65 FR 41431, July 5, 2000 A-570-827 Sunset Review Public Document MEMORANDUM TO: Troy H. Cribb Acting Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Review of Certain Cased Pencils from the People's Republic of China; Final Results Summary We have analyzed the substantive responses of interested parties in the expedited sunset review of the antidumping duty order covering certain cased pencils from the People's Republic of China ("PRC"). We recommend that, for our expedited final results, you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in this expedited sunset review for which we received a substantive response from the domestic interested parties: 1. Likelihood of continuation or recurrence of dumping: A. Weighted-average dumping margin B. Volume of imports 2. Magnitude of the margin likely to prevail A. Margins from investigation History of Order: The antidumping duty order on certain cased pencils ("pencils") from the PRC was published in the Federal Register on December 28, 1994 (59 FR 66909). (1) In the order, the Department assigned the weighted-average dumping margin of 8.60 percent ad valorem to China First; 19.36 percent to Shanghai Lansheng Corp. ("Lansheng"); 11.15 percent to Shanghai Foreign Trade Corp. ("SFTC"); 0.00 percent to Guangdong Stationery/Three Star Stationary ("Three Star"); 53.65 percent to Guangdong Stationery and all other producers; and 53.65 percent as the PRC country-wide rate. The Department has conducted three administrative reviews since the imposition of the order. (2) The order remains in effect for all producers and exporters of the subject merchandise. In its final determination of the investigation, the Department determined that critical circumstances exist for SFTC and Lansheng. (3) We note that the Department has not conducted any duty-absorption investigation in this proceeding. Background: On December 1, 1999, the Department initiated a sunset review of the antidumping duty order on pencils from the PRC (64 FR 67247) pursuant to section 751(c)(6)(A)(i) of the Tariff Act of 1930, as amended ("the Act"). On December 13, 1999, we received a Notice of Intent to Participate on behalf of the Writing Instrument Manufacturers Association, Inc., Pencil Section ("WIMA"), a national trade association representing the interests of cased pencil manufacturers: Sanford Corp. ("Sanford"); General Pencil Co., Inc. ("General"); J.R. Moon Pencil Co. (also known as Moon Products, Inc.) ("Moon"); Tennessee Pencil Co. ("Tennessee"); and Musgrave Pencil Co. ("Musgrave"), manufacturers of the domestic like product (hereinafter, collectively referred to as the "domestic interested parties"), within the deadline specified in 19 CFR 351.218(d)(1)(i) (1999) ("Sunset Regulations"). In their notice of intent to participate, the domestic interested parties indicated that, except for Musgrave, none of them is affiliated with a Chinese manufacturer/exporter or related to a U.S. importer of the subject merchandise. However, the domestic interested parties noted that Musgrave is an importer of the subject merchandise but is not related to a manufacturers/exporter of the subject merchandise or to any other domestic importer of the subject merchandise. We received a complete substantive response on behalf of the domestic interested parties on January 3, 2000, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). The domestic interested parties claim interested-party status under section 771(9)(E) and (C) of the Act as a trade organization whose members manufacture, produce, or wholesale a domestic like product or, alternatively, as manufacturers of a domestic like product. (4) In their substantive response, the domestic interested parties note that they are willing to fully participate in the instant review and that, except for one company, Tennessee, each of the domestic interested parties or its predecessor-in-interest participated in the original investigation. (5) We did not receive a substantive response from any respondent interested parties to this proceeding. In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). This review concerns a transition order within the meaning of section 751(c)(6)(C)(ii) of the Act. Therefore, on April 6, 2000, the Department determined that the sunset review of the antidumping duty order on certain cased pencils from the PRC is extraordinarily complicated and extended the time limit for completion of the final results of this review until not later than June 28, 2000, in accordance with section 751(c)(5)(B) of the Act. (6) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this sunset review to determine whether revocation of the antidumping duty order would be likely to lead to continuation or recurrence of dumping. Section 752(c) of the Act provides that, in making this determination, the Department shall consider the weighted-average dumping margins determined in the investigation and subsequent reviews and the volume of imports of the subject merchandise for the period before and the period after the issuance of the antidumping duty order. In addition, section 752(c)(3) of the Act provides that the Department shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the order is revoked. Below we address the substantive response of the domestic interested parties. 