[Federal Register Volume 66, Number 83 (Monday, April 30, 2001)]
[Notices]
[Pages 21328-21332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-10688]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-122-838]


Notice of Initiation of Antidumping Duty Investigation: Certain 
Softwood Lumber Products From Canada

<BD>AGENCY: <RM>Import Administration, International Trade 
Administration, Department of Commerce.

<BD>EFFECTIVE DATE: <RM>April 30, 2001.

<BD>FOR FURTHER INFORMATION CONTACT: <RM>Valerie Ellis or Charles 
Riggle at (202) 482-2336 and (202) 482-0650, respectively; Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230.

Initiation of Investigation

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department of Commerce (the Department) 
regulations are references to the provisions codified at 19 CFR part 
351 (2001).

The Petition

    On April 2, 2001, the Department received a petition filed in 
proper form by the Coalition for Fair Lumber Imports Executive 
Committee,\1\ the United

[[Page 21329]]

Brotherhood of Carpenters and Joiners, and the Paper, Allied-
Industrial, Chemical and Energy Workers International Union 
(collectively, the petitioners). On April 20, 2001, the petition was 
amended to include the following four companies individually as 
petitioners: Moose River Lumber Co., Shearer Lumber Products, Shuqualak 
Lumber Co. and Tolleson Lumber Co., Inc. The Department received 
information supplementing the petition during the twenty-day initiation 
period. In accordance with section 732(b) of the Act, the petitioners 
allege that imports of certain softwood lumber products from Canada are 
being, or are likely to be, sold in the United States at less than fair 
value within the meaning of section 731 of the Act, and that such 
imports are materially injuring an industry in the United States.
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    \1\ The Coalition for Fair Lumber Imports Executive Committee is 
comprised of Hood Industries, International Paper Company, Moose 
River Lumber Company, New South Incorporated, Plum Creek Timber 
Company, Polatch Corporation, Seneca Sawmill Company, Shearer Lumber 
Products, Shuqualak Lumber Company, Sierra Pacific Industries, Swift 
Lumber Incorporated, Temple-Inland Forest Products, and Tolleson 
Lumber Company, Incorporated.
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    The Department finds that the petitioners have standing to file 
this petition on behalf of the domestic industry because they are 
interested parties as defined in sections 771(9)(C), (D) and (E) of the 
Act and have demonstrated sufficient industry support with respect to 
the antidumping investigation that they are requesting the Department 
to initiate. <IT>See Determination of Industry Support for the 
Petition<RM>, below.

Scope of the Investigation

    The products covered by this investigation are softwood lumber, 
flooring and siding (softwood lumber products). Softwood lumber 
products include all products classified under headings 4407.1000, 
4409.1010, 4409.1090, and 4409.1020, respectively, of the HTSUS, and 
any softwood lumber, flooring and siding described below. These 
softwood lumber products include:
    (1) Coniferous wood, sawn or chipped lengthwise, sliced or peeled, 
whether or not planed, sanded or finger-jointed, of a thickness 
exceeding six millimeters;
    (2) Coniferous wood siding (including strips and friezes for 
parquet flooring, not assembled) continuously shaped (tongued, grooved, 
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like) 
along any of its edges or faces, whether or not planed, sanded or 
finger-jointed;
    (3) Other coniferous wood (including strips and friezes for parquet 
flooring, not assembled) continuously shaped (tongued, grooved, 
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like) 
along any of its edges or faces (other than wood mouldings and wood 
dowel rods) whether or not planed, sanded or finger-jointed; and (4) 
Coniferous wood flooring (including strips and friezes for parquet 
flooring, not assembled) continuously shaped (tongued, grooved, 
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like) 
along any of its edges or faces, whether or not planed, sanded or 
finger-jointed.
    Although the HTSUS subheadings are provided for convenience and 
U.S. Customs purposes, the written description of the merchandise under 
investigation is dispositive.
    During our review of the petition, we discussed the scope with the 
petitioners to ensure that it accurately reflects the products for 
which the domestic industry is seeking relief. Moreover, as discussed 
in the preamble to the Department's regulations (62 FR 27323), we are 
setting aside a period for parties to raise issues regarding product 
coverage. The Department encourages all interested parties to submit 
such comments within twenty days after the date of publication of this 
notice in the <CS>Federal Register<RM>. Comments should be addressed to 
Import Administration's Central Records Unit at Room 1870, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230. The period for scope comments is intended to 
provide the Department with ample opportunity to consider all comments 
and consult with parties prior to the issuance of the preliminary 
determination.

