[Federal Register Volume 76, Number 110 (Wednesday, June 8, 2011)]
[Notices]
[Pages 33219-33239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-14027]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-570-938]
Citric Acid and Certain Citrate Salts from the People's Republic
of China: Preliminary Results of Countervailing Duty Administrative
Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on citric acid and certain
citrate salts from the People's Republic of China for the period
September 19, 2008, through December 31, 2009. We preliminarily find
that RZBC Co., Ltd. (``RZBC Co.''); RZBC Import & Export Co., Ltd.
(``RZBC I&E''); RZBC (Juxian) Co., Ltd. (``RZBC Juxian''); and RZBC
Group Co., Ltd. (``RZBC Group'') (collectively, ``RZBC''), and Yixing
Union Biochemical Co., Ltd. (``Yixing Union Co.) and Yixing Union
Cogeneration Co., Ltd. (``Cogeneration'') (collectively, ``Yixing
Union'') received countervailable subsidies during the period of
review. If these preliminary results are adopted in our final results
of this review, we will instruct U.S.
[[Page 33220]]
Customs and Border Protection to assess countervailing duties as
detailed in the ``Preliminary Results of Review'' section of this
notice. Interested parties are invited to comment on these preliminary
results.
DATES: Effective Date: June 8, 2011.
FOR FURTHER INFORMATION CONTACT: David Layton, Seth Isenberg, or Austin
Redington, Office of AD/CVD Operations, Office 1, Import
Administration, International Trade Administration, U.S. Department of
Commerce, Room 3069, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230; telephone: (202) 482-0371, (202) 482-0588, and
(202) 482-1664, respectively.
SUPPLEMENTARY INFORMATION:
Background
On May 29, 2009, the Department of Commerce (``the Department'')
published a countervailing duty order on citric acid and certain
citrate salts (``citric acid'') from the People's Republic of China
(``PRC''). See Citric Acid and Certain Citrate Salts From the People's
Republic of China: Notice of Countervailing Duty Order, 74 FR 25705
(May 29, 2009) (``CVD Order''). On May 3, 2010, we published a notice
of ``Opportunity to Request Administrative Review'' for this
countervailing duty order. See Antidumping or Countervailing Duty
Order, Finding, or Suspended Investigation; Opportunity To Request
Administrative Review, 75 FR 23236 (May 3, 2010). On May 18, 2010, we
received a request for administrative review from the RZBC; on May 24,
2010, we received a request for administrative review from Yixing
Union. On June 1, 2010, we received a request from Archer Daniels
Midland Company; Cargill, Incorporated; and Tate & Lyle Americas
(collectively, ``Petitioners'') to conduct an administrative review of
56 companies, including RZBC and Yixing Union. In accordance with 19
CFR 351.221(c)(1)(i), we published a notice of initiation of the review
on June 30, 2010. See Initiation of Antidumping and Countervailing Duty
Administrative Reviews and Requests for Revocation in Part, 75 FR 37759
(June 30, 2010). On August 17, 2010, the Department issued a respondent
selection memorandum selecting RZBC and Yixing Union as mandatory
respondents. See Memorandum to Susan H. Kuhbach from Patricia M. Tran,
regarding Respondent Selection: Countervailing Duty Administrative
Review-Citric Acid and Certain Citrate Salts (August 17, 2010).
On September 27, 2010, Petitioners timely withdrew their request
for an administrative review for 54 companies. On November 22, 2010,
the Department published a partial rescission of review for these 54
companies, continuing the review with respect to RZBC and Yixing Union.
See Citric Acid and Certain Citrate Salts From People's Republic of
China: Partial Rescission of Countervailing Duty Administrative Review,
75 FR 71078 (November 22, 2010).
On September 17, 2010, we issued countervailing duty questionnaires
to the Government of the PRC (``GOC''), RZBC, and Yixing Union. We
received responses to these questionnaires from RZBC and Yixing Union
on November 9, 2010, and from the GOC on November 15, 2010. On February
28, 2011, we issued supplemental questionnaires to the GOC, RZBC, and
Yixing Union. We received responses to the first supplemental
questionnaires from each of the three respondents on March 28, 2011. On
April 21, 2011, we issued second supplemental questionnaires, which
also included some questions concerning the new subsidy allegations
discussed below, to the GOC, RZBC, and Yixing Union. We received
responses to the second supplemental questionnaire from the GOC on May
5, May 9, and May 10, 2011. We received responses to the second
supplemental questionnaire from RZBC on May 9, and May 10, 2011, and
from Yixing Union on May 9, 2011. The Department issued a third
supplemental questionnaire to Yixing Union and RZBC on May 11, and May
16, 2011, respectively. Yixing Union responded to the third
supplemental questionnaire on May 17, 2011, and RZBC responded to this
questionnaire on May 19, 2011.
On August 16, 2010, Petitioners submitted new subsidy allegations
requesting the Department examine two alleged subsidy programs that it
had deferred examining in the investigation and one additional program,
national policy lending. On December 2, 2010, Petitioners requested
that the Department extend the deadline to submit new subsidy
allegations. In response to Petitioners' request, the Department
extended the deadline to submit new subsidy allegations until December
10, 2010. See Department's Letter to Petitioners granting their
extension request (December 3, 2010), which is on file in the Central
Records Unit (``CRU'') in room 7046 in the main Department building. On
December 10, 2010, Petitioners submitted new subsidy allegations
requesting the Department expand its countervailing duty administrative
review to include five additional subsidy programs, and separately
requesting that the Department investigate Yixing Union's
creditworthiness. The Department rejected the new subsidy allegations
because the Petitioners failed to adequately identify the originators
of the business proprietary information included in the submission, and
it provided Petitioners with the opportunity to resubmit these
allegations by December 15, 2010. The Petitioners resubmitted the
allegations on December 15, 2010.
In response to Petitioners' new subsidy allegations, RZBC, the GOC,
and Yixing Union (collectively, ``Respondents'') submitted comments on
December 27, December 28, and December 30, 2010, respectively.
Petitioners submitted a rebuttal to these comments on January 25, 2011.
The Department removed the Petitioners' January 25 rebuttal submission
from the record on February 17, 2011, because it contained untimely new
factual information. Petitioners submitted a revised rebuttal to
Respondents' comments on the new subsidy allegation on February 18,
2011, which excluded the untimely new factual information. On February
22, 2011, the Department issued a memorandum recommending investigating
four of the five new subsidy allegations, as well as investigating
Yixing Union's creditworthiness for long-term loans outstanding during
the POR that originated between 2004 and 2009 and non-recurring
subsidies for which we need to calculate a discount rate. See
Memorandum to Susan H. Kuhbach, Director, Office 1 from David Layton
and Seth Isenberg, International Trade Compliance Analysts, Office 1,
``Analysis of New Subsidy Allegations'' (February 10, 2011) (``NSA
Memorandum''). On February 22, 2011, we issued questionnaires on the
new subsidy allegations to the GOC, RZBC, and Yixing Union. We received
responses to these new subsidy allegation questionnaires from the GOC,
Yixing Union and RZBC on March 18, 2011. The Department issued first
supplemental questionnaires on the new subsidy allegations to RZBC and
Yixing Union on March 28, 2011, and to the GOC on April 14, 2011. RZBC
and Yixing Union responded to the first supplemental questionnaires on
April 4, 2011. We received responses to the first new subsidy
allegation supplemental questionnaire from the GOC on April 27 and May
4, 2011. The Department issued second supplemental questionnaires on
the new subsidy allegations to RZBC and Yixing Union
[[Page 33221]]
on April 14, 2011, and to the GOC on May 3, 2011. RZBC responded to its
second new subsidy allegation supplemental questionnaire on May 3,
2011, and Yixing Union responded to its second new subsidy allegation
supplemental questionnaire on May 3 and May 6, 2011.
On January 14, 2011, we published a postponement of the preliminary
results in this review until May 31, 2011. See Citric Acid and Certain
Citrate Salts from People's Republic of China: Extension of Time Limit
for the Preliminary Results of the Countervailing Duty Administrative
Review, 76 FR 2648 (January 14, 2011).
On April 27, 2011, Petitioners filed an allegation that RZBC Co.,
RZBC I&E, and RZBC Juxian were uncreditworthy from 2006 to 2009. We
intend to address this allegation after issuance of these preliminary
results.
On May 18, 2011, the GOC filed information to supplement its May
17, 2011, response to the Department's second new subsidy allegation
supplemental questionnaire. The GOC did not request an extension for
the deadline to submit this information. Therefore, in accordance with
19 CFR 351.302(d), the Department will return the May 18, 2011, filing
to the GOC as untimely filed.
On May 13, 2011, Petitioners submitted information to rebut RZBC's
May 3, 2011, new subsidy allegation supplemental questionnaire
response. This submission included an alternate financial statement
that RZBC allegedly filed with the Chinese Administrative Bureau of
Industry and Commerce (``AIC''), as well as a sworn statement from a
chemical expert that disputes RZBC's reported sulfuric acid
consumption. On May 19, 2011, Petitioners submitted information to
rebut Yixing Union's May 9, 2011, supplemental questionnaire response.
This submission included an alternate financial statement that Yixing
Union allegedly filed with the AIC. On May 24, 2011, Petitioners
submitted comments arguing that the Department should apply total
adverse facts available (``AFA'') to both RZBC and Yixing Union due to
the alleged existence of alternate financial statements. Further,
Petitioners' submission argued that the Department should find the
provision of steam coal for less than adequate remuneration (``LTAR'')
to be a countervailable subsidy and that a tier-two benchmark should be
used to calculate the subsidy rate.
On May 24, 2011, Yixing Union requested that the Department reject
Petitioners' May 19, 2011 comments as containing untimely filed new
factual information or deny Petitioners' request for proprietary
treatment of certain foreign market research included in the May 19,
2011, comments. Further, Yixing Union noted that it is unable to
comment on the substance of Petitioners' allegations because of Yixing
Union's inability to view the May 19, 2011, comments. Yixing Union
asserts that the information contained in Petitioners' May 19, 2011,
comments is not authentic.
These comments submitted by Petitioners and Yixing Union in May
2011, were filed too late for the Department's consideration in these
preliminary results.
Scope of the Order
The scope of the order includes all grades and granulation sizes of
citric acid, sodium citrate, and potassium citrate in their unblended
forms, whether dry or in solution, and regardless of packaging type.
