[Federal Register Volume 79, Number 250 (Wednesday, December 31, 2014)]
[Notices]
[Pages 78792-78795]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30658]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-928]


Uncovered Innerspring Units From the People's Republic of China: 
Initiation of Anticircumvention Inquiry on Antidumping Duty Order

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.

SUMMARY: In response to a request from Leggett & Platt Incorporated 
(``Petitioner''), the Department of Commerce (``the Department'') is 
initiating an anticircumvention inquiry pursuant to section 781(b) of 
the Tariff Act of 1930, as amended (``the Act''), to determine whether 
certain imports are circumventing the antidumping duty order on 
uncovered innerspring units (``innerspring units'') from the People's 
Republic of China (``PRC'').\1\
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    \1\ See Uncovered Innerspring Units from the People's Republic 
of China: Notice of Antidumping Duty Order, 74 FR 7661 (February 19, 
2009) (``Order'').

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DATES: Effective Date: December 31, 2014.

FOR FURTHER INFORMATION CONTACT: Steven Hampton, AD/CVD Operations, 
Office V, Enforcement and Compliance, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-
0116.

SUPPLEMENTARY INFORMATION:

Background

    On December 31, 2007, Petitioner filed a petition seeking 
imposition of antidumping duties on imports of uncovered innerspring 
units from, among other countries, the PRC.\2\ Following completion of 
an investigation by the Department and the U.S. International Trade 
Commission (``the Commission''), the Department imposed an antidumping 
duty order on subject merchandise.\3\
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    \2\ The petition also included imports of uncovered innerspring 
units from South Africa and the Socialist Republic of Vietnam. See 
Uncovered Innerspring Units from the People's Republic of China, 
South Africa, and the Socialist Republic of Vietnam: Initiation of 
Antidumping Duty Investigations, 73 FR 4817 (January 28, 2008).
    \3\ Order, 74 FR at 7662.
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    In the fourth administrative review of the Order,\4\ Petitioner 
requested that the

[[Page 78793]]

Department review Goldon Bedding Manufacturing (M) Sdn. Bhd 
(``Goldon'').\5\ The Department initiated the review on March 29, 2013 
\6\ and sent questionnaires to the named respondents, including Goldon. 
On August 19, 2013, in response to the Department's supplemental 
questionnaire, Goldon acknowledged that it imports innerspring unit 
components from the PRC for use in the production of innerspring units 
in Malaysia.\7\ On September 19, 2014, the Department applied adverse 
facts available to all of Goldon's PRC-origin subject merchandise upon 
determining that Goldon did not cooperate to the best of its ability in 
the review.\8\
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    \4\ The fourth administrative review covered the period of 
review (``POR'') February 1, 2012, through January 31, 2013. See 
Initiation of Antidumping and Countervailing Duty Administrative 
Reviews and Request for Revocation in Part, 78 FR 19197 (March 29, 
2013) (``Initiation Notice'').
    \5\ The Department notes that Petitioner requested an 
administrative review and anticircumvention inquiry of ``Goldon 
Bedding Manufacturing Sdn Bhd.'' However, during the 2012-2013 
administrative review, Goldon provided its business license which 
indicated that the company's official name is ``Goldon Bedding 
Manufacturing (M) Sdn Bhd.'' See Uncovered Innerspring Units from 
the People's Republic of China: Final Results of Antidumping Duty 
Administrative Review; 2012-2013, 79 FR 56338, 56339 (September 19, 
2014) and accompanying Issues and Decision Memorandum (``Final 
Results''), at 1.
    \6\ See Initiation Notice, 78 FR at 19208.
    \7\ See Uncovered Innerspring Units from China: Request for a 
Circumvention Inquiry, dated November 7, 2014, at 3 (``Circumvention 
Request'').
    \8\ See Final Results, 79 FR at 56339.
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    On November 7, 2014, pursuant to section 781(b) of the Act and 
section 351.225(h) of the Department's regulations, Petitioner 
submitted a request for the Department to initiate an anticircumvention 
inquiry of Goldon to determine whether Goldon's innerspring units 
completed and assembled in Malaysia from PRC-origin components 
constitute circumvention of the Order.\9\ In its request, Petitioner 
contends that Goldon, by its own admission, imports innerspring unit 
components from the PRC to Malaysia, further assembles these components 
into uncovered innerspring units, and exports the assembled innerspring 
units to the United States in the form of subject merchandise.\10\ 
Petitioner argues that Goldon's operations constitute minor further 
assembly in a third country, i.e., Malaysia.
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    \9\ See generally Circumvention Request.
    \10\ Id., at 3.
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Scope of the Order