Determination of Industry Support for the Petition

    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, when determining the degree 
of industry support, the statute directs the Department to look to 
producers and workers who produce the domestic like product. The 
International Trade Commission (ITC), which is responsible for 
determining whether ``the domestic industry'' has been injured, must 
also determine what constitutes a domestic like product in order to 
define the industry. While both the Department and the ITC must apply 
the same statutory definition regarding the domestic like product 
(section 771(10) of the Act), they do so for different purposes and 
pursuant to separate and distinct authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
like product, such differences do not render the decision of either 
agency contrary to the law.\2\
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    \2\ <IT>See Algoma Steel Corp. Ltd., v. United States, <RM>688 
F. Supp. 639, 642-44 (CIT 1988); <IT>High Information Content Flat 
Panel Displays and Display Glass from Japan: Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition<RM>, 
56 FR 32376, 32380-81 (July 16, 1991).
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    Section 771(10) of the Act defines the domestic like product as ``a 
product which is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this subtitle.'' Thus, the reference point from which the 
domestic like product analysis begins is ``the article subject to an 
investigation,'' <IT>i.e., <RM>the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition.
    The petition covers softwood lumber as defined in the <IT>Scope of 
the Investigation <RM>section, above, a single class or kind of 
merchandise. The petitioners define the domestic like product as the 
class or kind of merchandise covered by the scope of the investigation. 
The Department has no basis on the record to find the petitioners' 
definition of the domestic like product to be inaccurate.
    The Department, therefore, has adopted the domestic like product 
definition set forth in the petition.
    Section 732(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for: (1) At least 
25 percent of the total production of the domestic like product; and 
(2) more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition. Finally, section 732(c)(4)(D) of the Act 
provides that if the petition does not establish support of domestic 
producers or workers accounting for more than 50 percent of the total 
production of the domestic like product, the administering agency 
shall: (i) poll the industry or rely on other information in order to 
determine if there is support for the petition as required by 
subparagraph (A), or (ii) determine industry support using a 
statistically valid sampling method.
    In this case, the Department has determined that the petition (and 
subsequent amendments) contain adequate evidence of industry support; 
therefore, polling is unnecessary. <IT>See <RM>Attachment I to <IT>AD 
Investigation Initiation Checklist: Certain Softwood Lumber Products 
from Canada <RM>(April 23, 2001) (<IT>Initiation Checklist<RM>). To

[[Page 21330]]

estimate total domestic production of softwood lumber products, the 
petitioners relied on year 2000 production figures published by the 
American Forest and Paper Association (AF&PA). The petitioners also 
made an upward adjustment to this figure to account, conservatively, 
for flooring and siding that may or may not otherwise be included in 
the AF&PA total production figure, but which is included in the 
definition of domestic like product. In a letter dated April 20, 2001, 
the Government of Canada attempted to show that this upward adjustment 
to the year 2000 total production figure was inadequate, and argued 
that numerous other product categories should also be added to the 
total production figure. We analyzed the claim made by the Government 
of Canada and have concluded that it would result in significant 
double-counting. Further, we have found no other evidence through 
independent research that would indicate that the petitioners' figure 
for total U.S. production is in any way understated. We therefore 
conclude that 67 percent of the U.S. softwood lumber-producing industry 
supports the petition. Because the petition has support from more than 
50 percent of the entire domestic industry, we are not required to 
consider any expression of opposition in our determination to initiate 
this investigation. Accordingly, the Department determines that this 
petition is filed on behalf of the domestic industry within the meaning 
of section 732(b)(1) of the Act.