The scope also includes blends of citric acid, sodium citrate, and
potassium citrate; as well as blends with other ingredients, such as
sugar, where the unblended form(s) of citric acid, sodium citrate, and
potassium citrate constitute 40 percent or more, by weight, of the
blend. The scope of the order also includes all forms of crude calcium
citrate, including dicalcium citrate monohydrate, and tricalcium
citrate tetrahydrate, which are intermediate products in the production
of citric acid, sodium citrate, and potassium citrate. The scope of the
order does not include calcium citrate that satisfies the standards set
forth in the United States Pharmacopeia and has been mixed with a
functional excipient, such as dextrose or starch, where the excipient
constitutes at least 2 percent, by weight, of the product. The scope of
the order includes the hydrous and anhydrous forms of citric acid, the
dihydrate and anhydrous forms of sodium citrate, otherwise known as
citric acid sodium salt, and the monohydrate and monopotassium forms of
potassium citrate. Sodium citrate also includes both trisodium citrate
and monosodium citrate, which are also known as citric acid trisodium
salt and citric acid monosodium salt, respectively. Citric acid and
sodium citrate are classifiable under 2918.14.0000 and 2918.15.1000 of
the Harmonized Tariff Schedule of the United States (HTSUS),
respectively. Potassium citrate and crude calcium citrate are
classifiable under 2918.15.5000 and 3824.90.9290 of the HTSUS,
respectively. Blends that include citric acid, sodium citrate, and
potassium citrate are classifiable under 3824.90.9290 of the HTSUS.
Although the HTSUS subheadings are provided for convenience and customs
purposes, the written description of the merchandise is dispositive.
Scope Rulings
On November 2, 2010, Aceto Corporation (``Aceto'') requested that
the Department find its calcium citrate USP to be outside the scope of
the CVD Order and the antidumping duty orders on citric acid and
certain citrate salts from the PRC and Canada. See Citric Acid and
Certain Citrate Salts from Canada and the People's Republic of China:
Antidumping Duty Orders, 74 FR 25703 (May 29, 2009). On February 14,
2011, the Department issued a final scope ruling, finding that Aceto's
product is within the scope of those orders. See Memorandum from
Christopher Siepmann, International Trade Analyst, to Christian Marsh,
Deputy Assistant Secretary for Antidumping and Countervailing Duty
Operations, ``Citric Acid and Certain Citrate Salts: Scope Ruling for
Calcium Citrate USP'' (February 14, 2011).
On July 26, 2010, Global Commodity Group LLC (``GCG'') requested
that the Department find a blend of citric acid it imports containing
35 percent citric acid from the PRC and 65 percent citric acid from
other countries is outside the scope of the CVD Order and the
antidumping duty order on citric acid and certain citrate salts from
the PRC. On May 2, 2011, the Department issued a final scope ruling,
finding that GCG's product is within the scope of those orders. See
Memorandum from Christopher Siepmann, International Trade Analyst, to
Christian Marsh, Deputy Assistant Secretary for Antidumping and
Countervailing Duty Operations, ``Citric Acid and Certain Citrate
Salts: Final Determination on Scope Inquiry for Blended Citrate Acid
from the People's Republic of China and Other Countries (May 2, 2011).
Pursuant to this ruling, we have instructed U.S. Customs and Border
Protection (``CBP'') that the quantity of citric acid from the PRC in
the commingled merchandise is subject to the CVD and AD orders. We have
also instructed the CBP that if the quantity of citric acid from the
PRC in a commingled shipment cannot be accurately determined, then the
entire commingled quantity is subject to the orders.
Period of Review
The period for which we are measuring subsidies, i.e., the period
of review (``POR''), is September 19, 2008,
[[Page 33222]]
through December 31, 2009.\1\ Because the POR spans two calendar years,
we are calculating separate countervailing duty rates for September 19,
2008, through December 31, 2008; and January 1, 2009, through December
31, 2009.
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\1\ For the purposes of the final results, we intend to analyze
data for the period January 1, 2008, through December 31, 2008, to
determine the subsidy rate for exports of subject merchandise made
during the period in 2008 when liquidation of entries was suspended.
In addition, we have analyzed data for the period January 1, 2009,
through December 31, 2009, to determine the subsidy rate for exports
during that period. The 2009 subsidy rate will serve as the cash
deposit rate for exports of subject merchandise subsequent to the
publication of the final results of this administrative review. See
``Programs for Which More Information Is Required,'' below.
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Application of the Countervailing Duty Law to Imports From the PRC
On October 25, 2007, the Department published Coated Free Sheet
Paper from the People's Republic of China: Final Affirmative
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007)
(``CFS from the PRC''), and the accompanying Issues and Decision
Memorandum (``CFS Decision Memorandum''). In CFS from the PRC, the
Department found that
given the substantial difference between the Soviet-style
economies and China's economy in recent years, the Department's
previous decision not to apply the CVD law to these Soviet-style
economies does not act as {a{time} bar to proceeding with a CVD
investigation involving products from China.
See CFS Decision Memorandum, at Comment 6. The Department has
affirmed its decision to apply the CVD law to the PRC in subsequent
final determinations. See, e.g., Circular Welded Carbon Quality Steel
Pipe from the People's Republic of China: Final Affirmative
Countervailing Duty Determination and Final Affirmative Determination
of Critical Circumstances, 73 FR 31966 (June 5, 2008) (``CWP from the
PRC''), and accompanying Issues and Decision Memorandum (``CWP Decision
Memorandum''), at Comment 1.
Additionally, for the reasons stated in the CWP Decision
Memorandum, we are using the date of December 11, 2001, the date on
which the PRC became a member of the World Trade Organization
(``WTO''), as the date from which the Department will identify and
measure subsidies in the PRC. See CWP Decision Memorandum, at Comment
2.
Use of Facts Otherwise Available and Adverse Inferences
Sections 776(a)(1) and (2) of the Tariff Act of 1930, as amended
(``the Act''), provide that the Department shall apply ``facts
otherwise available'' if necessary information is not on the record or
an interested party or any other person: (A) Withholds information that
has been requested; (B) fails to provide information within the
deadlines established, or in the form and manner requested by the
Department, subject to subsections (c)(1) and (e) of section 782 of the
Act; (C) significantly impedes a proceeding; or (D) provides
information that cannot be verified as provided by section 782(i) of
the Act.
Section 776(b) of the Act further provides that the Department may
use an adverse inference in applying the facts otherwise available when
a party has failed to cooperate by not acting to the best of its
ability to comply with a request for information.
The Department's practice when selecting an adverse rate from among
the possible sources of information is to ensure that the result is
sufficiently adverse ``as to effectuate the statutory purposes of the
adverse facts available rule to induce respondents to provide the
Department with complete and accurate information in a timely manner.''
See Notice of Final Determination of Sales at Less than Fair Value:
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909,
8932 (February 23, 1998). The Department's practice also ensures ``that
the party does not obtain a more favorable result by failing to
cooperate than if it had cooperated fully.'' See Statement of
Administrative Action (``SAA'') accompanying the Uruguay Round
Agreements Act, H.R. Doc. No. 103-316, vol. 1 at 870 (1994)
RZBC--Sulfuric Acid
We requested the respondent companies to provide detailed
information on all of their purchases of sulfuric acid during the POR,
including the identities of the producers of the sulfuric acid. See,
e.g., RZBC new subsidy questionnaire issued by the Department on
February 22, 2011, and again in a supplemental questionnaire issued on
April 14, 2011. RZBC identified certain producers of the sulfuric acid
it purchased. However, for some sulfuric acid purchases, RZBC failed to
provide the requested producer information.
We preliminarily determine that RZBC withheld necessary information
that was requested of it and, thus, that the Department must rely on
``facts available'' for these preliminary results. See section
776(a)(2)(A) of the Act. Moreover, we preliminarily determine that RZBC
failed to cooperate by not acting to the best of its ability to comply
with our request for information. Consequently, an adverse inference is
warranted in the application of facts available. See section 776(b) of
the Act.
Due to RZBC's failure to identify the producers of certain sulfuric
acid it purchased, we are assuming adversely that these suppliers of
sulfuric acid are ``authorities'' within the meaning of section
771(5)(B) of the Act.
GOC--Sulfuric Acid
On February 22, April 14, and May 3, 2011, we requested information
from the GOC about the specific companies that produced the sulfuric
acid purchased by the mandatory respondents. Specifically, we asked the
GOC to provide particular ownership information for these producers so
that we could determine whether the producers are ``authorities''
within the meaning of section 771(5)(B) of the Act. Although the GOC
provided some of the requested information, it failed to provide
certain necessary information. In particular, for certain suppliers, no
information was submitted; for certain other suppliers that had some
direct corporate ownership, the GOC failed to provide articles of
association for each level of ownership, information as to whether any
of the owners, members of the boards of directors or managers were also
government officials or Chinese Communist Party (``CCP'') officials, or
whether operational and strategic decisions made by the management or
boards of directors are subject to government review or approval; and
for other suppliers that were directly owned by individuals, the GOC
generally failed to address whether any of the owners, members or the
boards of directors or managers were also government officials or CCP
officials, or whether operational and strategic decisions made by the
management or boards of directors are subject to government review or
approval.
We preliminarily determine that the GOC has withheld necessary
information that was requested of it and, thus, that the Department
must rely on ``facts available'' for these preliminary results. See
section 776(a)(2)(A) of the Act. Moreover, we preliminarily determine
that the GOC has failed to cooperate by not acting to the best of its
ability to comply with our request for information. The GOC is well
aware of the Department's reporting requirements by now, yet, despite
being given multiple opportunities, it either stated that it had
contacted local authorities for the information or it simply did not
submit requested information. Consequently, an adverse inference is
warranted in the application of facts available. See section 776(b) of
the Act.
[[Page 33223]]
Due to the GOC's failure to provide the requested ownership
information about the producers of the sulfuric acid purchased by the
respondents, we are assuming adversely that all of the respondents'
suppliers of sulfuric acid are ``authorities.''
GOC--Steam Coal
On February 22, April 14, and May 3, 2011, we requested information
from the GOC about the specific companies that produced the steam coal
purchased by Yixing Union Co.'s parent, Cogeneration. Specifically, we
asked the GOC to provide particular ownership information for these
producers so that we could determine whether the producers are
``authorities'' within the meaning of section 771(5)(B) of the Act.
