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Notice

Duty Drawback Practice in Antidumping Proceedings

Document Details

Information about this document as published in the Federal Register.

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This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

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AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Request for comments.

SUMMARY:

The Department of Commerce (the Department) has a long-standing policy in antidumping proceedings, based on section 772(c)(1)(B) of the Tariff Act of 1930, as amended (the Act), of granting a duty drawback adjustment to export price where a respondent party establishes that: (1) the import duty paid and the rebate payment are directly linked to, and dependent upon, one another (or the exemption from import duties is linked to exportation); and (2) there were sufficient imports of the imported raw material to account for the drawback received upon the exports of the manufactured product.

In a number of recent proceedings, the Department has received comments expressing concerns about its current duty drawback adjustment policy and practice. This notice describes various issues that have been raised concerning the Department's practice and provides the public with an opportunity to comment on whether any changes to the Department's current practice would be warranted and specifically what such changes would entail.

DATES:

Comments must be submitted by July 25, 2005.

ADDRESSES:

Written comments (original and six copies) should be sent to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Central Records Unit, Room 1870, Pennsylvania Avenue and 14th Street NW, Washington, DC 20230.

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FOR FURTHER INFORMATION CONTACT:

John C. Kalitka, Office of Policy, Import Administration, U.S. Department of Commerce, Room 3712, Pennsylvania Avenue and 14th Street, NW, Washington, DC 20230, (202) 482-2730.

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SUPPLEMENTARY INFORMATION:

Background

With respect to the duty drawback adjustment, the Department is directed by section 772(c)(1)(B) of the Act, which states that “[t]he price used to establish export price and constructed export price shall be -- (1) increased by (B) the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the Start Printed Page 37765exportation of the subject merchandise to the United States.”

Based upon this statutory language, the Department applies a two-prong test to determine entitlement to a duty drawback adjustment. That is, the party claiming such adjustment must establish that: (1) the import duty paid and the rebate payment are directly linked to, and dependent upon, one another (or the exemption from import duties is linked to exportation); and (2) there were sufficient imports of the imported raw material to account for the drawback received upon the exports of the manufactured product. See, e.g., Stainless Steel Wire Rods From India: Preliminary Results of Antidumping Duty Administrative Review, Intent To Revoke Order In Part, and Extension of Time for the Final Results of Review, 70 FR 1413, 1420 (January 7, 2005); Light-Walled Rectangular Pipe and Tube From Turkey: Notice of Final Determination of Sales at Less Than Fair Value, 69 FR 53675 (September 2, 2004) and accompanying Issues and Decision Memorandum at Comment 1 (Pipe & Tube from Turkey). Moreover, the courts have sustained the Department's traditional two-prong test. See, e.g., Allied Tube & Conduit Corp. v. United States, 05-56, slip op. at 16-17 (CIT, May 12, 2005); Allied Tube & Conduit Corp. v. United States, 132 F. Supp. 2d 1087, 1093 (CIT 2001); Far East Machinery Co., Ltd. v. United States, 699 F. Supp. 309, 311 (CIT 1988); Carlisle Tire & Rubber Co. v. United States, 657 F. Supp. 1287, 1289-90 (CIT 1987).

One economic justification that parties have offered for the duty drawback adjustment is that the measure seeks to preserve accurate price comparability between home market and United States prices. See, e.g., Pipe & Tube from Turkey at Comment 1. Under this rationale, an adjustment is required for price differences created entirely by the imposition of import duties, which increase the cost of raw materials used to produce the product sold in the home market. Even where materials are sourced domestically and thus no import duties are paid on certain raw materials used in producing merchandise sold in the home market, an addition to United States price equal to the import duty is still appropriate to neutralize the effect of the increase in prices of domestically sourced raw material that is caused by the imposition of the duty. In these circumstances, it is argued, domestic suppliers of raw materials will raise the home market price of inputs as high as they can without facing competition from imported raw materials. For example, home market suppliers of domestically produced raw material inputs used in the production of the foreign like product likely would price their material just short of or equal to the total duty-inclusive cost of imported raw material inputs. Thus, the duty drawback adjustment seeks to account for the difference between the price of imported and locally sourced raw material inputs created solely by the duty on imported raw material inputs. Id. Furthermore, parties have argued, the price of the foreign like product would still be influenced by a respondent's home market competition, which may have paid import duties on the raw material. Id.

