Hydrofluorocarbon Blends From the People's Republic of China: Initiation of Anti-Circumvention Inquiry of Antidumping Duty Order; Unpatented R-421A, 28281-28284 [2019-12842]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Notices]
[Pages 28281-28284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12842]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-028]


Hydrofluorocarbon Blends From the People's Republic of China: 
Initiation of Anti-Circumvention Inquiry of Antidumping Duty Order; 
Unpatented R-421A

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.

SUMMARY: In response to a covered merchandise referral from U.S. 
Customs and Border Protection (CBP) and allegations of circumvention 
from the American HFC Coalition (the petitioners), the Department of 
Commerce (Commerce) is initiating an anti-circumvention inquiry to 
determine whether imports of non-patented R-421A (a blend of 
hydrofluorocarbon (HFC) components R-125 and R-134a) from the People's 
Republic of China (China) that are further processed into finished HFC 
blends in the United States are circumventing the antidumping duty (AD) 
order on HFC blends from China.

DATES: Applicable June 18, 2019.

FOR FURTHER INFORMATION CONTACT: Andrew Medley or Manuel Rey, AD/CVD 
Operations, Office II, Enforcement and Compliance, International Trade 
Administration, U.S. Department of Commerce, 1401 Constitution Avenue 
NW, Washington, DC 20230; telephone: (202) 482-4987 and (202) 482-5518, 
respectively.

SUPPLEMENTARY INFORMATION: 

Background

    On November 30, 2017, Choice Refrigerants (Choice) filed a scope 
ruling request that Commerce determine if non-patented R-421A HFCs 
imported from China qualify for the exclusion in the scope of the Order 
on HFC blends from China.\1\ On December 4, 2017, Commerce received a 
covered merchandise referral from CBP regarding CBP Enforce and Protect 
Act (EAPA) Investigation No. 7212.\2\ On December 27, 2017, LM Supply 
Inc. (LM Supply) submitted comments on Choice's scope request.\3\ On 
March 5, 2018, Commerce published a notice of covered merchandise 
referral providing parties notice of the referral and inviting 
participation from interested parties.\4\
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    \1\ See Letter from Choice, ``Application for Scope Ruling on 
Exclusion of Patented HFC Blends from Antidumping Duty Order A-570-
028: Hydrofluorocarbon Blends and Components Thereof from the 
People's Republic of China,'' dated November 30, 2017 (Choice Scope 
Ruling Request); see also Hydrofluorocarbon Blends from the People's 
Republic of China: Antidumping Duty Order, 81 FR 55436 (August 19, 
2016) (the Order).
    \2\ See Letter from CBP, ``EAPA Case Number: 7212; Scope 
Referral Request for merchandise under EAPA Investigation 7212, 
imported by LM Supply, Inc. and concerning the investigation of 
evasion of the antidumping duty order on hydrofluorocarbon blends 
from the People's Republic of China (A-570-028),'' dated December 4, 
2017 (CBP EAPA Referral Letter) and accompanying Attachments.
    \3\ See LM Supply Letter, ``Comments in response to Kenneth 
Ponder's and Choice Refrigerants' November 30, 2017 Application for 
a Scope Ruling,'' dated December 27, 2017 (LM Supply Scope 
Comments).
    \4\ See Hydrofluorocarbon Blends from the People's Republic of 
China: Notice of Covered Merchandise Referral, 83 FR 9277 (March 5, 
2018).
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    On April 4, 2018, we sent a questionnaire to LM Supply regarding 
the product included in the referral from CBP; \5\ on April 27, 2018, 
we received a response to the questionnaire from LM Supply.\6\ On May 
11, 2018, the American HFC Coalition and its individual members \7\ 
filed deficiency comments as well as factual information in response to 
LM Supply's April 27, 2018 submission.\8\
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    \5\ See Letter to LM Supply re: ``Hydrofluorocarbon Blends from 
the People's Republic of China--Scope Ruling Supplemental 
Questionnaire,'' dated April 4, 2018.
    \6\ See LM Supply Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Supplemental Questionnaire Response,'' 
dated April 27, 2018 (LM Supply April 27, 2018 SQR).
    \7\ The American HFC Coalition includes Amtrol Inc., Arkema 
Inc., The Chemours Company FC LLC, Honeywell International Inc., 
Hudson Technologies Inc., Mexichem Fluor Inc., and Worthington 
Industries Inc. were the petitioners in the underlying investigation 
(the petitioners).
    \8\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Submission of Factual Information in 
Response to Scope Exclusion Request,'' dated May 11, 2018.
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    On August 15, 2018, the petitioners filed a request that, pursuant 
to section

