Brake Rotors from the People's Republic of China: Notice of Initiation of Changed Circumstances Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

The Department of Commerce has received information sufficient to warrant initiation of a changed circumstances review of the antidumping order on brake rotors from the People's Republic of China (“PRC”). The review will be conducted to determine whether Shandong Huanri Group Co., Ltd. (“Huanri Group”) is the successor-in-interest to Shandong Huanri Group General Company (“Huanri Group General”).

EFFECTIVE DATE:

December 17, 2004.

FOR FURTHER INFORMATION CONTACT:

Amber Musser, AD/CVD Operations, Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-1777.

SUPPLEMENTARY INFORMATION:

Background

On April 17, 1997, the Department published in the Federal Register the antidumping duty order on brake rotors from the PRC (62 FR 18740). On October 28, 2004, Huanri Group submitted information and documentation in support of its claim that it is the successor-in-interest to Huanri Group General and requested that the Department conduct a changed-circumstances review to determine whether Huanri Group is the successor-in-interest to Huanri Group General and whether it should receive the same antidumping duty treatment as is accorded to Huanri Group General with respect to the subject merchandise. Huanri Group provided its response to the Department's separate rates questionnaire in this submission.

On November 5, 2004, the petitioner requested that the Department publish a separate notice of initiation and refrain from simultaneously issuing a preliminary finding because it claimed that Huanri Group did not give the Department sufficient information to conduct an expedited review; for example, the petitioner stated that it raised concerns regarding the ownership of Huanri Group on the public record of the seventh administrative review, and that these concerns were not addressed in Huanri Group's request for a changed circumstances review.

On November 18, 2004, the Department issued a letter to Huanri Group requesting that they provide additional information and documentation addressing the company's management structure, production facilities, supplier relations, and customer base. On November 26, 2004, Huanri Group provided a response to the Department's November 18, 2004, request for information.

Scope of Review

The products covered by this review are brake rotors made of gray cast iron, whether finished, semifinished, or unfinished, ranging in diameter from 8 to 16 inches (20.32 to 40.64 centimeters) and in weight from 8 to 45 pounds (3.63 to 20.41 kilograms). The size parameters (weight and dimension) of the brake rotors limit their use to the following types of motor vehicles: automobiles, all-terrain vehicles, vans, recreational vehicles under “one ton and a half,” and light trucks designated as “one ton and a half.”

Finished brake rotors are those that are ready for sale and installation without any further operations. Semi-finished rotors are those rotors which have undergone some drilling and on which the surface is not entirely smooth. Unfinished rotors are those which have undergone some grinding or turning.

These brake rotors are for motor vehicles and do not contain in the casting a logo of an original equipment manufacturer (“OEM”) which produces vehicles sold in the United States (e.g., General Motors, Ford, Chrysler, Honda, Toyota, and Volvo). Brake rotors covered in this review are not certified by OEM producers of vehicles sold in the United States. The scope also includes composite brake rotors that are made of gray cast iron which contain a steel plate but otherwise meet the above criteria. Excluded from the scope of the review are brake rotors made of gray cast iron, whether finished, semifinished, or unfinished, with a diameter less than 8 inches or greater than 16 inches (less than 20.32 centimeters or greater than 40.64 centimeters) and a weight less than 8 pounds or greater than 45 pounds (less than 3.63 kilograms or greater than 20.41 kilograms).

Brake rotors are currently classifiable under subheading 8708.39.5010 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Although the HTSUS subheading is provided for convenience and customs purposes, the written description of the scope of this review is dispositive.

Separate Rates

In proceedings involving non-market economy (“NME”) countries, the Department begins with a rebuttable presumption that all companies within the country are subject to government control and thus should be assessed a single antidumping duty deposit rate. To establish whether a firm is sufficiently independent from government control, and therefore entitled to a separate rate, the Department analyzes each exporting entity under a test arising out of Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, 56 FR 20588 (May 6, 1991) (“Sparklers”) and amplified in Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994) (“Silicon Carbide”). Under the separate rates criteria, the Department assigns separate rates in NME cases only if the respondent can demonstrate the absence of both de jure and de facto government control over export activities.

1. De Jure Control

Huanri Group has placed on the administrative record documentation to demonstrate absence of de jure government control, including the 1994 “Foreign Trade Law of the People's Republic of China,” and the “Administrative Regulations of the People's Republic of China Governing the Registration of Legal Corporations,” promulgated on June 3, 1988.

As in prior cases, we have analyzed these laws and have found them to establish sufficiently an absence of de jure control of stock companies including limited liability companies. See, e.g., Final Determination of Sales at Less than Fair Value: Furfuryl Alcohol from the People's Republic of China, 60 FR 22544 (May 8, 1995) (“Furfuryl Alcohol”), and Preliminary Determination of Sales at Less Than Fair Value: Certain Partial-Extension Steel Drawer Slides with Rollers from the People's Republic of China, 60 FR 29571 (June 5, 1995). We have no new information in this proceeding which would cause us to reconsider this determination with regard to Huanri Group.

