Acting Assistant Secretary for Enforcement and Compliance. Gary Taverman Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations

Transcription

1 A C Investigations Public Document E&C IV: SM June 23, 2017 MEMORANDUM TO: FROM: SUBJECT: Ronald K. Lorentzen Acting Assistant Secretary for Enforcement and Compliance Gary Taverman Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations Preliminary Decision Memorandum for Exclusion of Certain Softwood Lumber Products Certified By the Atlantic Lumber Board in the Less-Than-Fair-Value and Countervailing Duty Investigations of Certain Softwood Lumber Products from Canada I. SUMMARY The Department of Commerce (the Department) preliminarily determines that certain softwood lumber products certified by the Atlantic Lumber Board (ALB) as being first produced 1 in the Provinces of Newfoundland and Labrador, Nova Scotia, or Prince Edward Island (the Atlantic Provinces) from logs harvested in these three provinces are excluded from the scope of the investigations. Background On November 25, 2016, the Department received antidumping duty (AD) and countervailing (CVD) petitions covering imports of softwood lumber from Canada, which were filed in proper form by the Committee Overseeing Action for Lumber International Trade Investigations or 1 Lumber which is further processed or remanufactured, but that was not originally produced in one of the three provinces, would not be covered by this exclusion.

2 Negotiations (the COALITION, the petitioner). 2 The Department initiated less-than-fair-value (LTFV) and CVD investigations based on the Petitions on December 15, On May 5, 2017, the petitioner filed an amendment to the Petitions, 4 stating that it requested, pursuant to sections 702(b)(1) and 732(b)(1) of the Tariff Act of 1930, as amended, and 19 CFR (e), that the scope of the petitions originally filed on November 25, 2016, be amended by the Department and the U.S. International Trade Commission (ITC) to reflect the following product exclusion: Excluded from the scope of the investigations are softwood lumber products certified by the Atlantic Lumber Board (ALB) as being first produced in the Provinces of Newfoundland and Labrador, Nova Scotia, or Prince Edward Island from logs harvested in Newfoundland and Labrador, Nova Scotia, or Prince Edward Island. In its Petitions Amendment, as well as its submissions filed on April 3, 2017, 5 April 17, 2017, 6 and May 5, 2017, 7 the petitioner contended that ALB-certified lumber is unsubsidized, fairlytraded, and does not threaten injurious effects to producers of softwood lumber products in the United States in either the AD or CVD context. Thus, the petitioner states that it has no interest in seeking relief in connection with Canadian exports of these products to the United States. Additionally, the petitioner argued that the Department s established policy is to exclude from the scope of an order products in which the affected industry has no interest. 8 The petitioner 2 See Letter from the petitioner, Petition for the Imposition of Antidumping and Countervailing Duties on Imports of Certain Softwood Lumber Products from Canada, dated November 25, 2016 (the Petitions), Volumes I and II. The COALITION is an ad hoc association whose members are: Collum s Lumber Products, L.L.C., Hankins, Inc., Potlatch Corporation, Rex Lumber Company, Seneca Sawmill Company, Sierra Pacific Industries, Stimson Lumber Company, Swanson Group, Weyerhaeuser Company, Carpenters Industrial Council, Giustina Land and Timber Company, Sullivan Forestry Consultants, Inc., and the U.S. Lumber Coalition, Inc. Id., Volume I at 2. 3 See Certain Softwood Lumber Products from Canada: Initiation of Less-Than-Fair-Value Investigation, 81 FR (December 22, 2016) (AD Initiation Notice); see also Certain Softwood Lumber Products from Canada: Initiation of Less-Than-Fair-Value Investigation, 81 FR (December 22, 2016) (CVD Initiation Notice). 4 See Letter from the petitioner, Certain Softwood Lumber Products from Canada: Amendment to the Petitions, dated May 5, 2017 (Petitions Amendment). 5 See Letter from the petitioner, Certain Softwood Lumber Products from Canada: Additional Comments on Scope, dated April 3, See Letter from the petitioner, Certain Softwood Lumber Products from Canada: New Factual Information Regarding ALB-Certified Lumber, dated April 17, See Letter from the petitioner, Certain Softwood Lumber Products from Canada: Comments on Proposed Scope Exclusions, dated May 5, See, e.g., Initiation of Antidumping Duty Investigations: Spring Table Grapes From Chile and Mexico, 66 FR 26831, (May 15, 2001) (Spring Grapes) which stated, {t}o the extent {the petitioner} can establish that the covered imports are dumped and the cause of material injury, it is entitled to relief under the statute, notwithstanding the fact that it may have excluded from the scope other products which may or may not also be the subject of injurious dumping. {...