UNITED STATES INTERNATIONAL TRADE COMMISSION

AUTOMOTIVE REPLACEMENT GLASS WINDSHIELDS FROM CHINA

Investigation No. 731-TA-922 (Final)

DETERMINATION AND VIEWS OF THE COMMISSION

(USITC Publication No. 3494, March 2002)
 

1

 The record is defined in sec. 207.2(f) of the Commission’s Rules of Practice and Procedure (19 CFR § 207.2(f)).

 

2

 Vice Chairman Deanna Tanner Okun and Commissioner Jennifer A. Hillman dissenting.

UNITED STATES INTERNATIONAL TRADE COMMISSION

Investigation No. 731-TA-922 (Final)

AUTOMOTIVE REPLACEMENT GLASS WINDSHIELDS FROM CHINA

DETERMINATION

On the basis of the record1 developed in the subject investigation, the United States International

Trade Commission determines,2 pursuant to section 735(b) of the Tariff Act of 1930 (19 U.S.C.

§ 1673d(b)) (the Act), that an industry in the United States is materially injured by reason of imports of 

automotive replacement glass windshields from China, provided for in subheading 7007.21.10 of the

Harmonized Tariff Schedule of the United States, that have been found by the Department of Commerce to

be sold in the United States at less than fair value (LTFV). The Commission further determines that

critical circumstances do not exist with regard to those imports of the subject merchandise from China that

were subject to the affirmative critical circumstances determination by the Department of Commerce.

BACKGROUND

The Commission instituted this investigation on March 20, 2001, following receipt of a petition 

filed with the Commission and the Department of Commerce by PPG Industries, Inc., Pittsburgh, PA;

Safelite Glass Corp., Columbus, OH; and Apogee Enterprises, Inc., Minneapolis, MN. The final phase of

the investigation was scheduled by the Commission following notification of a preliminary determination by

the Department of Commerce that imports of automotive replacement glass windshields from China were

being sold at LTFV within the meaning of section 733(b) of the Act (19 U.S.C. § 1673b(b)). Notice of the

scheduling of the Commission’s investigation and of a public hearing to be held in connection therewith

was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade

Commission, Washington, DC, and by publishing the notice in the Federal Register of October 23, 2001

(66 FR 53630). The hearing was held in Washington, DC on February 5, 2002, and all persons who

requested the opportunity were permitted to appear in person or by counsel. 
 

3

 Vice Chairman Deanna Tanner Okun and Commissioner Jennifer A. Hillman dissenting. Vice Chairman

Okun and Commissioner Hillman join sections I.A through I.D of these views.

 

4

 19 U.S.C. § 1677(4)(A).

 

5

 19 U.S.C. § 1677(4)(A).

 

6

 19 U.S.C. § 1677(10).

 

7 See, e.g., NEC Corp. v. Department of Commerce, 36 F. Supp.2d 380, 383 (Ct. Int’l Trade 1998); Nippon Steel

Corp. v. United States, 19 CIT 450, 455 (1995); Torrington Co. v. United States, 747 F. Supp. 744, 749 n.3 (Ct.

Int’l Trade 1990), aff’d, 938 F.2d 1278 (Fed. Cir. 1991) (“every like product determination ‘must be made on the

particular record at issue’ and the ‘unique facts of each case’ ”). The Commission generally considers a number of

factors including: (1) physical characteristics and uses; (2) interchangeability; (3) channels of distribution; (4)

customer and producer perceptions of the products; (5) common manufacturing facilities, production processes and

production employees; and, where appropriate, (6) price. See Nippon, 19 CIT at 455 n.4; Timken Co. v. United

States, 913 F. Supp. 580, 584 (Ct. Int’l Trade 1996).

 

8 See, e.g., S. Rep. No. 96-249 at 90-91 (1979).

 

9 Nippon, 19 CIT at 455; Torrington, 747 F. Supp. at 748-49; see also S. Rep. No. 96-249 at 90-91 (1979)

(Congress has indicated that the like product standard should not be interpreted in “such a narrow fashion as to

permit minor differences in physical characteristics or uses to lead to the conclusion that the product and article are

not ‘like’ each other, nor should the definition of ‘like product’ be interpreted in such a fashion as to prevent

consideration of an industry adversely affected by the imports under consideration”).

 

10 Hosiden Corp. v. Advanced Display Mfrs., 85 F.3d 1561, 1568 (Fed. Cir. 1996) (Commission may find single

(continued...)

VIEWS OF THE COMMISSION

Based on the record in this investigation, we determine that an industry in the United States is

materially injured by reason of imports of automotive replacement glass windshields (“ARG windshields”)

from China that the U.S. Department of Commerce (“Commerce”) found were sold in the United States at

less than fair value.3

I. DOMESTIC LIKE PRODUCT AND INDUSTRY 

A. In General

In determining whether an industry in the United States is materially injured or threatened with

material injury by reason of imports of the subject merchandise, the Commission first defines the “domestic

like product” and the “industry.”4 Section 771(4)(A) of the Tariff Act of 1930, as amended (“the Act”),

defines the relevant domestic industry as the “producers as a [w]hole of a domestic like product, or those

producers whose collective output of a domestic like product constitutes a major proportion of the total

domestic production of the product.”5 In turn, the Act defines “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 ... .”6

The decision regarding the appropriate domestic like product(s) in an investigation is a factual

determination, and the Commission has applied the statutory standard of “like” or “most similar in

characteristics and uses” on a case-by-case basis.7 No single factor is dispositive, and the Commission

may consider other factors it deems relevant based on the facts of a particular investigation.8 The

Commission looks for clear dividing lines among possible like products and disregards minor variations.9

Although the Commission must accept the determination of Commerce as to the scope of the imported

merchandise that has been found to be sold at less than fair value, the Commission determines what

domestic product is like the imported articles Commerce has identified.10
 

10 (...continued)

domestic like product corresponding to several different classes or kinds defined by Commerce); Torrington, 747 F.

Supp. at 748-52 (affirming Commission determination of six domestic like products in investigations where

Commerce found five classes or kinds).

 

11 In its final determination, Commerce clarified that ARG windshields for campers, heavy trucks, buses, farm

and heavy machinery are included in the scope of this investigation. 67 Fed. Reg. 6482 (Feb. 12, 2002). 

Respondents argued that this clarification in effect expands the scope to include all self-propelled or self moving

vehicles covered under Chapter 87 of the HTSUS such as “motorcycles, heavy-duty trucks, recreational vehicles,

trains, trolley cars, subways, airplanes, helicopters, motor boats -- even, perhaps, spacecraft.” Xinyi Prehearing

Brief at 6; Xinyi Posthearing Brief at 6-7. According to respondents, the expansion allegedly complicates the

Commission's definition of the domestic like product and of the domestic industry because “it leaves the

Commission in the vulnerable position of rendering a final determination based upon its consideration of

information about potential domestic like product(s) that is certainly incomplete or never collected.” Xinyi

Posthearing Brief at 6-7. However, Commerce did not expand the scope, it merely clarified it, explaining that the

scope includes automotive windshields not just automobile windshields. Thus arguments that the scope has been

expanded to include windshields for airplanes, boats, trains, trolleys, and spacecraft are without basis. Moreover,

we find that Commerce's scope clarification virtually has no effect on the Commission's industry data because the

only known producers of these windshields are Viracon, Guardian, and PPG, all of which included such

windshields in their questionnaire responses. Finally, at the Commission’s hearing, Commissioner Miller asked

respondents to provide the Commission with useable data that would clarify whether companies other than

automotive ARG windshield producers manufactured heavy-duty truck and recreational vehicle windshields, and if

so, what percentage of the total ARG market these windshields represent. Hearing Tr. at 243-244. Respondents

provided no information responsive to Commissioner Miller's request.

 

12 Petitioners’ Postconference Brief at 7-21.

B. Product Description

In its final determination, Commerce defined the imported merchandise within the scope of this

investigation as:

ARG windshields, and parts thereof, whether clear or tinted, whether coated or not, and

whether or not they include antennas, ceramics, mirror buttons or VIN notches, and

whether or not they are encapsulated. ARG windshields are laminated safety glass (i.e.,

two layers of (typically float) glass with a sheet of clear or tinted plastic in between

(usually polyvinyl butyral)), which are produced and sold for use by automotive glass

installation shops to replace windshields in automotive vehicles (e.g., passenger cars, light

trucks, vans, sport utility vehicles, etc.) that are cracked, broken or otherwise damaged.

ARG windshields subject to this investigation are currently classifiable under

subheading 7007.21.10.10 of the Harmonized Tariff Schedules of the United States

(“HTSUS”). Specifically excluded from the scope of this investigation are laminated

automotive windshields sold for use in original assembly of vehicles. While HTSUS

subheadings are provided for convenience and Customs purposes, our written description

of the scope of this investigation is dispositive.11

C. Domestic Like Product

In the preliminary phase of this investigation, petitioners contended that the domestic like product

should not be expanded beyond the scope of subject imports in this investigation to include original

equipment manufacturer windshields (“OEM windshields”).12 Two groups of respondents – Fuyao Glass

Industry Co., Ltd. and Greenville Glass Industries, Inc. (collectively “FYG”) and Diamond Triumph Auto

Glass, Inc.; TCG International, Inc.; Shenzhen Benxun Automotive Glass Co., Ltd.; Xinyi Automotive
 

13 FYG’s Postconference Brief at 2-23; Diamond Respondents’ Postconference Brief at 3-19.

 

14 Automotive Replacement Glass Windshields from China, Inv. No. 731-TA-922 (Prelim.), USITC Pub. 3414 at

4-7 (Apr. 2001) (“Preliminary Determination”).

 

15 FYG’s Prehearing Brief at 16; FYG’s Posthearing Brief at 1-7; Diamond Respondents’ Prehearing Brief at 7-

15.

 

16 See, e.g., Petition at 25-30; Petitioners’ Prehearing Brief at 10-12, 14-17, 22-23; Petitioners’ Posthearing Brief

at 10-12, “Response to Commissioners’ Questions,” Hillman-6.

 

17 Commissioner Bragg does not join the remainder of Section I.C of these views. Based upon her review of the

record in this final phase investigation, Commissioner Bragg finds that there is a single domestic like product

consisting of both ARG and OEM windshields. In particular, Commissioner Bragg notes that in contrast to the

record in the preliminary phase investigation, the final record contains two new facts that, in her view, change the

balance of the domestic like product determination to include OEM windshields: (1) seven domestic producers,

accounting for approximately *** percent of reported U.S. production of ARG windshields in 2000, produced ARG

and OEM windshields on the same equipment and machinery with the same workers; and (2) the majority of

purchasers reported that ARG and OEM windshields are interchangeable. CR at I-9-10, II-6 & Table D-1; PR at I6-7, II-3 & Table D-1. Thus, although ARG and OEM windshields have different channels of distribution,

different prices, unique design processes, and no interchangeability in the original equipment installment market,

nonetheless, ARG and OEM windshields have essentially the same general physical characteristics and uses,

common manufacturing facilities and production employees, interchangeability in the replacement market (the

market segment in which subject imports compete with the domestic like product), and the majority of purchasers

perceived ARG and OEM windshields to be interchangeable. CR at I-3-12 & II-3-4, 6-7, PR at I-3-I-8 & II-2-II-3,

3-4. Commissioner Bragg finds that the record in this final phase investigation fails to establish a sufficiently

clear dividing line distinguishing ARG and OEM windshields; therefore, she determines that, on balance, the

record supports the definition of a single domestic like product consisting of ARG and OEM windshields. As a

result, Commissioner Bragg finds a single domestic industry consisting of all domestic producers of ARG and

OEM windshields. Given her broader like product definition, Commissioner Bragg recognizes that there are data

concerns regarding an inconsistency between official statistics and the questionnaire data for OEM windshield

production. CR at III-1, PR at III-1. Nonetheless, the final record indicates that the Commission data account for

(continued...)

Glass (Shenzhen) Co., Ltd.; Peaceful City Ltd.; Hebei Tong Yong Glass Industry Co., Ltd.; Hangzhou

Safety Glass Co., Ltd.; Elite Auto Glass; North Star Glass; and Mygrant Glass (collectively “the Diamond

Respondents”) – argued that the domestic like product should include both ARG and OEM windshields.13

The Commission acknowledged that there were factors supporting both proposed domestic like products

and recognized that the record was incomplete. For purposes of its preliminary determination, however, it

found that there was one domestic like product consisting of all ARG windshields, not including OEM

windshields. Specifically, it found that the physical characteristics and uses of ARG and OEM windshields

were very similar, but that the differences, particularly the fact that OEM windshields are produced to

manufacturers’ proprietary specifications with strict tolerances, were significant in the OEM market, and

prevented ARG windshields from being interchangeable for OEM uses. It noted that there appeared to be

largely different channels of distribution for ARG and OEM windshields because no manufacturers of new

automobiles and vehicles purchased ARG windshields for production. While the manufacturing processes

for OEM and ARG windshields are basically the same, and some domestic producers produce both OEM

and ARG windshields using the same facilities and workers, the limited information on the record at that

time suggested that the apparent majority of ARG and OEM windshields were produced in separate

facilities with separate workers.14

In the final phase of this investigation, respondents renewed their argument that the Commission

should find a single domestic like product that includes both ARG and OEM windshields,15 while the

petitioners maintained that the Commission correctly defined the domestic like product in its preliminary

determination.16 As set forth below, the Commission again finds one domestic like product comprised only

of all ARG windshields.17
 

17 (...continued)

the vast majority of domestic OEM production. See CR/PR at Table III-2 & C-2. Consequently, Commissioner

Bragg finds that there is sufficient evidence on the record upon which to base her determination consistent with her

domestic-like product finding. 

 

18 Conference Tr. at 70 (Fennell); Hearing Tr. at 168 (Fennell).

 

19 CR at I-6 -I- 7; PR at I-5.

 

20 Hearing Tr. 85-86 (Miner) (“Differences, different manufacturers in the after-market can create variations in

product types that would not be acceptable in an OEM type product. Some customers on a windshield will add a

sunshade where there is no sunshade in an OEM, totally unacceptable in one market, up to the manufacturer's

discretion to create that product in a second market. We see that on a vast number of part numbers, different

colors of glass. Coatings in some OEM type products that we provide that other after-market suppliers don't

provide any coating at all on the product”).