Although the GOC provided some of the requested information, it failed
to provide certain necessary information. In particular, for certain
suppliers, no information was submitted; for certain other suppliers
that had some direct corporate ownership, the GOC failed to provide
articles of association for each level of ownership, information as to
whether any of the owners, members of the boards of directors or
managers were also government officials or CCP officials, or whether
operational and strategic decisions made by the management or boards of
directors are subject to government review or approval; and for other
suppliers that were directly owned by individuals, the GOC generally
failed to address whether any of the owners, members or the boards of
directors or managers were also government officials or CCP officials,
or whether operational and strategic decisions made by the management
or boards of directors are subject to government review or approval.
For one coal supplier directly owned by individuals, the GOC responded
that none of the owners was a government or CCP official, but did not
address whether managers or board members were.
We preliminarily determine that the GOC has withheld necessary
information that was requested of it and, thus, that the Department
must rely on ``facts available'' for these preliminary results. See
section 776(a)(2)(A) of the Act. Moreover, we preliminarily determine
that the GOC has failed to cooperate by not acting to the best of its
ability to comply with our request for information. The GOC is well
aware of the Department's reporting requirements by now, yet, despite
being given multiple opportunities, it simply did not submit requested
information. Consequently, an adverse inference is warranted in the
application of facts available. See section 776(b) of the Act.
Due to the GOC's failure to provide the requested ownership
information about the producers of the steam coal purchased by
Cogeneration, we are assuming adversely that all of that company's
suppliers of steam coal are ``authorities.''
GOC--RZBC's and Yixing Union's ``Other Subsidies''
The financial statements and tax returns submitted by the
responding companies indicated that they received potentially
countervailable subsidies in the form of grants. Consequently, we
sought further information from the responding companies about these
grants, and also asked the GOC to provide information about the
programs under which these grants were given. See, e.g., supplemental
questionnaires issued to Respondents on February 28, 2011, and the
supplemental questionnaire issued to the GOC on April 21, 2011.
For certain programs identified below under ``Programs
Preliminarily Determined to be Countervailable: Other Subsidies,''
information submitted by the GOC and/or the company respondents showed
that the grants were specific and countervailable. We normally rely on
information from the government to assess program specificity, however,
the GOC did not submit this information in all instances. Where Yixing
Union or RZBC have submitted information about the specificity of
programs included in ``other subsidies,'' we have relied upon this
information to make our determinations. However, for the remaining
grants, addressed under ``Programs Preliminarily Determined to
Countervailable: Other Subsidies'', the GOC did not provide the
requested information about the programs under which they were given
and the company-provided information was limited to the amount given,
the date of the grant, and the granting authority. Where none of the
Respondents has provided information that would allow us to determine
the specificity of the ``other subsidies'' we have relied upon AFA for
our determination.
For certain additional programs identified below under ``Programs
Preliminarily Determined Not to Confer a Measurable Benefit During the
POR,'' the subsidy did not result in a measurable benefit, or the
benefit was expensed prior to the POR (see 19 CFR 351.524(a)(2)).
We preliminarily determine that the GOC has withheld necessary
information that was requested of it and, thus, that the Department
must rely on ``facts available'' for these preliminary results. See
section 776(a)(2)(A) of the Act. Moreover, we preliminarily determine
that the GOC has failed to cooperate by not acting to the best of its
ability to comply with our request for information. Consequently, an
adverse inference is warranted in the application of facts available.
See section 776(b) of the Act.
Due to the GOC's failure to provide the requested information about
the programs under which the grants received by RZBC and Yixing Union
were provided, we are assuming adversely that these grants are being
provided to a specific enterprise or industry, or group of enterprises
or industries. See section 771(5A) of the Act.
Subsidies Valuation Information
Allocation Period
The average useful life (``AUL'') period in this proceeding, as
described in 19 CFR 351.524(d)(2), is 9.5 years according to the U.S.
Internal Revenue Service's 1977 Class Life Asset Depreciation Range
System for assets used to manufacture the subject merchandise.
Consistent with the Department's practice, we have rounded the 9.5
years up to 10 years for purposes of setting the AUL. See Polyethylene
Terephthalate Film, Sheet, and Strip From India: Preliminary Results
and Rescission, in Part, of Countervailing Duty Administrative Review,
72 FR 43607, 43608 (August 6, 2007), unchanged in final, 72 FR at
43608.
Attribution of Subsidies
The Department's regulations at 19 CFR 351.525(b)(6)(i) state that
the Department will normally attribute a subsidy to the products
produced by the corporation that received the subsidy. However, 19 CFR
351.525(b)(6)(ii)-(iv) direct the Department to attribute subsidies
received by certain other companies to the combined sales of those
companies if (1) cross-ownership exists between the companies, and (2)
the cross-owned companies produce the subject merchandise, are a
holding or parent company of the subject company, or produce an input
that is primarily dedicated to the production of the downstream
product. In the case of a transfer of a subsidy between cross-owned
companies, 19 CFR 351.525(b)(6)(v) directs the Department to attribute
the subsidy to the sales of the company that receives the transferred
subsidy.
According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists
[[Page 33224]]
between two or more corporations where one corporation can use or
direct the individual assets of the other corporation(s) in essentially
the same ways it can use its own assets. This regulation states that
this standard will normally be met where there is a majority voting
interest between two corporations or through common ownership of two
(or more) corporations.
The Court of International Trade (``CIT'') has upheld the
Department's authority to attribute subsidies based on whether a
company could use or direct the subsidy benefits of another company in
essentially the same way it could use its own subsidy benefits. See
Fabrique de Fer de Charleroi v. United States, 166 F. Supp. 2d 593,
600-604 (CIT 2001).
RZBC
RZBC Co. responded to the Department's original and supplemental
questionnaires on behalf of itself, RZBC Group, RZBC Juxian and RZBC
I&E. RZBC Co., RZBC Juxian, and RZBC I&E are wholly owned by RZBC Group
and, hence, are cross-owned within the meaning of 19 CFR
351.525(b)(6)(vi). RZBC Co. and RZBC Juxian are both producers of
subject merchandise; RZBC I&E is an exporter of subject merchandise;
and RZBC Group is a headquarters company and does not produce any
merchandise. Consequently, the subsidies received by these companies
are being attributed according to the rules established in 19 CFR
351.525(b)(6)(ii), (c), and (b)(6)(iii), respectively. Moreover,
different cross-owned affiliates among RZBC Co., RZBC Juxian, and RZBC
I&E sell merchandise produced by RZBC Co. and RZBC Juxian to
unaffiliated parties for both export and domestic sales. Therefore, to
attribute properly the benefit from subsidies to RZBC Co. or RZBC
Juxian we are preliminarily using the sales of RZBC Co.--or RZBC
Juxian--produced merchandise by any of the three cross-owned affiliates
to unaffiliated companies.
In its questionnaire responses, RZBC also identified prior owners
of the company, i.e., companies that owned RZBC Co. prior to the POR,
but since the cut-off date of December 11, 2001. Given the level of
these companies' ownership in RZBC Co., we asked that RZBC also respond
on their behalf. These responses were submitted on May 10, 2011.
Based on the information provided by RZBC, we preliminarily
determine that these prior owners are ``cross-owned'' with the RZBC
companies (see 19 CFR 351.525(b)(6)(vi)). However, for these
preliminary results we do not have the correct sales data to attribute
certain subsidies the prior owners may have received. Moreover, we will
provide the GOC an opportunity to submit information on the programs
under which possible subsidies may have been granted. Therefore, with
the exception of Shandong Province Policy Loans (for which no further
information is required), we intend to address assistance to RZBC's
prior owners in a post-preliminary analysis.
Also, RZBC I&E reported that it exports subject merchandise
produced by other, unaffiliated companies, but that this merchandise
was not exported to the United States during the POR. Although any
subsidies to the unaffiliated producers would normally be cumulated
with those of the trading company that sold their merchandise pursuant
to 19 CFR 351.525(c), the Department has, in some instances, limited
the number of producers it examines where their merchandise was not
exported to the United States during the POR or accounted for a very
small share of respondent's exports to the United States. See, e.g.,
Certain Pasta from Italy: Final Results of the Fourth Countervailing
Duty Administrative Review, 66 FR 64214 (December 12, 2001), and
accompanying Issues and Decision Memorandum at ``Attribution.'' In this
review, we have not sent CVD questionnaires to the unaffiliated
producers of citric acid whose merchandise was exported by RZBC I&E
because their merchandise was not exported to the United States during
the POR. Also, we have removed the sales of these products from RZBC
I&E's sales for purposes of calculating countervailable subsidy rates
for RZBC.
Yixing Union
Yixing Union Co. responded to the Department's original and
supplemental questionnaires on behalf of itself and its parent and
electricity supplier, Cogeneration. Yixing Union Co. and Cogeneration
were found to be cross-owned in the investigation. See Citric Acid and
Certain Citrate Salts From the People's Republic of China: Final
Affirmative Countervailing Duty Determination, 74 FR 16836 (April 9,
2009) (``Citric Acid from the PRC'' or ``Investigation''), and
accompanying Issues and Decision Memorandum (``Citric Acid Decision
Memorandum'') at 9-10 and Comment 27.
We continue to find that Yixing Union Co. and Cogeneration are
cross-owned within the meaning of 19 CFR 351.525(b)(6)(vi). Further,
because Cogeneration is the parent of Yixing Union Co., we are
attributing the subsidies received by Cogeneration according to the
rule established in 19 CFR 351.525(b)(6)(iii).
Benchmarks and Discount Rates
The Department is investigating loans received by RZBC and Yixing
Union from Chinese policy banks and state-owned commercial banks
(``SOCBs''), as well as non-recurring, allocable subsidies (see 19 CFR
351.524(b)(1)). The derivation of the benchmark and discount rates used
to value these subsidies is discussed below. Benchmark for Short-Term
Renminbi (``RMB'') Denominated Loans: Section 771(5)(E)(ii) of the Act
explains that the benefit for loans is the ``difference between the
amount the recipient of the loan pays on the loan and the amount the
recipient would pay on a comparable commercial loan that the recipient
could actually obtain on the market.'' Normally, the Department uses
comparable commercial loans reported by the company for benchmarking
purposes. See 19 CFR 351.505(a)(3)(i). If the firm did not have any
comparable commercial loans during the period, the Department's
regulations provide that we ``may use a national interest rate for
comparable commercial loans.'' See 19 CFR 351.505(a)(3)(ii).
