Notice of Initiation of Countervailing Duty Investigation: Lightweight Thermal Paper from the People's Republic of China

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

November 2, 2007.

FOR FURTHER INFORMATION CONTACT:

Scott Holland or Nancy Decker, AD/CVD Operations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-1279 and (202) 482-0196, respectively.

SUPPLEMENTARY INFORMATION:

The Petition

On September 19, 2007, the Department of Commerce (the “Department”) received a petition filed in proper form by Appleton Papers Inc. (the “petitioner”) a domestic producer of lightweight thermal paper (“LWTP”). In response to the Department's requests, the petitioner provided timely information supplementing the petition on September 28, October 2, and October 23, 2007.

In accordance with section 702(b)(1) of the Tariff Act of 1930, as amended (“the Act”), the petitioner alleges that manufacturers, producers, or exporters of LWTP in the People's Republic of China ( the “PRC”), receive countervailable subsidies within the meaning of section 701 of the Act and that such imports are materially injuring, or threatening material injury to, an industry in the United States.

The Department finds that the petitioner filed the petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(C) of the Act and the petitioner has demonstrated sufficient industry support with respect to the countervailing duty investigation (see “Determination of Industry Support for the Petition” section below).

Period of Investigation

The period of investigation is January 1, 2006, through December 31, 2006.

Scope of the Investigation

The merchandise covered by each of this investigation includes certain lightweight thermal paper, which is thermal paper with a basis weight of 70 grams per square meter (“g/m”) (with a tolerance of ± 4.0 g/m) or less; irrespective of dimensions; with or without a base coat on one or both sides; with thermal active coating(s) on one or both sides that is a mixture of the dye and the developer that react and form an image when heat is applied; with or without a top coat; and without an adhesive backing. Certain lightweight thermal paper is typically (but not exclusively) used in point-of-sale applications such as ATM receipts, credit card receipts, gas pump receipts, and retail store receipts. The merchandise subject to these investigations may be classified in the Harmonized Tariff Schedule of the United States (“HTSUS”) under subheadings 4811.90.8040 and 4811.90.9090.⁵ Although HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.

Comments on Scope of Investigation

During our review of the petition, we discussed the scope with the petitioner 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 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 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 determinations.

Consultations

Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department invited representatives of the Government of the PRC for consultations with respect to the countervailing duty petition. The Department held these consultations in Beijing, China, with representatives of the Government of the PRC on September 28, 2007. See the Memorandum to The File, entitled, “Consultations with Officials from the Government of the People's Republic of China” (September 28, 2007) on file in the CRU of the Department of Commerce, Room B-099.

Determination of Industry Support for the Petitions

Section 702(b)(1) of the Act requires that a petition be filed by or 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 (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 petitioner does 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 lightweight thermal paper, both jumbo rolls and converted slit rolls, constitute a single domestic like product, 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. For a discussion of the domestic like product analysis in this case, see the Countervailing Duty Investigation Initiation Checklist: Lightweight Thermal Paper from the People's Republic of China (PRC Initiation Checklist) at Attachment II, on file in the Central Records Unit, Room B-099 of the main Department of Commerce building.

On October 9, 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 Notice of Extension of the Deadline for Determining the Adequacy of the Antidumping Duty Petitions: Lightweight Thermal Paper from Germany, the Republic of Korea, and the People's Republic of China; and the Countervailing Duty Petition: Lightweight Thermal Paper from the People's Republic of China, 72 FR 58639 (October 16, 2007).

On October 12 and 15, 2007, we issued polling questionnaires to all known producers of jumbo rolls and converted slit rolls of lightweight thermal paper identified in the petitions, submissions from other interested parties, and by the ITC. The questionnaires are on file in the CRU in room B-099 of the main Department of Commerce building. We requested that each company complete the polling questionnaire, certify its response, and fax its response to the Department by the due date. For a detailed discussion of the responses received see PRC Initiation Checklist at Attachment II.

Our analysis of the data indicates that the domestic producers of lightweight thermal paper who support the petitions account for at least 25 percent of the total production of the domestic like product and more than 50 percent of the production (by quantity and U.S. dollar sales value) of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. See PRC Initiation Checklist at Attachment II. Accordingly, the Department determines that the industry support requirements of section 702(c)(4)(A) of the Act have been met. Therefore, the Department determines that the petitioner filed the petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(C) of the Act and it has demonstrated sufficient industry support with respect to the countervailing duty investigation that it is requesting the Department initiate. See PRC 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 Injury and Causation

The petitioner alleges that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the individual and cumulated subsidized imports of the subject merchandise. The petitioner contends that the industry's injured condition is illustrated by reduced market share, increased inventories, lost sales, reduced production, reduced capacity and capacity utilization rate, reduced shipments, underselling and price depression or suppression, lost revenue, and a decline in financial performance. We have assessed 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 PRC Initiation Checklist at Attachment III (Injury).

Initiation of Countervailing Duty Investigation

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 the petitioner(s) supporting the allegations. The Department has examined the countervailing duty petition on LWTP from the PRC and finds 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 LWTP in the PRC receive countervailable subsidies. For a discussion of evidence supporting our initiation determination, see PRC 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 in the PRC:

Preferential Lending

1. Government Policy Lending Program

2. Loans provided pursuant to the Northeast Revitalization Program

3. Loan guarantees from government-owned and controlled banks

Income Tax Programs

4. “Two Free, Three Half” program

5. Income tax exemption program for export-oriented foreign investment enterprises (“FIEs”)

6. Corporate income tax refund program for reinvestment of FIE profits in export-oriented enterprises

7. Local income tax exemption and reduction program for “productive” FIEs

8. Reduced income tax rates for FIEs based on location

9. Reduced income tax rate for knowledge or technology intensive FIEs

10. Reduced income tax rate for high or new technology FIEs

11. Preferential tax policies for research and development at FIEs

12. Income tax credits on purchases of domestically produced equipment by domestically-owned companies

Indirect Tax Programs and Import Tariff Program

13. Export payments characterized as VAT rebates

14. VAT and tariff exemptions on imported equipment

Grant Programs

15. State Key Technology Renovation Program Fund

Provincial Subsidy Programs

16. Funds for “outward expansion” of industries in Guangdong Province

17. Export interest subsidy funds for enterprises located in Shenzhen City or Zhejiang Province

18. Loans and interest subsidies pursuant to the Liaoning Province's five-year framework

Currency Programs

19. Currency retention

For further information explaining why the Department is investigating these programs, see China 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:

A. Currency manipulation

Petitioner alleges that the PRC government's policy of maintaining an undervalued RMB is an export subsidy that provides either a direct transfer of funds or the provision of a good or service at less than adequate remuneration. Petitioner has 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.

B. Provision Of Goods Or Services For Less Than Adequate Remuneration

1. Electricity and natural gas

2. Water

3. Papermaking chemicals

4. Land

Respondent Selection

For this investigation, the Department expects to select respondents based on U.S. Customs and Border Protection data for U.S. imports during the POI. We intend to make our decision regarding respondent selection within 20 days of publication of this Federal Register notice. The Department invites comments regarding the CBP data and respondent selection within seven calendar days of publication of this Federal Register notice.

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 Government of the PRC. As soon as and 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, consistent with 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 the initiation, whether there is a reasonable indication that imports of subsidized LWTP from the PRC are causing material injury, or threatening to cause 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.