 

21 CR at II-6 n.12; PR at II-3, n.12.

 

22 CR at I-2; PR at I-2.

 

23 CR at I-4; PR at I-4. FYG argues that ***. The Commission economist, Mr. Deese, contacted *** in order to

clarify this point. ***. See Staff notes of William Deese, March 8, 2002.

 

24 CR at I-6; PR at I-5. Hearing Tr. at 22 (Dumbris) “That's why the OEM specification for this BMW windshield

are three inches of paper in a binder weighing about eight pounds, while the ARG specification for a similar BMW

windshield that was reverse engineered at Berea is two pages long. It's also why no OEM customer accepts ARG

windshields for OEM application. The OEM customer demand these physical differences and the OEM

windshield producers meet them.”

 

25 CR at I-4, I-6; PR at I-4 - I-5; Hearing Tr. at 25 (Dumbris); see Petitioners’ Postconference Brief, ***.

1. Analysis

Physical characteristics and uses. The general physical characteristics of ARG and OEM

windshields are essentially the same. Both ARG and OEM windshields are made of the same raw material,

laminated glass (usually “float” glass), have the same basic dimensions, and are produced to satisfy the

same federal safety regulations (e.g., Federal Motor Vehicle Safety Standard 205).18 ARG windshields,

however, are produced to correspond to part numbers published by National Auto Glass Specifications

(“NAGS”), while OEM windshields are not.19 Moreover, some ARG windshields may come in a wider

variety of colors and with features not available on OEM windshields.20 Although there may not be a

discernible difference in size, shape, or tint, many, but not all, purchasers reported that OEM windshields

have logos, trademarks, or some distinguishing marking to identify them as such.21

Both ARG and OEM windshields have the same uses, broadly speaking, i.e., to fill the opening in

the vehicle and to protect the vehicle and its occupants from the elements. However, virtually all OEM

windshields are used in the production of new vehicles, with the exception of a small volume of OEM

windshields sent to dealers for use in warranty replacement work.22 ARG windshields are used to replace

damaged windshields in the replacement market, and are seldom, if ever, used in the production of new

vehicles.23

OEM windshields are manufactured to precise proprietary specifications and tight tolerances

specified by the vehicle manufacturer, which may include spectral properties, glass and sunshade colors,

attachment characteristics, and dimensional control parameters. ARG windshields, on the other hand, are

generally not produced to those proprietary specifications.24 The automated assembly lines used by vehicle

manufacturers require windshields produced to those precise specifications, and the use of ARG

windshields deviating from those specifications can jam the robotic equipment and shut down the entire

assembly line.25

By contrast, many ARG windshields are “reverse-engineered” from OEM windshields, which

attempt to match the specifications of corresponding OEM windshields. Typically, tolerances for ARG
 

26 CR at I-4, I-6, I-8; PR at I-4 - I-6; Hearing Tr. 85-86 (Miner).

 

27 CR at I-8 to I-9; PR at I-6; Hearing Tr. at 22-30 (Dumbris).

 

28 CR at I-8; PR at I-6; Hearing Tr. at 22-30 (Dumbris).

 

29 CR at I-8; PR at I-6.

 

30 CR at I-7 to I-9; PR at I-5 - I-6; Hearing Tr. at 25 (Dumbris).

 

31 CR at III-1; PR at III-1. Viracon/Curvlite produces primarily for the ARG market, but produces some OEM

windshields for buses and recreational vehicles. CR at I-8 n.31; PR at I-6, n.32.

 

32 CR at I-9, PR at I-6.

 

33 CR at I-8, III-1; PR at I-6, III-1.

 

34 CR at I-10; PR at I-7.

 

35 Questionnaire response of ***; CR at II-7; PR at II-3.

windshields are less exacting than those for OEM windshields. While producers of ARG windshields try to

match the colors of the original equipment windshield, they have the latitude of offering colors not offered

on an OEM basis, so the ARG counterpart to an OEM windshield can be visibly different.26

Manufacturing Facilities and Employees. It is undisputed that production of OEM windshields

involves the same basic procedures and raw materials as production of ARG windshields. However, there

can be significant differences.

Production facilities for OEM windshields are designed for high-volume runs and maximum yields

to minimize the per unit cost to the OEM customer, with production of a limited number of OEM

windshield part numbers and limited pattern changes.27 By contrast, facilities producing only ARG

windshields are typically designed for flexibility, to produce large numbers of different windshield part

numbers, with short-to-medium volume runs and frequent pattern changes.28

As noted, ARG windshields are typically reverse-engineered using an OEM windshield obtained

from a vehicle dealer, generally without access to the proprietary specifications for that OEM windshield.29

Because OEM windshields are produced to meet the strict proprietary specifications of vehicle

manufacturers, product development is considerably more lengthy and costly for OEM windshields than it

is for ARG windshields. It can take 14 months to two years before the OEM windshield is ready for

production and shipment, while the ARG windshield product development process can last three months or

less. Additionally, the OEM product development process requires numerous engineers and technicians to

work with the customer on its specifications, and can cost ten times more than the ARG product

development process.30 

Of the seven reporting domestic ARG windshield producers, only one (***) does not produce OEM

windshields as well.31 Six of seven of these producers make both ARG and OEM windshields using the

same facilities and the same workers, and the record indicates that the majority of ARG windshields in

2000 were produced in the same facilities in which OEM windshields were produced. *** accounted for

*** percent of domestic ARG production in 2000. The seven ARG producers, who accounted for ***

percent of U.S. ARG production in 2000, stated that they did produce OEM windshields on the same

equipment used in the production of ARG windshields.32 Specifically, PPG, which accounts for ***

percent of domestic ARG production, produces ***.33

Interchangeability. While OEM windshields can be used interchangeably with ARG windshields

in the aftermarket, the evidence in this investigation indicates that such use in the aftermarket tends to be

limited to replacement by automobile dealers pursuant to a warranty.34 The OEM windshields sold in the

replacement market tend to be more expensive than their ARG counterparts; thus, some installers reported

that for practical purposes they are not interchangeable.35 Reverse-engineered ARG windshields, however,
 

36 CR at II-6 - II-7; PR at II-3.

 

37 CR at I-10; PR at I-7.

 

38 CR at I-10; PR at I-7.

 

39 CR at II-6 - II-7; PR at II-3. In evaluating customer perceptions in this investigation, we have relied primarily

on the perceptions of those customers who purchase products from the manufacturers, rather than the perceptions

of the ultimate end-users – individual car owners. The Commission has in prior investigations taken into account

consumer perceptions in its domestic like product analysis, when the product is one the consumer purchases

directly “off the shelf” at the retail level. See, e.g., Certain Pasta from Italy and Turkey, Invs. Nos. 701-TA-365-

366, 731-TA-734-735 (Final), USITC Pub. 2977 at 10-11 (July 1996); Bicycles from China, Inv. No. 731-TA-731

(Final), USITC Pub. 2968 at 6 (July 1996); Fresh Cut Roses from Colombia and Ecuador, Invs. Nos. 731-TA-684-

685 (Final), USITC Pub. 2862 at I-7 (March 1995). Car owners, however, generally do not purchase windshields

“off the shelf.” Instead, they typically purchase the service of having a replacement windshield installed. For this

reason, the producers of ARG windshields target their marketing campaigns at the installer and not at the car

owner. CR at I-10 and II-8; PR at I-7. In such circumstances, we believe that perceptions of car owners are of less

probative value than are the perceptions of producers and their customers, the distributors or OEMs, in

ascertaining distinctions between the types of windshields at issue. Moreover, to the extent that such perceptions

are relevant, the record contains no probative information concerning whether or why car owners prefer to use

OEM or ARG windshields. See the Commission’s similar conclusions about consumer perceptions in Certain

Brake Drums and Rotors from China, Inv. No. 731-TA-744 (Final), USITC Pub. 3035 (April 1997). (“Brake

Drums”) at 11 n.37.

 

40 CR at II-6; PR at II-3.

 

41 CR at II-6; PR at II-3.

 

42 CR at II-7; PR at II-3.

 

43 CR at II-7; PR at II-3. 

 

44 CR at II-7; PR at II-3; CR at I-10; PR at I-7.

cannot be used in the OEM market because they are not designed to the vehicle manufacturers’ precise

proprietary specifications and may affect assembly operations.36

Customer and Producer Perceptions. The evidence presented by petitioners indicates that they, as

well as some original equipment manufacturers that use OEM windshields, consider ARG and OEM

windshields as two different products.37 Respondents, on the other hand, suggest that ARG distributors

and vehicle owners, the ultimate end users, perceive them to be the same product.38

The Commission’s purchaser questionnaire data show that many distributors and retailers in the

aftermarket tend to view ARG and OEM windshields as interchangeable in that market.39 Nine out of 16

responding purchasers reported that they consider OEM windshields to be interchangeable with ARG

windshields, but they also reported that the demand for OEM windshields in the ARG market is usually

related to replacement under warranty or to customer preference, considered to account for a small share of

aftermarket demand.40

Purchaser *** stated that ARG and OEM windshields have the same characteristics, fit, and

function.41 *** stated that, while ARG and OEM windshields may be technically interchangeable, the

higher cost and limited availability of OEM windshields in the ARG windshield market made actual

interchangeability impractical.42 *** stated that, although technically interchangeable, installation methods,

packaging, and delivery methods were different between ARG and OEM windshields and thus ARG and

OEM windshields were not actually used interchangeably. *** stated that ARG windshields may not meet

OEM specifications.43

The Commission asked automobile manufacturers if they could use ARG and OEM windshields

interchangeably in their automotive assembly lines. *** stated that they could not use ARG and OEM

windshields interchangeably.44
 

45 CR at I-10 - I-11, II-3 - II-4; PR at I-7, II-3; ***, however, reported that they sell OEM windshields to

distributors and glass replacement shops. CR at II-6.

 

46 CR at I-10 - I-11, II-3 - II-4; PR at I-7, II-3. 

 

47 CR at I-11; PR at I-7 - I-8.

 

48 CR at I-12; PR at I-8.

 

49 CR at I-12; PR at I-8.

Channels of Distribution. OEM windshields are generally sold to vehicle manufacturers, with a

small volume re-sold by the vehicle manufacturers to car dealerships for use in warranty replacement.45 By

contrast, ARG windshields are generally sold to distributors and auto glass installation shops, and are not

sold to OEMs.46 The domestic ARG producers have increasingly become vertically integrated from

production through to wholesale distribution and retail glass installation operations. Domestic producers

PPG, Safelite, and Apogee are vertically integrated into the wholesale distribution level, and Apogee,

Guardian Industries, and Safelite are integrated into the glass installation shop level.47

Price. To compare prices of ARG and OEM windshields, the Commission collected pricing data

on four ARG windshields and their OEM counterparts. Because of the much larger volume production

runs of OEM windshields, the cost per unit of an OEM windshield to vehicle manufacturers is lower than

that for an ARG windshield, despite the larger development and engineering costs for OEM windshields. 

The lower prices of OEM windshields appear to reflect this lower per-unit cost.48 However, there is

evidence that OEM windshields purchased by a consumer through a dealer in the aftermarket will be

considerably more expensive than an ARG windshield purchased through a distributor or retail shop.49

2. Conclusion

We find one domestic like product comprised of ARG windshields. ARG and OEM windshields

have the same basic physical characteristics and end uses; the differences between them, principally their

conformity with vehicle manufacturers’ proprietary specifications, are subtle. Nevertheless, those

distinctions do have significant implications for other factors pertinent to the domestic like product

analysis. Interchangeability is limited. ARG windshields, which are not designed to those proprietary

specifications, may not be used in lieu of OEM windshields in automobile manufacturing. Although OEM

windshields may be used in lieu of ARG windshields, this use appears to be limited primarily to warranty

replacement where OEM windshields are required. There are significant differences in channels of

distribution, in that OEM windshields are sold primarily to vehicle manufacturers, and ARG windshields

are sold primarily to distributors and retail auto glass outlets. While certain basic manufacturing steps are

the same for ARG and OEM windshields, and there is significant overlap in some common manufacturing

facilities and employees producing both types of windshields in the United States, there are significant

differences between the two in the time and expense devoted to product development. Moreover, while

OEM windshields tend to be produced in high volume production runs with limited flexibility to change

patterns, ARG windshields are generally produced in flexible production facilities that use low to moderate

volume production runs, and make frequent pattern changes.

On the basis of this record, we find one domestic like product coextensive with the scope consisting

of ARG windshields.

D. Domestic Industry and Related Parties

1. Domestic Industry

Section 771(4) of the Act defines the relevant industry as “the producers as a [w]hole of a domestic

like product, or those producers whose collective output of a domestic like product constitutes the major
 

50 19 U.S.C. § 1677(4)(A).

 

51 See United States Steel Group v. United States, 873 F. Supp. 673, 681-84 (Ct. Int’l Trade 1994), aff’d, 96 F.3d

1352 (Fed. Cir. 1996).

 

52 Preliminary Determination, USITC Pub. 3414 at 7-8.

 

53 Except as otherwise noted in the staff report, the domestic industry’s trade data are based on information

submitted by the following domestic producers – Carlex, Guardian, Pilkington, PPG, Safelite, Viracon/Curvlite,

and Visteon. CR/PR at III-1.

 

54 Commissioner Bragg defines the domestic industry as all domestic producers of ARG and OEM windshields;

she further notes that this definition encompasses the same producers as those identified by her colleagues,

although she relies on the available data from these producers for both domestic ARG and OEM production.

 

55 19 U.S.C. § 1677(4)(B).