As noted above, section 771(5)(E)(ii) of the Act indicates that the
benchmark should be a market-based rate. However, for the reasons
explained in CFS from the PRC, loans provided by Chinese banks reflect
significant government intervention in the banking sector and do not
reflect rates that would be found in a functioning market. See CFS
Decision Memorandum at Comment 10. Because of this, any loans received
by respondents from private Chinese or foreign-owned banks in the PRC
would be unsuitable for use as benchmarks under 19 CFR
351.505(a)(2)(i). Similarly, because of the Chinese government's
significant presence in the banking sector, we cannot use a national
interest rate for commercial loans as envisaged by 19 CFR
351.505(a)(3)(ii). Therefore, because of the special difficulties
inherent in using a Chinese benchmark for loans, the Department is
selecting an external, market-based benchmark interest rate. The use of
an external benchmark is consistent with the Department's practice. For
example, in Softwood Lumber from Canada, the Department used U.S.
timber prices to measure the benefit for government-provided timber in
Canada. See Notice of Final Affirmative Countervailing Duty
Determination and Final Negative Critical Circumstances Determination:
Certain Softwood Lumber Products From Canada, 67 FR 15545 (April 2,
2002) (``Softwood Lumber from
[[Page 33225]]
Canada''), and accompanying Issues and Decision Memorandum (``Softwood
Lumber Decision Memorandum'') at ``Analysis of Programs, Provincial
Stumpage Programs Determined to Confer Subsidies, Benefit.''
We are calculating the external benchmark using the regression-
based methodology first developed in CFS from the PRC and more recently
updated in LWTP from the PRC. See CFS Decision Memorandum at Comment
10; Lightweight Thermal Paper from the People's Republic of China:
Final Affirmative Countervailing Duty Determination, 73 FR 57323
(October 2, 2008) (``LWTP from the PRC''), and accompanying Issues and
Decision Memorandum (``LWTP Decision Memorandum''). See also LWTP
Decision Memorandum at ``Benchmarks and Discount Rates.'' This
benchmark interest rate is based on the inflation-adjusted interest
rates of countries with per capita gross national incomes (``GNIs'')
similar to the PRC. The benchmark interest rate takes into account a
key factor involved in interest rate formation (i.e., the quality of a
country's institutions), which is not directly tied to the state-
imposed distortions in the banking sector discussed above.
Following the methodology developed in CFS from the PRC, we first
determined which countries are similar to the PRC in terms of GNI,
based on the World Bank's classification of countries as: low income;
lower-middle income; upper-middle income; and high income. The PRC
falls in the lower-middle income category, a group that includes 55
countries.\2\ As explained in CFS from the PRC, this pool of countries
captures the broad inverse relationship between income and interest
rates.
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\2\ See The World Bank Country Classification, http://econ.worldbank.org/.
---------------------------------------------------------------------------
Many of these countries reported lending and inflation rates to the
International Monetary Fund and are included in that agency's
international financial statistics (``IFS''). With the exceptions noted
below, we have used the interest and inflation rates reported in the
IFS for the countries identified as ``low middle income'' by the World
Bank. First, we did not include those economies that the Department
considered to be non-market economies for antidumping duty purposes for
any part of the years in question, for example: Armenia, Azerbaijan,
Belarus, Georgia, Moldova, and Turkmenistan. Second, the pool
necessarily excludes any country that did not report both lending and
inflation rates to IFS for those years. Third, we removed any country
that reported a rate that was not a lending rate or that based its
lending rate on foreign-currency denominated instruments. For example,
Jordan reported a deposit rate, not a lending rate, and the rates
reported by Ecuador and Timor L'Este are dollar-denominated rates;
therefore, the rates for these three countries have been excluded.
Finally, for the calculation of the inflation-adjusted short-term
benchmark rate, we also excluded any countries with aberrational or
negative real interest rates for the year in question.
Because these are inflation-adjusted benchmarks, it is necessary to
adjust the respondent's interest payments for inflation. This was done
using the PRC inflation rate as reported in the IFS.
Benchmark for Long-Term RMB Denominated Loans: The lending rates
reported in the IFS represent short- and medium-term lending, and there
are no sufficient publicly available long-term interest rate data upon
which to base a robust long-term benchmark. To address this problem,
the Department has developed an adjustment to the short- and medium-
term rates to convert them to long-term rates using Bloomberg U.S.
corporate BB-rated bond rates. See LWTP Decision Memorandum at
``Benchmarks and Discount Rates.'' In Citric Acid from the PRC, this
methodology was revised by switching from a long-term mark-up based on
the ratio of the rates of BB-rated bonds to applying a spread which is
calculated as the difference between the two-year BB bond rate and the
n-year BB bond rate, where n equals or approximates the number of years
of the term of the loan in question. See Citric Acid Decision
Memorandum at Comment 14. Finally, because these long-term rates are
net of inflation as noted above, we adjusted the benchmark to include
an inflation component.
Benchmarks for Foreign Currency-Denominated Loans: For foreign
currency-denominated short-term loans, the Department used as a
benchmark the one-year dollar interest rates for the LIBOR, plus the
average spread between LIBOR and the one-year corporate bond rates for
companies with a BB rating. See LWTP Decision Memorandum at 10. For
long-term foreign currency-denominated loans, the Department added the
applicable short-term LIBOR rate to a spread which is calculated as the
difference between the one-year BB bond rate and the n-year BB bond
rate, where n equals or approximates the number of years of the term of
the loan in question.
Uncreditworthiness Benchmark: As discussed below, the Department is
preliminarily finding that Yixing Union was uncreditworthy in 2009. To
construct the uncreditworthy benchmark rate for those years, we used
the long-term rates described above as the ``long-term interest rate
that would be paid by a creditworthy company'' in the formula presented
in 19 CFR 351.505(a)(3)(iii).
Discount Rates: Consistent with 19 CFR 351.524(d)(3)(i)(A), we have
used, as our discount rate, the long-term interest rate calculated
according to the methodology described above for the year in which the
government agreed to provide the subsidy.
For the calculated benchmark and discount rates, see Memorandum to
the File from Shane Subler, International Trade Compliance Analyst,
Office 1, AD/CVD Operations, regarding ``Benchmark Interest Rates''
(March 28, 2011).
Creditworthiness
The examination of creditworthiness is an attempt to determine if
the company in question could obtain long-term financing from
conventional commercial sources. See 19 CFR 351.505(a)(4). According to
19 CFR 351.505(a)(4)(i), the Department will generally consider a firm
to be uncreditworthy if, based on information available at the time of
the government-provided loan, the firm could not have obtained long-
term loans from conventional commercial sources. In making this
determination, according to 19 CFR 351.505(a)(4)(i)(A)-(D), the
Department normally examines the following four types of information:
(1) Receipt by the firm of comparable commercial long-term loans; (2)
present and past indicators of the firm's financial health; (3) present
and past indicators of the firm's ability to meet its costs and fixed
financial obligations with its cash flow; and (4) evidence of the
firm's future financial position. If a firm has taken out long-term
loans from commercial sources, this will normally be dispositive of the
firm's creditworthiness. However, if the firm is government-owned, the
existence of commercial borrowings is not dispositive of the firm's
creditworthiness. This is because, in the case of a government-owned
firm, a bank is likely to consider that the government will repay the
loan in the event of a default. See Countervailing Duties; Final Rule,
63 FR 65348, 65367 (November 25, 1998). For government-owned firms, we
will make our creditworthiness determination by examining receipt by
the firm of comparable commercial long-term loans
[[Page 33226]]
and the other factors listed in 19 CFR 351.505 (a)(4)(i).
Yixing Union
Petitioners alleged that Yixing Union was uncreditworthy for the
period 2004 through 2009. For purposes of these preliminary results, we
have limited our analysis to 2009. As discussed below, the Department
has preliminarily determined that Yixing Union received countervailable
national policy loans in that year. During the years 2006--2008,
neither Yixing Union Co. nor Cogeneration received countervailable
loans or allocable subsidies. For 2004 and 2005, as discussed below in
the ``Programs for Which More Information is Required'' section, the
Department requires additional information related to Cogeneration in
order to complete its creditworthiness analysis.
Based on our analysis of the information described in 19 CFR
351.505(a)(4)(i)(A)-(D), we preliminarily determine that Yixing Union
Co. was uncreditworthy in 2009. Yixing Union Co. did not receive
commercial long-term loans in that year; its financial information
indicated that the company could have problems meeting its costs and
financial obligations with its cash flow, making it a significant
credit risk to lenders; and there was no record evidence to suggest
that the health of the citric acid industry or Yixing Union was due to
improve in the near future. For further analysis, see Memorandum from
Austin Redington, International Trade Compliance Analyst, through
Yasmin Nair, Program Manager, to Susan Kuhbach, Senior Office Director,
``Preliminary Creditworthiness Determination for Yixing-Union
Biochemical Co., Ltd. and Yixing-Union Cogeneration Co., Ltd.,'' dated
May 31, 2011.
RZBC
As noted above in the ``Background'' section, Petitioners filed an
allegation that RZBC Co., RZBC I&E, and RZBC Juxian were uncreditworthy
in years 2006 through 2009. We intend to address this allegation
following the issuance of these preliminary results and will provide
the parties with an opportunity to comment on our finding.
I. Programs Preliminarily Determined To Be Countervailable
A. Government Policy Lending
In the Investigation, the Department found that the Shandong
Provincial government supported its citric acid industry with policy
loans, i.e., that loans made by policy banks and SOCBs in Shandong
province conferred a subsidy on citric acid producers in Shandong. We
also found that there was not a national program or a Jiangsu Province
program of policy lending to citric acid producers. See Citric Acid
Decision Memorandum at Comment 5. In this review, Petitioners provided
new evidence that caused the Department to examine again allegations of
national and Jiangsu provincial policy lending programs. See NSA
Memorandum (February 10, 2011).
As explained below, we preliminarily determine that a national
level policy lending program exists for citric acid as part of China's
``light industry'' and that there is not a Jiangsu Province policy
lending program for citric acid. Because no information has been
provided that would cause us to reach a different determination from
the Investigation for Shandong Province, we preliminarily determine
that the Shandong government's policy lending program continues.
