[Federal Register Volume 69, Number 23 (Wednesday, February 4, 2004)]
[Notices]
[Pages 5316-5319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2277]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-865]


Notice of Initiation of Antidumping Duty Investigation: Outboard 
Engines from Japan

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Initiation of Antidumping Duty Investigation.

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EFFECTIVE DATE: February 4, 2004.

FOR FURTHER INFORMATION CONTACT: James Kemp at (202) 482-5346 or Salim 
Bhabhrawala at (202) 482-1784, AD/CVD Enforcement Office 5, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230.

INITIATION OF INVESTIGATION:

The Petition

    On January 8, 2004, the U.S. Department of Commerce (the 
Department) received a petition filed in proper form by Mercury Marine, 
a division of Brunswick Corporation (the petitioner). The Department 
received supplemental information from the petitioner on
    January 20, and January 22, 2004.
    In accordance with section 732(b)(1) of the Tariff Act of 1930, as 
amended (the Act), the petitioner alleges that imports of outboard 
engines from Japan are, or are likely to be, sold in the United States 
at less than fair value within the meaning of section 731 of the Act, 
and that imports from Japan are materially injuring, or are threatening 
to materially injure, an industry in the United States.
    The Department finds that the petitioner filed the petition on 
behalf of the domestic industry because the petitioner is an interested 
party as defined in section 771(9)(C) of the Act and the petitioner 
demonstrated sufficient industry support with respect to the 
antidumping investigation that the petitioner is requesting the 
Department to initiate. See infra, ``Determination of Industry Support 
for the Petition.''

Period of Investigation

    The period of investigation (POI) is January 1, 2003, through 
December 31, 2003.

Scope of Investigation

    For the purpose of this investigation, the products covered are 
outboard engines (also referred to as outboard motors), whether 
assembled or unassembled; and powerheads, whether assembled or 
unassembled. The subject engines are gasoline-powered spark-ignition, 
internal combustion engines designed and used principally for marine 
propulsion for all types of light recreational and commercial boats, 
including, but not limited to, canoes, rafts, inflatable, sail and 
pontoon boats. Specifically included in this scope are two-stroke, 
direct injection two-stroke, and four-stroke outboard engines.
    Outboard engines are comprised of (1) a powerhead assembly, or an 
internal combustion engine, (2) a midsection

[[Page 5317]]

assembly, by which the outboard engine is attached to the vehicle it 
propels, and (3) a gearcase assembly, which typically includes a 
transmission and propeller shaft, and may or may not include a 
propeller. To the extent that these components are imported together, 
but unassembled, they collectively are covered within the scope of this 
investigation. An ``unassembled'' outboard engine consists of a 
powerhead as defined below, and any other parts imported with the 
powerhead that may be used in the assembly of an outboard engine.
    Powerheads are comprised of, at a minimum, (1) a cylinder block, 
(2) pistons, (3) connecting rods, and (4) a crankshaft. Importation of 
these four components together, whether assembled or unassembled, and 
whether or not accompanied by additional components, constitute a 
powerhead for purposes of this investigation. An ``unassembled'' 
powerhead consists of, at a minimum, the four powerhead components 
listed above, and any other parts imported with it that may be used in 
the assembly of a powerhead.
    The scope does not include parts or components (other than 
powerheads) imported separately.
    The outboard engines and powerheads subject to this investigation 
are typically classified in the Harmonized Tariff Schedule of the 
United States (HTSUS) at subheadings 8407.21.0040 and 8407.21.0080. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the merchandise under 
investigation is dispositive.

Product Coverage

    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. As discussed in the 
preamble to the Department's regulations (Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), 
we are setting aside a period for parties to raise issues regarding 
product coverage. The Department encourages all parties to submit such 
comments within 20 calendar days of publication of this notice. 
Comments should be addressed to Import Administration's Central Records 
Unit, Room 1870, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230, following the filing 
requirements outlined in section 351.303 of the Department's 
regulations. The period of scope consultations is intended to provide 
the Department with ample opportunity to consider all comments and 
consult with parties prior to the issuance of a preliminary 
determination.