 

56 Sandvik AB v. United States, 721 F. Supp. 1322, 1331-32 (Ct. Int’l Trade 1989), aff’d mem., 904 F.2d 46

(Fed. Cir. 1990); Empire Plow Co. v. United States, 675 F. Supp. 1348, 1352 (Ct. Int’l Trade 1987). The primary

factors the Commission has examined in deciding whether appropriate circumstances exist to exclude the related

parties include: (1) the percentage of domestic production attributable to the importing producer; (2) the reason

the U.S. producer has decided to import the product subject to investigation, i.e., whether the firm benefits from the

less than fair value sales or subsidies or whether the firm must import in order to enable it to continue production

and compete in the U.S. market; and (3) the position of the related producer vis-a-vis the rest of the industry, i.e.,

whether inclusion or exclusion of the related party will skew the data for the rest of the industry. See, e.g.,

Torrington Co. v. United States, 790 F. Supp. 1161, 1168 (Ct. Int’l Trade 1992), aff’d mem., 991 F.2d 809 (Fed.

Cir. 1993). The Commission has also considered the ratio of import shipments to U.S. production for related

producers and whether the primary interests of the related producers lie in domestic production or in importation. 

See, e.g., Melamine Institutional Dinnerware from China, Indonesia, and Taiwan, Invs. Nos. 731-TA-741 to 743

(Final), USITC Pub. 3016 (Feb. 1997) at 14 n.81.

 

57 Preliminary Determination, USITC Pub. 3414 at 8.

 

58 See, e.g., Petitioners’ Prehearing Brief at 24, n.24.

proportion of that product.”50 In defining the domestic industry, the Commission’s general practice has

been to include in the industry all domestic production of the domestic like product, whether toll-produced,

captively consumed, or sold in the domestic merchant market.51

In the preliminary phase of this investigation, based on its domestic like product determination, the

Commission found a single domestic industry that included all domestic producers of ARG windshields.52

For the same reason, we again define the domestic industry as all domestic producers of ARG

windshields.53 54

2. Related Parties

We must further determine whether any producer of the domestic like product should be excluded

from the domestic industry pursuant to section 771(4)(B) of the Act. That provision of the statute allows

the Commission, if appropriate circumstances exist, to exclude from the domestic industry producers that

are related to an exporter or importer of subject merchandise or which are themselves importers.55

Exclusion of such a producer is within the Commission’s discretion based upon the facts presented in each

case.56

In the preliminary phase of this investigation, no party argued for the exclusion of any domestic

producers as a related party.57 In the final phase of this investigation, petitioners argued that appropriate

circumstances do not exist to exclude any domestic producers that are related parties from the domestic

industry. None of the respondents addressed this issue.58
 

59 See, e.g., CR at III-2, IV-1; PR at III-2, IV-1 ***. See, e.g., CR at III-2; PR at III-2; ***; Foreign Producer

Questionnaire responses of ***.

 

60 See, e.g., *** domestic producer and importer questionnaire responses; CR at III-4; PR at III-2; CR/PR at

Table III-2.

 

61 See, e.g., CR at III-1; PR at III-1.

 

62 See, e.g., *** domestic producer and importer questionnaire responses; CR at III-4; PR at III-2; CR/PR at

Table III-2.

 

63

 See, e.g., CR/PR at Table VI-2.

 

64 See, e.g., CR at III-4; PR at III-2.

 

65 See, e.g., *** Importer Questionnaire response at II-4.

 

66 See, e.g., CR at III-4; PR at III-2. ***. See, e.g., Foreign Producer Questionnaire responses of ***; CR at III3.

 

67 See, e.g., CR/PR at Table VI-2.

 

68 Therefore, for purposes of our analysis in the final phase of this investigation, the domestic industry consists of

Carlex; Guardian; Pilkington; PPG; Safelite; Viracon/Curvlite; Visteon; and Daimler/Chrysler. See, e.g., CR/PR

at III-1.

 

69 Vice Chairman Okun and Commissioner Hillman do not join section II of these Views. See Separate and

Dissenting Views of Vice Chairman Okun and Commissioner Hillman.

 

70 19 U.S.C. § 1673d(b).

We find that the two domestic producers of ARG windshields, *** and ***, who directly imported

Chinese subject merchandise during the period of investigation are related parties.59 We do not, however,

find appropriate circumstances exist to exclude either of these producers from the domestic industry. ***

reported importing *** ARG windshields, valued at $*** from China in 1999 and *** ARG windshields

valued at $*** from China in 2000.60 *** was the ***-largest domestic producer of ARG windshields in

2000 with *** percent of reported production that year.61 Its ratio of subject imports to domestic

production was *** percent in 1999 and *** percent in 2000.62 Given this low ratio of subject imports to

production, it does not appear that *** primary interest lies in importing subject merchandise. Moreover,

*** operating income ratio to net sales value was ***.63 Given that there is no evidence that *** derived

any significant benefit from importing, we find that appropriate circumstances do not exist to exclude ***

from the domestic industry.

*** reported importing *** ARG windshields, valued at $*** from China in 1998, *** ARG

windshields, valued at $***, from China in 1999, and *** ARG windshields, valued at $*** from China in

2000.64 ***.65 Its imports of subject merchandise from China were equivalent to *** percent of its U.S.

production of ARG windshields in 1998, *** percent in 1999, and *** percent in 2000.66 Given this low

ratio of subject imports to production, *** primary interest appears to lie in its domestic production. 

Moreover, given that *** had the *** financial performance of ***, and the *** financial performance in

1999 and 2000,67 we find no evidence that it has been shielded from the effects of any unfairly traded

imports as a result of its own importation. Accordingly, we find that appropriate circumstances do not

exist to exclude *** from the domestic industry.68

II. MATERIAL INJURY BY REASON OF LESS THAN FAIR VALUE IMPORTS69

In the final phase of an antidumping duty investigation, the Commission determines whether an

industry in the United States is materially injured by reason of the imports under investigation.70 In making

this determination, the Commission must consider the volume of imports, their effect on prices for the

domestic like product, and their impact on domestic producers of the domestic like product, but only in the
 

71 19 U.S.C. § 1677(7)(B)(i). The Commission “may consider such other economic factors as are relevant to the

determination” but shall “identify each [such] factor . . . [a]nd explain in full its relevance to the determination.” 

19 U.S.C. § 1677(7)(B); see also Angus Chemical Co. v. United States, 140 F.3d 1478 (Fed. Cir. 1998).

 

72 19 U.S.C. § 1677(7)(A).

 

73 19 U.S.C. § 1677(7)(C)(iii).

 

74 Id.

 

75 Preliminary Confidential Report (“PCR”) at II-12; Preliminary Public Report (“PPR”) at II-6.

 

76 CR/PR at Table IV-2. However, on a value basis, apparent domestic consumption declined from $649.5

million in 1998 to $605.6 million in 1999, and then increased to $618.3 million in 2000; apparent domestic

consumption in interim 2000 was $480.0 million compared to $519.0 million in interim 2001. Id.

 

77 PCR at II-8; PPR at II-4; Conference Tr. at 54 (Tann); PCR at II-13; PPR at II-7.

 

78 PCR at II-2, II-7; PPR at II-1 to II-2, II-4.

 

79 Conference Tr. at 54-55 (Tann); 103-104, 108-109 (Harris).

 

80 Conf. Tr. at 13-16 (Jungbluth), 77-79 (Wiley); Petition at 30-32.

context of U.S. production operations.71 The statute defines “material injury” as “harm which is not

inconsequential, immaterial, or unimportant.”72 In assessing whether the domestic industry is materially

injured by reason of subject imports, we consider all relevant economic factors that bear on the state of the

industry in the United States.73 No single factor is dispositive, and all relevant factors are considered

“within the context of the business cycle and conditions of competition that are distinctive to the affected

industry.”74

For the reasons discussed below, we determine that the domestic industry is materially injured by

reason of subject imports from China found to be sold at less than fair value.

A. Conditions of Competition

Several conditions of competition are pertinent to our analysis.

Domestic producers, importers and purchasers agree that the demand for ARG windshields is

primarily determined by the number of vehicles on the road, the number of miles driven, vehicle age, and

weather. Since the 1990s, motor vehicle use and the average age of vehicles on the road has been

increasing, which has led to a steady increase in the consumption of ARG windshields.75 Apparent

domestic consumption of ARG windshields increased from 11,939,656 units in 1998, to 12,314,872 units

in 1999, and 12,612,138 units in 2000; apparent domestic consumption in interim 2001 was 10,137,666

units compared to 9,718,883 units in interim 2000.76 77

A major segment of the ARG windshield market (possibly as much as 50 to 70 percent) is related

to claims by insured motorists for windshield replacement.78 Some or all of the U.S. producers act as thirdparty administrators for certain property and casualty insurance companies in the United States with

respect to such claims for windshield replacement.79 Petitioners contended, however, that the majority of

auto glass claims are satisfied by the policy holder’s preferred shop, not a shop suggested by the auto glass

replacement service provider.80

While most domestic producers of ARG windshields also produce OEM windshields, we note that

demand for OEM windshields differs from that of ARG windshields. Demand for OEM windshields is

almost entirely driven by the demand for new vehicles whereas demand for ARG windshields is driven by

such factors as the number of vehicles on the road, miles driven, vehicle age, and weather.

There has been increasing vertical integration in the domestic industry over the investigation

period. As a result of recent mergers and acquisitions, some domestic producers now operate at several

levels of the ARG windshield production and distribution system, including wholesale distribution and

retail glass installation shops. Thus, some domestic producers supply and compete with independent
 

81 Conf. Tr. at 13-14, 15-16 (Jungbluth); 77-79 (Wiley); Petition at 30-32.

 

82 CR at II-7; PR at II-4.

 

83 CR at II-7; PR at II-4.

 

84 CR at II-8; PR at II-4. 

 

85 CR at II-15; PR at II-7; Conference Tr. at 43 (Chimka).

 

86 CR at II-15; PR at II-7; Conference Tr. at 38-39 (Chimka); 62-63 (Tann); 63 (Jungbluth); 72 (Anderson).

 

87 Commissioner Bragg notes that domestic producers AFG Industries, Guardian, Pilkington, and Visteon

produce both ARG and OEM windshields whereas AP Technoglass, the DaimlerChrysler Corp., Carlex and a few

smaller producers primarily produce OEM windshields. Safelite is the only company that produces exclusively

ARG windshields. CR at II-1; PR II-1. Viracon/Curvelite produces primarily for the ARG windshield market but

also produces OEM windshields for busses and recreational windshields. There are many importers of subject and

nonsubject products (primarily from Canada and Mexico), as well as independent wholesalers and retailers. CR at

II-1; PR II-1.

 

88 Nonsubject imports increased in quantity from 5,368,130 units in 1998 to 5,514,042 units in 1999, then

decreased to 5,202,413 units in 2000; nonsubject imports were 4,024,712 units in interim 2000 compared to

3,948,530 units in interim 2001. By value, nonsubject imports declined from $212.3 million in 1998 to $207.3

million in 1999 and $200.4 million in 2000; nonsubject imports were $155.5 million in interim 2000 compared to

$164.0 million in interim 2001. By value, the market share of nonsubject imports decreased from 32.7 percent in

1998 to 34.2 percent in 1999 and 32.4 percent in 2000. CR/PR at Tables IV-1 to IV-2.

 

89 Petitioners argued for the inclusion of imports from Hong Kong in the Commission’s analysis of subject import

volume alleging that these imports are of Chinese origin. However, Commerce has not addressed transshipments

and the United States Customs Service’s country of origin designation does not identify imports from Hong Kong

as being originally from China. We find that the record does not contain sufficient evidence to support an

independent determination of transshipment. Therefore, we include imports from Hong Kong in our discussion

and analysis of nonsubject imports. We note, however, that imports from Hong Kong were relatively insignificant

during the period of investigation and would not have affected our ultimate injury determination had we decided to

treat them as subject imports.

 

90 19 U.S.C. § 1677(7)(C)(i).

distributors for sales at both the wholesale and retail level. This vertical integration, along with increasing

concentration, has contributed to the price competitiveness of this market.81

Windshield sales under insurance claims account for 56.2 percent of retail sales.82 Several

domestic producers have arrangements with insurance companies through which they administer claims

including locating installers.83 Insurance companies are aggressive in reducing costs, and there is no

evidence that any particular supplier or country of origin windshield is preferred.84

The record indicates that subject imports from China and the domestic like product are highly

substitutable.85 While in the past Chinese ARG windshields were perceived to be of lower quality than

domestically produced ARG windshields, in recent years this perception of lower quality has largely

been eliminated, and subject imports from China are now viewed as substitutable for the domestic like 

product.86 87

Finally, nonsubject imports declined over the period of investigation, both by quantity and by

value.88 89

B. Volume of Subject Imports

Section 771(7)(C)(i) of the Act provides that the “Commission shall consider whether the volume

of imports of the merchandise, or any increase in that volume, either in absolute terms or relative to

production or consumption in the United States, is significant.”90
 

91 CR/PR at Table IV-1.

 

92 CR/PR at Tables IV-1, C-1.

 

93 Commissioner Bragg finds that when measured against her broader like product definition, both the absolute

volume of subject imports and the increase in that volume relative to apparent domestic consumption, are

significant. See CR/PR at Table C-2.

 

94 CR/PR at Table IV-2.

 

95 CR/PR at Table IV-2.

 

96 CR/PR at Table IV-2.

 

97 19 U.S.C. § 1677(7)(C)(ii).

 

98 Purchasers reported that quality and price are the most important factors in choosing a supplier. CR/PR

Table II-3.

 

99 CR at II-19; PR at II-10.

 

100 CR at II-19; PR at II- II-10

The volume of subject ARG windshields imported from China increased dramatically throughout

the period of investigation from 481,393 units in 1998 to 1,089,278 units in 1999, and 1,808,630 units in

2000; subject imports were 1,217,620 units in interim 2000 compared to 1,680,646 units in interim 2001.91

Thus, the volume increased 275.7 percent between 1998 and 2000.92

The market penetration of subject imports also increased during the period of investigation.93

Subject import market penetration, measured by quantity, increased from 4.0 percent in 1998 to 8.8 percent

in 1999, and to 14.3 percent in 2000. Subject import market penetration was higher in interim 2001, when

it was 16.6 percent, than in interim 2000, when it was 12.5 percent.94

The domestic industry lost market share to subject imports from China. Domestic producers’

market share, measured by quantity, decreased from 51.0 percent in 1998 to 46.4 percent in 1999, and to

44.4 percent in 2000. The domestic industry’s market share was lower in interim 2001, at 44.5 percent,

than in interim 2000, when it was 46.1 percent.95 The market share of nonsubject imports also decreased,

from 44.9 percent in 1998 to 41.3 percent in 2000.96

We consequently find the absolute volume of subject imports, and the increase in that volume

relative to apparent domestic consumption, to be significant.