} It is also appropriate that the Department not force the petitioner to seek duties on products against its will. See also Large Residential Washers from the Republic of Korea: Final Affirmative Countervailing Duty Determination, 77 FR (Dec. 26, 2012) and accompanying Issues and Decision Memorandum at Comment 1, and Notice of Final Determination of Sales at Less Than Fair Value: Outboard Engines from Japan, 70 FR 326 (Jan. 4, 2005) and accompanying Issues and Decision Memorandum at Comment 17. See also Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, (May 19, 1997). 2

3 alleged no subsidies provided by the governments of the Atlantic Provinces, and none of the mandatory respondents 9 reported producing softwood lumber in these provinces. In its case filings, the petitioner submitted the substantive elements and procedures of the ALB and its certification process, which include detailed reporting of information about the producer and its mill, product description, method of transportation, and certification statements. The petitioner stated in its submissions that it is satisfied that the procedures for issuing such certificates will be adequate to prevent circumvention. In support of this certification requirement, the petitioner argued that the Department has adopted scope exclusions based on industry certifications, manufacturing procedures and standards in other proceedings. In support of this argument, the petitioner cited primarily to Pasta from Italy, 10 which excluded imports of organic pasta from Italy that were accompanied by appropriate certifications. Specifically, according to the petitioner, an exclusion for ALBcertified lumber could be administered in the same manner as the Pasta from Italy certifications, which were based on the cultivation and processing (i.e., the growing process) of an input to the subject merchandise. The ALB certification would similarly attest to the growing process of timber harvested and first produced into lumber in the Atlantic Provinces. Uncertified lumber produced in these provinces would continue to be subject to the investigations. Further, and similar to Pasta from Italy, ALB export certificates were created in response to ongoing AD and CVD proceedings. Additionally, the petitioner contended that Customs and Border Protection (CBP) already has in place the procedures and infrastructure for considering certifications for softwood lumber imports from certain provinces, which were required under the 2006 Softwood Lumber Agreement (SLA). Finally, in its May 5 submission, the petitioner argued that if the Department determines that it is unable to exclude ALB-certified lumber from the scope of the LTFV and CVD investigations as proposed by the petitioner in its amendment to the Petitions, the Department should, in the alternative, adopt the approach set forth in Lumber IV 11 by exempting ALB-certified lumber from the CVD investigation only. The Government of Nova Scotia (GNS) filed two submissions supporting the petitioner s exclusion request. 12 In its submissions, the GNS argued that there are unique circumstances that justify exclusion of ALB-certified lumber from these investigations: 9 The mandatory respondents in the investigations are: Canfor Corporation, Resolute FP Canada Inc., Tolko Marketing and Sales Ltd., and West Fraser Mills Ltd. J.D. Irving, Limited, a voluntary respondent in the CVD investigation, also did not comment on the Petitions Amendment. 10 See Final Affirmative Countervailing Determination of Countervailing Duty Investigation: Certain Pasta from Italy, 61 FR (June 14, 1996) (Pasta from Italy). 11 Notice of Final Determination of Sales at Less Than Fair Value: Certain Softwood Lumber Products from Canada, 67 FR (April 2, 2002) and accompanying Issues and Decision Memorandum (Lumber IV) at Scope Issues. 12 See Letter from GNS, Certain Softwood Lumber from Canada: Scope Comments from the Government of Nova Scotia, dated May 3, See also Letter from GNS, Certain Softwood Lumber from Canada: Scope Comments Requesting the Exclusion from the Antidumping and Countervailing Duty Investigations of ALB-Certified Softwood Lumber Products, dated May 5,