Export Price and Normal Value

    The petitioners based export price (EP) on affidavits containing 
price quotes from Canadian lumber producers in British Columbia and 
Quebec. These quotes reflect prices to unaffiliated U.S. purchasers for 
different types and sizes of the subject merchandise commonly exported 
to the United States. In addition, the petitioners provided prices 
contained in the industry publication <IT>Random Lengths<RM>.\3\ Both 
POI-average and week-specific prices were provided from Random Lengths. 
Because the terms of these prices are delivered, the petitioners 
calculated a net U.S. price by subtracting an estimated amount for 
international freight. In addition, for the price quote from British 
Columbia, the petitioners deducted a trading company mark-up.
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    \3\ <IT>Random Lenths <RM>is a weekly newsletter that is 
received by subscribers int he U.S., Canada, and forty-one other 
countries. The publication reports prices, analyzes markets, and 
examines issues affecting markets for the North American softwood 
lumber industry.
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    For initiation purposes, we relied only on the estimated margins 
based on the POI-average <IT>Random Lengths <RM>prices and actual price 
quotes from Canadian producers. The petitioners argue that the week-
specific <IT>Random Lengths <RM>prices should be used by the Department 
because they are indicative of actual sales that occurred during that 
week for a specific product with identical sales terms, and they are 
akin to an individual-price transaction.\4\ However, since the POI-
average prices from <IT>Random Lengths <RM>and price quotes from 
Canadian lumber producers are sufficient for the purposes of this 
initiation, it is not necessary to consider the petitioners' 
alternative methodology at this time.
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    \4\ The margins calculated using these prices, revised by the 
Department as described in the <IT>Initiation Checklist<RM>, would 
range from 31.52-49.44 percent.
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    With respect to normal value (NV), the petitioners provided a home-
market price that was obtained from <IT>Random Lengths <RM>for the 
eastern-spruce-pine-fir (ESPF) commonly produced in Quebec, and from 
the British Columbia Ministry of Forest's published market pricing 
system (MPS) lumber values for western-spruce-pine-fir (WSPF). Inland 
freight was deducted from the delivered price for ESPF. The prices for 
WSPF were considered by the petitioners to be ex-mill prices and no 
deductions were made. For a more detailed discussion of the deductions 
and adjustments relating to home market price, U.S. price and sources 
of data, <IT>see Initiation Checklist. <RM>Should the need arise to use 
any of this information in our preliminary or final determinations as 
facts available under section 776 of the Act, we may re-examine the 
information and revise the margin calculations, if appropriate.
    Although the petitioners provided information on home market 
prices, they also provided information demonstrating reasonable grounds 
to believe or suspect that sales of softwood lumber in Canada were made 
at prices below the fully absorbed cost of production (COP), within the 
meaning of section 773(b) of the Act, and requested that the Department 
conduct a country-wide sales-below-cost investigation.
    We note that the WSPF prices provided appear not to be Canada-
specific prices. The MPS lumber values are obtained by the British 
Columbia Ministry of Forests from B.C. lumber producers. However, the 
petition does not indicate that these prices are in any way restricted 
to sales in Canada. The petitioners acknowledge this, but contend the 
MPS lumber values represent conservative prices based on anecdotal 
evidence that a Canada-specific price would be lower. For purposes of 
examining the below-cost allegation, we have not considered the WSPF 
prices. However, we note that they are unnecessary, as the petitioners 
were able to demonstrate sales below cost using other domestic prices 
contained in the petition.
    Pursuant to section 773(b)(3) of the Act, cost of production (COP) 
includes cost of manufacturing, selling, general and administrative 
expenses, and packing. The petitioners based the cost of materials, 
fabrication and packing on the experience of certain petitioning 
companies, adjusted for known differences in costs between the United 
States and Canada, and publicly available Canadian industry data. The 
petitioners estimated per-unit selling, general and administrative 
expenses using data from Tembec Industries Inc.''s (Tembec) 2000 
financial statements.\5\ The petitioners estimated the per-unit 
financial expense using data from the 2000 financial statements of 
Tembec's parent company, Tembec Inc. We adjusted the petitioners' 
calculation of depreciation by using the amount from Tembec's forest 
products line of business rather than the company as a whole, which 
includes results from non-subject merchandise such as pulp, publishing 
paper, paperboard products, and chemicals. <IT>See Initiation of Cost 
Investigation <RM>section, below.
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    \5\ The petitioners chose Tembec because it is one of the 
largest softwood lumber producers within Canada and operates mills 
in british Columbis, Quebec, and Ontario.
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    Based upon the comparison of the home market prices of the foreign 
like product to the calculated COP of the product, we find reasonable 
grounds to believe or suspect that sales of the foreign like product 
were made below the COP, within the meaning of section 773(b)(2)(A)(i) 
of the Act. Because the NV petitioners used for the softwood lumber 
sales is below the COP, the petitioners based NV on CV. The petitioners 
calculated CV incorporating the same costs used for the COP. We made 
the same depreciation adjustment for CV that was made for COP. The 
petitioners included an amount for CV profit which was based on the 
profit of the Canadian producer's financial statements. We adjusted the 
petitioner's calculation of profit by using profit from the forest 
products line of business rather than the company as a whole, which 
includes results from non-subject merchandise such as pulp, publishing 
paper, paperboard products, and

