifies a heavy duty tire designated for use on 
``HC'' 15'' tapered rims used on trucks, buses, and other vehicles. 
This suffix is intended to differentiate among tires for light trucks, 
and other vehicles or other services, which use a similar designation. 
Example: 8R17.5 LT, 8R17.5 HC;
     LT--Identifies light truck tires for service on trucks, 
buses, trailers, and multipurpose passenger vehicles used in nominal 
highway service; and
     MC--Identifies tires and rims for motorcycles.
    The following types of tires are also excluded from the scope: 
Pneumatic tires that are not new, including recycled or retreaded tires 
and used tires; non-pneumatic tires, including solid rubber tires; 
tires of a kind used on aircraft, all-terrain vehicles, and vehicles 
for turf, lawn and garden, golf and trailer applications; and, tires of 
a kind used for mining and construction vehicles and equipment that 
have a rim diameter equal to or exceeding 39 inches. Such tires may be 
distinguished from other tires of similar size by the number of plies 
that the construction and mining tires contain (minimum of 16) and the 
weight of such tires (minimum 1500 pounds).

[FR Doc. 07-3833 Filed 8-6-07; 8:45 am]
BILLING CODE 3510-DS-M