    The merchandise subject to the order is uncovered innerspring units 
composed of a series of individual metal springs joined together in 
sizes corresponding to the sizes of adult mattresses (e.g., twin, twin 
long, full, full long, queen, California king, and king) and units used 
in smaller constructions, such as crib and youth mattresses. All 
uncovered innerspring units are included in the scope regardless of 
width and length. Included within this definition are innersprings 
typically ranging from 30.5 inches to 76 inches in width and 68 inches 
to 84 inches in length. Innersprings for crib mattresses typically 
range from 25 inches to 27 inches in width and 50 inches to 52 inches 
in length.
    Uncovered innerspring units are suitable for use as the innerspring 
component in the manufacture of innerspring mattresses, including 
mattresses that incorporate a foam encasement around the innerspring. 
Pocketed and non-pocketed innerspring units are included in this 
definition. Non-pocketed innersprings are typically joined together 
with helical wire and border rods. Non-pocketed innersprings are 
included in this definition regardless of whether they have border rods 
attached to the perimeter of the innerspring. Pocketed innersprings are 
individual coils covered by a ``pocket'' or ``sock'' of a nonwoven 
synthetic material or woven material and then glued together in a 
linear fashion.
    Uncovered innersprings are classified under subheading 9404.29.9010 
and have also been classified under subheadings 9404.10.0000, 
7326.20.0070, 7320.20.5010, or 7320.90.5010 of the Harmonized Tariff 
Schedule of the United States (``HTSUS''). The HTSUS subheadings are 
provided for convenience and customs purposes only; the written 
description of the scope of the order is dispositive.

Initiation of Circumvention Proceeding

    Section 781(b)(1) of the Act provides that the Department may find 
circumvention of an antidumping duty order when merchandise of the same 
class or kind subject to the order is completed or assembled in a 
foreign country other than the country to which the order applies. In 
conducting circumvention inquiries, under section 781(b)(1) of the Act, 
the Department will also evaluate whether: (1) The process of assembly 
or completion in the other foreign country is minor or insignificant; 
(2) the value of the merchandise produced in the foreign country to 
which the antidumping duty order applies is a significant portion of 
the total value of the merchandise exported to the United States; and 
(3) action is appropriate to prevent evasion of such an order or 
finding. As discussed below, Petitioner has provided evidence with 
respect to these criteria.

A. Merchandise of the Same Class or Kind

    Petitioner argues that the innerspring units that Goldon completes 
or assembles in Malaysia and subsequently ships to the United States 
are of the same class or kind as that subject to the Order. Petitioner 
contends that there is no question that the uncovered innerspring units 
that Goldon exports to the United States meet the physical 
characteristics that define the scope of the order.\11\ Goldon 
acknowledged this fact in the fourth administrative review when it 
stated: ``{y{time} es, merchandise as stated in the database are the 
subject merchandise that {sic{time}  comprised from locally source 
{sic{time}  material and imported material from PRC.'' \12\
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    \11\ Id., at 7-8.
    \12\ Id., at 8; and Exhibit 1, at 2.
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B. Completion of Merchandise in a Foreign Country