4 The petitioner has no interest in seeking AD/CVD relief for these products. There is a three-decade long history of exclusion of softwood lumber produced in the Atlantic Provinces, 13 going back to the 1986 Memorandum of Understanding, as amended in December 1987, which exempted softwood lumber products exported from the Atlantic Provinces from trade measures. There are no allegations or findings of subsidies from the Atlantic Provinces. In fact, the Department has preliminarily found that stumpage prices for private-origin standing timber in Nova Scotia may serve as a tier-one benchmark. Application of CVD or AD duties to ALB-certified lumber would have the unintended effect of distorting market conditions in the three provinces and tainting the Department s CVD benchmark in the first administrative review. The government of Canada (GOC) has already signaled its support for exclusion in its pre-initiation consultation submission. The ALB is a Canadian quasi-governmental body that is entirely unrelated to the petitioner or the Canadian producers of softwood lumber. In the intervening time since Lumber IV, the WTO Appellate Body in United States - Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India, Dec. 8, 2014 (WT/DS436/AB/R) (DS436) found that the United States violated its international obligations by cross-cumulating subsidized imports with non-subsidized dumped imports. Regardless of the merits of that decision, an exclusion should apply in both the AD and CVD investigations to avoid unnecessarily complicating the ITC s final injury determination. The proposed exclusion is administrable and parallels the exclusion that CBP has dealt with before. The ALB improves on the previous system by providing electronic certification. The GNS also argued that under binding precedent at the Court of Appeals for the Federal Circuit (CAFC) in Wheatland Tube 14 and Fedmet, 15 there can be no finding of unfairly traded and injurious imports because the petitioner amended its Petitions to exclude ALB-certified softwood lumber products from the scope. Specifically, GNS argued that the Department and the ITC rely upon a petitioner s representations in the Petitions to determine which products to investigate. The Government of Canada (GOC) also submitted comments regarding a possible scope exclusion covering merchandise from the Atlantic provinces. 16 In its submission, the GOC stated that it supports product-based exclusions for products from all provinces, including the Atlantic Provinces. 13 In the prior lumber proceedings and under the SLA, softwood lumber from New Brunswick was excluded. However, in the current CVD investigation, the petitioner has alleged that softwood lumber producers in New Brunswick benefit from countervailable subsidies, and the petitioner intends that softwood lumber produced in New Brunswick or from logs harvested in New Brunswick remain subject to the investigations. 14 See Wheatland Tube Co. v. United States, 161 F.3d 1365 (Fed. Cir. 1998). 15 See Fedmet Res. Corp. v. United States, 755 F.3d 912 (Fed. Cir. 2014). 16 See Letter from the GOC, Certain Softwood Lumber Products from Canada: Comments on Proposed Scope Exclusions Currently under Consideration by the Department, dated May 5,

5 II. ANALYSIS As noted above, the Petitions as originally filed did not contain the exclusion language for ALBcertified lumber. In fact, it was not until over five months into these investigations that the petitioner amended the Petitions to reflect a different proposed scope of the LTFV and CVD investigations, specifically excluding softwood lumber products certified by the Atlantic Lumber Board (ALB) as being first produced in the Provinces of Newfoundland and Labrador, Nova Scotia, or Prince Edward Island from logs harvested in Newfoundland and Labrador, Nova Scotia, or Prince Edward Island (ALB-certified softwood lumber products). 17 Although an amendment to the Petitions so late into an investigation is legally permissible, it is also not typical of the Department s investigation procedures. Accordingly, the Department is issuing this memorandum on the record of both the LTFV and CVD investigations to address this scope amendment independently of other scope issues raised in these proceedings. For most scoperelated matters, the Department is addressing those issues in a scope memorandum that will be issued concurrently with the upcoming preliminary determination in the LTFV investigation. 18 Upon consideration of the amended scope in the Petition, as well as the arguments raised by the petitioner, and the Governments of Canada and Nova Scotia, we preliminarily determine that ALB-certified softwood lumber products should be excluded from the scope of these investigations. Although the ultimate authority rests with the Department to define or clarify the scope of an investigation, as a general rule, the Department defers to the intent of the petitioner and fulfills the Department s statutory mandate to provide, where appropriate, the relief requested by the petitioning industry. 