Large Power Transformers From the Republic of Korea: Initiation of Antidumping Duty Investigation, 49439-49443 [2011-20336]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 76, Number 154 (Wednesday, August 10, 2011)]
[Notices]
[Pages 49439-49443]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20336]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-867]


Large Power Transformers From the Republic of Korea: Initiation 
of Antidumping Duty Investigation

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

DATES: Effective Date: August 10, 2011.

FOR FURTHER INFORMATION CONTACT: Angelica Mendoza at (202) 482-3019 or 
David Cordell at 202-482-0408, AD/CVD Operations, Office 7, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230.

SUPPLEMENTARY INFORMATION: 

The Petition

    On July 14, 2011, the Department of Commerce (``the Department'') 
received a petition concerning imports of large liquid dielectric power 
transformers (``large power transformers'') from the Republic of Korea 
(``Korea''), filed in proper form on behalf of ABB Inc., Delta Star, 
Inc. and Pennsylvania Transformer Technology, Inc., (collectively, 
``the Petitioners''). See the Petition for the Imposition of 
Antidumping Duties on Large Power Transformers from the Republic of 
Korea, filed on July 14, 2011 (``the Petition''). On July 20, 2011, the 
Department issued a request for additional information and 
clarification of certain areas of the Petition. The Petitioners filed a 
response to this request on July 26, 2011 (hereinafter, ``Supplement to 
the Petition''). In accordance with section 732(b) of the Tariff Act of 
1930, as amended (``the Act''), the Petitioners allege that imports of 
large power transformers from Korea 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, or threatening material injury to, an industry in the United 
States. On July 28, 2011, the Petitioners filed an amendment to the 
Petition in which they revised the scope language, amended the lost 
sales listing and provided the Harmonized Tariff Schedule of the United 
States (``HTSUS'') page for HTSUS number 8504.90.9540, (hereinafter, 
``Second Supplement to the Petition''). On August 1, 2011, the 
Petitioners filed an additional amendment to the Petition with respect 
to industry support for the Petition (hereinafter, ``Third Supplement 
to the Petition'').
    On July 28, 2011, the Department received a standing challenge to 
the Petition by Hyosung Corporation, a Korean producer and exporter of 
the subject merchandise, and its U.S. affiliate HICO America Inc. 
(collectively, ``Hyosung''). On July 29, 2011, the Department received 
a standing challenge to the petition by Hyundai Corporation, a Korean 
producer and exporter of the subject merchandise, and its U.S. 
affiliate Hyundai Corporation, USA (collectively, ``Hyundai''). The 
Petitioners responded to HICO's and Hyundai's submission on August 1, 
2011 (hereinafter, ``Fourth Supplement to the Petition'').
    The Department finds that the Petitioners filed the Petition on 
behalf of

[[Page 49440]]

the domestic industry because the Petitioners are interested parties as 
defined in section 771(9)(C) of the Act and have demonstrated 
sufficient industry support with respect to the antidumping duty 
investigation which the Petitioners are requesting that the Department 
initiate (see ``Determination of Industry Support for the Petition'' 
section below).

Period of Investigation

    The period of investigation (``POI'') is July 1, 2010, through June 
30, 2011. See 19 CFR 351.204(b)(1).

Scope of Investigation

    The products covered by this investigation are large power 
transformers from Korea. For a full description of the scope of the 
investigation, please see the ``Scope of Investigation,'' in Appendix I 
of this notice.

Comments on Scope of Investigation

    During our review of the Petition, we discussed the scope with the 
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 Department's 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 invites all 
interested parties to submit such comments by August 23, 2011, 20 
calendar days from the signature date of this notice. The period of 
scope consultations 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.
    All comments must be filed on the record of the investigation. If 
filed after August 5, 2011, all comments and submissions to the 
Department must be filed electronically using Import Administration's 
Antidumping Countervailing Duty Centralized Electronic Service System 
(``IA ACCESS'').\1\
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    \1\ See https://www.gpo.gov/fdsys/pkg/FR-2011-07-06/pdf/2011-16352.pdf for details of the Department's Electronic Filing 
Requirements, which go into effect on August 5, 2011. Information on 
help using IAACCESS can be found at https://iaaccess.trade.gov/help.aspx and a handbook can be found at https://iaaccess.trade.gov/help/Handbook%20on%20Electronic%20Filling%20Procedures.pdf.
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Comments on Product Characteristics for Antidumping Duty Questionnaire