Determination of Industry Support for the Petition

    Section 732(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that the Department's industry support determination, which is 
to be made before the initiation of the investigation, be based on 
whether a minimum percentage of the relevant industry supports the 
petition. A petition satisfies this requirement if the domestic 
producers or workers who support the petition account for: (1) at least 
25 percent of the total production of the domestic like product; and 
(2) 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 732(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 either 
poll the industry or rely on other information in order to determine if 
there is support for the petition.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers 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 U.S. 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 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 the law.\1\
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    \1\ 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, 642-44 (CIT 1988). See also High Information Content Flat 
Panel Displays and Display Glass from Japan: Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition, 56 FR 
32376, 32380-81 (July 16, 1991).
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    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.
    In this case, the petition covers a single class or kind of 
merchandise, outboard engines, as defined in the ``Scope of 
Investigation'' section, above. The petitioner does not offer a 
definition of the domestic like product distinct from the scope of the 
investigation. Further, based on our analysis of the information 
presented to the Department by the petitioner, we have determined that 
there is a single domestic like product which is consistent with the 
definition of the ``Scope of the Investigation'' section above and have 
analyzed industry support in terms of this domestic like product.
    The Department has determined that the petitioner has established 
industry support representing over 50 percent of total production of 
the domestic like product, requiring no further action by the 
Department pursuant to section 732(c)(4)(D) of the Act. In addition, 
the Department received no opposition to the petition from domestic 
producers of the like product. Therefore, the domestic producers or 
workers who support the petition account for at least 25 percent of the 
total production of the domestic like product, and the requirements of 
section 732(c)(4)(A)(i) of the Act are met. Furthermore, the domestic 
producers or workers who support the petition account for 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. Thus, the requirements of section 732(c)(4)(A)(ii) of the Act 
also are met.
    Accordingly, we determine that the petition is filed on behalf of 
the domestic industry within the meaning of section 732(b)(1) of the 
Act. See Office 5 AD/CVD Enforcement, Initiation Checklist: Outboard 
Engines from Japan (January 28, 2004) (Initiation Checklist) at 
Attachment I, on file in the Central Records Unit, Room B-099 of the 
Department of Commerce.

[[Page 5318]]

Constructed Export Price and Normal Value

    The following are descriptions of the allegations of sales at less 
than fair value upon which the Department based its decision to 
initiate this investigation. The sources of data for the deductions and 
adjustments relating to U.S. and home market prices are discussed in 
greater detail in the Initiation Checklist. Should the need arise to 
use any of this information as facts available under section 776 of the 
Act in our preliminary or final determination, we may re-examine the 
information and revise the margin calculations, if appropriate.

Constructed Export Price

    The petitioner based constructed export price (CEP) on U.S. dealer 
list prices issued by Japanese companies during the POI. The petitioner 
determined that CEP was appropriate because sales were made in the 
United States through affiliated resellers. Starting with base prices 
from the dealer lists, the petitioner made adjustments for various 
discounts and rebates, foreign inland freight, ocean freight (including 
insurance), and indirect selling expenses incurred in the United 
States. The petitioner made no adjustment to CEP for U.S. inland 
freight charges because this information was not readily available.

Normal Value

    With respect to normal value (NV), the petitioner also started with 
Japanese dealer list prices issued during the POI by Japanese producers 
of outboard engines. The petitioner stated the prices in yen, their 
original currency, and converted them to U.S. dollars, using a single 
average exchange rate for the POI derived from monthly average exchange 
rates published by the Board of Governors of the Federal Reserve Board, 
after making adjustments for discounts and inland freight.
    Although the petitioner provided margins based on a price-to-price 
comparisons, the petitioner also provided information demonstrating 
reasonable grounds to believe or suspect that sales of outboard engines 
in the home market were made at prices below the fully absorbed cost of 
production (COP), within the meaning of section 773(b) of the Act, and 
requested that the Department conduct a country-wide sales-below-cost 
investigation. See ``Initiation of Cost Investigation'' section infra 
for further discussion.
    The estimated dumping margins for subject merchandise from Japan, 
based on a comparison of CEP and NV, ranged from 11.80 percent to 41.50 
percent.

Fair Value Comparisons

    Based on the data provided by the petitioner, there is reason to 
believe that imports of outboard engines from Japan are being, or are 
likely to be, sold at less than fair value in the United States.

