March 31, 2005
On March 7, 2005, the U.S. Department of Commerce ("Commerce") published a notice in the Federal Register that it has initiated two anticircumvention inquiries, based upon requests by the National Candle Association ("NCA"), to determine whether candles made primarily of palm oil and vegetable-based wax are within the scope of the antidumping order on petroleum wax candles from China. Candles made of petroleum wax covered by this antidumping order are subject to the antidumping duty rate of 108.3%. Two separate circumvention inquiries are being initiated by Commerce on this issue, which are described below.
Candles Involved in Anticircumvention Proceedings
The March 7, 2005, Federal Register notice indicates that the type of candles under review in the anticircumvention proceedings are "mixed wax candles composed of petroleum wax and varying amounts of either palm or vegetable-based waxes." Thus, at this point, these proceedings would not appear to encompass candles that are 100% palm oil or made of 100% vegetable-based waxes.
"Minor Alterations" Anticircumvention Proceeding
One of the anticircumvention inquiries is based upon the issue of whether the addition of palm or vegetable-based waxes to petroleum wax for producing candles constitutes a "minor alteration" for purposes of the anticircumvention statute. A finding that the addition of palm oil to petroleum wax is a "minor alteration" would render such candles subject to the antidumping duty rate of 108.3%. The NCA has already identified a number of companies that it believes are allegedly manufacturing candles using vegetable-based wax (in varying amounts). However, Commerce is giving the NCA 45 days from the date of initiation to submit names of other exporters who manufacture candles that are mixtures of petroleum and either palm or vegetable-based waxes.
Initiation of "Later-Developed Merchandise" Anticircumvention Proceeding
A separate anticircumvention proceeding is being initiated by Commerce to determine whether candles produced through the addition of vegetable and/or palm-based wax to petroleum wax are "later-developed products". Under the applicable statute, products that are developed after the issuance of an antidumping order, but have the same characteristics as the products subject to antidumping, can be determined to be "later developed products", and subject to the antidumping order. In this inquiry, the NCA is submitting evidence that candles made of the mixture of petroleum wax and palm or other vegetable-based waxes have the same essential characteristics as petroleum wax candles and, therefore, should be considered "later developed". A finding that these candles are "later developed" will subject them to antidumping duty rates of 108.3%.
Delay of Suspension of the Liquidation of the Entries
Commerce indicated in the March 7, 2005, Federal Register notice that it will not order the suspension of liquidation of entries of any candles at this time. However, they may do so if they issue a preliminary affirmative determination in which it is decided that palm oil candles are within the scope of the order. Commerce has indicated that it will consult with interested parties and establish a schedule for questionnaires and comments on the issues.
Effect of Preliminary Determination
In a number of months, Commerce will issue a preliminary determination for each of these anticircumvention proceedings. If these determinations are affirmative (that palm oil/paraffin candles are within the scope of the order), Commerce will issue instructions to Customs to require cash deposits of antidumping duties of 108.3% on palm oil/paraffin candles entered after the preliminary determination is published in the Federal Register. Under the regulations, Commerce must issue its Final Determination within 300 days from March 7, 2005. We will provide additional information regarding the status of these proceedings as it develops
We recommend that companies start planning now on the effect of an adverse preliminary determination and the requirement to post cash deposits on the pricing of candles made of palm oil and vegetable-based wax produced in the PRC. We recommend that companies continue to monitor the status of these proceedings in order to make informed decisions regarding the importation and sale of this product line.
If you wish to continue to receive updates on the candle scope issues or if you have any questions with regard to this newsletter, please do not hesitate to contact Stephen Spraitzar at (415) 288-0427 or at firstname.lastname@example.org, or George R. Tuttle at (415) 288-0425 or at email@example.com.
Stephen Spraitzar and George R. Tuttle are attorneys with the Law Offices of George R. Tuttle in San Francisco. The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.
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