    We are requesting comments from interested parties regarding the 
appropriate physical characteristics of large power transformers to be 
reported in response to the Department's antidumping questionnaire. 
This information will be used to identify the key physical 
characteristics of the subject merchandise in order to more accurately 
report the relevant factors and costs of production, as well as to 
develop appropriate product comparison criteria.
    Interested parties may provide any information or comments that 
they feel are relevant to the development of an accurate listing of 
physical characteristics. Specifically, they may provide comments as to 
which characteristics are appropriate to use as (1) general product 
characteristics and (2) the product comparison criteria. We note that 
it is not always appropriate to use all product characteristics as 
product comparison criteria. We base product comparison criteria on 
meaningful commercial differences among products. In other words, while 
there may be some physical product characteristics utilized by 
manufacturers to describe large power transformers, it may be that only 
a select few product characteristics take into account commercially 
meaningful physical characteristics. In addition, interested parties 
may comment on the hierarchy under which the physical characteristics 
should be considered in product matching.
    In order to consider the suggestions of interested parties in 
developing and issuing the antidumping duty questionnaire, we must 
receive comments by August 23, 2011. Additionally, rebuttal comments 
must be received by August 30, 2011.

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 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 to poll the industry.
    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. Although both the Department 
and the ITC must apply the same statutory definition regarding the 
domestic like product (see 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 (CIT 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 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, 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 large power transformers 
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 Antidumping Duty 
Investigation Initiation Checklist: Large Power Transformers from the

[[Page 49441]]

Republic of Korea (``Checklist''), at Attachment II, Analysis of 
Industry Support for the Petition Covering Large Power Transformers 
from Korea, on file in the Central Records Unit, Room 7046 of the main 
Department of Commerce building.
    In determining whether the Petitioners have standing under section 
732(c)(4)(A) of the Act, we considered the industry support data 
contained in the Petition with reference to the domestic like product 
as defined in the ``Scope of Investigation'' section above. To 
establish industry support, the Petitioners provided their production 
of the domestic like product in 2010 and compared this to the estimated 
total production of the domestic like product for the entire domestic 
industry. See Volume I of the Petition at Exhibit 2 and Supplement to 
the Petition, at Exhibit 9. To estimate total 2010 production of the 
domestic like product, the Petitioners used their own data and industry 
specific knowledge. See Volume I of the Petition, at Exhibit 2 and 
Supplement to the Petition, at Exhibit 9; see also Checklist at 
Attachment II. We have relied upon data the Petitioners provided for 
purposes of measuring industry support. For further discussion, see 
Checklist at Attachment II.
    As noted above, on July 28, 2011, and July 29, 2011, we received 
submissions on behalf of Hyosung and Hyundai, respectively, Korean 
producers and exporters of the subject merchandise, questioning the 
domestic like product definition and the industry support calculation 
in the Petition. On August 1, 2011, the Petitioners filed a reply. For 
further discussion of these submissions, see Checklist at Attachment 
II.
    Based on information provided in the Petition, supplemental 
submissions, and other information obtained by the Department, we 
determine that the domestic producers and workers have met the 
statutory criteria for industry support under section 732(c)(4)(A) of 
the Act because 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 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. See Checklist 
at Attachment II for further details on the Department's evaluation of 
industry support for the Petition. 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.
    The Department finds that the Petitioners filed the Petition on 
behalf of the domestic industry because they are interested parties as 
defined in section 771(9)(C) of the Act and they have demonstrated 
sufficient industry support with respect to the antidumping duty 
investigation that they are requesting the Department initiate, in 
accordance with section 732(c)(4)(A) of the Act.

Allegations and Evidence of Material Injury and Causation

    The Petitioners allege that the U.S. industry producing the 
domestic like product is being materially injured, or is threatened 
with material injury, by reason of the imports of the subject 
merchandise sold at less than normal value (``NV''). In addition, the 
Petitioners allege that subject imports exceed the negligibility 
threshold provided for under section 771(24)(A) of the Act.
    The Petitioners contend that the industry's injured condition is 
illustrated by reduced market share, reduced shipments, reduced 
capacity utilization, underselling and price depression or suppression, 
a decline in financial performance, lost sales and revenue, an increase 
in import penetration, and threat of future injury. See Volume I of the 
Petition, at 21-22, 24-33, and Exhibits 5, 7-9, and 10-11, and Second 
Supplement to the Petition at 3 and at Attachment 1. We have assessed 
the allegations and supporting evidence regarding material injury, 
threat of 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 Checklist at Attachment 
III, Analysis of Allegations and Evidence of Material Injury and 
Causation for the Petition Covering Large Power Transformers from the 
Republic of Korea.

Allegations of Sales at Less Than Fair Value

    The following is a description of the allegations of sales at less 
than fair value upon which the Department based its decision to 
initiate this investigation of imports of large power transformers from 
Korea. The sources of data for the deductions and adjustments relating 
to the U.S. price, and cost of production (``COP'') are also discussed 
in the initiation checklist. See Checklist at 6-9.