[[Page 21331]]

chemicals. Based upon the comparison of EP to CV, the estimated dumping 
margins, as adjusted by the Department, range from 0.60 to 37.64 
percent.

Initiation of Cost Investigation

    As noted above, pursuant to section 773(b) of the Act, the 
petitioners provided specific factual information demonstrating 
reasonable grounds to believe or suspect that sales in the Canadian 
home market were made at prices below the fully absorbed COP and, 
accordingly, requested that the Department conduct a country-wide 
sales-below-COP investigation. The Statement of Administrative Action 
accompanying the URAA, H.R. Doc.103-412 (SAA), states that an 
allegation of sales below COP need not be specific to individual 
exporters or producers. The SAA states that ``Commerce will consider 
allegations of below-cost sales in the aggregate for a foreign country, 
just as Commerce currently considers allegations of sales at less than 
fair value on a country-wide basis for purposes of initiating an 
antidumping investigation.'' <IT>See <RM>SAA at 833.
    Further, the SAA provides that ``new section 773(b)(2)(A) retains 
the current requirement that Commerce have `reasonable grounds to 
believe or suspect' that below cost sales have occurred before 
initiating such an investigation. `Reasonable grounds' * * * exist when 
an interested party provides specific factual information on costs and 
prices, observed or constructed, indicating that sales in the foreign 
market in question are at below-cost prices.'' <IT>Id. <RM>Based upon 
the comparison of the adjusted prices from the petition for the 
representative foreign like products to their costs of production, we 
find the existence of ``reasonable grounds to believe or suspect'' that 
sales of the foreign like product in Canada were made below the COP 
within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly, 
the Department is initiating the requested country-wide cost 
investigation.

Fair Value Comparisons

    Based on the data provided by the petitioners, there is reason to 
believe that imports of certain softwood lumber products from Canada 
are being, or are likely to be, sold at less than fair value.