The Department is considering whether changes to its practice, including the two-prong test detailed above, may be appropriate. For instance, some parties have argued that the Department's practice should be modified by requiring a respondent party seeking a duty drawback adjustment to demonstrate payment of import duties on raw material inputs used to produce merchandise sold in the home market. They argue that such a requirement is consistent with principles of price comparability and the implementation of Congressional intent with respect to the duty drawback adjustment. In addition, according to such parties, any duty drawback adjustment made should also be limited to the amount of duties actually paid on material inputs used to produce merchandise sold in the home market. See, e.g., Certain Welded Carbon Steel Pipes and Tubes from Thailand: Final Results of Antidumping Duty Administrative Review, 69 FR 61649 (October 20, 2004); Antidumping Administrative Review: Certain Welded Carbon Steel Pipe and Tube From Turkey, 69 FR 48843 (August 11, 2004); Circular Welded Non-Alloy Steel Pipe From the Republic of Korea; Final Results of Antidumping Duty Administrative Review, 69 FR 32492 (June 10, 2004). Certain parties have also argued that the Department should allocate the total pool of relevant drawback available under some systems to total exports of subject merchandise to ensure that the adjustment claimed on U.S. sales is not overstated. See Notice of Final Results of the Tenth Administrative Review and New Shipper Review of the Antidumping Duty Order on Certain Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea, 70 FR 12443 (March 14, 2005) and accompanying Issues and Decision Memorandum at Comment 4.

Parties advocating a change in Department practice argue that in creating the duty drawback adjustment, Congress intended that an increase in the export price resulting from the duty drawback adjustment was designed to offset an increase in the home market price resulting from the payment of import duties on inputs. As a result, the duty drawback adjustment was designed to prevent dumping margins from arising simply because of the rebate (or non-collection) of import duties on the inputs resulting from the export of subject merchandise to the United States. Yet, these parties argue, to permit a drawback adjustment where home market sales do not include import duties leaves nothing for the rebate or exemption to offset.

In order to fully consider and address these claims as well as other concerns about the Department's practice regarding duty drawback, the Department is providing an opportunity for the public to comment. Such comments should be submitted by the date specified above. The Department is particularly interested in comments relating to questions and possible approaches set forth in the Appendix to this notice, including comments on the consistency with the statute and Congressional intent.

Comments

Persons wishing to comment should file a signed original and six copies of each set of comments by the date specified above. The Department will consider all comments received before the close of the comment period. Comments received after the end of the comment period will be considered, if possible, but their consideration cannot be assured. The Department will not accept comments accompanied by a request that a part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. The Department will return such comments and materials to the persons submitting the comments and will not consider them in development of any changes to its practice. All comments responding to this notice will be a matter of public record and will be available for public inspection and copying at Import Administration's Central Records Unit, Room B-099, between the hours of 8:30 a.m. and 5 p.m. on business days. The Department requires that comments be submitted in written form. The Department recommends submission of comments in electronic form to accompany the required paper copies. Comments filed in electronic form should be submitted either by e-mail to Start Printed Page 37766the webmaster below, or on CD-ROM, as comments submitted on diskettes are likely to be damaged by postal radiation treatment.

Comments received in electronic form will be made available to the public in Portable Document Format (PDF) on the Internet at the Import Administration Web site at the following address: http://ia.ita.doc.gov/​.

Any questions concerning file formatting, document conversion, access on the Internet, or other electronic filing issues should be addressed to Andrew Lee Beller, Import Administration Webmaster, at (202) 482-0866, e-mail address: webmaster-support@ita.doc.gov.

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Dated: June 24, 2005.

Joseph. A Spetrini,

Acting Assistant Secretary for Import Administration.

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APPENDIX

The following questions are for consideration in commentary on the duty drawback adjustment in antidumping duty proceedings. In particular, the Department is interested in comments regarding the legal, policy and commercial rationale for the duty drawback adjustment and any proposed modifications to the Department's practice.

(1) What should the requirements be for making a duty drawback adjustment in an antidumping proceeding? For example, should a party seeking such adjustment be required to demonstrate that it actually paid import duties that were not rebated on some portion of raw material inputs during the relevant period, i.e., that exports did not account for all of the imported material in question? Please explain, in detail, any changes to the Department's current practice that would be required to implement such a modification.

(2) How do you propose the amount of the adjustment should be determined, assuming that some domestically sourced and some imported material was used?

(3) If duty drawback (or exemption) is claimed for some, but not all, exports incorporating the material input in question, how do you propose the amount of any duty drawback adjustment should be determined?

(4) Please provide any additional views on any other matter pertaining to the Department's practice regarding duty drawback adjustments.

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[FR Doc. E5-3441 Filed 6-29-05; 8:45 am]

BILLING CODE 3510-DS-S