Export Price

    The Petitioners based U.S. export price (``EP'') on the prices of 
four large power transformers manufactured in Korea and offered for 
sale in the United States by two Korean producers/exporters. See 
Checklist at 7; see also Volume II of the Petition at II-2 and Exhibit 
AD-2 and Supplement to the Petition at 29, 30 and Exhibits 18 and 21. 
Based on the stated sales and delivery terms, the Petitioners then 
adjusted the U.S. prices to account for certain expenses associated 
with exporting and delivering the product to the U.S. customers (i.e., 
U.S. inland rail freight, ocean freight and U.S. port fees). While the 
Department will normally make additional downward adjustments to U.S. 
price for U.S. brokerage and handling, foreign brokerage and handling, 
direct selling and credit expenses, the Petitioners took a conservative 
approach and did not include any such adjustments in their calculation 
of U.S. price. See Checklist at 7; see also Volume II of the Petition 
at page II-3, 5, 7, and 10 and Exhibits AD-2-3, and Supplement to the 
Petition, at 29-31 and Exhibits 18-21.

Normal Value

    According to the Petitioners, large power transformers are highly 
complex and specialized products that are manufactured to a customer's 
unique specifications. As such, identifying sales of identical or 
similar large power transformers in the U.S. and Korean markets that 
could be compared on a price-to-price basis is virtually impossible 
because they differ substantially. Accordingly, the Petitioners based 
normal value on constructed value (``CV'') in accordance with section 
773(a)(4) of the Act.
    Constructed value consists of the cost of manufacturing, selling, 
general and administrative (``SG&A'') expenses, financial expenses and 
profit. See section 773(a)(4) of the Act. The Petitioners calculated 
constructed value based on the U.S. producer's bid proposal cost of 
production model for the U.S. sales of large power transformers used in 
the Petition. The U.S. producer develops the cost of production for 
each transformer when bidding on large power transformers contracts in 
the United States, and thus the costs were developed based on the 
specific transformer for each U.S. sale identified in the Petition.
    In calculating constructed value, the Petitioners adjusted the U.S. 
producer's cost of manufacturing for known differences, where 
available, between the U.S. and Korean markets. Specifically, the 
Petitioners based the cost of labor on the Korean manufacturing wage 
from the International Labor Statistics as published on the 
Department's Web site.

[[Page 49442]]

See Supplement to the Petition at Exhibit 13. The Petitioners also 
adjusted the U.S. producer's energy costs based on publicly available 
Korean electricity and natural gas costs. See Supplement to the 
Petition at Exhibits 14 and 15. The Petitioners did not adjust the U.S. 
producer's cost of materials for the differences between the U.S. and 
Korean markets. According to the Petitioners such an adjustment is not 
practical because the materials used in the production of large power 
transformers are specialized inputs, the costs of which are not 
reflected accurately in published data. The Petitioners also state that 
the U.S. material costs are comparable to the costs in the Korean 
market because most of the inputs are commodity-type products that are 
widely traded on world markets. To calculate the variable and fixed 
overhead costs, the Petitioners relied upon the variable and fixed 
overhead rates of the U.S. producer calculated as a percentage of the 
labor costs adjusted for known differences between the U.S. and Korean 
markets. See Supplement to the Petition at Exhibit 16.
    To determine constructed value, the Petitioners added to the cost 
of manufacturing amounts for SG&A expenses, financial expenses and 
profit based on financial statements of the Korean producers that 
manufactured the specific transformers sold to the United States 
pursuant to each U.S. sale identified in the Petition. See Supplement 
to the Petition at Exhibits 16 and 17; see also Checklist, at 8 and 9.

Fair Value Comparisons

    Based on the data provided by Petitioners, there is reason to 
believe that imports of large power transformers from Korea are being, 
or are likely to be, sold in the United States at less than fair value. 
Based on a comparison of EPs and CV calculated in accordance with 
section 773(a)(4) of the Act, the estimated dumping margins for large 
power transformers range from 43.01 percent to 60.81 percent. See 
Checklist at 9.

Initiation of Antidumping Investigation

    Based upon the examination of the Petition on large power 
transformers from Korea, the Department finds 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 large power transformers are being, or are likely to be, 
sold in the United States at less than fair value. In accordance with 
section 733(b)(1)(A) of the Act and 19 CFR 351.205(b)(1), unless 
postponed, we will make our preliminary determination no later than 140 
days after the date of this initiation.

Targeted Dumping Allegations

    On December 10, 2008, the Department issued an interim final rule 
for the purpose of withdrawing 19 CFR 351.414(f) and (g), the 
regulatory provisions governing the targeted dumping analysis in 
antidumping duty investigations, and the corresponding regulation 
governing the deadline for targeted dumping allegations, 19 CFR 
351.301(d)(5). See Withdrawal of the Regulatory Provisions Governing 
Targeted Dumping in Antidumping Duty Investigations, 73 FR 74930 
(December 10, 2008). The Department stated that ``{w{time} ithdrawal 
will allow the Department to exercise the discretion intended by the 
statute and, thereby, develop a practice that will allow interested 
parties to pursue all statutory avenues of relief in this area.'' Id. 
at 74931.
    In order to accomplish this objective, if any interested party 
wishes to make a targeted dumping allegation in this investigation 
pursuant to section 777A(d)(1)(B) of the Act, such allegations are due 
no later than 45 days before the scheduled date of the preliminary 
determination.