19 Thus, absent an overarching reason to modify the scope in the petition, the Department accepts {the scope} as written. 20 As the CAFC has explained, a purpose of the petition is to propose an investigation, while a purpose of the investigation is to determine what merchandise should be included in the final order. 21 In defining the scope of an order, the CAFC has also explained that the Department has a large amount of discretion to determine the appropriate scope of an order to ensure that it will be effective to remedy the dumping or countervailable subsidies determined to exist during an investigation See Petitions Amendment at See Memorandum to Gary Taverman, re: Certain Softwood Lumber Products from Canada: Scope Decision, dated concurrent with the Preliminary Determination in the Less-Than-Fair-Value Investigation. 19 See, e.g., Narrow Woven Ribbons with Woven Selvedge from the People s Republic of China: Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination, 75 FR 7244, 7247 (February 18, 2010), unchanged in Notice of Final Determination of Sales at Less Than Fair Value: Narrow Woven Ribbons with Woven Selvedge from Taiwan, 75 FR (July 19, 2010) (Narrow Woven Ribbons). 20 See e.g., Circular Welded Austenitic Stainless Pressure Pipe from the People s Republic of China: Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination, 73 FR 51788, (September 5, 2008), unchanged in Circular Welded Austenitic Stainless Pressure Pipe from the People s Republic of China: Final Determination of Sales at Less Than Fair Value, 74 FR 4913 (January 28, 2009). 21 See Duferco Steel, Inc. v. United States, 296 F. 3d 1087, 1089 (Fed. Cir. 2002). 22 See Mitsubishi Electric Corporation v. United States, 898 F.3d 1577, 1583 (Fed. Cir. 1990) (Mitsubishi II). See also Senate Report on Trade Agreements Act of 1979, S. Rep. No (1979), at 45 (stating that domestic 5

6 Accordingly, the Department must take into consideration three primary concerns in determining whether or not to include particular products in the definition of the scope of an investigation and, subsequently, an AD and/or CVD order. First, the Department must ensure that the scope accurately reflects the products for which the petitioner seeks relief. 23 Second, the Department must provide interested parties with sufficient opportunity to present comments that can be evaluated by the Department, because once the scope of an order is published, with certain exceptions, that scope will apply for the duration of the order. 24 Finally, the Department must seek to ensure that the final scope is both administrable by CBP and not susceptible to circumvention and evasion. 25 The intent of the Petitions Amendment is clear the petitioner wishes to exclude from the scope of the investigations ALB-certified softwood lumber products. Furthermore, as the petitioner explains, the proposed ALB certificate of origin program appears to closely parallel the previous certificate of origin program used in accordance with Lumber IV and the SLA, and because it will allegedly be generated electronically, the record suggests that it will work within CBP s Automated Commercial Environment. 26 If this proves to be true, then the administration of this exclusion will be administered in a manner similar to the administration of the previous Maritime certificate-of-origin program. This leads us to preliminarily conclude that such an exclusion will be administrable. We recognize that in Lumber IV, the exemption applied only to products under the CVD investigation, and not the AD investigation. 27 Nonetheless, for purposes of administration of this exclusion, we do not see a meaningful difference. petitioners and the administrators of the law have reasonable discretion to identify the most appropriate group of products for purposes of both the subsidy and injury investigations ). 23 While the Department possesses the authority to determine the scope of the investigation, the Department s standard practice is to provide ample deference to the petitioner with respect to the definition of the product(s) for which it seeks relief during the investigation phase of an AD or CVD proceeding. Thus, in establishing the scope of an investigation, the Department strives to craft a scope that both includes the specific products for which the petitioner has requested relief, and excludes those products which would otherwise fall within the general scope physical description, but for which the petitioner does not seek relief. See e.g., Certain Steel Nails from the People s Republic of China: Final Determination of Sales at Less Than Fair Value and Partial Affirmative Determination of Critical Circumstances, 73 FR 33977, (June 16, 2008); Spring Grapes, 66 FR at See Smith Corona Corp. v. United