Ni-Resist Piston Inserts from Argentina Investigation No. 701-TA-460 (Final) Publication 4104 October 2009 U.S. International Trade Commission Washington,DC20436 U.S. International Trade Commission COMMISSIONERS Shara L. Aranoff, Chairman Daniel R. Pearson, Vice Chairman Deanna Tanner Okun Charlotte R. Lane Irving A. Williamson Dean A. Pinkert Robert A. Rogowsky Director of Operations Staff assigned Angela M. W. Newell, Investigator Deborah McNay, Commodity-Industry Analyst Craig Thomsen, Economist David Boyland, Accountant/Auditor Marc Bernstein, Attorney Lita David-Harris, Statistician George Deyman, Supervisory Investigator Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Ni-Resist Piston Inserts from Argentina Investigation No. 701-TA-460 (Final) Publication 4104 October 2009 CONTENTS Page Determination .................................................................. 1 Views of the Commission ......................................................... 3 Part I: Introduction ............................................................ I-1 Background .................................................................. I-1 Statutory criteria and organization of the report ...................................... I-2 Statutory criteria ........................................................... I-2 Organization of the report .................................................... I-3 U.S. market summary .......................................................... I-3 Summary data and data sources .................................................. I-3 Previous and related investigations................................................ I-3 Nature and extent of subsidies ................................................... I-4 Argentina ................................................................. I-4 The subject merchandise ........................................................ I-4 Commerce’s scope .......................................................... I-4 Tariff treatment ............................................................ I-5 The product .................................................................. I-5 Description and applications .................................................. I-5 Manufacturing process ...................................................... I-9 Domestic like product .......................................................... I-11 Part II: Conditions of competition in the U.S. market ................................ II-1 U.S. market characteristics and channels of distribution ............................... II-1 Geographic markets ........................................................... II-1 Supply and demand considerations................................................ II-1 Supply ................................................................... II-1 Demand .................................................................. II-4 Substitutability issues .......................................................... II-7 Factors affecting purchasing decisions .......................................... II-7 Comparisons of domestic products with subject and nonsubject imports ................ II-9 Comparisons of subject and nonsubject imports ................................... II-11 Elasticity estimates ............................................................ II-11 U.S. supply elasticity ........................................................ II-11 U.S. demand elasticity ....................................................... II-11 Substitution elasticity ....................................................... II-11 Part III: U.S. producer’s production, shipments, and employment ...................... III-1 U.S. producer ................................................................ III-1 U.S. capacity, production, and capacity utilization ................................... III-1 U.S. producer’s U.S. shipments and export shipments ................................. III-2 U.S. producer’s imports and purchases of imports .................................... III-2 U.S. producer’s inventories ..................................................... III-2 U.S. employment, wages, and productivity ......................................... III-3 i CONTENTS Page Part IV: U.S. imports, apparent consumption, and market shares ...................... IV-1 U.S. importers ................................................................ IV-1 U.S. imports ................................................................. IV-1 Negligibility ................................................................. IV-2 Apparent U.S. consumption ..................................................... IV-2 U.S. market shares ............................................................ IV-2 Ratio of imports to U.S. production ............................................... IV-3 Part V: Pricing and related information ............................................ V-1 Factors affecting prices ......................................................... V-1 Raw material costs .......................................................... V-1 U.S. inland transportation costs ................................................ V-1 Pricing practices .............................................................. V-2 Price data ................................................................... V-3 Price trends ............................................................... V-4 Price comparisons .......................................................... V-4 Lost sales and lost revenues ..................................................... V-4 Part VI: Financial experience and condition of the U.S. producer ...................... VI-1 Background .................................................................. VI-1 Operations on Ni rings ......................................................... VI-2 Capital expenditures and research and development expenses ........................... VI-4 Capital and investment ......................................................... VI-4 Actual negative effects ...................................................... VI-4 Anticipated negative effects .................................................. VI-4 Part VII: Threat considerations and information on nonsubject countries ............... VII-1 The industry in Argentina ....................................................... VII-1 U.S. importers’ inventories ...................................................... VII-2 U.S. importers’ current orders ................................................... VII-2 Antidumping and countervailing duty investigations in third-country markets .............. VII-2 Information on nonsubject countries .............................................. VII-2 Appendixes A. Federal Register notices....................................................... A-1 B. Hearing witnesses ............................................................ B-1 C. Summary data............................................................... C-1 D. Quarterly domestic and nonsubject-country price data ............................... D-1 Note.–Information that would reveal confidential operations of individual concerns may not be published and therefore has been deleted from this report. Such deletions are indicated by asterisks. ii UNITED STATES INTERNATIONAL TRADE COMMISSION Investigation No. 701-TA-460 (Final) NI-RESIST PISTON INSERTS FROM ARGENTINA DETERMINATION On the basis of the record1 developed in the subject investigation, the United States International Trade Commission (Commission) determines, pursuant to section 705(b) of the Tariff Act of 1930 (19 U.S.C. § 1671d(b)) (the Act), that an industry in the United States is not materially injured or threatened with material injury, and the establishment of an industry in the United States is not materially retarded, by reason of imports from Argentina of Ni-resist piston inserts, provided for in subheading 8409.99.91 of the Harmonized Tariff Schedule of the United States, that have been found by the Department of Commerce (Commerce) to be subsidized by the Government of Argentina. BACKGROUND The Commission instituted this investigation effective January 26, 2009, following receipt of a petition filed with the Commission and Commerce by Korff Holdings LLC d/b/a Quaker City Castings, Salem, OH. The final phase of the investigation was scheduled by the Commission following notification of a preliminary determination by Commerce that imports of Ni-resist piston inserts from Argentina were being subsidized within the meaning of section 703(b) of the Act (19 U.S.C. § 1671b(b)). Notice of the scheduling of the final phase 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 July 17, 2009 (74 FR 34784). The hearing was held in Washington, DC, on September 17, 2009, and all persons who requested the opportunity were permitted to appear in person or by counsel. 1 The record is defined in sec. 207.2(f) of the Commission’s Rules of Practice and Procedure (19 CFR § 207.2(f)). VIEWS OF THE COMMISSION Based on the record in the final phase of this investigation, we unanimously find that an industry in the United States is neither materially injured nor threatened with material injury by reason of imports of Ni-resist piston inserts (“Ni rings”) subsidized by the government of Argentina.1 I. BACKGROUND Korff Holdings, LLC, doing business as Quaker City Castings (“QCC”), filed the petition in this investigation on January 26, 2009. The petition concerned imports from Argentina and Korea. The U.S. Department of Commerce (“Commerce”) subsequently made a negative subsidy determination on Ni rings from Korea,2 and the Commission accordingly terminated the investigation concerning subject imports from Korea.3 QCC, the only known domestic producer of Ni rings, appeared at the hearing and submitted prehearing and posthearing briefs. Three respondents entered appearances as parties. Karl Schmidt Unisia, Inc. (“Karl Schmidt”), an importer of subject merchandise from Argentina and a purchaser of domestically produced Ni rings, appeared at the hearing and submitted prehearing and posthearing briefs and final comments.4 Clorindo Appo SRL (“Clorindo”), a producer and exporter of subject merchandise from Argentina, also entered an appearance. Federal-Mogul Corp., an importer of Ni rings from Korea and a purchaser of domestically produced Ni rings, filed a prehearing brief. Federal-Mogul ceased its active participation in the Commission investigation (and ceased to be an interested party) once Commerce reached a final negative subsidy determination in the investigation of Ni rings from Korea. II. 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.”5 Section 771(4)(A) of the Tariff Act of 1930, as amended (“the Tariff 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.”6 In turn, the Tariff Act defines “domestic like 1 Material retardation of the establishment of an industry is not an issue in this investigation. 2 74 Fed. Reg. 48059 (Sept. 21, 2009). 3 74 Fed. Reg. 51319 (Oct. 6, 2009). 4 The second sentence of the second full paragraph on page 12 of Karl Schmidt’s Final Comments contains new factual information in violation of 19 U.S.C. § 1677m(g) and 19 C.F.R. § 207.30(b). Accordingly, we have disregarded the information in this sentence. 5 19 U.S.C. § 1677(4)(A). 6 19 U.S.C. § 1677(4)(A). 3 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 ... .”7 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.8 No single factor is dispositive, and the Commission may consider other factors it deems relevant based on the facts of a particular investigation.9 The Commission looks for clear dividing lines among possible like products and disregards minor variations.10 Although the Commission must accept Commerce’s determination as to the scope of the imported merchandise that is subsidized or sold at less than fair value,11 the Commission determines what domestic product is like the imported articles Commerce has identified.12 B. Scope Definition Commerce has defined the scope of the imported merchandise under investigation as follows: all Ni-resist piston inserts regardless of size, thickness, weight, or outside diameter. Ni- resist piston inserts may also be called other names including, but not limited to, “Ring Carriers,” or “Alfin Inserts.” Ni-resist piston inserts are alloyed cast iron rings, with or without a sheet metal cooling channel pressed and welded into the interior of the insert. Ni-resist piston inserts are composed of the material known as Ni-resist, of the chemical composition: 13.5% – 17.5% Ni (nickel), 5.5% – 8.0% Cu (copper), 0.8% – 2.5% Cr(chromium), 0.5% – 1.5% Mn (manganese), 1.0% – 3.0% Si (silicon), 2.4% – 3.0% C 7 19 U.S.C. § 1677(10). 8 See, e.g., Cleo, Inc. v. United States, 501 F.3d 1291, 1299 (Fed. Cir. 2007); 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 the following: (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). 9 See, e.g., S. Rep. No. 96-249 at 90-91 (1979). 10 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.”). 11 See, e.g., USEC, Inc. v. United States, 34 Fed. Appx. 725, 730 (Fed. Cir. 2002) (“The ITC may not modify the class or kind of imported merchandise examined by Commerce.”); Algoma Steel Corp. v. United States, 688 F. Supp. 639, 644 (Ct. Int’l Trade 1988), aff’d, 865 F.3d 240 (Fed. Cir.), cert. denied, 492 U.S. 919 (1989). 12 Hosiden Corp. v. Advanced Display Mfrs., 85 F.3d 1561, 1568 (Fed. Cir. 1996) (the Commission may find a single like product corresponding to several different classes or kinds defined by Commerce); Cleo, 501 F.3d at 1298 n.1 (“Commerce’s {scope} finding does not control the Commission’s {like product} determination.”); Torrington, 747 F. Supp. at 748-52 (affirming the Commission’s determination defining six like products in investigations where Commerce found five classes or kinds). 4