[[Page 28282]]

781(a) of the Tariff Act of 1930, as amended (the Act), Commerce 
initiate an anti-circumvention inquiry regarding imports of non-
patented R-421A (a blend of HFC components R-125 and R-134a) from China 
that are further processed into finished HFC blends in the United 
States, which the petitioners allege are circumventing the Order.\9\ On 
September 6, 2018, LM Supply filed an objection to the petitioners' 
request for an anti-circumvention inquiry.\10\ Also on September 6, 
Choice filed a response to the petitioners' allegation of 
circumvention, in which it reiterated its request that Commerce issue a 
determination in the scope ruling inquiry immediately, and also voiced 
its belief that LM Supply was circumventing the Order.\11\ On September 
24, 2018, Commerce received rebuttal comments to LM Supply's objection 
to the application of section 781(a) from the petitioners.\12\
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    \9\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Scope Investigation Regarding Certain 
Unpatented HFC Blends: Request to Apply Section 781(a) to Prevent 
Circumvention,'' dated August 15, 2018 (Initiation Request).
    \10\ See LM Supply's Letter, ``Hydrofluorocarbon Blends from the 
People's Republic of China: Scope Investigation Regarding Certain 
Unpatented HFC Blends: Objection to Petitioners' Request to Initiate 
Anti-Circumvention Proceedings Pursuant to Section 781(a),'' dated 
September 6, 2018.
    \11\ See Choice's Letter, ``Response of Choice Refrigerants to 
the American HFC Coalition's Request to Apply Section 781(a) to 
Prevent Circumvention; Hydrofluorocarbon Blends from the People's 
Republic of China: Antidumping Duty Order, DCK. A-570-028, 81 Fed. 
Reg. 55436 (Aug. 19, 2016),'' dated September 6, 2016.
    \12\ See Petitioners' Letter, ``Hydrofluorocarbon Blends from 
the People's Republic of China: Scope Investigation Regarding 
Certain Unpatented Blends: Response to LM Supply Inc.'s Objection to 
Application of Section 781(a) to Prevent Circumvention,'' dated 
September 24, 2018.
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Scope of the Order

    The products subject to the Order are HFC blends. HFC blends 
covered by the scope are R-404A, a zeotropic mixture consisting of 52 
percent 1,1,1 Trifluoroethane, 44 percent Pentafluoroethane, and 4 
percent 1,1,1,2-Tetrafluoroethane; R-407A, a zeotropic mixture of 20 
percent Difluoromethane, 40 percent Pentafluoroethane, and 40 percent 
1,1,1,2-Tetrafluoroethane; R-407C, a zeotropic mixture of 23 percent 
Difluoromethane, 25 percent Pentafluoroethane, and 52 percent 1,1,1,2-
Tetrafluoroethane; R-410A, a zeotropic mixture of 50 percent 
Difluoromethane and 50 percent Pentafluoroethane; and R-507A, an 
azeotropic mixture of 50 percent Pentafluoroethane and 50 percent 
1,1,1-Trifluoroethane also known as R-507. The foregoing percentages 
are nominal percentages by weight. Actual percentages of single 
component refrigerants by weight may vary by plus or minus two percent 
points from the nominal percentage identified above.\13\
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    \13\ R-404A is sold under various trade names, including 
Forane[supreg] 404A, Genetron[supreg] 404A, Solkane[supreg] 404A, 
Klea[supreg] 404A, and Suva[supreg]404A. R-407A is sold under 
various trade names, including Forane[supreg] 407A, Solkane[supreg] 
407A, Klea[supreg]407A, and Suva[supreg]407A. R-407C is sold under 
various trade names, including Forane[supreg] 407C, Genetron[supreg] 
407C, Solkane[supreg] 407C, Klea[supreg] 407C and Suva[supreg] 407C. 
R-410A is sold under various trade names, including EcoFluor R410, 
Forane[supreg] 410A, Genetron[supreg] R410A and AZ-20, 
Solkane[supreg] 410A, Klea[supreg] 410A, Suva[supreg] 410A, and 
Puron[supreg]. R-507A is sold under various trade names, including 
Forane[supreg] 507, Solkane[supreg] 507, Klea[supreg]507, 
Genetron[supreg]AZ-50, and Suva[supreg]507. R-32 is sold under 
various trade names, including Solkane[supreg]32, Forane[supreg]32, 
and Klea[supreg]32. R-125 is sold under various trade names, 
including Solkane[supreg]125, Klea[supreg]125, Genetron[supreg]125, 
and Forane[supreg]125. R-143a is sold under various trade names, 
including Solkane[supreg]143a, Genetron[supreg]143a, and 
Forane[supreg]125.
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    Any blend that includes an HFC component other than R-32, R-125, R-
143a, or R-134a is excluded from the scope of the Order.
    Excluded from the Order are blends of refrigerant chemicals that 
include products other than HFCs, such as blends including 
chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs), 
hydrocarbons (HCs), or hydrofluoroolefins (HFOs).
    Also excluded from the Order are patented HFC blends, including, 
but not limited to, ISCEON[supreg] blends, including MO99TM 
(R-438A), MO79 (R-422A), MO59 (R-417A), MO49PlusTM (R-437A) 
and MO29TM (R-4 22D), Genetron[supreg] 
PerformaxTM LT (R-407F), Choice[supreg] R-421A, and 
Choice[supreg] R-421B.
    HFC blends covered by the scope of the Order are currently 
classified in the Harmonized Tariff Schedule of the United States 
(HTSUS) at subheadings 3824.78.0020 and 3824.78.0050. Although the 
HTSUS subheadings are provided for convenience and customs purposes, 
the written description of the scope is dispositive.\14\
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    \14\ See Order.
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Merchandise Subject to the Anti-Circumvention Inquiry