2. De Facto Control

As stated in previous cases, there is some evidence that certain enactments of the PRC central government have not been implemented uniformly among different sectors and/or jurisdictions in the PRC. See Silicon Carbide and Furfuryl Alcohol. Therefore, the Department has determined that an analysis of de facto control is critical in determining whether the respondents are, in fact, subject to a degree of government control which would preclude the Department from assigning separate rates.

The Department typically considers four factors in evaluating whether a respondent is subject to de facto government control of its export functions: (1) Whether the export prices are set by, or subject to the approval of, a government authority; (2) whether the respondent has authority to negotiate and sign contracts and other agreements; (3) whether the respondent has autonomy from the government in making decisions regarding the selection of management; and (4) whether the respondent retains the proceeds of its export sales and makes independent decisions regarding the disposition of profits or financing of losses. See Silicon Carbide and Furfuryl Alcohol.

Huanri Group asserted the following: (1) It establishes its own export prices; (2) it negotiates contracts without guidance from any government entities or organizations; (3) it makes its own personnel decisions; and (4) it retains the proceeds of its export sales, uses profits according to its business needs, and has the authority to sell its assets and to obtain loans. Additionally, statements contained in Huanri Group's October 28, 2004, submission indicate that the company does not coordinate its prices with other exporters. This information supports a initial finding that there is de facto absence of government control of the export functions of Huanri Group. See Pure Magnesium from the People's Republic of China: Preliminary Results of Antidumping Duty New Shipper Administrative Review, 62 FR 55215 (October 23, 1997). Consequently, for purposes of initiating its request for a changed circumstances review, we find that there is a sufficient basis to determine that Huanri Group has met the criteria for the application of a separate rate.

Initiation of Antidumping Duty Changed Circumstances Review.

Pursuant to section 751(b)(1) of the Act, the Department will conduct a changed circumstances review upon receipt of information concerning, or a request from an interested party for a review of, an antidumping duty order which shows changed circumstances sufficient to warrant a review of the order. In its October 28, 2004, submission and its November 26, 2004, supplemental submission, Huanri Group notified the Department that it had changed its name on June 9, 2004, following a change in ownership. In its submissions, Huanri Group also stated that it has (1) retained the same management, (2) used the same production facilities, (3) retained the same suppliers, and (4) maintained the same customers. The information submitted by Huanri Group that addresses the four aforementioned criteria, is sufficient to warrant a changed circumstance review. See 19 CFR 351.216(c).

In antidumping duty changed circumstances reviews involving a successor-in-interest determination, the Department typically examines several factors including, but not limited to, changes in: (1) Management; (2) production facilities; (3) supplier relationships; and (4) customer base. See Brass Sheet and Strip from Canada: Notice of Final Results of Antidumping Administrative Review, 57 FR 20460, 20462 (May 13, 1992) (“Brass Sheet”). While no single factor or combination of factors will necessarily be dispositive, the Department generally will consider the new company to be the successor to the predecessor company if the resulting operations are essentially the same as those of the predecessor company. See, e.g., Industrial Phosphorus Acid from Israel: Final Results of Changed Circumstances Review, 59 FR 6944, 6945 (February 14, 1994), and Brass Sheet. Thus, if the record evidence demonstrates that, with respect to the production and sale of the subject merchandise, the new company operates as the same business entity as the predecessor company, the Department may assign the new company the cash deposit rate of its predecessor. See, e.g., Fresh and Chilled Atlantic Salmon from Norway: Final Results of Changed Circumstances Antidumping Duty Administrative Review, 64 FR 9979, 9980 (March 1, 1999).

Based on data contained in its October 28, 2004, submission and its November 26, 2004, supplemental submission, Huanri Group has provided sufficient evidence to warrant a review to determine if it is the successor-in-interest to Huanri Group General based on the successor-in-interest criteria enunciated in Brass Sheet and the Department's separate rates criteria articulated in Sparklers and amplified in Silicon Carbide. However, we consider it inappropriate to expedite this review by combining the preliminary results of review with this notice of initiation, as permitted under 19 CFR 351.221(c)(3)(ii), because Huanri Group's request for this changed circumstances review did not address Huanri Group General's ownership, the reasons for the change in ownership, or the change in legal classification. In addition, we have not had sufficient time to analyze the data contained in Huanri Group's November 26, 2004, supplemental submission. Therefore, the Department is not issuing the preliminary results of its antidumping duty changed circumstances review at this time.

The Department will publish in the Federal Register a notice of preliminary results of antidumping duty changed circumstances review, in accordance with 19 CFR 351.221(b)(4) and 19 CFR 351.221(c)(3)(I). This notice will set forth the factual and legal conclusions upon which our preliminary results are based and a description of any action proposed based on those results. Pursuant to 19 CFR 351.221(b)(4)(ii), interested parties will have an opportunity to comment on the preliminary results of review. In accordance with 19 CFR 351.216(e), the Department will issue the final results of its antidumping duty changed circumstances review not later than 270 days after the date on which the review is initiated.

During the course of this antidumping duty changed circumstances review, we will not change the cash deposit requirements for the merchandise subject to review. The cash deposit will only be altered, if warranted, pursuant to the final results of this review.

This notice of initiation is in accordance with section 751(b)(1) of the Act and 19 CFR 351.216 and 351.222.