National Policy Lending
In the Investigation, the Department concluded that there was not
substantial evidence of policy lending to the citric acid industry at
the national level because record evidence indicated that citric acid
was not considered to be a ``new biochemical product'' targeted for
support in the Decision No. 40 and the Catalogue on Readjustment of
Industrial Structural Adjustment. See Citric Acid Decision Memorandum
at Comment 5, pages 52-53. In their new subsidy allegations for this
administrative review, Petitioners provided evidence in the form of the
USDA report concerning GOC support of industrial corn processors and
GOC key product and high and new technology enterprise certificates
held by a citric acid respondent company. Petitioners argue that the
USDA report identifies industrial corn processors, including citric
acid producers as a ``key industry'' for government support in 2000 and
also indicates that ``the industry was singled out for support in
China's five-year plans for 2000-05 and 2009-10.'' Petitioners also
argue that the special certificates held by RZBC that recognize it as a
producer of a national key new product and recognize RZBC as a high and
new technology enterprise reinforce the Petitioners' arguments from the
investigation that citric acid is part of the encouraged new
biochemical and food additive product categories. See Petitioners'
Additional Subsidy Allegation (December 15, 2010) (``PNSA2'') at 18-19.
In its initial new subsidy allegation questionnaire response, dated
March 18, 2011 (``GNSAQR''), the GOC states that citric acid is not
considered a ``new biochemical product'' in the PRC, but instead ``is
classified as light industry product as most citric acid is consumed by
the food and beverage industry with``{o{time} nly 10% of citric acid
produced is used in the chemical industry''.\3\ See GNSAQR at 17. In
response to further questions on what constitutes a ``new biochemical
product,'' the GOC stated that there are no official criteria that the
National Development and Reform Commission (``NDRC'') uses to determine
what constitutes a, ``new biochemical product,'' other than it is not
citric acid. The GOC provided a letter from the NDRC reiterating the
preceding points and stating that ``citric acid does not constitute a
`new biochemical product.' '' See GOC New Subsidy Allegation First
Supplemental Questionnaire Response (Part 1), (April 27, 2011)
(``GNSASQR1, Part 1'') at 6-7 and Exhibit 1. The NDRC letter also
stated that ``{g{time} iven that China's citric acid manufacturing
technology is well-developed and the production capacity is redundant,
relevant government agencies have placed constraints on the development
of the industry since 2005.''
---------------------------------------------------------------------------
\3\ We have requested that GOC clarify what is included in the
10% portion of citric acid used by the chemical industry, but to
date the GOC has not responded to this.
---------------------------------------------------------------------------
The GOC also dismissed Petitioners' claims regarding the responding
company's certificates, stating that RZBC's ``national key new
product'' certificate was specific to the production of a specialized
medical grade citric acid, and that it expired at the end of 2008. See
GOC Comments on Petitioners' Additional New Subsidy Allegation,
(December 27, 2010) (``GOC NSA Comments'') at 11-12. With regard to
RZBC's high and new technology designation, the GOC has reported that
this certificate was provided under the auspices of the program for
``Reduced Income Tax Rate for High or New Technology Enterprises,''
also addressed in the GOC's responses. See GOC Questionnaire Response
(November 15, 2010) (``GQR''), at 16-24 and Exhibits I-8 and I-9; GOC
Supplemental Questionnaire Response (February 28, 2011) (``GSQR''), at
6.
To document citric acid's classification as a light industry, the
GOC provided a copy of the Notice of the State Council on Light
Industry Adjustment and Revitalization Plan (``Light Industry Plan'')
and the Guiding Category for Phasing-out outdated manufacturing devices
and Products of Certain Industries (2010 edition) (``2010 Phase-out
Plan''). See GNSAQR (March
[[Page 33227]]
18, 2011) at Exhibits 11 and 12. The GOC argues that Chinese government
planners consider citric acid to be a developed industry with redundant
and outdated production capacity and, thus, it is counterintuitive that
it would also be included with the encouraged industry categories in
the plans and catalogues. The GOC points to specific statements in the
Light Industry Plan, the 2010 Phase-out Plan, the 2007 On Healthy
Development of the Corn Industrial Processing Industry (``Corn
Processor Plan''), at GNSAQR (March 18, 2011) at Exhibit 8, and 2006
Urgent Strengthening the Administration of Corn Deep Processing
Projects, which note overcapacity in citric acid production and which
mandate the elimination of outdated citric acid operations and the
reduction of citric acid development projects.
As in the Investigation, we do not have any government plans or
other policy directives on the record that lay out objectives or goals
for developing the citric acid industry per se. In particular, while
the GOC reports that citric acid production is a light industry, that
product is not specifically named in the Light Industry Plan.
Nonetheless, the evidence on the record supports the GOC's statement.
A central guideline of the Light Industry Plan, which reflects
general objectives from the national 11th Five Year Plan for Economic
and Social Development,\4\ is to ``focus on promoting structural
adjustment and industrial upgrading by accelerating self-directed
innovation implementing technological reform, building our own brand
and eliminating the backward productions.'' See GNSAQR (March 18, 2011)
at Exhibit 11 (Light Industry Plan at Section 2.A). As a basic
principle, the Light Industry Plan states that it will ``focus on key
industries'' and ``nurture key enterprises''. See Light Industry Plan
at 2(B)b. Under the section outlining the ``main tasks'' of the plan,
the GOC states it will ``promote technological innovation and
industrialization'' by establishing a ``public service platform for
technological innovation of key sectors'' including ``the technology
innovation alliance of paper, fermentation, wine, sugar and leather
industries.'' (emphasis added)
---------------------------------------------------------------------------
\4\ See Guidelines of the 11th Five Year Plan for Economic and
Social Development at Chapter 3, ``Major Objectives of Economic and
Social Development. These major objectives include
``{o{time} ptimization and upgrading of industrial structure.'' See
Memorandum To File from David Layton: Placement of Guidelines of the
11th Five Year Plan for Economic and Social Development on the
Record, (May 26, 2011), attached English translation of the
guidelines at 4-5.
---------------------------------------------------------------------------
We know from the Corn Processor Plan that the GOC considers citric
acid producers to be part of the fermentation industry. See GNSAQR
(March 18, 2011) at Exhibit 8 (hereafter citations are to the page
numbers of the English translation in Exhibit 8). The Corn Processor
Plan includes two different tables in which citric acid is specifically
referenced as one of several ``fermented goods'' or as part of the
``fermentation'' industry. See Corn Processor Plan at 14, ``Box2''; 16,
``Box3.''; and 22 at item 2 of ``Notes of related terms.''
To accomplish the objectives of the Light Industry Plan, the GOC
states in the ``Policies and Measures'' section that it will
``{i{time} ncrease financial support,'' and ``encourage financial
institutions to increase credit support for light industry
enterprises.'' See Light Industry Plan at 4(F). It will also
``encourage guarantee institutions to provide credit guarantee and
financing services for small and medium sized light industry
enterprises and ``help light industry enterprises to facilitate trade
finance * * *.'' Id.
Finally, the Light Industry Plan states that it will
``{s{time} trengthen guidance of industrial policy. Develop industrial
policy and access condition of fermentation, grain, oil, leather,
batteries, lighting appliances, household glass, plastic sheeting and
others as soon as possible'' and ``{a{time} djust the `Guiding
Catalogue of Industrial Structural Adjustment' and `Catalogue for the
Guidance of Foreign Investment Industries' at appropriate times.'' The
Department reviewed the 2005 edition of Structural Adjustment Catalogue
in force during the POR and found no pre-existing specific reference to
the fermentation industry. However, this section of the Light Industry
Plan suggests that the GOC would consider adjustment of the Structural
Adjustment Catalogue to recognize industries encouraged by that
plan.\5\
---------------------------------------------------------------------------
\5\ We understand that a new edition of the Structural
Adjustment Catalogue was published in March 2011. See GNSASQR1, Part
1 at 6.
---------------------------------------------------------------------------
In response to our request for additional ``Light Industry Plans''
that cover the periods before 2009-2011 (the period covered by the
Light Industry Plan submitted on this record), the GOC stated that no
previous light industry plans exist. Accordingly, we have examined the
2007 Corn Processor Plan to determine whether it lays out objectives or
goals for developing the citric acid industry and calls for lending to
support these objectives or goals in the period prior to 2009. We found
that while the Corn Processor Plan clearly articulates national
government support for the measured development of industrial corn
processors (or the ``corn deep processing industry'' as it is
translated), and is equally clear that citric acid producers are part
of this group, the plan does not provide a mandate for lending to
support these objectives. Without a directive to support the plan's
objectives through credit or loans, this document does not provide a
basis for finding a program of national policy lending to the citric
acid industry.
Therefore, we preliminarily determine that the GOC has a policy in
place to encourage and support the restructuring and updating of the
fermentation industry, as one of a limited number of selected key
sectors of light industry specifically identified in the Light Industry
Plan. The Light Industry Plan expressly outlines a number of measures
to support the fermentation industry, including the encouragement of
financial institutions to provide credit. Moreover, consistent with CFS
from the PRC, we preliminarily determine that loans from policy banks
and SOCBs in the PRC constitute a direct financial contribution from
the government under section 771(5)(D)(i) of the Act and that they
provide a benefit equal to the difference between what the recipients
paid on their loans and the amount they would have paid on comparable
commercials loans. Finally, we preliminarily determine that the loans
are de jure specific because of the GOC's policy, as illustrated in the
Light Industry Plan, to encourage and support the restructuring and
updating of the fermentation industry of which citric acid is a part.
As the Light Industry Plan became effective in 2009, the Department
will only consider loans provided on or after January 1, 2009, to be
provided pursuant to the GOC's national policy lending program.
To calculate the benefit, we used the benchmarks described in the
``Benchmarks and Discount Rates'' section above and the methodology
described in 19 CFR 351.505(c)(1) and (2). We divided the benefit by
Yixing Union Co.'s total sales and Yixing Union's consolidated sales,
in accordance with 19 CFR 351.525(b)(6)(iii).
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 1.65 percent ad valorem in 2009.
We are treating RZBC's loans as having been given under the Shandong
Policy Loan Program discussed next.
Shandong Province Policy Loans Program
As explained in the Investigation, the Shandong Province
Development Plan
[[Page 33228]]
of Chemical Industry during ``Tenth Five-Year Plan'' Period (``Shandong
Province Tenth Five-Year Chemical Plan'') identifies objectives and
goals for development of the citric acid industry and calls for lending
to support these objectives and goals. Moreover, loan documents
reviewed by the Department stated that because the food-use citric acid
industry ``has characteristics of capital and technology concentration
and belongs to high and new technology * * * the State always takes
positive policy to encourage its development.'' See Memorandum to File:
Placing Government of China Verification Reports from the CVD
Investigation of Citric Acid and Certain Citrate Salts from People's
Republic of China into the Record of the First Administrative Review,
(February 28, 2011) and attached ``Government of the People's Republic
of China, Anqiu City and Shandong Province Verification Report, at 8.