States, 796 F. Supp. 1532, 1535 (CIT 1992); Allegheny Bradford Com. v. United States, 342 F. Supp. 2d 1172, (CIT 2004); Mitsubishi Electric Corporation v. United States, 700 F. Supp. 538, 556 (CIT 1988), aff d by Mitsubishi II, 898 F.3d at 1583 (finding that the Department has the authority to define and/or clarify what constitutes the subject merchandise to be investigated as set forth in the petition taking into consideration such factors as the known tactics of foreign industries attempting to avoid a countervailing duty order ); Torrington v. United States, 745 F. Supp. 718, 721 (CIT 1990), aff d 938 F.2d 1276 (Fed. Cir. 1991) (holding that in certain circumstances the Department may narrow the definition of the scope as proposed in a petition as long as such that modification is based on record evidence and not unreasonable ; finding the existence of five classes or kinds of merchandise, rather than one, as alleged in the petition). 25 See, e.g., Certain Steel Wheels from the People s Republic of China: Notice of Final Determination of Sales at Less Than Fair Value and Partial Affirmative Final Determination of Critical Circumstances, 77 FR (March 23, 2012) and accompanying Issues and Decision Memorandum at Comment Petitions Amendment at In the first administrative CVD review of Lumber IV, the Department explained that the exemption for softwood lumber products from the Maritime Provinces from the CVD Order was an exclusion for certain products, and was not intended to exclude the Maritime Provinces as provinces. Notice of Final Results of 6

7 With respect to the susceptibility of such an exclusion to circumvention and evasion, the Department s AD and CVD orders cover imports from entire countries not subdivisions of geopolitical entities. As we explained in the Lumber IV First Review, the Department does not exclude subdivisions of countries, but under certain circumstances may exclude certain products originating from those areas if sufficient criteria exist to satisfy the Department that there is little to no concern about possible evasion or circumvention. One of the biggest concerns with such an exclusion is that CBP will be unable to distinguish, based on physical characteristics, softwood lumber products produced in the Atlantic Provinces from logs sourced in the Atlantic Provinces from any other log-sourced/lumber-produced combination in Canada. Thus, to address evasion concerns, the Department must be confident in an export certification procedure before it will agree to scope exclusions such as those requested by the petitioner in these proceedings. As raised by both the petitioner and GNS, there are similarities between the facts in this case and the Department s allowance for an exclusion of organic pasta from the scope of the Pasta from Italy AD order, but only if upon importation the alleged organic pasta product is accompanied by a National Organic Program import certificate for organic products certified by a European Union authorized body. 28 Under the European Commission s Regulation No. 2092/91, for the pasta to be deemed organic, the authority must attest to the cultivation, processing, storage, and transportation of organic foodstuffs with inspections of farms and processing plans by ECapproved national certification authorities. 29 There is no physical means by which CBP can distinguish organic from non-organic Italian pasta at the border; thus the only means to enforce this exclusion and prevent evasion of the disciplines of the AD order in that case is through the use of the certification which accompanies the alleged organic pasta. There are several factors which give us confidence in the certification procedures advocated by the petitioner in this case. First, as in Pasta from Italy, based on the record evidence, we believe the certifying body serves a specific quasi-governmental function in Canada through its relationship with individual Atlantic Province governments. 30 Second, we believe that the ALB is unrelated to the petitioner or other domestic producers of the investigated merchandise, thereby alleviating some of our concerns about the potential for manipulation of our investigation procedures. 31 Third, the petitioner placed on the record the substantive elements and procedures of the ALB, including detailed reporting requirements for information about the producers, their mills, descriptions of their products, methods of transportation, and other such information. 32 This information provides us with a degree of confidence in the legitimacy of this certification program. Countervailing Duty Administrative Review: Certain Softwood Lumber Products from Canda, 70 FR (Dec. 12, 2005) and accompanying Issues and Decision Memorandum at Comment 20 (Lumber IV First Review). 28 See Certain Pasta From Italy: Final Results of Antidumping Duty Administrative Review; , 80 FR 8604 (Feb. 18, 2015) and accompanying Issues and Decision Memorandum at Scope. 29 See Pasta From Italy, 61 FR at See Petitioner s April 3, 2017 Submission at Id. 32 See Petitioner s April 17, 2017 Submission at Exhibit 1. 7