    Petitioner observes that the Order clearly indicates that 
innerspring units are assembled from three key components: Steel wire 
coils, helical wires, and in certain cases border rods.\13\ Petitioner 
argues that Goldon admitted that it imports the key inputs used in the 
production of innerspring units and provided invoices describing the 
components as ``spring mattress coils,'' ``wire,'' ``steel frame,'' and 
``steel strips.'' \14\ Furthermore, Petitioner contends that Goldon 
indicated that 70 percent of its materials used in the production of 
innerspring units are sourced from the PRC, the country with respect to 
which the Order applies, and that it ``shipped the completed 
merchandise into the U.S.'' \15\
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    \13\ See Circumvention Request at 8. The Commission also noted 
that innerspring coils and border rods are major components of an 
innerspring unit. See Uncovered Innerspring Units from South Africa 
and Vietnam, USITC Pub. 4051, Inv. Nos. 731-TA-1141-1142 at I-11 
(December 2008) (hereinafter, ``USITC Uncovered Innersprings 
Report''). In its final determination regarding imports of uncovered 
innersprings from the PRC, the Commission adopted the findings and 
analyses in its determinations and views regarding subject imports 
from South Africa and Vietnam with respect to the domestic like 
product, the domestic industry, cumulation, and material injury. 
Uncovered Innerspring Units from China, USITC Pub. 4061, Inv. No. 
731-TA-1140 at 3 and I-1 (February 2009).
    \14\ See Circumvention Request, at 9; and Exhibit 2, at 
Attachment 2.
    \15\ Id., at 9, 15 and Exhibit 2, at Attachment 2.
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C. Minor or Insignificant Process

    Under section 781(b)(2) of the Act, the Department is required to 
consider five factors to determine whether the process of assembly or 
completion of

[[Page 78794]]

merchandise in a foreign country is minor or insignificant. Petitioner 
believes that an examination of these factors indicates that Goldon's 
process of assembly and completion of innerspring units in Malaysia is 
not significant.
(1) Level of Investment
    Petitioner states that the process employed to assemble innerspring 
components into innerspring units is relatively simple and requires 
only limited investment and labor, and that the start-up investment 
costs and the barriers to entry into this type of assembly operation 
(i.e., manual or semi-automated) are low.\16\ Petitioner asserts that 
in the most basic, fully-manual operation, coils are assembled manually 
using a wooden or steel jig in which the coils (continuous or bonnell) 
\17\ are hand-loaded, then hand-laced with helical wire and finished by 
clipping the border rods to the unit.\18\ Petitioner posits that the 
cost of a new wooden (or steel) jig is approximately $200-$400.\19\ 
Petitioner argues that the level of investment would also be low if 
Goldon relies on a semi-automated assembly operation where a machine is 
used to assemble the rows of coils.\20\
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    \16\ See Circumvention Request, at 10.
    \17\ Bonnell coils, the most commonly used type of coils in 
innerspring units, have an hour-glass shape which tapers inward from 
top to center and then outward from the center to bottom. Bonnell 
coils are generally the lowest priced units and the type of coil 
generally used in imported innerspring units. Continuous coils have 
entire rows of continuous coils formed from a single piece of wire. 
For a more detailed description of the types of innerspring coils, 
see USITC Uncovered Innersprings Report at I-8 to I-10.
    \18\ See Circumvention Request, at 10. A somewhat more advanced 
assembly operation may involve manual assembly using a wooden or 
steel jig in which the coils are hand-set, and a lacing machine is 
used to feed the helical to join the rows, and then the borders are 
manually clipped to the unit. Id.
    \19\ Id.
    \20\ Id.
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(2) Level of Research and Development
    Petitioner is not aware that Goldon performs any research and 
development related to the assembly and/or production of innerspring 
units.\21\ Moreover, Petitioner states that it would not expect Goldon 
to incur any research and development expenses related to its 
innerspring assembly operations.\22\
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    \21\ Id., at 11.
    \22\ Id.
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(3) Nature of the Production Process
    According to Petitioner, the manufacturing process for assembling 
innerspring units from imported components is relatively simple and 
does not require significant start-up costs, sophisticated machinery 
and inputs, or substantial labor.\23\ This process, as described by 
Goldon, is very similar to the process found to be insignificant by the 
Department in the prior circumvention inquiry on this Order. \24\
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    \23\ Id.
    \24\ See Circumvention Request, at 11; see also Uncovered 
Innerspring Units from the People's Republic of China: Affirmative 
Final Determination of Circumvention of the Antidumping Duty Order, 
79 FR 3345 (January 21, 2014) (``Reztec Final Determination'').
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(4) Extent of Production in the Malaysia
    Petitioner states that Goldon only has one facility for the 
production of innerspring units.\25\ Goldon indicated that six to seven 
workers are involved in the assembly of innerspring units, with another 
one or two workers devoted to packing.\26\ Petitioner contends that 
this indicates that the portion of Goldon's production facility 
attributable to assembly operations is small.\27\
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    \25\ See Circumvention Inquiry, at 12.
    \26\ Id.
    \27\ Id.
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(5) Value of Processing in Malaysia as Compared to Uncovered 
Innerspring Units Imported Into the United States
    Petitioner asserts that the value of assembly processing performed 
in Malaysia represents a small portion of the total value of the 
innerspring units imported into the United States.\28\ Petitioner 
believes Goldon's assembly operations likely rely on relatively 
unskilled, low wage employees.\29\ Thus, these assembly operations 
involve minimal additional labor costs.\30\ Petitioner asserts that, by 
any standard, the assembly operations represent an insignificant 
portion of the total value.\31\
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    \28\ Id., at 13.
    \29\ Id.
    \30\ Id. There are virtually no additional energy costs given 
that the machines, if utilized, are quite basic. The only additional 
material inputs (besides the coils, which represent the single 
largest cost of an innerspring unit) are steel wire for lacing and 
border clips. Id.
    \31\ Id.
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D. Value of Merchandise Produced in PRC