In this administrative review, the GOC claims that no policy loan
program was in effect in Shandong Province during the POR. See GQR
(November 15, 2010) at 8. Specifically, the GOC argues that the
Shandong Province Tenth Five-Year Chemical Plan has been replaced by
the Shandong Province Eleventh Five-Year Petro-Chemical Plan
(``Shandong Eleventh Five-Year Chemical Plan''). Additionally, the GOC
maintains that the Shandong Eleventh Five-Year Chemical Plan is not
government policy because it was compiled by the Shandong Province
Petro-Chemical Industry Association, which the GOC identifies as a
``non-governmental organization.'' Id. at 9.
The Shandong Eleventh Five-Year Chemical Plan (covering the period
2006-2010) was on the Investigation record. Despite the fact that the
period covered by the Investigation (2007), fell within the time span
covered by the Shandong Eleventh Five-Year Chemical Plan, the
Department concluded that actual loan documentation supported a finding
of a policy lending program in Shandong Province.\6\ Accordingly, the
GOC has not provided us with new evidence on the record of this review
that demonstrates that the Shandong Policy Loan Program has changed.
---------------------------------------------------------------------------
\6\ Id. at 2-7.
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Consistent with the Investigation, we preliminarily determine that
the Shandong Province policy loans constitute a direct financial
contribution from the government under section 771(5)(D)(i) of the Act
and that they provide a benefit equal to the difference between what
the recipients paid on their loans and the amount they would have paid
on comparable commercial loans. We also preliminarily determine that
the loans are de jure specific because of the Government of Shandong's
policy to develop the citric acid industry.
To calculate the benefit, we used the benchmarks described in the
``Benchmarks and Discount Rates'' section above and the methodology
described in 19 CFR 351.505(c)(1) and (2). Because of the manner in
which the RZBC companies reported their loans, we are not able to
calculate separate rates for the periods September 19, 2008, through
December 31, 2008, and January 1, 2009, through December 31, 2009,
except for the loans received by RZBC Co.'s prior owners, Shandong
Province High-Tech Investment Co. Ltd. (``HTI'') and Sisha Co., Ltd.
(``Sisha''). Therefore, we are calculating a single rate for the loans
received by the RZBC companies and applying it to both years, while the
loans to HTI and Sisha are being added to the rate for 2008, the year
in which their ownership of RZBC Co. ended.
For loans to Sisha, we divided the benefit by the sum of Sisha's
consolidated 2008 sales and the 2008 sales denominator for RZBC Co. (as
described above in the ``Subsidies Valuation Information'' section), in
accordance with 19 CFR 351.525(b)(6)(iii). For loans to HTI, we divided
the benefit by the sum of HTI's 2008 consolidated sales, Sisha's 2008
consolidated sales, and the 2008 sales denominator for RZBC Co., in
accordance with 19 CFR 351.525(b)(6)(iii).
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.69 percent ad valorem in 2008 and 0.42
percent in 2009.
B. Export Seller's Credit for High- and New-Technology Products
RZBC reported receiving loans from the Export-Import Bank of China
(``EXIM'') under the Export Seller's Credit Program. The supporting
loan documentation for the loans shows that they were provided under
EXIM's ``Export Seller's Credit for High- and New Tech Products.''
In the Investigation, the Department found that loans under this
program conferred a countervailable subsidy and the GOC has responded
that that there were no changes to this program during the POR.
Therefore, consistent with the Investigation, we preliminarily
determine that the loans provided by the GOC under this program
constitute financial contributions under sections 771(5)(B)(i) and
771(5)(D)(i) of the Act. The loans also provide a benefit under
771(5)(E)(ii) of the Act in the amount of the difference between the
amounts the recipient paid and would have paid on comparable commercial
loans. Finally, the receipt of loans under this program is tied to
actual or anticipated exportation or export earnings and, therefore,
this program is specific pursuant to sections 771(5A)(A)-(B) of the
Act.
To calculate the subsidy, we used the benchmark interest rates
described in the ``Benchmarks and Discount Rates'' section above and
the methodology described in 19 CFR 351.505(c)(1) and (2). We divided
the benefit by RZBC Co's and RZBC I&E's export sales during the POR.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.82 percent ad valorem in 2008 and 0.82 in
2009.
C. Reduced Income Tax Rates to FIEs Based on Location
This program was created June 15, 1988, pursuant to the Provisional
Rules on Exemption and Reduction of Corporate Income Tax and Business
Tax of FIEs in Coastal Economic Development Zone issued by the Ministry
of Finance. The March 18, 1988 Circular of State Council on Enlargement
of Economic Areas enlarged the scope of the coastal economic areas and
the July 1, 1991 FIE Tax Law continued this policy.
In the Investigation, the Department found that Yixing Union Co.
paid a reduced tax rate under this program. Yixing Union Co.'s 2007 tax
return (filed in 2008) indicates that it continued to pay the reduced
rate in that year. The program was not used by any responding company
for the tax returns filed in 2009.
Consistent with our finding in the Investigation, we preliminarily
determine that the reduced tax rates paid by FIEs under this program
confer a countervailable subsidy. The reduced rate is a financial
contribution in the form of revenue foregone by the GOC and it provides
a benefit to the recipient in the amount of the tax savings. See
section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further
determine preliminarily that the reduction afforded by this program is
limited to enterprises located in designated geographic regions and,
hence, is specific under section 771(5A)(D)(iv) of the Act.
To calculate the benefit, we treated the income tax savings enjoyed
by Yixing Union Co. as a recurring benefit, consistent with 19 CFR
351.524(c)(1),
[[Page 33229]]
and divided the company's tax savings received during the POR by Yixing
Union Co.'s sales during the POR, pursuant to 19 CFR 351.525(b)(6)(i).
To compute the amount of the tax savings, we compared the tax rate
Yixing Union Co. paid to what it would have paid in the absence of the
program (30 percent).
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.21 percent ad valorem under
this program in 2008.
D. ``Two Free, Three Half'' Program
Under Article 8 of the FIE Tax Law, an FIE that is productive and
scheduled to operate for more than 10 years may be exempted from income
tax in the first two years of profitability and pay income taxes at
half the standard rate for the next three years.
In the Investigation, the Department found that Yixing Union Co.
paid a reduced tax rate under this program. Yixing Union Co.'s 2007 tax
return (filed in 2008) indicates that it continued to pay the reduced
rate in that year. The program was not used by any responding company
for the tax returns filed in 2009.
Consistent with our finding in the Investigation, we preliminarily
determine that the reduced tax rates paid by FIEs under this program
confer a countervailable subsidy. The reduced rate is a financial
contribution in the form of revenue foregone by the GOC and it provides
a benefit to the recipient in the amount of the tax savings. See
section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further
determine preliminarily that the exemption/reduction afforded by this
program is limited as a matter of law to certain enterprises,
``productive'' FIEs and, hence, is specific under section 771(5A)(D)(i)
of the Act.
To calculate the benefit, we treated the income tax savings enjoyed
by Yixing Union Co. as a recurring benefit, consistent with 19 CFR
351.524(c)(1), and divided the company's tax savings received during
the POR by Yixing UnionCo. 's sales during the POR, pursuant to 19 CFR
351.525(b)(6)(i). To compute the amount of the tax savings, we compared
the tax rate Yixing Union Co. paid to what it would have paid in the
absence of the program.
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.41 percent ad valorem under
this program in 2008.
E. Local Income Tax Exemption/Reduction Program for ``Productive'' FIEs
Under Article 9 of the FIE Tax Law, the provincial governments have
the authority to exempt FIEs from the local income tax of three percent
or to reduce the rate applicable to them. Yixing Union Co.'s and
Cogeneration's 2007 tax returns (filed in 2008) indicate that they used
this program. The program was not used by any responding company for
the tax returns filed in 2009.
Consistent with prior determinations,\7\ we preliminarily determine
that the exemptions/reduced rates afforded to FIEs under this program
confer a countervailable subsidy. The exemptions/reduced rates are a
financial contribution in the form of revenue foregone by the GOC and
provide a benefit to the recipient in the amount of the tax savings.
See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We
further determine preliminarily that the exemption/reduction afforded
by this program is limited as a matter of law to certain enterprises,
``productive'' FIEs and, hence, is specific under section 771(5A)(D)(i)
of the Act.
---------------------------------------------------------------------------
\7\ See, e.g., Certain Seamless Carbon and Alloy Steel Standard,
Line, and Pressure Pipe from the People's Republic of China: Final
Affirmative Countervailing Determination, Final Affirmative Critical
Circumstances Determination, 75 FR 57444 (September 21, 2010)
(``Seamless Pipe from the PRC''), and accompanying Issues and
Decision Memorandum (``Seamless Pipe Decision Memorandum'') at 26-
27; Certain Coated Paper Suitable for High-Quality Print Graphics
Using Sheet-Fed Presses From the People's Republic of China: Final
Affirmative Countervailing Duty Determination, 75 FR 59212
(September 27, 2010) (``Certain Coated Paper from the PRC''), and
accompanying Issues and Decision Memorandum (``Certain Coated Paper
Decision Memorandum'') at 14-15.
---------------------------------------------------------------------------
To calculate the benefit, we treated the income tax savings enjoyed
by Yixing Union Co. and Cogneration as a recurring benefit, consistent
with 19 CFR 351.524(c)(1), and divided the companies' tax savings
received during the POR by Yixing Union Co.'s sales during the POR,
pursuant to 19 CFR 351.525(b)(6)(i), and by Yixing Union's consolidated
sales during the POR, pursuant to 19 CFR 351.525(b)(6)(iii). To compute
the amount of the tax savings, we compared the tax rate Yixing Union
Co. and Cogeneration paid to what they would have paid in the absence
of the program (3 percent).
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.34 percent ad valorem under
this program in 2008.