    This anti-circumvention inquiry covers imports of unpatented R-
421A, a blend of HFC components R-125 and R-134a, from China that are 
further processed in the United States to create an HFC blend that 
would be subject to the Order.

Initiation of Anti-Circumvention Proceeding

    Section 781(a) of the Act and 19 CFR 351.225(g) provide that 
Commerce may find circumvention of an AD order when merchandise of the 
same class or kind as merchandise that is subject to the order is 
completed or assembled in the United States. In conducting anti-
circumvention inquiries under section 781(a)(1) of the Act, Commerce 
relies upon the following criteria: (A) Merchandise sold in the United 
States is of the same class or kind as other merchandise that is 
subject to an AD order; (B) such merchandise sold in the United States 
is completed or assembled in the United States from parts or components 
produced in the foreign country with respect to which the AD order 
applies; (C) the process of assembly or completion in the United States 
is minor or insignificant; and (D) the value of the parts or components 
is a significant portion of the total value of the merchandise.

A. Merchandise of the Same Class or Kind

    The petitioners point to proprietary information to claim that 
imported unpatented R-421A, a blend of HFC components R-125 and R-134A, 
produced in China may be further processed into an HFC blend covered by 
the Order and sold in the United States.\15\ The petitioners contend 
that, in principle, when starting with a blend of R-125 and R-134A it 
would be relatively simple to add additional HFC components R-32 or R-
134A to obtain an in-scope HFC blend.\16\ Further, the petitioners 
argue that the imported R-421A blend is not sold in the United States, 
but, rather, is consumed by LM Supply, and that LM Supply's affiliate, 
not LM Supply, sells HFC blends which are covered by the Order.\17\ 
Therefore, the petitioners contend that the requirements of section 
781(a)(1)(A)(i) of the Act are satisfied.
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    \15\ See Initiation Request at 10-12 (citing LM Supply April 27, 
2018 SQR; Choice Scope Ruling Request; and CBP EAPA Referral Letter 
and accompanying Attachment 2).
    \16\ Id. at 11.
    \17\ Id. at 10-12 (citing LM Supply April 27, 2018 SQR; Choice 
Scope Ruling Request; and CBP EAPA Referral Letter and accompanying 
Attachment 2).
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B. Completion of Merchandise in the United States

    The petitioners point to record evidence to demonstrate that the 
imported unpatented R-421A blend is imported from China.\18\ Therefore, 
the petitioners contend that the requirements of section 781(a)(1)(B) 
of the Act are satisfied.
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    \18\ See Initiation Request at 12 (citing LM Supply Scope 
Comments).
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C. Minor or Insignificant Process

    Under sections 781(a)(1)(C) and 781(a)(2) of the Act, Commerce will 
take into account five factors to determine

