U.S. Customs and Border Protection · CROSS Database
March 8, 2012 HQ H118455 OT:RR:CTF:ER H118455 ASL Ms. Melissa Edwards Management Program Analysis U.S. Customs and Border Protection 6650 Telecom Drive, Suite 100 Indianapolis, IN 46278 RE: Affected Domestic Parties, Captive Production, Continued Dumping and Subsidy Offset Act of 2000 Dear Ms. Edwards: This is in response to a request for internal advice, dated August 3, 2010, pursuant to 19 C.F.R. § 177.11. The request seeks guidance regarding the request for reconsideration of a verification of a distribution under the Continued Dumping and Subsidy Offset Act ("CDSOA") of 2000 filed on behalf of Steel Dynamics, Inc. ("SDI"). FACTS: On November 13, 2001, the United States International Trade Commission ("ITC") notified the United States Department of Commerce ("Commerce") of its final determination that an industry in the United States was materially injured by reason of less than fair market value imports of hot-rolled carbon steel flat products from the Netherlands. Hot-Rolled Steel Products from China, India, Indonesia, Kazakhstan, the Netherlands, Romania, South Africa, Taiwan, Thailand, and Ukraine, 66 Fed. Reg. 57482 (Nov. 15, 2001). Commerce, on November 29, 2001, published its antidumping duty order in case A-421-807 covering certain hot-rolled carbon steel flat products. Antidumping Duty Order: Certain Hot-Rolled Carbon Steel Flat Products From the Netherlands, 66 Fed. Reg. 59565 (Nov. 29, 2001). One of the petitioners in this investigation was SDI, a producer of hot-rolled steel, cold-rolled steel, and other coated products. According to SDI, in order to produce its cold-rolled steel and other coated products, it captively consumes the hot-rolled steel it produces. In other words, in addition to selling hot-rolled steel, SDI also further processes hot-rolled steel within its company to create other downstream merchandise. On July 15, 2010, U.S. Customs and Border Protection ("CBP") Audit Oversight Branch ("AOB") issued a letter to SDI requesting allocation percentages and calculation details for hot-rolled steel products produced for its Butler, Indiana facility. Failure to do this, the letter warned, would result in a denial of all SDI CDSOA claims relating to hot-rolled steel. According to SDI, at issue was whether CBP's AOB could deny distribution for captive production under CDSOA. On July 22, 2010, SDI requested CBP Programs Branch, Revenue Division to reconsider CBP Audit Oversight Branch's determination to limit the disbursement of CDSOA funds to SDI for the products it captively consumed. The Revenue Division requested internal advice from this office on August 3, 2010. ISSUE: Whether SDI is eligible to receive disbursement for qualifying expenditures used to make captively consumed products that are covered under an antidumping order. LAW & ANALYSIS: At issue here is whether SDI should receive CDSOA distributions on its total production of hot-rolled steel, including what is captively consumed. Upon review of SDI's claim, on August 3, 2010, CBP Programs Branch, Revenue Division found that there was no basis for AOB to limit CDSOA distribution for captively consumed products. We determine that there is neither a statutory nor regulatory preclusion to the disbursement of CDSOA funds for qualifying expenditures on a covered product that is captively consumed. In 2000, Congress enacted the CDSOA as part of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001, Pub. L. No. 106-387, §§ 1001-03, 114 Stat. 1549, 19 U.S.C. § 1675c (2000) (repealed 2006).1 Under the CDSOA, CBP reviews the producers' certifications to determine whether they are eligible to receive payments and, if so, the amount of their qualifying expenditures for reimbursement. Upon certification, CBP distributes antidumping and countervailing duties collected from foreign producers to certain members of the domestic industry as reimbursement for specified qualifying expenditures. Pursuant to 19 U.S.C. § 1675c, antidumping and countervailing duties collected under the CDSOA are, "distributed on an annual basis under this section to the affected domestic producers for qualifying expenditures." The statute defines affected domestic producers as follows: The term "affected domestic producer" means any manufacturer, producer, or farmer, rancher, or worker representative (including associations of such persons) that- (A) was a petitioner or interested party in support of the petition with respect to which an antidumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered, and (B) remains in operation. 19 U.S.C. § 1675c(b)(1) (2004). The statute further specifies, however, that: Companies, businesses, or persons that have ceased the production of the product covered by the order or finding or who have been acquired by a company or business that is related to a company that opposed the investigation shall not be an affected domestic producer. Id. In other words, in order to receive the benefits under the CDSOA, a company has to have been a petitioner or interested party in the petition and must remain in operation. The only prohibition on receiving funds is if production of the "product" has ceased, or the company was acquired by another company that opposed the investigation. SDI was a petitioner in Commerce case A-421-807 and currently remains in operation producing the covered "product," hot-rolled carbon steel flat products. Therefore, SDI qualifies as an affected producer of hot-rolled steel and can receive disbursements for "qualifying expenditures," as defined in 19 U.S.C. § 1675c(b)(4). The issue here is whether SDI should receive CDSOA disbursements for the "qualifying expenditures" incurred in the production of the hot-rolled steel that is captively consumed for the production of other downstream merchandise. Although the statute does not address this specific question, the regulations provide more insight into the intended application of CDSOA. CBP regulations implementing the CDSOA further require that the qualifying expenditures relate to the production of the "product" that is covered under the scope of the order. 19 C.F.R. § 159.61(c). In its rulemaking notice, CBP explained: The statute (19 U.S.C. 1675c(b)(1)(B)) mandates that an affected domestic producer produce the product that is covered by an order or finding under which the offset is sought. Accordingly, there is a corresponding statutory limitation upon those qualifying expenditures that may lawfully be claimed as an offset under the order or finding. Consequently, qualifying expenditures on which a distribution may be claimed under section 1675c(b)(4) are limited only to those expenditures that can be related to the production of the product that is covered by the scope of the order or finding. Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers, 66 Fed. Reg. 48,546, 48,548 (Sept. 21, 2001) (Final Rule). Thus, CBP is concerned only with the qualifying expenditures that relate to the production of the "product," in this case, hot-rolled carbon steel flat products covered under the antidumping order. There is neither a statutory nor regulatory preclusion to the disbursement of CDSOA funds for qualifying expenditures on a covered product that is then captively consumed for later downstream production. Therefore, SDI can receive CDSOA disbursements for qualifying expenditures on its hot-rolled carbon steel flat products regardless of whether it sells that hot-rolled steel or uses it to produce downstream products. However, SDI must still provide CBP with sufficient information of its qualifying expenditures in order to claim its disbursements. See 19 C.F.R. § 159.63(b)(3)(ii) (providing for notice to CBP where same qualifying expenditures were included on more than one certification). SDI may also not claim for its downstream products any qualifying expenditures related to the production of captively consumed products where disbursements were already made on the captively consumed product. See 19 C.F.R. § 159.63(b)(3)(i) (the affected domestic producer must affirm that the net amount certified does not include any qualifying expenditures for which distribution has previously been made). Otherwise, SDI would be receiving disbursements for the same expenditures multiple times. HOLDING: SDI can receive CDSOA disbursements for qualifying expenditures on all of its hot-rolled steel products regardless of whether it sells them or captively consumes them. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division 1 On February 8, 2006, Congress repealed the CDSOA. The repeal, however, did not affect distribution of duties paid on goods that entered the United States before October 1, 2007. See Deficit Reduction Act of 2005, Pub. L. No. 109-171, § 7601(b), 120 Stat. 4, 154 (2006). ?? ?? ?? ??