F. Reduced Income Tax Rate for Technology or Knowledge Intensive FIEs
Under Article 7.3 of the FIE Tax Law and Article 73 of the
Implementation Rules for the Foreign Invested Enterprise and Foreign
Enterprise Income Tax Law, FIEs located in designated areas and meeting
technology-intensive and knowledge-intensive criteria could enjoy a
reduced income tax rate of 15 percent. This program terminated when the
Enterprise Income Tax Law of the People's Republic of China (``EITL'')
came into effect on January 1, 2008. However, pursuant to Article 57 of
the EITL and the Notice of the State Council on the Implementation of
the Transitional Preferential Policies in Respect of Enterprise Income
Tax (GUOFA {2007{time} Number 39), enterprises that enjoyed a reduced
income tax rate of 15 percent under the terminated program are
permitted a five-year grace period to transition to the new EITL rate
of 25 percent. Thus, for example, companies that faced the 15 percent
rate on their 2007 tax return (filed in 2008) would pay 18 percent on
their 2008 return (filed in 2009).
In the Investigation, the Department found that Cogeneration
received benefits under this program. Cogeneration's 2007 tax return
(filed in 2008) indicates that it continued to pay the reduced rate in
that year. For the 2008 tax return (filed in 2009), Cogeneration paid
income tax at a rate of 18 percent. We continue to find that this
program provides a financial contribution in the form of revenue
foregone and provides a benefit to the recipient in the amount of the
tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR
351.509(a). Further, the program is limited to enterprises located in
designated geographic regions and, hence, is specific under section
771(5A)(D)(iv) of the Act.
To calculate the benefit, we treated the income tax savings enjoyed
by Cogeneration as a recurring benefit, consistent with 19 CFR
351.524(c)(1) and divided the company's tax savings received during the
POR by Yixing Union's consolidated sales during the POR, pursuant to 19
CFR 351.525(b)(6)(iii). To compute the amount of the tax savings, we
compared the rate Cogeneration would have paid in the absence of the
program (30 percent in 2008 for the 2007 return and 25 percent in 2009
for the 2008 return).
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 1.20 percent ad valorem under
this program in 2008 and 0.18 in 2009.
G. Reduced Income Tax Rate for High or New Technology Enterprises
Article 28.2 of the EITL authorizes a reduced income tax rate of 15
percent for high- and new-technology enterprises (``HNTEs''). The
criteria and procedures for identifying eligible
[[Page 33230]]
HTNEs are provided in Measures on Recognition of High and New
Technology Enterprises (GUOKEFAHUO {2008{time} No. 172) (``Measures on
Recognition of HNTEs'') and the Guidance on Administration of
Recognizing High and New Technology Enterprises (GUOKEFA HUO
{2008{time} No.362). Article 8 of the Measures on Recognition of HNTEs
provides that the science and technology administrative departments of
each province, autonomous region and municipality directly under the
central government or cities under separate state planning shall
collaborate with the finance and taxation departments at the same level
to recognize HTNEs in their respective jurisdictions. Article 10 of the
Measures on Recognition of HNTEs outlines the general requirements for
recognition as a HNTE qualified for this tax reduction. Among these
requirements, applicant enterprises must have the following: (1)
Independent intellectual property of core technologies in its key
products or services obtained in the past three years; (2) products
that fall in the categories prescribed in the ``High and New Technology
Field under Key Support of the State;'' (3) scientific and technical
personnel with a junior college education or higher that account for 30
percent of the employees at the enterprise; (4) research and
development personnel that account for at least ten percent of the
employees; (5) an active research and development program aimed at
substantially improving products during the past three years (the
proportion of minimum R&D expenditure to sales depends on the overall
size of the enterprise's sales); and (6) the percentage of total
revenue represented by sales of new and high technology products must
be at least 60 percent during the current year.
The annex of the Measures on Recognition of HNTEs lists eight high-
and new-technology areas selected for the State's ``primary support:''
(1) Electronics and Information Technology; (2) Biology and New
Medicine Technology; (3) Aerospace Industry; (4) New Materials
Technology; (5) High-tech Service Industry; (6) New Energy and Energy-
Saving Technology; (7) Resources and Environmental Technology; and (8)
High-tech Transformation of Traditional Industries.
RZBC Co. reported that it paid the reduced income tax rate of 15
percent on its 2008 tax return (filed in 2009) under this program. The
GOC contends that the eight high- and new-technology areas designated
for support cover wide-ranging, diverse and non-conforming areas of the
Chinese economy.
We preliminarily determine that the reduced income tax rate applied
to RZBC Co. is a financial contribution in the form of revenue foregone
by the GOC, and it provides a benefit to the recipient in the amount of
the tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR
351.509(a)(1). We also determine that the reduction afforded by this
program is limited as a matter of law to certain new and high
technology companies selected by the government pursuant to legal
guidelines specified in Measures on Recognition of HNTEs, and, hence,
is specific under section 771(5A)(D)(i) of the Act. Both the number of
targeted industries (eight) and the narrowness of the identified
project areas under those industries support a finding that the
legislation expressly limits access to the program to a specific group
of enterprises or industries.
To calculate the benefit, we treated the income tax savings enjoyed
by RZBC Co. as a recurring benefit, consistent with 19 CFR
351.524(c)(1) and divided the company's tax savings received during the
POR by RZBC Co.'s, RZBC I&E's, and RZBC Juxian's sales during the POR,
pursuant to 19 CFR 351.525(b)(6)(iii) and 19 CFR 351.525(c). To compute
the amount of the tax savings, we compared the rate RZBC Co. would have
paid in the absence of the program (25 percent).
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.29 percent ad valorem under this program
in 2009.
H. Income Tax Credits on Purchases of Domestically Produced Equipment
According to the Provisional Measures on Enterprise Income Tax
Credit for Investment in Domestically Produced Equipment for Technology
Renovation {Projects{time} (CAI SHU ZI {1999{time} No. 290), a
domestically invested company may claim tax credits on the purchase of
domestic equipment if the project is compatible with the industrial
policies of the GOC. Specifically, a tax credit up to 40 percent of the
purchase price of the domestic equipment may apply to the incremental
increase in tax liability from the previous year.
The GOC reported that this program terminated when the EITL came
into effect on January 1, 2008, but pursuant to Article 57 of the EITL,
enterprises that were previously eligible for income tax credits under
this program may continue to claim the credits for five years after the
EITL's effective date.
RZBC Co. claimed credits under this program on the 2007 and 2008
tax returns filed respectively in 2008 and 2009. RZBC Juxian claimed
credits under this program on the 2008 tax return filed in 2009. No
other companies used this program during the POR.
Consistent with prior determinations,\8\ we preliminarily determine
that income tax credits for the purchase of domestically produced
equipment are countervailable subsidies. The tax credits are a
financial contribution in the form of revenue foregone by the
government and provide a benefit to the recipients in the amount of the
tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR
351.509(a)(1). We further preliminarily determine that these tax
credits are contingent upon use of domestic over imported goods and,
hence, are specific under section 771(5A)(C) of the Act.
---------------------------------------------------------------------------
\8\ See, e.g., Certain Oil Country Tubular Goods From the
People's Republic of China: Final Affirmative Countervailing Duty
Determination, Final Negative Critical Circumstances Determination,
74 FR 64045 (December 7, 2009) (``OCTG from the PRC''), and
accompanying Issues and Decision Memorandum (``OCTG Decision
Memorandum'') at 18; see also Circular Welded Carbon Quality Steel
Line Pipe from the People's Republic of China: Final Affirmative
Countervailing Duty Determination, 73 FR 70961 (November 24, 2008),
and accompanying Issues and Decision Memorandum at 25-26.
---------------------------------------------------------------------------
To calculate the benefit, we treated the income tax savings enjoyed
by RZBC Co. and RZBC Juxian as a recurring benefit, consistent with 19
CFR 351.524(c)(1), and divided the companies' tax savings by RZBC Co's,
RZBC I&E's, and RZBC Juxian's sales during the POR, pursuant to 19 CFR
351.525(b)(6)(iii) and 19 CFR 351.525(c).
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.20 percent ad valorem under this program
in 2008 and 1.38 percent in 2009.
I. Value-Added Tax (``VAT'') and Duty Exemptions on Imported Equipment
Enacted in 1997, the Circular of the State Council on Adjusting Tax
Policies on Imported Equipment (GUOFA No. 37) exempts both FIEs and
certain domestic enterprises from the VAT and tariffs on imported
equipment used in production so long as the equipment does not fall
into prescribed lists of non-eligible items. Qualified enterprises
receive a certificate either from the NDRC or its provincial branch.
The objective of the program is to encourage foreign investment and to
introduce foreign advanced technology equipment and industry technology
upgrades. To receive the exemptions, qualified enterprises must
adequately document both the product eligibility and the
[[Page 33231]]
eligibility of the imported article to the local Customs.
The GOC states that this program has been partially terminated.
Pursuant to Announcement No. 103 of the General Administration of
Customs {2008{time} , since January 1, 2009, enterprises importing
equipment that is eligible for preferential import tax treatment under
Circular of the State Council on Adjusting Tax Policies on Imported
Equipment (GUOFA No. 37) can no longer import equipment free of VAT,
though they may continue to import equipment free of duties. However
the GOC reports that there is a transitional arrangement for projects
that were certified under Certificate for State Encouraged Projects on
or before November 19, 2008, which permits equipment related to those
projects to be exempted from original VAT and customs duties provided
the equipment is declared to customs on or before June 30, 2009.
RZBC Co., RZBC Juxian, Yixing Union Co. and Cogeneration received
VAT and duty exemptions in various years since December 11, 2001.
In the Investigation, the Department found that the VAT and duty
exemptions under this program conferred a countervailable subsidy.
Therefore, consistent with the Investigation, we preliminarily
determine that the VAT and duty exemptions provided by the GOC under
this program constitute financial contributions in the form of revenue
foregone under section 771(5)(D)(ii) of the Act, and that they confer a
benefit in the amount of the exemption (see 19 CFR 351.510(a)(1)). We
further determine preliminarily that the VAT and duty exemptions under
this program are specific under section 771(5A)(D)(i) because the
program is limited to FIEs and certain domestic enterprises.
Normally, we treat exemptions from indirect taxes and import
charges as recurring benefits, consistent with 19 CFR 351.524(c)(1),
and allocate these benefits to the year in which they were received.
However, when an indirect tax or import charge exemption is provided
for, or tied to, the capital structure or capital assets of a firm, the
Department may treat it as a non-recurring benefit and allocate the
benefit to the firm over the AUL. See 19 CFR 351.524(c)(2)(iii) and 19
CFR 351.524(d)(2).
Where the VAT and duty exemptions in a given year were less than
0.5 percent of the companies' sales, we expensed the exemptions in the
year in which they were received, consistent with 19 CFR 351.524(a).