C. Price Effects of the Subject Imports

Section 771(7)(C)(ii) of the Act provides that, in evaluating the price effects of the subject imports,

the Commission shall consider whether –

 (I) there has been significant price underselling by the imported merchandise as compared

with the price of domestic like products of the United States, and

(II) the effect of imports of such merchandise otherwise depresses prices to a significant degree or

prevents price increases, which otherwise would have occurred, to a significant degree.97

 As noted above, the domestic product and subject imports are highly substitutable, and price is an

important factor in purchasing decisions.98 While quality is also an important factor in purchasing

decisions, contract bids are generally solicited from suppliers whose quality and reliability have already

been established, making price and volume the focal point of contract negotiations.99 For instance, some

purchasers reported that they require potential suppliers to pass certain qualification procedures to assure

that quality standards are met before they will enter into contract negotiations with them.100 Some
 

101 CR at II-19; PR at II-10.

 

102 CR at II-8; PR at II-4.

 

103 Commissioner Bragg notes that although quality is important, during contract negotiations quality has already

been established and price is the most important factor.

 

104 Preliminary Determination at 15.

 

105 CR at V-5; PR at V-3 to V-4.

 

106 See generally, Comments to draft Questionnaires filed September 10, 2001.

 

107 Respondents argued that data should be gathered at the retail level instead of at the first unrelated sale level. 

The Commission practice has consistently been to gather pricing data, whenever practicable, at the first unrelated

sale level. Although some importers may be integrated all the way down to the retail level and some U.S.-

produced ARG windshields are sold through related parties at the retail level, many transactions still occur at the

unrelated wholesale or distribution level. CR at V-5 n.9; PR at V-3 n.9. Thus, we find that the record evidence

does not support deviation from our prior established practice. 

 

108 CR at V-5; PR at V-3.

 

109 CR at Tables V-1 - V-8.

 

110 CR at V-19, n. 12.

 

111 See, for example, Table V-3.

purchasers reported disqualifying certain suppliers because of poor quality.101 Also, domestic producers

and purchasers reported that most insurance companies, although not direct purchasers of windshields,

want the lowest price regardless of brand or country of origin and that insurance companies are aggressive

in reducing costs.102 103

In the preliminary phase of the investigation the Commission noted that in the final investigation it

would collect pricing data covering a broader product range than it did during the preliminary phase.104 

Thus, in the final phase of the investigation the Commission asked the parties to comment on how the

Commission could best collect and analyze pricing data in order to cover a fair and accurate cross section

of the ARG windshield market. Because of the large number of product types and wide disparity in prices

between those products, the parties acknowledged that aggregate industry-wide pricing data would be of

limited probative value in making direct price comparisons. Therefore, at petitioners’ and respondents’

suggestion, the Commission gathered pricing information on a representative sample of eight different ARG

windshield model numbers.105 According to the parties, these model numbers accounted for some of the

largest volume sales of ARG windshields during the period of investigation and are a fairly representative

sample of the market for ARG windshields.106

The Commission requested that U.S. producers, importers, and purchasers of ARG windshields

provide quarterly data for the total delivered quantity and value of ARG windshield transactions to

unrelated parties in the U.S. market.107 Data were requested from January 1998 to September 2001 for

producers and importers and from January 1999 to September 2001 for purchasers.108

For domestic producers, prices for ARG windshields fluctuated sharply downward throughout

most of the investigation period.109 While some of this decline may be attributable to expanded supply of

particular ARG windshields as more companies produce them,110 we note that prices dropped even for

products for which quarterly volumes remained relatively stable and also when quarterly volumes showed

increases.111 These price decreases were occurring as the Chinese product was increasing its presence in

the market at price levels well below those of the domestic windshields, thereby depressing the domestic

prices. 

Product-specific domestic producer and importer pricing data indicate frequent and substantial

underselling by subject merchandise over the period of investigation. Subject imports undersold the

domestic like product in all but five quarters. For the seven pricing products for which there were
 

112 Underselling margins ranged from 17.5 to 44.1 percent for product 1 over 11 quarters; from 26.9 to 67.5

percent for product 2 over 15 quarters; from 9.9 to 52.1 percent for product 4 over 15 quarters; from 1.0 to 36.0

percent for product 6 over 11 quarters; from 12.3 to 54.1 for product 7 over 15 quarters; from 10.8 to 53.9 percent

for product 8 over 15 quarters; from 0.7 to 32.2 percent for product 9 over 15 quarters; and from 23.2 to 39.1

percent for product 11 over 11 quarters. CR/PR at Tables V-1 to V-8. 

 

113 CR/PR Table V-11 to V-18.

 

114 Commissioner Bragg notes that there were no sales of subject merchandise for OEM applications and thus

price comparisons involving domestic OEM windshields are not possible. Commissioner Bragg further notes that

the decline in average unit values for the domestic like product, as she has defined it (see n.15), is consistent with

record evidence that significant volumes of subject imports served to depress prices for the domestic like product to

a significant degree. See CR/PR at Table C-2.

 

115 CR at V-19; PR at V-7. “As discussed in our prehearing brief, nominal prices declined over time for specific

windshield specifications. But these are not necessarily indicative of adverse trends or adverse effects. As reported

by Apogee in its SEC form 10Ks, prices for specific windshield models were generally characterized by declines

over the product life cycles as new windshields and refinements and enhancements to older windshields are

introduced.” Hearing Tr. at 185-186 (Klett).

 

116 Hearing Tr. at 112.

 

117 Petitioners’ Posthearing Brief at Okun-9-11.

 

118 CR/PR App E; CR at V-20 to V-21; PR at V-7 to V-8.

comparisons between the subject merchandise and the domestic like product, the underselling margins

ranged from 0.7 to 67.5 percent.112 

Purchaser pricing data also show consistent and pervasive underselling by subject imports. Subject

imports from China undersold the domestic like product in 75 out of 88 quarters observed. Margins of

underselling ranged from 1.5 to 68.2 percent.113 

In light of the importance of price in purchasing decisions and the significant and increasing

volume and market share of subject imports during the period of investigation, we find the underselling

indicated by the pricing data to be significant. We also find that increased volumes of lower priced and

substitutable subject imports depressed domestic prices to a significant degree.114

Respondents argued that price declines in the domestic ARG market during the period of

investigation were largely due to the “product life cycle” effect.115 However, we find that the record does

not suggest that product life cycle effects played an important role in domestic price declines during the

period of investigation. First, respondents were unable to substantiate their argument with any quantifiable

pricing data. Although domestic industry representatives did agree that prices may decline to certain

plateaus over the product life span,116 petitioners refuted the basic premise of respondents’ argument. They

stated that the information relied on by respondents was in reference to a division of Apogee that does not

produce ARG windshields.117 We, therefore, cannot conclude that the price declines in this market over the

period of investigation are explained to any significant degree by any product life cycle effect.

Respondents also claim that domestic ARG producers that also produce OEM windshields are able

to sell their windshields at a substantial premium compared with the lower-priced Safelite (the only

domestic ARG producer that does not produce OEM) windshields and subject imports from China. 

Respondents contend that the large price disparities between subject imports and the domestic like product

can be explained by this price premium because domestic producers can market their windshields as

manufactured by an “original equipment manufacturer.” Evidence on the record does not support this

argument. When Safelite’s reported prices are compared to prices of subject imports from China, the

imported Chinese product also undersold Safelite’s reported prices in every quarter for which comparable

data were reported.118 Moreover, Safelite’s reported truckload prices were *** domestic producers’ prices
 

119 CR at V-21; PR at V-8.

 

120 In the preliminary phase of this investigation, we indicated that we would examine the significance of these

trends in any final phase investigation. We attempted to collect additional information on this issue, including the

collection of additional information about vertical arrangements, sending questionnaires to insurance companies,

and asking for additional information at the hearing.

 

121 See, e.g., CR at II-2 to II-3; PR at II-1 to II-2.

 

122 See, e.g., Petitioners’ Posthearing Brief at Answers to Commissioner Hillman’s Questions at 1-3.

 

123 The statute directs the Commission to examine the condition of the domestic industry as a whole, e.g., 19

U.S.C. §§ 1673d(b) 1677(4)(A); see also, e.g., Sandvik AB v. United States, 721 F. Supp. 1322, 1330 (Ct. Int’l

Trade 1989) (“there is no basis” for a firm by firm analysis of the condition of the domestic industry due to the

statute’s admonition to determine whether the domestic industry “as a whole” is materially injured by subject

imports.”), aff’d, 904 F.2d 46 (Fed. Cir. 1990). Nevertheless, respondents raised a number of data problems with

respect to individual companies’ reported information and argued such problems affected the Commission’s

analysis. In any event, an examination of the financial condition of each responding U.S. producer does not lend

credence to respondents’ argument. See, e.g., Mem. INV-Z-026 (Mar. 6, 2002).

 

124 CR/PR Table VI-1.

 

125 19 U.S.C. § 1677(7)(C)(iii); see also SAA at 851 and 885 (“In material injury determinations, the

Commission considers, in addition to imports, other factors that may be contributing to overall injury. While these

factors, in some cases, may account for the injury to the domestic industry, they also may demonstrate that an

(continued...)

*** percent of the time, even though Safelite cannot market its windshields as manufactured by an “original

equipment manufacturer.”119

We have also considered Respondents’ contention that vertical integration in the domestic industry

insulates it from foreign price competition. As indicated earlier, the record shows that the domestic

industry has become increasingly vertically integrated as some domestic producers became involved at the

wholesale distribution and retail outlet levels, some produced their own float glass, and several domestic

producers merged or formed other relationships with other players in the market, including insurance

companies.120 Further, information collected in this final phase of the investigation about vertical

arrangements and the role of insurance companies, does not confirm respondents’ arguments that these

arrangements curtailed competition from independent distributors. Only three out of fifteen purchasers

agreed with this allegation,121 and record data showed ***.122 There is no indication that vertical integration

or insurance company arrangements influence the purchasing decisions of retailers, or otherwise prevent

retailers from buying Chinese ARG windshields.123

Additionally, we find that while vertical integration by domestic producers is a significant condition

of competition in this market, it does not insulate the domestic industry from foreign price competition to

any measurable degree. For instance, one would not expect an insulated domestic industry to lose market

share to subject imports, as the domestic industry did during the period of investigation. Moreover, the

domestic industry’s volume, value, and average unit values of transfers to related firms decreased during

the period of review, as did its volume, value, and average unit values of commercial sales.124

Therefore, we find, based primarily on the evidence of declining price trends and significant

underselling by subject imports, and the high degree of substitutability between the domestic like product

and subject imports, that subject imports have significantly depressed prices and that subject imports are

having significant negative price effects on the domestic like product.

D. Impact of the Subject Imports

In examining the impact of the subject imports on the domestic industry, we consider all relevant

economic factors that bear on the state of the industry in the United States.125 These factors include output,
 

125 (...continued)

industry is facing difficulties from a variety of sources and is vulnerable to dumped or subsidized imports.”).

 

126 19 U.S.C. § 1677(7)(C)(iii); see also SAA at 851, 885; Live Cattle from Canada and Mexico, Invs. Nos. 701-

TA-386 and 731-TA-812 to 813 (Prelim.), USITC Pub. 3155 (Feb. 1999) at 25, n.148.

 

127 The statute instructs the Commission to consider the “magnitude of the dumping margin” in an antidumping

proceeding as part of its consideration of the impact of imports. 19 U.S.C. § 1677(7)(C)(iii)(V). In its amended

final antidumping determination, Commerce found the following weighted average margins: FYG 11.80; Xinyi

3.71; Benxun 9.84; Changchun 9.84; Guilin 9.84; Wuhan 9.84; TCGI 9.84; China-wide 124.50. 67 Fed. Reg. at

6484 (Feb. 12, 2002).

 

128 Commissioner Bragg notes that she does not ordinarily consider the magnitude of the margin of dumping to

be of particular significance in evaluating the effects of subject imports on the domestic producers. See Separate

and Dissenting Views of Commissioner Lynn M. Bragg in Bicycles from China, Inv. No. 731-TA-731 (Final),

USITC Pub. 2968 (June 1996); Anhydrous Sodium Sulfate from Canada, Inv. No. 731-TA-884 (Prelim.), USITC

Pub. 3345 (Sept. 2000) at 11, n.63.

 

129 ARG production declined from 6.4 million units in 1998 to 6.3 million units in 1999 and to 6.1 million units

in 2000, a 4.6-percent decline. Production was lower in interim 2001, at 4.5 million units, than it was in interim

2000, when it was 4.7 million units. See, e.g., CR/PR at Table III-1. The quantity of the domestic industry’s U.S.

ARG shipments declined from 6.1 million units in 1998 to 5.6 million units in 2000, a decline of 8.0 percent. The

quantity of U.S. shipments was higher in interim 2001, at 4.51 million units, than it was in interim 2000, when it

was 4.48 million units. See, e.g., CR/PR at Table III-1. The value of the domestic industry’s U.S. shipments

declined from $417.2 million in 1998 to $365.5 million in 2000, a decline of 12.4 percent. The $300.8 million in

U.S. shipments in interim 2001 was more than the $287.1 million in U.S. shipments in interim 2000. See, e.g.,

CR/PR at Table III-1.

 

130 Domestic production capacity declined from 8.6 million units in 1998 to 8.0 million units in 2000, a decline of

3.3 percent. Capacity was higher in interim 2001, when it was 7.0 million units, than in interim 2000, when it was

6.3 million units. See, e.g., CR/PR at Table III-1. Capacity utilization fluctuated during the period of

investigation, increasing from 74.4 percent in 1998 to 78.2 percent in 1999, and then decreasing to 73.4 percent in

2000. Capacity utilization was lower in interim 2001, at 64.7 percent, than in interim 2000, when it was 74.8

percent. See, e.g., CR/PR at Table III-1. Two domestic producers, Amilite Corp./dba Premier Autoglass Corp. and

Calwin/AKG Industries, ceased production of ARG windshields. CR at III-1 n.2; PR at III-1. ***. CR at III-2;

PR at II-2.