Critical Circumstances

    In their submission, the petitioners claim that, following the 
March 31, 2001, expiration of the U.S.-Canada Softwood Lumber Agreement 
(SLA), there is a reasonable basis to believe or suspect that critical 
circumstances will exist with regard to imports of softwood lumber from 
Canada.
    Section 733(e)(1) of the Act states that, if a petitioner alleges 
critical circumstances, the Department will find that such 
circumstances exist, at any time after the date of initiation, when 
there is a reasonable basis to believe or suspect that under 
subparagraph (A)(i) there is a history of dumping and material injury 
by reason of dumped imports in the United States or elsewhere of the 
subject merchandise, or (ii) the person by whom, or for whose account, 
the merchandise was imported knew or should have known that the 
exporter was selling the subject merchandise at less than its fair 
value and that there was likely to be material injury by reason of such 
sales, and (B) there have been massive imports of the subject 
merchandise over a relatively short period. Section 351.206(h) of the 
Department's regulations defines ``massive imports'' as imports that 
have increased by at least 15 percent over the imports during an 
immediately preceding period of comparable duration. Section 351.206(i) 
of the regulations states that ``relatively short period'' will 
normally be defined as the period beginning on the date the proceeding 
begins and ending at least three months later.
    The petitioners allege that importers knew, or should have known, 
that lumber was being sold at less than its fair value. Specifically, 
the petitioners allege margins, as adjusted by the Department, as high 
as 37.64 percent, a level high enough to impute importer knowledge that 
merchandise was being sold at less than its fair value. Additionally, 
they state that there is likely to be material injury by reason of such 
sales, and have submitted numerous documents, including news articles 
in the lumber trade press published over the past several months, that 
warn of antidumping and countervailing duty cases and discuss the 
threat of additional price declines and substantial material injury to 
the U.S. industry.
    The petitioners request that the Department immediately begin 
reviewing import data of the subject merchandise and that the 
Department request the U.S. Customs Service to compile information on 
an expedited basis regarding entries of subject merchandise. We note 
that section 732(e) of the Act states that when there is a reasonable 
basis to believe or suspect (1) there is a history of dumping in the 
United States or elsewhere of the subject merchandise, or (2) the 
person by whom, or for whose account, the merchandise was imported 
knew, or should have known, that the exporter was selling the subject 
merchandise at less than its fair value, the Department may request the 
Commissioner of Customs to compile information on an expedited basis 
regarding entries of the subject merchandise.
    Taking into consideration the foregoing, we will analyze this 
matter further and continue to monitor imports of softwood lumber from 
Canada. If, at any time, the criteria for a finding of critical 
circumstances are established, we will issue a critical circumstances 
finding at the earliest possible date. <IT>See Policy Bulletin 98/
4<RM>, 63 FR 55364, (October 15, 1998) (determination of critical 
circumstances may be made any time after initiation).

Allegations and Evidence of Material Injury, Causation and Threat 
of Material Injury

    The petitions allege that the U.S. industry producing the domestic 
like product is being materially injured, or is threatened with 
material injury, by reason of the imports of the subject merchandise 
sold at less than NV. The petitioners contend that the industry's 
injured condition is evident in the declining trends in production, 
employment, sales, and income. The allegations of injury and causation 
are supported by relevant evidence including U.S. Customs import data, 
lost sales and revenues, and pricing information. The petitioners also 
allege the imminent threat of material injury, based on the likely 
increases in production volume of Canadian softwood lumber and the 
inventory levels of such merchandise, the likelihood of substantially 
increased imports, and the prices of these imports having the likely 
effect of depressing or suppressing domestic prices of softwood lumber. 
We have assessed the allegations and supporting evidence regarding 
material injury, causation, and the threat of material injury, and we 
have determined that these allegations are properly supported by 
accurate and adequate evidence and meet the statutory requirements for 
initiation. <IT>See <RM>Attachment II of the <IT>Initiation Checklist.

<RM>Initiation of Antidumping Investigation

    Based upon our examination of the petition on certain softwood 
lumber products from Canada, and the petitioners' response to our 
supplemental questionnaire clarifying the petition, we have found that 
the petition meets the requirements of section 732 of the Act. 
Therefore, we are initiating an antidumping duty investigation to 
determine whether

[[Page 21332]]

imports of certain softwood lumber products from Canada are being, or 
are likely to be, sold in the United States at less than fair value. 
Unless this deadline is extended, we will make our preliminary 
determination no later than 140 days after the date of this initiation.

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representatives 
of the Government of Canada.

International Trade Commission Notification

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

Preliminary Determination by the ITC

    The ITC will determine, no later than May 17, 2001, whether there 
is a reasonable indication that imports of certain softwood lumber 
products from Canada are causing material injury, or threatening to 
cause material injury, to a U.S. industry. A negative ITC determination 
will result in the investigation being terminated; otherwise, the 
investigation will proceed according to statutory and regulatory time 
limits.
    This notice is published pursuant to section 777(i) of the Act. 
Effective January 20, 2001, Bernard T. Carreau is fulfilling the duties 
of the Assistant Secretary for Import Administration.

    April 23, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 01-10688 Filed 4-27-01; 8:45 am]
BILLING CODE 3510-DS-P