[[Page 28283]]

whether the process of assembly or completion of merchandise in the 
United States is minor or insignificant. Specifically, Commerce will 
consider: (A) The level of investment in the United States; (B) the 
level of research and development in the United States; (C) the nature 
of the production process in the United States; (D) the extent of 
production facilities in the United States; and (E) whether the value 
of the processing performed in the United States represents a small 
proportion of the value of the merchandise sold in the United States.
(1) Level of Investment in the United States
    The petitioners point to record evidence, including information 
presented to the International Trade Commission (ITC) during its 
investigation, to demonstrate that blending is a simple and 
straightforward process that requires relatively small investment, as 
compared to an investment to set-up a production facility to 
manufacture HFC components.\19\ According to the petitioners, blending 
HFC components only requires a holding tank for the finished HFC blend, 
some pipes, and valves, and, further, adding a single HFC component to 
an existing R-125/R-134a blend requires a holding tank into which the 
component would be introduced.\20\ Further, the petitioners contend 
that there is no chemical reaction and no temperature change involved 
in blending two or more HFC components, and simply involves combining 
the components in accordance with the blending recipe, then packaging 
the blend into various containers.\21\ The petitioners further note 
that LM Supply has not provided information regarding its investment in 
the United States in blending operations. The petitioners provided 
information indicating that blending requires less than a one million 
dollar investment, while a production facility to manufacture HFC 
components requires an investment of hundreds of millions of dollars in 
equipment needed to handle high-hazard reaction and purification 
processes.\22\ As such, petitioners contend that a significant level of 
investment in the United States is not required to perform blending.
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    \19\ See Initiation Request at 13-16 (citing LM Supply April 27, 
2018 SQR), Exhibit 1 (ITC Hearing transcript), Exhibit 2 (TTI 
Response to Section D), Exhibit 3 (ITC Conference transcript), 
Exhibit 4 (Memorandum to File, ``Antidumping Duty Investigation of 
Hydrofluorocarbon Blends and Components (HFCs) from the People's 
Republic of China: Conference Call with Officials from U.S. Customs 
and Border Protection (CBP),'' dated July 30, 2015 (CBP Conference 
Call Memo)).
    \20\ Id. at 14.
    \21\ Id. at 14 and Exhibit 2 (TTI Response to Section D).
    \22\ Id. at 15 and Exhibits 1 and 3 (ITC Conference transcript 
and ITC Hearing transcript).
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(2) Level of Research and Development in the United States
    The petitioners assert that LM Supply does not identify any 
research and development required to blend HFC components or undertake 
such operations.\23\
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    \23\ Id. at 16.
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(3) Nature of the Production Process in the United States
    The petitioners provide record evidence to demonstrate that 
blending is a simple production process consisting of blending two 
components together, and consists of ISO tanks and only a handful of 
workers.\24\ The petitioners further contend that blending requires a 
different level of expertise and much fewer workers than producing HFC 
components.\25\ As such, the petitioners contend that the nature of the 
production process in the United States appears to be neither complex 
nor significant.
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    \24\ Id. at 16-17 and Exhibit 1 (ITC Hearing transcript).
    \25\ Id.
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(4) Extent of Production Facilities in the United States
    The petitioners provide record evidence to demonstrate that the 
extent of production facilities in the United States, as compared to 
the production of HFC components, is minimal.\26\
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    \26\ Id.
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(5) Value of Processing Performed in the United States
    The petitioners provide an analysis based on proprietary 
information to demonstrate that the blending and re-packaging in the 
United States amounts to a very small percent of the total value of the 
imported R-421A.\27\ The petitioners further point to Commerce's 
determination in the underlying investigation that blending costs do 
not reach the level of significance to change the country of 
origin.\28\ Thus, the petitioners contend that such a small percentage 
of value-added represents a very small proportion of the value of the 
merchandise sold in the United States.
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    \27\ Id. at 17-18 (citing Memorandum to the File, 
``Hydrofluorocarbon Blends from the People's Republic of China: 
Placement of CBP Letter and Attachments,'' dated March 6, 2018, 
enclosing LM Supply's response to a CBP Form 28, dated February 13, 
2018 (and enclosed ``Proforma Invoice'') and Exhibit 5 (a 
proprietary agreement demonstrating the cost to blend HFC 
components).
    \28\ Id. at 18; see also Hydrofluorocarbon Blends and Components 
Thereof from the People's Republic of China: Final Determination of 
Sales at Less Than Fair Value and Final Affirmative Determination of 
Critical Circumstances, 81 FR 42314 (June 29, 2016), and 
accompanying Issues and Decision Memorandum at Comment 4.
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D. Value of Merchandise Produced in the Foreign Country Is a 
Significant Portion of the Value of the Merchandise