 

131 The number of production and related workers declined from 1,967 in 1998 to 1,837 in 2000. The 1,885

production and related workers in interim 2001 were more than the 1,807 workers in interim 2000. Hours worked

declined from 2,795 in 1998 to 2,506 in 2000, and the 1,859 hours worked in interim 2001were more than the

1,826 hours worked in interim 2000. Wages paid declined from $52.6 million in 1998 to $47.8 million in 2000,

but were higher in interim 2001, at $39.0 million, than in interim 2000, when they were $37.0 million. CR/PR at

Table III-1. On the other hand, some employment indicators improved during the period of investigation. Hourly

wages increased from $18.81 in 1998 to $19.15 in 2000, and hourly wages in interim 2001 of $21.00 were higher

than in interim 2000, at $20.27. Productivity increased from 1.96 units per hour in 1998 to 2.13 units per hour in

2000, although productivity in interim 2001 of 2.15 units per hour was lower than in interim 2000 of 2.25 units per

(continued...)

sales, inventories, capacity utilization, market share, employment, wages, productivity, profits, cash flow,

return on investment, ability to raise capital, and research and development. No single factor is dispositive

and all relevant factors are considered “within the context of the business cycle and conditions of

competition that are distinctive to the affected industry.”126 127 128

The domestic industry’s condition declined between 1998 and 2000, as reflected by virtually all

domestic industry performance indicators. The domestic industry’s production levels and the quantity and

value of its U.S. shipments decreased between 1998 and 2000.129 During this time, domestic ARG

production capacity and capacity utilization also declined.130 The number of production workers, hours

worked, and wages paid each declined from 1998 to 2000.131 Domestic producers’ end-of-period ARG
 

131 (...continued)

hour. CR/PR at Table III-1.

 

132 End-of-period inventories were 2.1 million units in 1998, 2.0 million units in 1999, 2.3 million units in 2000,

2.0 million units in interim 2000, and 2.0 million units in interim 2001. The ratio of inventories to total domestic

shipments was 33.3 percent in 1998, 34.6 percent in 1999, 39.4 percent in 2000, 32.1 percent in interim 2000, and

33.0 percent in interim 2001. CR/PR at Table III-1.

 

133 Apparent domestic consumption increased from 11.9 million units in 1998 to 12.6 million units in 2000;

apparent domestic consumption in interim 2001 was 10.1 million units compared to 9.7 million units in interim

2001. CR/PR at Table IV-2.

 

134 CR/PR at Table IV-2. The domestic industry’s market share was slightly lower in interim 2001, at 44.5

percent, than it was in interim 2000, when it was 46.1 percent. Id.

 

135 CR/PR at Table VI-1.

 

136 CR/PR at Table VI-1. Unit net sales declined from 6.2 million units in 1998 to 5.6 million units in 2000.

 

137 Industry operating income declined from $36.6 million in 1998 to $4.9 million in 1999 and then increased to

$11.3 million in 2000; operating income in interim 2001 at $13.4 million was lower than in interim 2000 when it

was $15.8 million. Operating income as a ratio of net sales declined from 8.7 percent in 1998 to 1.3 percent in

1999 then increased to 3.1 percent in 2000; the ratio in interim 2001 (4.4 percent) was lower than in interim 2000

(5.4 percent). CR/PR at Table VI-1.

 

138 CR/PR at Table VI-3.

 

139 Domestic producers also reported a number of other negative effects from subject imports on their firms’

growth, investments, ability to raise capital, and/or development and production efforts. CR/PR at Appendix E. 

Safelite filed a voluntary petition under chapter 11 of the Federal Bankruptcy Code on June 9, 2000 as part of a

pre-arranged plan to restructure its debt. See, e.g., CR at VI-3 n.4; PR at VI-1; Petitioners’ Posthearing Brief at 

Ex. 16.

 

140 CR/PR Table VI-3.

 

141 Petitioners’ Final Comments at 10; Testimony of Safelite (recovery by going to lower volume higher margin). 

See, e.g., CR at VI-6; PR at V-1; Petitioner’s Final Comments at 10; Hearing Tr. at 57, 211 (indicating that only in

(continued...)

inventories fluctuated during the period of investigation but accounted for an increasingly larger ratio of

total domestic shipments over time.132 These declines occurred during a period of increasing apparent

domestic consumption.133 While the subject imports were increasing in both quantity and market

penetration, the domestic industry’s market share declined from 51.0 percent in 1998 to 44.4 percent in

2000.134

Domestic producers’ per unit cost of goods sold generally decreased during the period of

investigation, declining from $41.69 in 1998 to $40.11 in 2000.135 The domestic industry’s unit net sales

value declined from $67.63 in 1998 to $64.73 in 2000.136 Operating income as a share of net sales declined

from 8.7 percent in 1998 to 1.3 percent in 1999, before recovering somewhat to 3.1 percent in 2000.137

Although research and development expenses increased from $*** in 1998 to $*** in 2000, capital

expenditures declined from $*** in 1998 to $*** in 2000.138 139 The decreased volume, market share, and

revenue of the domestic industry contrast with the substantially increased volume of significantly lowerpriced imports that have obtained a significant and growing share of the market, at the domestic industry’s

expense.

The record indicates limited improvement in certain financial indicators between 1999 and 2000,140

and in performance indicators between interim 2000 and interim 2001. While we recognize that these

improvements occurred as subject imports continued to increase, the domestic producers argued that some

of these apparent improvements are due to the fact that subject imports induced domestic producers to cut

costs and/or change their product mix towards production of the higher-end, ARG windshields, such as

those for SUVs and minivans, which are larger, cost more, and have higher profit margins.141 
 

141 (...continued)

the last three months had the Chinese started supplying ARG windshields for the Chevy Suburban DW1217, which

domestic producers had supplied until then). We note that the domestic industry’s unit cost of goods sold in

interim 2001 is 4.6 percent higher than in interim 2000 whereas unit cost of goods sold had fallen between 1998

and 1999 and between 1999 and 2000. Likewise, the domestic industry’s unit net sales value in interim 2001 was

4.3 percent higher than in interim 2000 whereas unit net sales value had fallen 5.6 percent between 1998 and 1999

and was only 1.4 percent higher in 2000 than in 1999. CR/PR at Table C-1.

 

142 Given her definition of the domestic like product and the domestic industry, Commissioner Bragg notes that

inclusion of domestic OEM windshield production does not substantially alter the trends displayed in the data

relied upon by the majority to assess the impact of subject imports, or the conclusions reached. Indeed, the record

indicates that as the volume of significantly lower-priced subject imports captured increasing market share from

domestic producers of ARG and OEM windshields, the financial performance of the domestic industry

continuously deteriorated throughout the period of investigation. In particular, domestic production, capacity

utilization, U.S. shipments, number of production workers, net sales, and capital expenditures each declined

significantly; in addition, operating margins decreased from 8.2 percent in 1998 to -0.3 percent in 2000, and

decreased between interim periods. CR/PR at Table C-2. Moreover, four domestic producers operated with losses

in 2000, and two additional domestic producers ceased production of ARG windshields during the period of

investigation. Domestic producer questionnaires; INV-Z-032; CR at III-1 n.2, PR at III-1; Tr. at 93-95

(Petitioners’ response to question posed by Commissioner Bragg). Consequently, Commissioner Bragg concurs

that subject imports are having a significant adverse impact on the domestic industry she has defined (see n. 15 ).

 

143 19 U.S.C. § 1673d(b)(4)(A)(i)(emphasis added). The statute further provides that in making this

determination:

 the Commission shall consider, among other factors it considers relevant--

(I) the timing and volume of the imports,

(II) a rapid increase in inventories of the imports, and 

(III) any other circumstances indicating that the remedial effect of the antidumping order will be

seriously undermined.

 19 U.S.C. § 1673d(b)(4)(A)(ii).

 

144 SAA at 877.

Furthermore, the improved operating income and margin still show an industry performing substantially

worse than in the beginning of the investigation period.

The significant increase in the volume of subject imports both absolutely and relative to apparent

domestic consumption combined with the significant underselling and price-depressing effects of subject

imports resulted in overall declines in most domestic industry performance indicators, the departure of two

domestic producers from the industry, the closures of production facilities, and the bankruptcy of another

producer. We accordingly find that the subject imports are having a significant adverse impact on the

domestic industry.142

E. Critical Circumstances

Because Commerce made affirmative critical circumstances determinations with respect to certain

imports of ARG windshields from China, and given our respective determinations that a domestic industry

is materially injured by reason of the volume of subject imports, we must further determine “whether the

imports subject to the affirmative [Commerce critical circumstances] determination . . . are likely to

undermine seriously the remedial effect of the antidumping order to be issued.”143 The URAA SAA

indicates that the Commission is to determine “whether, by massively increasing imports prior to the

effective date of the relief, the importers have seriously undermined the remedial effect of the order.”144
 

145 66 Fed. Reg. 6482 (Feb. 12, 2002).

 

146 See Certain Preserved Mushrooms from China, India, and Indonesia, Invs. Nos. 731-TA-777-779 (Final),

USITC Pub. 3159 (Feb. 1999) at 24 (Views of Vice Chairman Miller and Commissioners Hillman and Koplan), 28

(Views of Chairman Bragg and Commissioners Crawford and Askey); Certain Brake Drums and Rotors from

China, Inv. No. 731-TA-744 (Final), USITC Pub. 3035 at 19 (April 1997). 

 

147 Petitioners’ Posthearing Brief at appendix Bragg-3.

 

148 CR/PR Table IV-3.

In its final determinations, Commerce made affirmative findings of critical circumstances with

respect to the “all others” category of nonresponding producers and exporters of ARG windshields from

China.145 

Consistent with Commission practice, in considering the timing and volume of imports, we have

compared import quantities prior to filing of the petition with those subsequent to the filing of the

petition.146 The record contains monthly export data for the firms subject to the affirmative Commerce

critical circumstances determinations. We have examined the data included in the six-month periods before

and after the filing of the petitions.

Petitioners are not pursuing critical circumstances because the share of subject imports for which

Commerce made an affirmative critical circumstances finding is ***.147 Similarly, we determine that

imports of ARG windshields subject to affirmative critical circumstances findings by Commerce will not

seriously undermine the remedial effect of the antidumping orders as both the level of subject imports and

importers’ inventory levels were lower in the months after the filing of the petition and were very small

relative to the volume of ARG windshields from China not subject to critical circumstances.148

Accordingly, we make negative critical circumstances determinations concerning those imports of

ARG windshields from China that are subject to final affirmative critical circumstances findings by

Commerce. 

CONCLUSION

For the foregoing reasons, we determine that an industry in the United States is materially injured

by reason of subject imports of ARG windshields from China that Commerce found to be sold at less than

fair value in the U.S. market.
 

149 There is no issue in this investigation regarding whether there is a reasonable indication that a domestic

industry is materially retarded by reason of subject imports.

 

150 19 U.S.C. § 1673d(b).

 

151 19 U.S.C. § 1677(7)(B)(i). The Commission “may consider such other economic factors as are relevant to the

determination” but shall “identify each [such] factor . . . [a]nd explain in full its relevance to the determination.” 

19 U.S.C. § 1677(7)(B); see also Angus Chemical Co. v. United States, 140 F.3d 1478 (Fed. Cir. 1998).

 

152 19 U.S.C. § 1677(7)(A).

 

153 19 U.S.C. § 1677(7)(C)(iii).

 

154 Id.

 

155 Based on our definition of ARG windshields as the domestic like product in these investigations, we find that

Chinese subject imports exceeded the three percent statutory negligibility threshold during the pertinent period. 

CR/PR at Table IV-1; 19 U.S.C. § 1677(24). Accordingly, we conclude that Chinese subject imports are not

negligible.

DISSENTING VIEWS OF VICE CHAIRMAN DEANNA TANNER OKUN

AND JENNIFER A. HILLMAN

Based on the record in this investigation, we find that an industry in the United States is not

materially injured or threatened with material injury by reason of imports of automotive glass replacement

(“ARG”) windshields from China that the U.S. Department of Commerce (“Commerce”) found were sold

in the United States at less than fair value (“LTFV”).149 

I. NO MATERIAL INJURY BY REASON OF LESS THAN FAIR VALUE IMPORTS

In the final phase of antidumping duty investigations, the Commission determines whether an

industry in the United States is materially injured by reason of the imports under investigation.150 In

making this determination, the Commission must consider the volume of imports, their effect on prices for

the domestic like product, and their impact on domestic producers of the domestic like product, but only in

the context of U.S. production operations.151 The statute defines “material injury” as “harm which is not

inconsequential, immaterial, or unimportant.”152 In assessing whether the domestic industry is materially

injured by reason of subject imports, we consider all relevant economic factors that bear on the state of the

industry in the United States.153 No single factor is dispositive, and all relevant factors are considered

“within the context of the business cycle and conditions of competition that are distinctive to the affected

industry.”154

For the reasons discussed below, we determine that the domestic ARG windshield industry is not

materially injured by reason of subject imports from China that are sold in the United States at less than

fair value.

A. Conditions of Competition155

Several conditions of competition are pertinent to our analysis.

1. Demand / Major Market Segment

Domestic producers, importers and purchasers agree that the demand for ARG windshields is

primarily determined by the number of vehicles on the road, the number of miles driven, vehicle age, and

weather. Since the 1990s, motor vehicle use and the average age of vehicles on the road has been
 

156 Confidential Staff Report (“CR”) at II-12, Public Staff Report (“PR”) at II-6.

 

157 CR/PR at Table IV-2. However, on a value basis, apparent domestic consumption declined from $649.5

million in 1998 to $605.6 million in 1999, and then increased to $618.3 million in 2000; apparent domestic

consumption in interim 2000 was $480.0 million compared to $519.0 million in interim 2001. Id.