1. Likelihood of Continuation or Recurrence of Dumping Interested Parties' Substantive Response: The domestic interested parties argue that dumping of the subject merchandise will continue or recur should the Department revoke the order. In support of their argument, the domestic interested parties contend that Chinese manufacturers/exporters have continued to dump the subject merchandise at levels above de minimis since the issuance of the order. The domestic interested parties also claim that import volumes of the subject merchandise declined immediately after the issuance of the order. (See January 3, 2000, Substantive Response of the domestic interested parties at 7 - 11.) As to import volumes of the subject merchandise, the domestic interested parties argue that, after the imposition of the order, imports of pencils from the PRC substantially declined before rebounding in 1998 and 1999. The domestic interested parties note that, for example, in 1994 (the year in which the order was imposed), Chinese manufacturers/exporters exported 4,312,947 gross of pencils to the United States. However, in 1995, the year following the year in which the order was issued, the total imports of the subject merchandise decreased to 1,841,622 gross - a decline of more than 57 percent. Id. With respect to their argument regarding continued dumping of the subject merchandise, the domestic interested parties claim that, despite the existence of the weighted-average margins ranging up to 53.65 percent, failures by manufacturers/exporters of the subject merchandise to participate in any of the previous three administrative reviews indicate that Chinese pencil manufacturers/exporters continue to dump in the United States. In short, the domestic interested parties argue that because import volumes of the subject merchandise significantly declined and because dumping continued at levels above de minimis after the issuance of the order, the Department should not revoke the order. Id. Department's Position: Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the Statement of Administrative Action ("the SAA"), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the bases for likelihood determinations. In its Sunset Policy Bulletin, the Department indicated that determinations of likelihood will be made on an order-wide basis. (See section II.A.2.) In addition, the Department indicated that normally it will determine that revocation of an antidumping order is likely to lead to continuation or recurrence of dumping where (a) dumping continued at any level above de minimis after the issuance of the order, (b) imports of the subject merchandise ceased after the issuance of the order, or (c) dumping was eliminated after the issuance of the order and import volumes for the subject merchandise declined significantly. (See section II.A.3.) In addition to considering the guidance on likelihood cited above, section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of an order is likely to lead to continuation or recurrence of dumping where a respondent interested party waives its participation in the sunset review. In the instant review, the Department did not receive a response from any respondent interested party. Pursuant to section 351.218(d)(2)(iii) of the Sunset Regulations, this constitutes a waiver of participation. Consistent with section 752(c) of the Act, the Department considered import volumes of the subject merchandise before and after the issuance of the order. According to the United States Census Bureau (Customs Data) IM146 and the International Trade Commission Data, immediately after the imposition of the order, import volumes of the subject merchandise have declined substantially. (See Memorandum to File: Regarding Imports for Consumption of the Subject Merchandise in the United States.) In 1992, the year preceding the initiation of antidumping investigation, the import volume of the subject merchandise was 3,241,000 gross. In 1995, the year immediately following the imposition of the order, the import volume decreased to 1,801,000 gross - a 44 percent decline. However, during 1995 through 1998, the imports of the subject merchandise showed an increasing trend. As a matter of fact, in 1997 and 1998, the import volumes of Chinese pencils exceeded the 1992 import volumes. (7) Therefore, we do not agree with the domestic interested parties' assertion that Chinese manufacturers/exporters of pencils are unable to compete in the "face of offsetting duties." As indicated in section II.A.3 of the Sunset Policy Bulletin, the SAA at 890, and the House Report at 63-64, the Department also considered whether dumping continued at any level above de minimis after the issuance of the order. If companies continue dumping with the discipline of an order in place, the Department may reasonably infer that dumping would continue were the discipline removed. After examining the published findings pertaining to the weighted-average dumping margins in the order and in subsequent administrative reviews (8) and considering our policy that determinations of likelihood will be made on an order-wide basis (see section II.A.2), we agree with the domestic interested parties that margins above de minimis have persisted throughout the life of the order. Hence, we determine that dumping of pencils from the PRC continued after the issuance of the order. Given that dumping continued over the life of the order, and that the respondent interested parties waived their right to participate in the instant sunset review, we agree with the domestic interested parties' contention that dumping is likely to continue or recur if the order is revoked. 