    Relying on proprietary information, the petitioners contend that 
the R-421A imported by LM Supply from China accounts for a significant 
portion of the total value of the merchandise, in accordance with 
section 781(a)(1)(D) of the Act.\29\
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    \29\ Id. at 19 (citing LM Supply April 27, 2018 SQR).
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E. Factors To Consider in Determining Whether Action Is Necessary

    Section 781(a)(3) of the Act identifies additional factors that 
Commerce shall consider in determining whether to include parts or 
components in an AD order as part of an anti-circumvention inquiry, 
such as patterns of trade, including sourcing patterns, and 
affiliations. The petitioners contend that based on the proprietary 
information on the record and other record evidence, LM Supply's 
imports of unpatented R-421A, which are sourced from a major Chinese 
exporter, and routed through Jamaica, represent a change in the pattern 
of trade.\30\ Additionally, the petitioners contend that LM Supply's 
affiliation with BMP International, a major source of low-priced HFC 
blends in the investigation, further points to a pattern of trade 
intended to be addressed by section 781(a) of the Act, which, if 
allowed to continue, will negate the effectiveness of the Order.\31\
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    \30\ Id. at 20-21 (citing CBP EAPA Referral Letter and 
accompanying Attachment 2), Exhibit 4 (CBP Conference Call Memo), 
Exhibit 6 (presentation by the HFC Coalition to CBP, dated March 10, 
2017), and Exhibit 7 (Kivlan and Company Scope Comments).
    \31\ Id. at 20-21.
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Conclusion

    After analyzing the record evidence and the petitioners' 
allegation, we determine that there is sufficient information to 
warrant an initiation of a formal anti-circumvention inquiry, pursuant 
to section 781(a) of the Act and 19 CFR 351.225(g). Commerce will 
determine whether the merchandise subject to the inquiry (as described 
in the ``Merchandise Subject to the Anti-Circumvention Inquiry'' 
section above) is circumventing the Order such that it should be 
included within the scope of the Order. Additionally, as part of this 
anti-circumvention inquiry, we intend to address both the covered

[[Page 28284]]

merchandise referral from CBP and the scope inquiry filed by Choice 
under 19 CFR 351.225(c).\32\ Our final findings in this anti-
circumvention inquiry will also include a response to the covered 
merchandise referral and a final finding with regards to Choice's scope 
inquiry.\33\
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    \32\ See CBP EAPA Referral Letter and Choice Scope Ruling 
Request.
    \33\ We aligned the EAPA referral and Choice's request for a 
scope ruling on unpatented R-421A because they cover the same 
merchandise. See Memorandum, ``Alignment of Scope Inquiry and EAPA 
Referral on Unpatented R-421A,'' dated March 5, 2018. Additionally, 
the petitioners filed their anti-circumvention inquiry request onto 
the record of the scope inquiry involving R-421 unpatented blends at 
the same time that they also filed their anti-circumvention inquiry 
request onto the record of the EAPA investigation. See Initiation 
Request.
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    In accordance with 19 CFR 351.225(l)(2), if Commerce issues a 
preliminary affirmative determination, we will then instruct CBP to 
suspend liquidation and require a cash deposit of estimated duties, at 
the applicable rate, for each unliquidated entry of the merchandise at 
issue, entered or withdrawn from warehouse for consumption on or after 
the date of initiation of the inquiry.
    Following consultation with interested parties, Commerce will 
establish a schedule for questionnaires and comments on the issues 
related to the inquiry. Before issuance of any affirmative 
determination, Commerce intends to notify the ITC of any proposed 
inclusion of the inquiry merchandise under the Order in accordance with 
section 781(e)(1)(A) of the Act. Pursuant to section 781(f) of the Act 
and 19 CFR 351.225(f)(5), Commerce intends to issue its final 
determination within 300 days of the date of publication of this 
initiation.

Notification to Interested Parties

    This notice is published in accordance with section 781(a) of the 
Act and 19 CFR 351.225(g).

    Dated: June 12, 2019.
Jeffrey I. Kessler,
Assistant Secretary for Enforcement and Compliance.
[FR Doc. 2019-12842 Filed 6-17-19; 8:45 am]
 BILLING CODE 3510-DS-P