Initiation of Cost Investigation

    As noted above, pursuant to section 773(b) of the Act, the 
petitioner provided information demonstrating reasonable grounds to 
believe or suspect that sales in the home market were made at prices 
below the fully absorbed COP and, accordingly, requested that the 
Department conduct a country-wide sales-below-COP investigation in 
connection with the requested antidumping investigation. Pursuant to 
section 773(b)(3) of the Act, COP consists of cost of manufacture 
(COM), selling, general, and administrative (SG&A) expenses, and 
packing expenses. The petitioner based its cost buildup on an outboard 
engine model produced by Yamaha Motor Co., Ltd. (Yamaha). However, the 
petitioner was unable to obtain Yamaha's manufacturing costs and, 
instead, calculated COM based on the experience of a U.S. producer of 
outboard engines, adjusted for known differences between costs incurred 
to manufacture outboard engines in the United States and Japan. See 
Petition at Exhibit I-10-A and Initiation Checklist at 9. To calculate 
the depreciation, SG&A, and financial expenses, which were also 
included in the cost buildup, the petitioner used information from 
Yamaha's 2003 financial statements.
    The Statement of Administrative Action (SAA), submitted to the U.S. 
Congress in connection with the interpretation and application of the 
Uruguay Round Agreement Action, states that an allegation of sales 
below COP need not be specific to individual exporters or producers. 
SAA, H.R. Doc. No. 103-316 at 833 (1994). The SAA states that 
``Commerce will consider allegations of below-cost sales in the 
aggregate for a foreign country, just as Commerce currently considers 
allegations of sales at less than fair value on a country-wide basis 
for purposes of initiating an antidumping investigation.'' Id.
    Further, the SAA provides that ``new section 773(b)(2)(A) retains 
the current requirement that Commerce have 'reasonable grounds to 
believe or suspect' that below cost sales have occurred before 
initiating such an investigation. 'Reasonable grounds' ... exist when 
an interested party provides specific factual information on costs and 
prices, observed or constructed, indicating that sales in the foreign 
market in question are at below-cost prices.'' Id.
    Based upon a comparison of the price of the foreign like product in 
the home market to the calculated COP of the product, we find 
reasonable grounds to believe or suspect that sales of the foreign like 
product were made below the COP, within the meaning of section 
773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating a 
country-wide cost investigation.

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 imports of the subject 
merchandise from Japan and sold at less than NV.
    The petitioner contends that the industry's injured condition is 
evident in the declining trends in operating profits, net sales 
volumes, domestic prices, revenue, production employment, capacity 
utilization, and domestic market share. The allegation of injury and 
causation is supported by relevant evidence including U.S. import data, 
lost sales, and pricing information.
    The Department has assessed the allegation and supporting evidence 
regarding material injury and causation and determined that this 
allegation is properly supported by adequate evidence and meets the 
statutory requirements for initiation. See the Initiation Checklist at 
Attachment II.

Initiation of Antidumping Investigation

    Based upon our examination of the petition, we have found that it 
meets the requirements of section 732 of the Act. See the Initiation 
Checklist. Therefore, we are initiating an antidumping duty 
investigation to determine whether imports of outboard engines from 
Japan are being, or are likely to be, sold in the United States at less 
than fair value. Unless this deadline is extended, we will make our 
preliminary determination no later than 140 days after the date of this 
initiation.

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representative 
of the government of Japan. We will attempt to provide a copy of the 
public version of the petition to each exporter named in the petition, 
as provided for under 19 CFR 351.203(c)(2).

[[Page 5319]]

ITC Notification

    We have notified the ITC of our initiation as required by section 
732(d) of the Act.

Preliminary Determination by the ITC

    The ITC will determine no later than February 23, 2004, whether 
there is a reasonable indication that imports of outboard engines from 
Japan are causing material injury, or threatening to cause material 
injury, to a U.S. industry. A negative ITC determination will result in 
the investigation being terminated; otherwise, this investigation will 
proceed according to statutory and regulatory time limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    Dated: January 28, 2004.
James Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 04-2277 Filed 2-3-04; 8:45 am]
BILLING CODE 3510-DS-S