Respondent Selection

    Following standard practice in AD investigations involving market 
economy countries, in the event the Department determines that the 
number of known exporters or producers for this investigation is large, 
the Department intends to select respondents based on U.S. Customs and 
Border Protection (``CBP'') data for U.S. imports under the HTSUS 
numbers 8504.23.0040 and 8504.23.0080 for the large power 
transformers.\2\ We intend to release the CBP data under Administrative 
Protective Order (``APO'') to all parties with access to information 
protected by APO within five days of publication of this Federal 
Register notice and make our decision regarding respondent selection 
within 20 days of publication of this notice. The Department invites 
comments regarding the CBP data and respondent selection within seven 
days of publication of this Federal Register notice.
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    \2\ The scope also covers HTSUS number 8504.90.9540 of all 
transformer parts. However, we will not use this number in our 
respondent selection analysis as it is a basket category and would 
not allow for a meaningful analysis.
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    Interested parties must submit applications for disclosure under 
APO in accordance with 19 CFR 351.305. Instructions for filing such 
applications may be found on the Department's Web site at https://ia.ita.doc.gov/apo.

Distribution of Copy of the Petition

    In accordance with section 732(b)(3)(A) of the Act and 19 CFR 
351.202(f), a copy of the public version of the Petition has been 
provided to the representatives of the Government of Korea. The 
Department considers the service of the public version of the Petition 
to the foreign producers/exporters satisfied by the delivery of the 
public version of the Petition to the Government of Korea, consistent 
with 19 CFR 351.203(c)(2).

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 August 29, 
2011, whether there is a reasonable indication that imports of large 
power transformers from Korea are materially injuring, or threatening 
material injury to a U.S. industry. A negative ITC determination will 
result in the investigation being terminated; otherwise, this 
investigation will proceed according to statutory and regulatory time 
limits.

Notification to Interested Parties

    Interested parties must submit applications for disclosure under 
APO in accordance with 19 CFR 351.305. On January 22, 2008, the 
Department published Antidumping and Countervailing Duty Proceedings: 
Documents Submission Procedures; APO Procedures, 73 FR 3634 (January 
22, 2008). Parties wishing to participate in this investigation should 
ensure that they meet the requirements of these procedures (e.g., the 
filing of letters of appearance as discussed at 19 CFR 351.103(d)).
    Any party submitting factual information in an AD/CVD proceeding 
must certify to the accuracy and completeness of that information. See 
section 782(b) of the Act. Parties are hereby reminded that revised 
certification requirements are in effect for company/government 
officials as well as their representatives in all segments of any AD/
CVD proceedings initiated on or after March 14, 2011. See Certification 
of Factual Information to Import Administration During Antidumping and 
Countervailing Duty Proceedings: Interim Final Rule, 76 FR 7491 
(February 10, 2011) (``Interim Final Rule'') amending 19 CFR 
351.303(g)(1) and (2). The formats for the revised certifications are 
provided at the end of

[[Page 49443]]

the Interim Final Rule. The Department intends to reject factual 
submissions in any proceeding segments initiated on or after March 14, 
2011, if the submitting party does not comply with the revised 
certification requirements.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

     Dated: August 3, 2011.
Ronald K. Lorentzen
Deputy Assistant Secretary for Import Administration.

Appendix I

Scope of Investigation

    The scope of this investigation covers large liquid dielectric 
power transformers (LPTs) having a top power handling capacity 
greater than or equal to 60,000 kilovolt amperes (60 megavolt 
amperes), whether assembled or unassembled, complete or incomplete.
    Incomplete LPTs are subassemblies consisting of the active part 
and any other parts attached to, imported with or invoiced with the 
active parts of LPTs. The ``active part'' of the transformer 
consists of one or more of the following when attached to or 
otherwise assembled with one another: the steel core or shell, the 
windings, electrical insulation between the windings, the mechanical 
frame for an LPT.
    The product definition encompasses all such LPTs regardless of 
name designation, including but not limited to step-up transformers, 
step-down transformers, autotransformers, interconnection 
transformers, voltage regulator transformers, rectifier 
transformers, and power rectifier transformers.
    The LPTs subject to this investigation are currently 
classifiable under subheadings 8504.23.0040, 8504.23.0080 and 
8504.90.9540 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheadings are provided for convenience 
and customs purposes, the written description of the scope of this 
investigation is dispositive.

[FR Doc. 2011-20336 Filed 8-9-11; 8:45 am]
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