 

158 There is evidence in the record that some domestic producers have advertised windshield repair as an

alternative to windshield replacement, and that windshield repair has increased. (We note that some purchasers

reported that windshield repair is only feasible for limited types of windshield damage). CR at II-13, PR at II-7;

Transcript of Staff Conference (“Conference Tr.”) at 54 (testimony of Mr. Tann).) However, the Commission

lacks data concerning windshield repair. While the increase in apparent domestic consumption appears to weigh

against concluding that windshield repair has diminished demand for windshield replacement, without windshield

repair data, it is impossible to conclude how much impact this has had on windshield replacement demand.

 

159 This figure is based on responses of purchasers that had retail sales. Producers and distributors generally

reported that they did not know the share of their sales that were related to insurance claims. CR at II-7, PR at II4. The actual share could be as much as 70 percent of the market. Conference Tr. at 107-108 (testimony of Mr.

Harris); see also Safelite Glass Corp. SEC Form 10-K for FY 1999 at 1 (attached to FYG’s Prehearing Brief at

exhibit 12) (“Safelite has targeted its marketing efforts principally towards auto insurance companies which

management believes, through their policyholders, directly or indirectly influence approximately 70% of the

selections of automotive glass replacement and repair providers”).

 

160 Conference Tr. at 54-55 (testimony of Mr. Tann); 103-104, 107-109 (testimony of Mr. Harris).

 

161 Transcript of Hearing (“Hearing Tr.”) at 132-34 (testimony of Mr. Pearson) (“In some situations, that

allocation goes to Safelite because of a pricing advantage that we provide to the insurance company”); Petitioners’

Posthearing Brief at Miller-8. The table gives the percentage of claims distributed to Safelite stores for five

insurance companies. While this shows that *** claims for certain insurance companies (***) are directed toward

related installers (*** percent and *** percent, respectively), the table provides no data concerning the quantity of

claims, which could be significant for the larger insurance companies.

 

162 CR at II-1, PR at II-1.

increasing, and has led to a steady increase in the consumption of ARG windshields.156 Apparent domestic

consumption of ARG windshields increased from 11,939,656 units in 1998, to 12,314,872 units in 1999,

and 12,612,138 units in 2000; apparent domestic consumption in interim 2000 was 9,718,883 units

compared to 10,137,666 units in interim 2001.157 158

A major segment of the ARG windshield market (approximately 56.2 percent, but perhaps up to 70

percent) is related to claims by insured motorists for windshield replacement.159 Many of the domestic

producers act as third-party administrators for certain property and casualty insurance companies in the

United States with respect to such claims for windshield replacement.160 Based on limited data, the record

reflects a significant portion of these claims are directed toward related installers.161

While most domestic producers of ARG windshields also produce OEM windshields, we note that

demand for OEM windshields differs from that of ARG windshields. Demand for OEM windshields is

almost entirely driven by the demand for new vehicles whereas, as noted above, demand for ARG

windshields is driven by such factors as the number of vehicles on the road, the number of miles driven,

vehicle age, and weather.

2. Domestic Industry / Supply

Domestic producers AFG Industries, Guardian, Pilkington, PPG and Visteon produce both ARG

and OEM windshields whereas AP Technoglass, the DaimlerChrysler Corp., Carlex and a few smaller

producers primarily produce OEM windshields. Safelite and Viracon/Curvlite produce almost exclusively

ARG windshields. There are many importers of subject and nonsubject products (primarily from Canada

and Mexico), as well as independent wholesalers and retailers.162
 

163 CR at II-10, PR at II-5; Hearing Tr. at 23 (testimony of Mr. Dumbris), at 160-161 (testimony of Mr.

Skidmore).

 

164 *** is contractually obligated to produce OEM windshields for ***. CR/PR at Table III-2; CR at II-6, PR at

II-3; *** Questionnaire Response at Question II-3, II-4.

 

165 CR at II-10, PR at II-5.

 

166 CR at II-11, PR at II-5 - II-6; Hearing Tr. at 164 (testimony of Mr. Topping), at 172 (testimony of Mr.

Fennel). In its questionnaire response, *** stated that *** stopped selling ARG windshields to them because it

had switched to the OEM market. *** Questionnaire Response. Moreover, as discussed above, *** also has

shifted resources from ARG production to OEM production.

 

167 *** Questionnaire Response.

 

168 *** Questionnaire Response; *** Questionnaire Response.

 

169 CR at II-1 - II-2, PR at II-1. Indeed, during the period of investigation, domestic producers reported that

approximately 31 percent to *** percent of U.S. shipments are to related parties. Id.

 

170 Conference Tr. at 13-14, 15-16 (testimony of Mr. Jungbluth); 77-79 (testimony of Mr. Wiley).

 

171 CR at II-15, PR at II-7; Conference Tr. at 43 (testimony of Mr. Chimka).

 

172 CR at II-15, PR at II-7; Conference Tr. at 38-39 (testimony of Mr. Chimka); 62-63 (testimony of Mr. Tann);

63 (testimony of Mr. Jungbluth); 72 (testimony of Mr. Anderson).

The record indicates that domestic producers of both ARG and OEM windshields shift production

between ARG to OEM windshields based on demand and OEM contractual obligations.163 Indeed,

domestic producer *** shifted production away from ARG windshields to OEM production during the

period of investigation.164 However, because of a high level of competition for OEM contracts and

additional certification requirements by automotive OEMs, it may be easier to shift from producing for the

OEM windshield market to producing for the ARG windshield market than vice versa.165

The record also indicates that domestic producers recently have had some difficulty supplying the

market because of increased consolidation and the switch by some domestic producers to manufacture

mainly for the OEM market.166 A purchaser stated that *** and *** had put it on allocation in the summer

of 2000.167 This is partially confirmed by the fact that two domestic producers stated that they had to place

customers on allocation because of ***.168

3. Vertical Integration

There has been increasing vertical integration in the domestic industry during the period of

investigation. As a result of recent mergers and acquisitions, some domestic producers now operate at

several levels of the ARG windshield production and distribution system, including wholesale distribution

and retail glass installation shops.169 Thus, an increasing number of domestic producers supply and

compete with independent distributors for sales at both the wholesale and retail level.170

4. Substitutability

The record indicates that subject imports from China and the domestic like product are highly

substitutable.171 While in the past Chinese ARG windshields were perceived to be of lower quality than

domestically produced ARG windshields, in recent years this perception of lower quality has largely been

eliminated, and subject imports from China are now viewed as substitutable for the domestic like

product.172 However, as the domestic industry has achieved greater vertical integration down to the retail

level during the period of investigation, the importance of substitutability has diminished.

5. Price-Competitive Market
 

173 CR at II-8, PR at II-4. Domestic producers and purchasers reported that most insurance companies want the

lowest price regardless of brand or country of origin and that insurance companies are aggressive in reducing costs.

The record indicates that insurance companies tell retailers/installers what they can charge, which forces retailers

to seek lower prices from distributors or manufacturers. Id.

 

174 CR at II-15, PR at II-7 - II-8; Conference Tr. at 14 (testimony of Mr. Jungbluth); 23 (testimony of Mr. Tann);

37-41 (testimony of Mr. Chimka); 148 (testimony of Mr. Dunnegan).

 

175 CR at II-1, PR at II-1.

 

176 Petition at 35-36.

 

177 CR/PR at Table C-1.

 

178 CR/PR at Table IV-1. Petitioners argued for the inclusion of imports from Hong Kong in the Commission’s

analysis of subject import volume on the basis that these imports are of Chinese origin. However, Commerce has

not addressed whether to include transshipments in the scope of subject merchandise and the U.S. Customs

Service’s country of origin designation through Hong Kong does not identify imports from Hong Kong as being

originally from China. Consistent with Congressional direction to respect Hong Kong’s status as a separate

customs territory, we have not assumed imports from Hong Kong to be imports from China for purposes of

evaluating subject import volume. 22 U.S.C § 5712(3). Moreover, it has been the Commission’s consistent

practice to decline to make a determination regarding the country of origin of imports or regarding transshipments,

where to do so would be inconsistent with the Customs Service’s country of origin designation or with Commerce’s

definition of the scope of subject merchandise – unless Commerce has specifically included transshipments in the

scope of subject merchandise or the Commission itself has obtained persuasive evidence that the imports have been

transshipped. See Certain Stainless Steel Butt-Weld Pipe Fittings from Italy, Malaysia, and the Philippines, Invs.

Nos. 731-TA865-867 (Final), USITC Pub. 3387 (January 2001) at 10-11, n. 64. Commerce did not include

transshipments in its scope, and we find that the record does not contain sufficient evidence to support an

independent determination of transshipment. Therefore, we include imports from Hong Kong in our discussion

and analysis of nonsubject imports. We note, however, that imports from Hong Kong were relatively insignificant

during the period of investigation and would not have affected our ultimate injury determination had we decided to

treat them as subject imports. 

 

179 CR/PR at Table IV-1.

The ARG market is price competitive because there are numerous suppliers of ARG windshields, a

significant portion of the market is supplied by nonsubject imports, and the insurance companies use their

market position to leverage lower prices.173 The available information in the record suggests that

purchasing decisions are made largely on the basis of price.174 Although concentration has increased in the

U.S. windshield market and distribution system in recent years, domestic competitors and importers limit

large domestic producers’ ability to influence market prices.175 Moreover, petitioners report that in the last

few years, “the automotive replacement windshield installation industry has been going through a

consolidation as smaller operators are unable to compete effectively with the larger, diversified companies. 

This has greatly increased the downward pressure on prices for ARG windshields at the wholesale level.”176

6. Nonsubject Imports

Finally, while nonsubject imports declined over the period examined, both by quantity and by

value, they were a significant part of the market, holding market share similar to that of the domestic

industry.177 Nonsubject imports increased in quantity from 5,368,130 units in 1998 to 5,514,042 units in

1999 then decreased to 5,202,413 units in 2000; nonsubject imports were 4,024,712 units in interim 2000

compared to 3,948,530 units in interim 2001.178 By value, nonsubject imports declined from $212.3

million in 1998 to $207.3 million in 1999 and $200.4 million in 2000; nonsubject imports were $155.5

million in interim 2000 compared to $164.0 million in interim 2001.179 By quantity, the market share of

nonsubject imports was 44.9 percent in 1998 and 44.4 percent in 1999, then decreased to 41.3 percent in

2000; nonsubject imports’ market share by quantity was 41.4 percent in interim 2000 compared to 38.9
 

180 CR/PR at Table C-1.

 

181 Id.

 

182 19 U.S.C. § 1677(7)(C)(I).

 

183 CR/PR at Table IV-1; CR/PR at Table C-1.

 

184 CR/PR at Table IV-2.

 

185 19 U.S.C. § 1677(7)(C)(ii).

 

186 Total shipments reported by U.S. producers for the eight products totaled *** units, or *** percent of

commercial sales, during the period of investigation. See CR/PR at Tables V-1 thru V-8, and Table III-3.

 

187 CR/PR at Tables V-1 thru V-8. 

 

188 Petitioners’ Posthearing Brief at 5.

 

189 CR/PR at Table II-5.

 

190 The domestic product appears to have a large advantage in delivery time (nine out of 11 firms reporting). 

(continued...)

percent in interim 2001.180 By value, the market share of nonsubject imports decreased from 32.7 percent

in 1998 to 34.2 percent in 1999 and 32.4 percent in 2000.181

B. Volume 

Section 771(C)(I) of the Act provides that the “Commission shall consider whether the volume of

imports of the merchandise, or any increase in that volume, either in absolute terms or relative to

production or consumption in the United States, is significant.”182

The volume of subject imports of ARG windshields from China increased 275.7 percent during

1998-2000, rising from 481,393 units to 1,808,630 units. Subject import volume was 38.0 percent higher

in interim 2001 than in interim 2000, reaching 1,680,646 units.183 As a share of apparent U.S.

consumption (by volume), subject imports rose from 4.0 percent in 1998 to 14.3 percent in 2000, and were

16.6 percent in interim 2001 compared to 12.5 percent in interim 2000.184 Consequently, we find the

volume of subject imports, and the increase in that volume relative to apparent domestic consumption, to be

significant.

C. Price Effects of the Subject Imports

Section 771(C)(ii) of the Act provides that, in evaluating the price effects of the subject imports, 

the Commission shall consider whether –

(I) there has been significant price underselling by the imported merchandise as 

compared with the price of domestic like products of the United States, and

(II) the effect of imports of such merchandise otherwise depresses prices to a

significant degree or prevents price increases, which otherwise would have

occurred, to a significant degree.185

As noted above, the ARG windshield market is price competitive, with increasing concentration in

the market during the period of investigation. The Commission’s questionnaires identified eight specific

ARG windshield products for comparison, representing *** percent of U.S. producers’ shipments during

the period of investigation.186 Specific product price comparisons indicate extensive underselling by subject

imports over the investigation period.187 Petitioners, however, recognize that the extensive underselling by

subject imports throughout the period of investigation in part, reflects the advantages U.S. producers

posses in availability, delivery time, and less restrictive quantity requirements.188 189 190 Nonetheless, based
 

190 (...continued)

CR/PR at Table II-5. Indeed, one purchaser, ***, reported having to wait four to six months for delivery of

Chinese product. CR at V-34, PR at V-11.

 

191 Hearing Tr. at 112 (testimony of Mr. Miner), 179-180 and 235-236 (testimony of Mr. Carino). See also FYG

Posthearing Brief at exhibit 3.

 

192 CR at V-5, PR at V-3 - V-4; CR V-19, PR at V-6 - V-7.

 

193 Id.; FYG Posthearing Brief at exhibit 3.

 

194 At least 56.2 percent of windshield sales were to insured motorists. CR at II-7, PR at II-4.

 

195 Apogee Enterprises, Inc. SEC Form 10-K for FY 2001 at 5 (attached to FYG’s Prehearing Brief at exhibit 5).

 

196 ***.

 

197 CR at II-8, PR at II-4.

 

198 Conference Tr. at 14 (testimony of Mr. Jungbluth); Hearing Tr. at 44 (testimony of Mr. Jungbluth).

 

199 Apogee Enterprises, Inc. SEC Form 10-K for FY 1998 at 5 (attached to FYG’s Prehearing Brief at exhibit 5).

on the limited price comparisons in the record, we find the underselling by subject imports to be significant

when viewed in isolation.