8 We agree with the petitioner that because, as offered, the excluded merchandise would need to be produced from logs harvested in the Atlantic Provinces, sawn in the Atlantic Provinces, manufactured into softwood lumber in the Atlantic Provinces, and then certified by the ALB, the proposed exclusion is not a broad-based geographic exclusion which would apply wholesale to all softwood lumber products from those Provinces, but is sufficiently narrowly tailored to address potential evasion concerns. 33 Finally, we believe the long history of similar exclusions in previous Department softwood lumber proceedings gives us confidence in this proposed exclusion. In Lumber IV, the Department was satisfied that because of the unique circumstances of exports from the Maritime Provinces, an exemption was warranted using a certificate of origin issued by the Maritime Lumber Bureau. 34 This followed Lumber III, in which the Department had selfinitiated a CVD investigation and excluded products originating from that region as well. 35 In fact, as GNS points out in its May 3, 2017 Submission, as early as the December 1987 amendment to the 1986 Memorandum of Understanding, softwood lumber products exported from Newfoundland and Labrador, Nova Scotia, and Prince Edward Island were exempt from (the Department s) trade measures. 36 As such, we believe that the effectiveness of this ALBcertified exclusion can be vigorously monitored and enforced. Based on our consideration of all of these factors, we conclude preliminarily that the totality of the information on the record supports a determination that the possibility of evasion or circumvention of the disciplines of the LTFV and CVD investigations through the proposed exclusion for ALB-certified softwood lumber products is sufficiently low to warrant acceptance of this exclusion. 37 IV. CONCLUSION Thus, for the reasons stated above, we preliminarily recommend excluding from the scope of the LTFV and CVD investigations softwood lumber products certified by the Atlantic Lumber Board (ALB) as being first produced in the Provinces of Newfoundland 33 See Petitions Amendment at See Amendment to the Notice of Initiation of Countervailing Duty Investigation: Certain Softwood Lumber Products from Canada, 66 FR 40228, (Aug. 2, 2001) 35 See Self-Initiation of Countervailing Duty Investigation: Certain Softwood Lumber Products from Canada, 56 FR 56055, (Oct. 31, 1991). 36 See GNS May 3, 2017 Submission at 7 (citing Softwood Lumber from Canada, Inv. No. 701-TA-312 (Final), USITC Pub (July 1992) at A-4 n. 9 (discussing the exemption of softwood lumber products produced in the Maritime Provinces from the 15 percent export charge)). We recognize that in all of these past cases, the exclusion was applied solely in the context of a CVD investigation. Nonetheless, we believe the fact that evasion through the use of this exclusion appears to have not been alleged during the existence of the softwood lumber CVD orders and during the SLA is a relevant factor to consider with respect to the threat of evasion in both investigations. 37 This is a preliminary determination, but we note that for the moment, all interested parties appear to be in support of this exclusion. Accordingly, to the extent that no party challenges this issue, this determination will be considered final upon the publication of the final determinations in these investigations. 8

9 and Labrador, Nova Scotia, or Prince Edward Island from logs harvested in these three provinces. 38 Agree Disagree 6/23/2017 X Signed by: RONALD LORENTZEN Ronald K. Lorentzen Acting Assistant Secretary for Enforcement and Compliance 38 As CBP has not yet begun collecting ALB certifications, the Department needs assurance that CBP will have a system in place to collect the certifications before we permit these products to be excluded. Thus, CBP will continue to suspend liquidation of entries of merchandise subject to the CVD investigation, and we will instruct CBP to begin suspension of liquidation of merchandise subject to the LTFV investigation, if there is a preliminary affirmative determination of sales at LTFV. If there are no changes to the preliminary decision to exclude this merchandise, at the final determination, the Department will instruct CBP to stop suspension of liquidation of the merchandise subject to the exclusion and to refund cash deposits. 9