    Petitioner argues that the value of the components that Goldon 
imports from the PRC for further assembly in Malaysia into subject 
merchandise is a significant portion of the total value of the 
innerspring units exported to the United States.\32\ As Petitioner 
noted previously, innerspring coils, helical wires, and border rods are 
the key components of an innerspring unit. Petitioner explains that 
they also constitute a significant portion of the overall costs of an 
innerspring unit.\33\ Petitioner does not have access to other PRC 
innerspring unit producer/exporter costs. Therefore, it conducted an 
analysis related to the production costs of various innerspring unit 
models at its own facility in Guangzhou, PRC. Petitioner believes that 
its operation (and costs) in the PRC are representative of the 
operations (and costs) of other PRC innerspring unit producers/
exporters, as it is the largest producer of innersprings in the 
PRC.\34\ According to Petitioner's analysis of its own production costs 
in the PRC, the total value of these innerspring components compose a 
significant portion of the total value of an innerspring unit.\35\
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    \32\ Id., at 14.
    \33\ Id.
    \34\ Id.
    \35\ Id., at 14-15.
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E. Additional Factors for Consideration

    Section 781(b)(3) of the Act directs the Department to consider 
additional factors in determining whether to include merchandise 
assembled or completed in a foreign country within the scope of the 
Order. Petitioner believes that an examination of these factors 
supports finding that Goldon's Malaysian exports of innerspring units 
should be within the scope of the Order.\36\
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    \36\ Petitioner did not analyze or submit evidence concerning 
affiliation under section 781(b)(3)(B) of the Act.
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(1) Pattern of Trade
    Goldon has stated that while it was originally set up to supply the 
domestic market, in 2011 it changed its business strategy to serve the 
United States.\37\ As described by Goldon, this strategy consists of 
assembling innersprings from 70 percent PRC-origin components and 30 
percent Malaysian components, and exporting the assembled innerspring 
units to the United States.\38\
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    \37\ Id., at 15.
    \38\ Id.
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    Based on official U.S. import data, Petitioner contends that 
imports of uncovered innerspring units from Malaysia have increased 
dramatically since the Order was imposed.\39\ Petitioner provided a 
chart that illustrated the U.S. annual imports from

[[Page 78795]]