However, we do not find that the record indicates significant price suppression or depression from

subject imports. Rather we find the declines in prices for the specific ARG windshield products are more

attributable to product life cycles, increasing pricing pressure from the largest purchaser segment – the

insurance industry – and the increasing consolidation of the automotive replacement windshield installation

industry. Furthermore, the increasing vertical integration of several large domestic ARG windshield

producers has helped to insulate the domestic industry from subject import competition.

Petitioners and respondents agree that ARG windshield prices naturally trend downward over time,

and prices are highest when the specific ARG windshield is first introduced into the market.191 All eight of

the specific ARG windshields for which the Commission requested pricing data (1) are for vehicle models

introduced from 1993 to 1998, (2) have been on the market for a long enough period of time to have

significant competition in the ARG market, and (3) as noted above, represent a small share of the numerous

ARG windshield products in the market.192 Consistent with the record evidence, natural price declines from

product life cycles likely have contributed to the price declines reported for these specific products.193

As noted above, the record also contains evidence of pricing pressure exerted by the insurance

industry.194 Apogee, the parent company of petitioner Viracon/Curvlite, stated that the ARG windshield

market’s pricing structure “has changed significantly in recent years as insurance companies seek volume

pricing at discounted rates from historical levels . . . Consequently, margins have narrowed at the retail,

wholesale and manufacturing levels . . . ”195 Pilkington, in 1999, noted ***.196 Moreover, *** reported

that *** insurance company dictated retailer prices, forcing retailers to obtain lower prices from ARG

windshield distributors and manufacturers.197

Petitioners, however, argue that the presence of imports from China facilitated the ability of

insurance companies to put downward pressure on prices.198 The record does not support this theory. In

its public SEC filings, Apogee reported that the insurance industry price pressure existed as far back as

1997, when the Chinese presence in the market was minimal.199 

In addition, petitioners report that consolidation at the automotive replacement windshield

installation level has placed downward pressure on prices.

In the last few years, the automotive replacement windshield installation industry has been

going through a consolidation as smaller operators are unable to compete effectively with
 

200 Petition at 35-36.

 

201 CR at II-1, PR at II-1.

 

202 CR/PR at Table III-3; CR/PR at Table VI-1.

 

203 CR/PR at Table III-3.

 

204 Id.

 

205 Id.

 

206 CR/PR at Table VI-1.

 

207 U.S. producers’ operating income to net sales was 8.7 percent, 1.3 percent, and 3.1 percent during 1998-2000,

and was 4.4 percent in interim 2001, compared with 5.4 percent during the same period in 2000. CR/PR at Table

VI-1. We note that ***. CR at VI-3, PR at VI-1; CR/PR Table VI-2.

 

208 We are mindful that average unit values in this investigation cover a large number of ARG windshield

products, may reflect shifting product mixes and are not necessarily a proxy for actual prices. However, we find

the increasing trend in average unit values, which likely reflects an increasing share of higher-value related

transfers and continuing shifts by U.S. producers’ to the newest product models are inconsistent with reported

product specific price declines and alleged subject import price suppression or depression. CR/PR at Table III-3;

Hearing Tr. at 137-143 (discussion related to the value-added features present now in ARG products); Apogee

(continued...)

the larger, diversified companies. This has greatly increased the downward pressure on

prices for ARG windshields at the wholesale level.200

Moreover, during the period of investigation, an increasing share of the domestic industry’s ARG

windshield production was shielded from subject import price competition. Concentration in the domestic

ARG market increased during the period as some U.S. producers enhanced their vertical integration. For

example in 2000, the largest domestic producer, PPG ***. Under the agreement, PPG *** to distribution

and retail markets for its ARG windshields through a large installer ***.201

Increased integration by several domestic producers resulted in an increasing share of total

shipments being transferred to related firms, with increasing unit values, rather than competing with subject

imports.202 Indeed, U.S. producers’ transfers to related firms increased from 32.2 percent of total domestic

ARG windshield shipments during 1998 to *** percent in interim 2001.203 On an absolute basis, related

transfers were *** percent higher in 2001 (annualized) than in 1998.204 Average unit values for related

transfers increased *** percent, from $63.47 to *** during 1998-2000, and increased an additional ***

percent, reaching ***, during interim 2001.205 The shift toward higher-value related transfer shipments

during the period of investigation provided increased insulation for the domestic industry from subject

import pricing.

Therefore, we find that pricing declines are more attributable to product life cycles, increased

pricing pressure from the insurance industry, and consolidation at the automotive replacement windshield

installation level than to subject imports. Furthermore, an increasing shift by domestic producers toward

higher-value related transfer shipments has helped to shield the domestic industry from subject import price

competition.

Finally, the declines in prices for the selected ARG windshield products contrasts sharply with

trends in average unit values for the aggregate like product and the domestic industry’s profitability,

particularly during the period of investigation when the volume and market share of subject imports was

greatest. The average unit values of U.S. producers’ net sales declined 4.3 percent, from $67.63 to $64.73

during 1998-2000, then rebounded to $67.61 in interim 2001, reaching the 1998 level.206 The domestic

industry’s profitability similarly improved, after declining sharply from 1998-1999.207 Consequently, we

do not place substantial weight on the declines in prices for the selected domestic products given the limited

volume of such sales, nor subject import underselling amidst increased profitability and aggregate prices,

as measured in average unit values, during the height of subject import volumes and market share.208 209
 

208 (...continued)

Enterprises, Inc. SEC Form 10-K for FY 2000 at 4 (attached to FYG’s Prehearing Brief at exhibit 5)

(“Viracon/Curvlite seeks to offer a broad selection of windshields by promptly adding new windshields as new

models are introduced”); Hearing Tr. at 211 (testimony of Mr. Topping) (only in the last three months had the

Chinese started supplying ARG windshields for the Chevy Suburban, part DW1217 – the most popular part in the

United States – which domestic producers had supplied until then).

 

209 Additionally, although lost sales or lost revenues may constitute anecdotal evidence of direct price

competition, there were few confirmed lost sales or lost revenues in this investigation. At best, the evidence of lost

sales or lost revenues constitute a small volume and the results are mixed. CR at V-32 - V-35, PR at V-10 - V-11.

 

210 19 U.S.C. § 1677(7)(C)(iii). See also SAA at 851 and 885 (“In material injury determinations, the

Commission considers, in addition to imports, other factors that may be contributing to overall injury. While these

factors, in some cases, may account for the injury to the domestic industry, they also may demonstrate that an

industry is facing difficulties from a variety of sources and is vulnerable to dumped or subsidized imports.”)

 

211 19 U.S.C. § 1677(7)(C)(iii). See also SAA at 851 and 885; Live Cattle from Canada and Mexico, Invs. Nos.

701-TA-386 and 731-TA-812-813 (Preliminary) USITC Pub. 3155 (Feb. 1999) at 25, n. 148. 

 

212 The statute instructs the Commission to consider the “magnitude of the dumping margin” in an antidumping

proceeding as part of its consideration of the impact of imports. 19 U.S.C. § 1677(7)(C)(iii)(V). In its amended

final antidumping duty determination, Commerce assigned the following antidumping duty margins to subject

imports: Benxun (9.84); Changchun (9.84); FYG (11.80); Guilin (9.84); TCGI (9.84); Wuhan (9.84); Xinyi (3.71);

all others from China (124.50). 67 Fed. Reg. 11670, 11673 (March 15, 2002).

In sum, while the record indicates declining domestic prices and extensive underselling by subject

imports during the period of investigation, we do not find that subject imports have suppressed or depressed

the prices for the domestic like product to a significant degree. Accordingly, we find that the subject

imports have not had significant adverse effects on domestic prices during the period of investigation.

D. Impact of the Subject Imports

Section 771(7)(C)(iii) provides that the Commission, in examining the impact of the subject

imports on the domestic industry, “shall evaluate all relevant economic factors which have a bearing on the

state of the industry.”210 These factors include output, sales, inventories, capacity utilization, market share,

employment, wages, productivity, profits, cash flow, return on investment, ability to raise capital, and

research and development. No single factor is dispositive and all relevant factors are considered “within

the context of the business cycle and conditions of competition that are distinctive to the industry.”211 212

We find that the subject imports of ARG windshields have not had a significant impact on the

condition of the domestic ARG windshield industry. Although the volume and market share of the subject

imports increased substantially during the period of investigation, the record does not indicate that these

increases had any significant impact on the condition of the domestic industry. Indeed, the record lacks a

correlation between increasing subject imports and the performance of the domestic industry. This is

consistent with the fact that the domestic industry increasingly is integrating vertically and relies on

business generated from insurance claims to insulate itself from import competition.
 

213 The domestic industry’s production fell from 6,374,238 units in 1998 to 6,079,991 units in 2000; and it was

4,525,948 units in interim 2001 compared to 4,683,883 units in interim 2000. CR/PR at Table III-1. The

industry’s share of domestic apparent consumption declined, from 51.0 percent in 1998 to 44.4 percent in 2000,

but slightly increased in interim 2001 to 44.5 percent. CR/PR at Table C-1. The industry’s domestic shipments

also declined from 6,090,133 units in 1998 to 5,601,095 units in 2000, but improved slightly over the interim

periods. CR/PR at Table III-1.

 

214 While employment, hours worked and wages declined from 1998 to 2000, they all improved in 2001. 

Moreover, the industry’s hourly wages and productivity levels generally improved or remained stable over the

period of investigation. Id.

 

215 The domestic industry’s capacity utilization fluctuated over the investigation period and did not decline

significantly until the end of the period. Initially, it increased from 74.4 percent in 1998 to 78.2 percent in 1999

before it receded back to 73.4 percent in 2000. Id. The real decline occurred in interim 2001 when the domestic

industry’s capacity utilization declined from 74.8 percent in interim 2000 to 64.7 percent in interim 2001. Id.

However, during this time of decline, the domestic industry significantly increased production capacity. Indeed,

while the industry decreased capacity early in the period of investigation – decreasing by 6.2 percent between 1998

and 1999 – it increased capacity by 3 percent between 1999 and 2000 and by 11.7 percent between interim periods. 

CR/PR at Table C-1.

 

216 Inventories increased over the period. Id. While inventories increased, we note that the domestic industry

finds that it is necessary to maintain a “significant amount of inventory” to cover the breadth of product line as

well as to be prepared for sudden localized swings in demand due to bad weather. CR at II-10, PR at II-5;

Petitioners’ Posthearing Brief at Okun-5. In addition, while capital expenditures slightly declined over the period

of investigation, they remained at fairly high levels. CR/PR at Table VI-3. Finally, we note that research and

development expenses actually increased slightly over the period. Id.

 

217 CR/PR at Table III-2; *** Questionnaire Response at Question II-3, II-4.

 

218 Id.

 

219 *** Questionnaire Response at Question II-3, II-4.

 

220 CR at III-1, PR at III-1.

 

221 CR at II-6, PR at II-3.

 

222 Moreover, there is evidence that ***. See *** attached to FYG’s Prehearing Brief at exhibit ***; Petition at

***.

 

223 In our preliminary determination, the Commission noted that we intended to “examine the performance of

individual domestic producers to ensure that our assessment of the impact of subject imports on the domestic

industry” was not distorted by the conditions of individual domestic producers unrelated to subject imports. 

Automotive Replacement Glass Windshields from China, Inv. No 731-TA-922 (Prelim), USITC Pub. 3414 at 15

(Apr. 2001). While the Commission must consider the industry as a whole, we must not attribute declines in

important performance indicators to subject imports when the record demonstrates that those declines are driven by

one producer that has shifted its priorities based on factors unrelated to subject import competition.

The data show that over the investigation period, the domestic industry experienced declines in

many economic indicators, such as operating income, production, shipments and market share.213 214 215 216

However, most of the industry’s declines over the investigation period in capacity, production and

shipments are attributable to ***. *** continued to shift resources from ARG windshield production to

OEM windshield production ***.217 Indeed, *** produced almost *** fewer ARG windshields in 2000 than

*** in 1998, and *** fewer units between the interim periods.218 ***.219 As ***220 and *** is contractually

obligated to produce OEM windshields for ***,221 we attribute these declines in capacity, production and

shipments, and the industry’s declines for those factors, to *** shifting resources because of contractual

obligations rather than to a producer exiting the ARG windshield market because of subject import

competition.222 223

Furthermore, there is little, if any, causal nexus between the subject imports and the financial

condition of the industry, particularly at the end of the period of investigation when the volume of subject
 

224 The statute permits the Commission to reduce the weight accorded to the data for the period after the filing of

the petition in making its determination of material injury or threat of material injury of an industry in the United

States. 19 U.S.C. § 1677(I). The Commission may do this after considering “whether any change in the volume,

price effects, or impact of imports of the subject merchandise since the filing of the petition . . . is related to the

pendency of the investigation . . . .” Id. Based on the trends for these factors, there is no reason to discount the

improvements in the condition of the domestic industry between the interim periods. The Commission often

discounts the interim period data if subject import volume has ceased or slowed considerably. This did not occur in

this investigation. Indeed, subject imports increased by 38 percent between interim periods and were on track to

surpass the increase in the number of units between 1998-1999, based on annualized figures. CR/PR at Table C-1. 

While domestic producers argued that these apparent improvements were the result of reducing costs (see, e.g.,

Petitioners’ Final Comments at 10, Hearing Tr. at 57 (testimony of Mr. Goudy)), this is a normal business practice

that can be attributed to any type of competition, whether it be from subject imports, nonsubject imports, domestic

competition or adjusting to the pressure applied by the insurance industry to lower prices.

 

225 The domestic industry’s financial condition most likely will have improved from 2000 to full year 2001. The

nine-month period in 2000, when the industry reached 5.4 percent operating income margin, but then declined in

the full-year period to 3.1 percent, was not typical. This is explained by the fact that ***, this affected the

industry’s operating margins for interim 2000 and calendar year 2000. CR at VI-3, PR at VI-1.

 

226 As noted above, the financial condition of the industry began to improve in 2000.

 

227 Apogee Enterprises, Inc. SEC Form 10-K for FY 2001 at 5 (attached to FYG’s Prehearing Brief at exhibit 5). 

See also Pilkington “Step Change Programme in North America,” March 2000 at slide 10 (attached to FYG’s

Prehearing Brief at exhibit 2); CR at II-8, PR at II-4.