2. Magnitude of the Margin Likely to Prevail Interested Parties' Substantive Responses: In their substantive response, the domestic interested parties argue that, in most cases, the Department provides the Commission the weighted- average dumping margins from the final determination in the original less- than-fair-value investigation, as amended. The domestic interested parties also contend that because Shanghai Lansheng failed to participate in the first administrative review of the order, it should be subject to the PRC- wide rate. (See domestic interested parties' substantive response at 11 - 12.) Department's Position: In the Sunset Policy Bulletin, the Department stated that it will normally provide to the Commission the margin that was determined in the final determination of the original investigation. Further, for companies not specifically investigated or for companies that did not begin shipping until after the order was issued, the Department normally will provide a margin based on the all-others rate from the investigation. (See section II.B.1 of the Sunset Policy Bulletin.) Exceptions to this policy include the use of a more recently calculated margin, where appropriate, and consideration of duty absorption determinations. (See sections II.B.2 and 3 of the Sunset Policy Bulletin.) We note that the Department has not conducted any duty-absorption investigation with respect to the subject merchandise. The Department agrees with the domestic interested parties' contention that the likely-to-prevail margins are those from the original investigation. Since the facts of the case do not warrant the consideration of a more recently calculated margin, and absent any duty- absorption investigation by the Department, we determine that the margins from the original investigation are probative of the behavior of Chinese manufacturers/exporters of pencils without the discipline of the order. Therefore, we will report to the Commission the rates as contained in the Final Results of Review section of this notice. Final Results of Review Based on the above analysis, the Department finds that revocation of the antidumping duty order would be likely to lead to continuation or recurrence of dumping at the margins listed below: ----------------------------------------------------------------------- Manufacturer/Exporter Margin (percent) ----------------------------------------------------------------------- China First ------------------------------------------------- 8.60 Shanghai Lansheng Corp. ------------------------------------- 19.36 Shanghai Foreign Trade Corp. -------------------------------- 11.15 Guangdong Stationery/Three Star Stationery* ----------------- 0.00 Guangdong Stationery/all other producers** ------------------ 53.65 PRC-wide ---------------------------------------------------- 53.65 --------------------------------------------------------------------- (*) Exported by Guangdong and produced by Three Star. (**) Exported by Guangdong and produced by all other producers. Recommendation Based on our analysis of the substantive responses received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review in the Federal Register. AGREE____ DISAGREE____ ______________________ Troy H. Cribb Acting Assistant Secretary for Import Administration _____________________ (Date) ________________________________________________________________________ footnotes: 1. See Antidumping Duty Order: Certain Cased Pencils From the People's Republic of China, 59 FR 66909 (December 28, 1994), as amended, Certain Cased Pencils From the People's Republic of China: Notice of Amended Final Determination of Sales at Less Than Fair Value and Amended Antidumping Duty Order in Accordance With Final Court Decision, 64 FR 25275 (May 11, 1999). 2. See Certain Cased Pencils From the People's Republic of China; Final Results of Antidumping Duty Administrative Review, 62 FR 24636 (May 6, 1997), as amended, Certain Cased Pencils From the People's Republic of China; Amended Final Results of Antidumping Duty Administrative Review, 62 FR 36491 (July 8, 1997); Certain Cased Pencils From the People's Republic of China; Final Results of Antidumping Duty Administrative Review, 63 FR 779 (January 7, 1998); Certain Cased Pencils From the People's Republic of China; Final Results of Antidumping Duty Administrative Review, 64 FR 2171 (January 13, 1999). 3. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cased Pencils From the People's Republic of China, 59 FR 55625 (November 8, 1994). 4. The domestic interested parties also add a sixth company, Dixon- Ticonderoga, Inc. ("Dixon"), which was not included in their notice of intent to participate, as another participant in this proceeding while indicating that Dixon is not related to a manufacturer/exporter/U.S. importer of the subject merchandise. 5. The domestic interested parties note that, after the issuance of the order, Sanford acquired the interests of Faber Castell Corp. and Berol Corp. which were petitioners in the original investigation. 6. See Extension of Time Limit for Final Results of Five-Year Reviews, 65 FR 18058 (April 6, 2000). 7. Yearly import volumes of Chinese pencils imported to the United States during the year 1995 through 1998 are as follows: 1995 - 1,801; 1996 - 2,562; 1997 - 3,821; and 1998 - 5,963 (units are in 1,000 gross). 8. In all of its three administrative reviews, the Department determined that, other than those firms excluded from the order or entitled to a separate rate, the PRC-wide rate was 53.65 percent ad valorem (the period of review for the first review was December 21, 1994 through November 30, 1995; second review was December 1, 1995 through November 30, 1996; and third review was December 1, 1996 through November 30, 1997. (See footnote 2, supra.)