Malaysia under the relevant HTSUS subheadings.\40\ Petitioner states 
that prior to 2009, there were virtually no imports of uncovered 
innerspring units from Malaysia to the United States.\41\ However, 
according to the chart, subject imports from Malaysia to the United 
States have steadily increased: 185,917 pieces were imported in 2009; 
312,317 pieces were imported in 2010; 344,388 pieces were imported in 
2011; 132,017 pieces were imported in 2012; and 52,051 pieces were 
imported in 2013.\42\ Petitioner claims that the lower overall entry 
quantities over the last two years are due to the previous 
anticircumvention inquiry filed by Petitioner in 2012.\43\ Petitioner 
notes that quantities of imports after 2012, while not as high as the 
immediately preceding years, are still significant compared to before 
the Order was in place.\44\
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    \39\ See Circumvention Inquiry, at 15-16. Petitioner states that 
until 2011, U.S. imports of uncovered innerspring units were 
properly classified and entered the United States under harmonized 
tariff schedule (``HTS'') 9404.29.9010 (``uncovered innerspring 
units''). In 2011, the HTS classification for uncovered innerspring 
units was refined and further broken out to provide a separate ten-
digit classification for innerspring units used in cribs and toddler 
beds. Thus, HTS 9409.29.9010 was eliminated and replaced with 
9404.29.9005 (Uncovered innerspring units: For use in a crib or 
toddler bed) and 9404.29.9011 (Uncovered innerspring units: Other).
    \40\ Id., at 17.
    \41\ Id., at 16.
    \42\ Id., at 17.
    \43\ Id.
    \44\ Id.
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    Furthermore, Petitioner contends that Malaysia's official import 
statistics indicated that imports from the PRC of one of the key 
components in innerspring units (i.e., coils) have increased 
substantially since the Order was imposed.\45\ Petitioner provided a 
chart of import data related to Malaysia's imports of coils from the 
PRC over the last several years, as well as the current year under HTS 
7320.99.000 (other springs and leaves for springs, of iron/steel, 
kilograms (``kgs'')). This chart shows an increase of imported coils 
from 2,995,519 kgs in 2007 to 11,972,478 kgs in 2011, and a gradual 
decrease to 5,218,789 kgs for the current year.\46\ Again, Petitioner 
notes that imports have somewhat declined starting in 2012, which may 
be due to the Department's determination in the previous 
anticircumvention inquiry filed by Petitioner.\47\ Nevertheless, 
Petitioner contends that imports of coils from the PRC remain higher 
than before the Order was in place.\48\
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    \45\ Id.
    \46\ Id. Petitioner also provided a description of Malaysia's 
relevant HTS numbers. Id., at Exhibit 7.
    \47\ Id.; see also Reztec Final Determination, 79 FR 3345 and 
accompanying Issues and Decision Memorandum. Petitioner did not 
submit any Malaysian import statistics regarding imports of helical 
wires and border rods from the PRC.
    \48\ Id.
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(2) Increase of Subject Imports From the PRC to Malaysia After the 
Investigation Initiation
    Petitioner did not provide any evidence regarding an increase in 
subject imports (i.e., completed uncovered innerspring units) from the 
PRC to Malaysia after the initiation of the investigation. However, as 
noted above, Petitioner provided information that imports of one of the 
key components of innerspring units from PRC to Malaysia increased 
significantly during this time.

F. Whether Action Is Appropriate To Prevent Evasion of the Order

    Based on the information provided by Petitioner, and for the 
reasons provided in the analysis below, the Department determines that 
initiating an anticircumvention inquiry is appropriate to identify any 
potential evasion of the Order.
Analysis of the Request
    Based on our analysis of Petitioner's circumvention inquiry 
request, the Department determines that Petitioner has satisfied the 
criteria under section 781(b)(1) of the Act to warrant an initiation of 
a formal circumvention inquiry.\49\ In accordance with section 
351.225(e) of the Department's regulations, the Department finds that 
the issue of whether a product is included within the scope of an order 
cannot be determined based solely upon the application and the 
descriptions of the merchandise. Accordingly, the Department will 
notify by mail all parties on the Department's scope service list of 
the initiation of a circumvention inquiry.
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    \49\ Id., at 7-17.
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    In accordance with section 351.225(l)(2) of the Department's 
regulations, if the Department issues a preliminary affirmative 
determination, we will then instruct U.S. Customs and Border Protection 
to suspend liquidation and require a cash deposit of estimated duties 
on the merchandise. This circumvention inquiry covers Goldon. If, 
within sufficient time, the Department receives a formal request from 
an interested party regarding potential circumvention of the Order by 
other Malaysian companies, we will consider conducting additional 
inquiries concurrently.
    The Department will establish a schedule for questionnaires and 
comments on the issues. In accordance with section 351.225(f)(5) of the 
Department's regulations, the Department intends to issue its final 
determination within 300 days of the date of publication of this 
initiation, in accordance with section 781(f) of the Act. This notice 
is published in accordance with section 351.225(f) of the Department's 
regulations.

    Dated: December 22, 2014.
Christian Marsh,
Deputy Assistant Secretary for Antidumping and Countervailing Duty 
Operations.
[FR Doc. 2014-30658 Filed 12-30-14; 8:45 am]
BILLING CODE 3510-DS-P