 

228 “{I}nsurance companies expect to receive a better deal than a cash customer because they are buying hundreds

of thousands of windshields.” Hearing Tr. at 73-74 (testimony of Mr. Pearson). However, we note that if the

domestic producers can capture more volume in the insurance claims replacement market, then they can afford to

offer lower prices, which in turn helps them secure more of the claims.

 

229 CR at II-7, PR at II-4; Conference Tr. at 107-108 (testimony of Mr. Harris).

imports was the greatest.224 Significantly, the only major decline in performance indicators occurred

between 1998 and 1999 – falling from 8.7 percent operating income margin to 1.3 percent and increasing

from one firm reporting losses to three – when subject imports increased by about 608,000 units. But, in

the next year when subject imports increased even more substantially, by almost 720,000 units, the

industry began to rebound – improving from 1.3 percent operating income margin to 3.1 percent and

declining from three firms reporting losses to one. This trend also continued in the interim period. In

interim 2001, the operating income margin was 4.4 percent (compared to 5.4 percent in interim 2000) and

no firm reported losses as imports continued to grow – increasing 38 percent between interim periods.225

Therefore, during the times when there was the greatest increase in subject imports, the financial condition

of the industry actually improved.

While the domestic industry’s financial condition declined between 1998 and 2000, we attribute

much of this deterioration to the pricing pressure exerted by the insurance industry and product life cycle.226

As noted above in the pricing section, the domestic industry recognizes that the ARG windshield market’s

pricing structure has changed significantly in recent years as insurance companies seek volume pricing at

discounted rates from historical levels, which has led to a decline in profitability.227 The insurance industry

is looking for the lowest price as long as quality is met.228 As a major segment of ARG windshield market

sales – approximately 56.2 percent, but perhaps up to 70 percent – is related to claims by insured motorists

for windshield replacement,229 the insurance industry leverages lower prices. This pressure from the

insurance industry significantly explains the decline in prices.

Furthermore, the record indicates that much of the domestic industry is sheltered from import

competition by acting as third-party administrators in the insurance claims market. Arguably, the domestic

industry has invested heavily in establishing insurance claim call centers so that it can reap at least one of
 

230 CR at II-7, PR at II-4; Hearing Tr. at 149 (testimony of Mr. Harris) (stating that installers also pay fees to PPG

and have paid fees to both Harmon and Safelite in certain insurance programs).

 

231 Hearing Tr. at 103-104, 107-108, 215-216 (testimony of Mr. Harris); Chapter 11 Plan of Reorganization, filed

in the United States Bankruptcy Court for the District of Delaware, June 9, 2000, at II.A. (attached to Petition at

exhibit 35) (“Safelite acts as administrator of an insurance company’s automotive glass claims. By entering into

these arrangements . . ., Safelite has been able to increase its volume and enhance its base of recurring revenues”).

 

232 Petitioners argue that insurance companies require that customer preference is always honored, and they

submitted the scripts used by the third-party administrators to process claims. Hearing Tr. at 132-134 (testimony

of Mr. Pearson). However, consumer choice is relatively rare in this industry. Most consumers do not have

experience with auto glass companies because the their demand for ARG windshields is erratic. Therefore, when a

third-party administrator inquires whether the insured has a preference for an installer, it is unlikely that they will

have one. Hearing Tr. at 216-217 (testimony of Mr. Harris). If the policyholder does not have a preference, then

the insurance companies direct the third-party administrator as to how they would like that business allocated. 

Petitioners admit that some of that allocation goes to them because of a pricing advantage that they provide to the

insurance company. Hearing Tr. at 132-134 (testimony of Mr. Pearson).

 

233 Hearing Tr. at 132-34 (testimony of Mr. Pearson) (“In some situations, that allocation goes to Safelite because

of a pricing advantage that we provide to the insurance company.”); Petitioners’ Posthearing Brief at Miller-8;

Chapter 11 Plan of Reorganization, filed in the United States Bankruptcy Court for the District of Delaware, June

9, 2000, at II.B. (attached to Petition at exhibit 35) (“Given Safelite’s vertical integration, a transaction with a

policyholder of an insurance company customer is more profitable for Safelite when its shop, rather than that of a

network affiliate, provides the replacement glass or repair service.” ***.

 

234 CR at II-1 to II-2, PR at II-1.

 

235 CR at II-1, PR at II-1; CR/PR at Table III-3.

 

236 While the record indicates that subject imports from China and the domestic like product are highly

substitutable, we note that as the domestic industry has achieved greater vertical integration down to the retail level

during the period of investigation, the importance of substitutability has diminished.

 

237 While transfers to related firms declined from 1998 to 2000, the trend reversed between interim periods. 

Domestic producers transferred 1,370,463 units to related firms in interim 2000 compared to *** units in interim

2001. CR/PR at Table III-3. This change is attributable to *** as it *** shifted its sales to related distributors

from unrelated end users. See also Petitioners’ Posthearing Brief at ***.

 

238 ***.

two benefits from it – (1) insurance claims call center administration fees,230 and/or (2) the ability to direct

a larger portion of the claims to their own products.231 232 This has allowed them to control a large segment

of the windshield replacement market because domestic ARG windshield producers have increasingly

integrated operations down to the retail level. While they do not capture all of the insurance claims, they

secure a significant portion of them.233 This helps to insulate domestic producers from subject import

competition.

Finally, concentration in the domestic ARG windshield industry also helps to insulate the industry

from subject import competition. The industry increasingly has moved toward vertical integration. As a

result of recent mergers and acquisitions, some domestic producers now operate at several levels of the

ARG windshield production and distribution system. Some domestic producers have become involved at

the wholesale distribution and retail glass installation levels. Some produce their own float glass and

several domestic producers have merged or formed distribution relationships.234 Domestic producers

reported that approximately 31 percent to *** percent of U.S. shipments are to related parties.235 The

record data show a shift toward sales to related distributors from unrelated parties.236 237 238

We find that this growing vertical integration by domestic producers is a significant condition of

competition in the ARG windshield market and that it helps to insulate the domestic industry from subject

import competition. While the domestic industry has lost market share since the beginning of the period,

this loss of market share has decreased (1) as the industry became more vertically integrated, (2) as the
 

239 CR/PR at Table III-3; CR/PR at Table VI-1.

 

240 19 U.S.C. §§ 1673b(a) and 1677(7)(F)(ii).

 

241 19 U.S.C. § 1677(7)(F)(ii). An affirmative threat determination must be based upon “positive evidence

tending to show an intention to increase the levels of importation.” Metallverken Nederland B.V. v. United States,

744 F. Supp. 281, 287 (Ct. Int’l Trade 1990), citing American Spring Wire Corp. v. United States, 590 F. Supp.

1273, 1280 (Ct. Int’l Trade 1984); see also Calabrian Corp. v. United States, 794 F. Supp. 377, 387-88 (Ct. Int’l

Trade 1992), citing H.R. Rep. No. 98-1156 at 174 (1984).

 

242 19 U.S.C. § 1677(7)(F)(I). Factor I regarding countervailable subsidies and Factor VII regarding raw and

processed agriculture products are inapplicable to the product at issue. See 19 U.S.C. § 1677(7)(F)(I)(I) and (VII).

increase in subject imports grew the most, and (3) as the industry had problems supplying the retail level of

the market in 2000 and interim 2001. In addition, as noted above, the domestic industry’s volume, value

and average unit values of transfers to related firms increased during the investigation period as the same

factors for commercial sales decreased.239 These trends indicate that the domestic industry is becoming

more insulated from import competition and help to explain the industry’s improved financial performance

in the face of increased subject import volumes.

Therefore, we find that subject imports from China have not had a substantial negative impact on

the domestic industry. Accordingly, we do not find that the domestic ARG windshield industry is

materially injured by reason of subject imports from China.

II. NO THREAT OF MATERIAL INJURY BY REASON OF LESS THAN FAIR VALUE

IMPORTS

Section 771(7)(F) of the Act directs the Commission to determine whether the domestic industry is

threatened with material injury by reason of the subject imports by analyzing whether “further dumped or

subsidized imports are imminent and whether material injury by reason of imports would occur unless an

order is issued or a suspension agreement is accepted.”240 The Commission may not make such a

determination “on the basis of mere conjecture or supposition,” and considers the threat factors “as a

whole.”241 In making our determination, we have considered all factors that are relevant to this

investigation.242 Based on an evaluation of the relevant statutory factors, we find that an industry in the

United States is not threatened with material injury by reason of imports of ARG windshields from China

that are sold in the United States at less than fair value.

Initially, we find that the domestic industry is not vulnerable to a threat of material injury by

reason of the subject imports from China. As was the case with our present material injury analysis, there

are two major factors in our analysis of threat of material injury. First, the domestic industry is becoming

increasingly insulated from subject import competition. Second, through these changes, the industry’s

condition has improved even as the increases in subject imports were the greatest. Therefore, there are no

imminent changes that would lead to a threat of material injury by reason of subject imports. We discuss

the statutory factors below.

A. Foreign Production Capacity

The record indicates that there may be unused production capacity in China to produce ARG

windshields. In particular, there are a large number of ARG windshield producers in China, and exports of

ARG windshields from China have been increasing over the investigation period, both to the United States
 

243 The Commission received data from 12 of 14 Chinese producers, which accounts for a substantial portion of

the total production in China, and accounts for essentially all U.S. imports of ARG windshields from China in

2000. CR at VII-1, PR at VII-1.

 

244 Chinese producers have increased their capacity from 2,865,674 units in 1998 to 4,189,474 units in 2000. 

CR/PR at Table VII-1. They project total capacity to expand to 4.9 million units in 2001 and to almost 5.5 million

units in 2002. Id. Chinese producers also have increased their production from 1,827,902 units in 1998 to

3,563,392 units in 2000. Id. They project total production to expand to a little more than 4 million units in 2001

and to almost 4.8 million units in 2002. Id. Over the period of investigation, approximately two-thirds of Chinese

production has been for export and approximately two-thirds of those exports have been directed toward the United

States. Id. Capacity utilization was at almost 64 percent in 1998 and has grown to about 85 percent in 2000. Id.

Chinese producers anticipate that capacity utilization will remain at about that level in 2002. Id.

 

245 CR/PR at Table VII-1. Respondents contend that Chinese market penetration is not significant when

compared to that of nonsubject imports.

 

246 CR at VII-3, PR at VII-3.

 

247 CR/PR at Table VII-1 (from 14.5 percent in 1998 to 8.4 percent in 2000 and from 14.4 percent in 1998 to 8.4

percent in 2000, respectively).

 

248 CR/PR at Table VII-2 (from *** percent in 1998 to *** percent in 2000 and from *** percent in 1998 to ***

percent in 2000, respectively).

and to other export markets.243 244 The record overall indicates that the recent increase in subject imports to

the United States is likely to continue.

B. Volume and Market Penetration

As noted in our material injury analysis, the rate of increase of volume and market penetration has

been high.245 Eight firms reported imports or arrangements for importation of about 460,000 units after

interim 2001.246

C. Likely Price Effects

As noted in our material injury analysis, data are mixed. While the record indicates declining

domestic prices and extensive underselling by subject imports during the period of investigation, these

declines contrast sharply with trends in average unit values for the aggregate like product and the domestic

industry’s profitability, particularly during the period of investigation when the volume and market share of

subject imports was the greatest. We find that it is unlikely that subject imports will enter the U.S. market

at prices likely to suppress or depress domestic prices to any significant degree. As noted above, the record

indicates that subject import prices have had no significant adverse effects on domestic prices. We see

nothing in the record that indicates that conditions of competition in the industry will change so

significantly in the imminent future that domestic prices will likely be adversely affected to a significant

degree by subject import prices. Indeed, the domestic industry is becoming increasingly insulated from

subject import competition because of vertical integration.

D. Inventories

The ratios of Chinese producers’ home inventories to production and shipments both declined

during the period of investigation.247 The ratio of importers’ inventories to imports declined during the

period of investigation whereas the ratio of importers’ inventories to U.S. shipments of imports rose during

the period.248 These ratios increased in interim 2001 as compared to interim 2000, as the increases
 

249 The ratios of inventories to imports and inventories to U.S. shipments of imports increased to *** percent and

*** percent, respectively. Id.

 

250 See Tables III-1, VII-1 and VII-2.

 

251 We also find no reasonable indication of likely product shifting in China. The record contains no evidence

that equipment in China used in the production of other products is likely to be directed to the production of subject

imports.

 

252 CR/PR at Table VI-3.

 

253 CR at VII-3, PR at VII-3.

coincided with an increase in exports to the United States during the same period.249 However, the

inventory-to-shipment ratio reported by Chinese producers and U.S. importers are much lower than those

reported by domestic producers.250 Accordingly, we find that inventory levels do not indicate a likelihood

of increased imports in the imminent future, which would threaten to injure the domestic industry.251

E. Negative Effects on Development and Production Efforts

As noted in our material injury analysis, while capital expenditures slightly declined during the

period of investigation, they remained at fairly high levels. Moreover, research and development expenses

actually increased slightly over the period.252 Therefore, we also find that subject imports are not likely to

have an actual or potential negative effect on the domestic industry’s existing development and production

efforts.

F. Dumping in Third-Country Markets

On December 19, 2001, Canada instituted an antidumping duty investigation on ARG windshields

from China. On February 15, 2002, Canada made a preliminary determination of injury.253 This may or

may not shift Chinese exports from Canada to the United States.

As noted above, due to the facts that (1) the domestic industry is becoming increasingly insulated

from subject import competition, and (2) through these changes, the industry’s condition has improved as

the increase in subject imports grew the greatest, we do not find it likely that imports of subject

merchandise will significantly depress or suppress domestic prices. Nor do we find any other demonstrable

trends indicating a likely threat of material injury.

Therefore, based on the record in this investigation, we find that the domestic industry producing

ARG windshields is not threatened with material injury by reason of subject imports from China.

III. CONCLUSION

For the foregoing reasons, we determine that the domestic industry producing ARG windshields is

neither materially injured nor threatened with material injury by reason of subject imports from China that

are sold in the United States at less than fair value.