For those years in which the VAT and duty exemptions were greater than
0.5 percent of the companies' sales for that year, we are treating the
exemptions as non-recurring benefits, consistent with 19 CFR
351.524(c)(2)(iii), and allocating the benefits over the AUL.
To calculate the benefit, we used the methodology for non-recurring
benefits described in 19 CFR 351.524(b). Specifically, we used the
discount rate described above in the ``Benchmarks and Discount Rates''
section to calculate the amount of the benefit for the POR. Next, we
divided the amount allocated to the POR by the relevant sales in that
period. VAT and duty exemptions received by RZBC Co. and RZBC Juxian
were divided by the combined sales of RZBC Co., RZBC Juxian, and RZBC
I&E. The exemptions received by Cogeneration were divided by Yixing
Union's consolidated sales and, the exemptions received by Yixing Union
Co. were divided by Yixing Union Co.'s total sales.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.01 percent ad valorem in 2008. Yixing
Union's countervailable subsidies in those years were 0.74 percent and
0.29 percent, respectively.
J. Provision of Sulfuric Acid for LTAR
The Department is investigating whether the PRC government provided
sulfuric acid to producers of the subject merchandise for LTAR. As
discussed under ``Use of Facts Otherwise Available and Adverse
Inferences,'' above, we are preliminarily relying on AFA to determine
that the producers of the sulfuric acid purchased by RZBC and Yixing
Union were ``authorities'' within the meaning of section 771(5)(B) of
the Act. Therefore, we preliminarily determine that citric acid
producers have received a financial contribution from the government in
the form of the provision of a good. See section 771(5)(D)(iii) of the
Act.
To determine whether the government's provision of sulfuric acid
conferred a benefit within the meaning of section 771(5)(E)(iv) of the
Act, we relied on 19 CFR 351.511(a)(2) to identify an appropriate,
market-determined benchmark for measuring the adequacy of remuneration.
Potential benchmarks are listed in hierarchical order by preference:
(1) Market prices from actual transactions within the country under
investigation (e.g., actual sales, actual imports or competitively run
government auctions) (tier one); (2) world market prices that would be
available to purchasers in the country under investigation (tier two);
or (3) an assessment of whether the government price is consistent with
market principles (tier three). As we explained in Softwood Lumber from
Canada, the preferred benchmark in the hierarchy is an observed market
price from actual transactions within the country under investigation
because such prices generally would be expected to reflect most closely
the prevailing market conditions of the purchaser under investigation.
See Softwood Lumber Decision Memorandum at ``Market-Based Benchmark''
section.
Beginning with tier-one, we must determine whether the prices from
actual sales transactions involving Chinese buyers and sellers are
significantly distorted. As explained in the Preamble:
Where it is reasonable to conclude that actual transaction
prices are significantly distorted as a result of the government's
involvement in the market, we will resort to the next alternative
{tier two{time} in the hierarchy.
See Preamble to Countervailing Duty Regulations, 63 FR 65377, (November
25, 1998) (``Preamble''). The Preamble further recognizes that
distortion can occur when the government provider constitutes a
majority or, in certain circumstances, a substantial portion of the
market. Id.
In the instant review, the GOC reported that Chinese state-
controlled and collectively- controlled sulfuric acid producers
accounted for 56 percent of sulfuric acid production volume in 2008 and
54 percent of domestic sulfuric acid production in 2009.\9\ See GOC New
Subsidy Allegation First Supplemental Questionnaire Response (Part 2)
(May 4, 2011) (``GNSASQR1, Part 2'') at 3. In addition, the GOC reports
that in 2008 and 2009, respectively, Chinese domestic production
accounted for 97.09 and 95.47 percent of domestic consumption of
sulfuric acid. See GNSAQR (March 18, 2011) at 3. The fact that Chinese
SOEs were responsible for such a large percentage of domestic
production volume and that imports accounted for such a small share of
domestic consumption, makes it reasonable to conclude that actual
transaction prices are significantly distorted as a result of the
government's involvement in the market. See Preamble, 63 FR at 65337.
As further evidence of the government's involvement in the Chinese
sulfuric acid market, the GOC reports that it imposed a temporary
export tax on
[[Page 33232]]
sulfuric acid from February 2008 to June 2009. See GNSASQR1, (Part 2)
(May 8, 2011) at 8. Such an export restraint can discourage exports and
increase the supply of sulfuric acid in the domestic market, and
possibly result in domestic prices that are lower than they would be
otherwise. See Certain Kitchen Shelving and Racks from the People's
Republic of China: Final Affirmative Countervailing Duty Determination,
74 FR 37012 (July 27, 2009) (``Racks from the PRC''), and accompanying
Issues and Decision Memorandum (``Racks Decision Memorandum'') at 15.
For these reasons, we preliminarily determine that domestic prices in
the PRC cannot serve as viable, tier-one benchmark prices. For the same
reasons, we determine that import prices into the PRC cannot serve as a
benchmark.
---------------------------------------------------------------------------
\9\ As we have explained elsewhere, these reported ownership
percentages may understate the share of production accounted for by
SOEs and collectives because of the GOC's method of classifying
possible SOEs as FIEs. See, e.g., Certain Coated Paper Decision
Memorandum at 22.
---------------------------------------------------------------------------
Turning to tier two benchmarks, i.e., world market prices available
to purchasers in the PRC, Petitioners have placed on the record export
values for sulfuric acid from Canada, the European Union, Thailand,
India, and the United States in 2009 taken from trade statistics
compiled by Canadian Customs, Eurostat, Thai Customs, the Department,
the U.S. International Trade Commission, and Global Trade Atlas. See
PNSA2 at 7-8 and Exhibit 18; see also Petitioners' Submission:
Submission of Factual Information (April 15, 2011) (``Benchmark
Submission'') at 3 and Exhibit 4. The average of the export prices
provided by the Petitioners represents an average of commercially-
available world market prices for sulfuric acid that would be available
to purchasers in the PRC. We note that the Department has relied on
similar pricing data from export statistics in other recent CVD
proceedings involving the PRC.\10\ Also, 19 CFR 351.511(a)(2)(ii)
states that where there is more than one commercially available world
market price, the Department will average the prices to the extent
practicable. Therefore, we have averaged the prices to calculate a
single benchmark by month.
---------------------------------------------------------------------------
\10\ See, e.g., Certain Seamless Carbon and Alloy Steel
Standard, Line, and Pressure Pipe From the People's Republic of
China: Preliminary Affirmative Countervailing Duty Determination,
Preliminary Affirmative Critical Circumstances Determination
Seamless Pipe, 75 FR 9163, 9174 (March 1, 2010); OCTG from the PRC,
CWP Decision Memorandum at 11, and LWRP Decision Memorandum at 9.
---------------------------------------------------------------------------
Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of
remuneration under tier one or tier two, the Department will adjust the
benchmark price to reflect the price that a firm actually paid or would
pay if it imported the product, including delivery charges and import
duties. Regarding delivery charges, we averaged the international
freight rates from Canada, the European Union, Thailand, India and the
United States to Shanghai, submitted by Petitioners. See PNSA2 at 6 and
Exhibit 18, and Benchmark Submission at 4 and Exhibits 2 and 5. We also
added inland freight in the PRC based on RZBC respondents' sulfuric
acid purchase information,\11\ import duties as reported by the GOC,
and the VAT applicable to imports of sulfuric acid into the PRC,\12\ as
both RZBC and Yixing Union reported their prices to the Department
inclusive of inland freight and VAT.
---------------------------------------------------------------------------
\11\ See RZBC Respondents' New Subsidy Allegation Supplemental
Questionnaire Response (May 3, 2011) at 3-4 and Exhibits 5 and 6.
\12\ See GNSASQR at A5.
---------------------------------------------------------------------------
In deriving the benchmark we did not include marine insurance. In
prior CVD investigations involving the PRC, the Department has found
that while the PRC customs authorities impute an insurance cost on
certain imports for purposes of levying duties and compiling
statistical data, there is no evidence to suggest that PRC customs
authorities require importers to pay insurance charges. See, e.g., Pre-
Stressed Concrete Steel Wire Strand from the People's Republic of
China: Final Affirmative Countervailing Duty Determination, 75 FR 28557
(May 21, 2010) (``PC Strand from the PRC''), and accompanying Issues
and Decision Memorandum (``PC Strand Decision Memorandum'') at Comment
13. Further, we have not added separate brokerage, handling, and
documentation fees to the benchmark because we find that such costs are
already reflected in the ocean freight cost from Maersk Line that is
being used in these preliminary results. See Petitioners' Benchmark
Submission at Exhibit 4.
The submitted benchmarks covered calendar year 2009. Therefore, we
used the benchmark calculated for January 2009 in our calculations for
2008.
Comparing the adjusted benchmark prices to the prices paid by the
respondents for their sulfuric acid, we preliminarily determine that
the GOC provided sulfuric acid for less than adequate remuneration, and
that a benefit exists in the amount of the difference between the
benchmark and what the respondents paid. See 19 CFR 351.511(a).
Finally, with respect to specificity, the third subsidy element
specified under the Act, the GOC has provided a list of industries that
purchase sulfuric acid directly. Using the Industrial Classification
for National Economic Activities published by the National Bureau of
Statistics, the GOC identifies users in three major industrial
categories: Mining, Manufacturing and Electric Power, Gas and Water
Production and Supply. See GNSAQR at Exhibit 2. The three major
industrial categories include 44 more specific categories, 37 of which
fall under Manufacturing. These more specific product categories
include such items as special chemical manufacturing and manufacture of
household chemicals. While numerous companies may comprise the listed
industries, section 771(5A)(D)(iii)(I) of the Act clearly directs the
Department to conduct its analysis on an industry or enterprise basis.
Based on our review of the data and consistent with our past practice,
we determine that the industries named by the GOC are limited in number
and, hence, the subsidy is specific, within the meaning of section
771(5A)(D)(iii)(I) of the Act. See Light-Walled Rectangular Pipe and
Tube from the People's Republic of China: Final Results of the 2008-
2009 Antidumping Duty Administrative Review, 75 FR 57456 (September 21,
2010) (``LWRP from the PRC''), and accompanying Issues and Decision
Memorandum (``LWRP Decision Memorandum'') at Comment 7; see also Racks
Decision Memorandum at ``Provision of Wire Rod for Less Than Adequate
Remuneration.''
Based on the above, we preliminarily determine that the GOC
conferred a countervailable subsidy on RZBC and Yixing Union through
the provision of sulfuric acid for less than adequate remuneration. To
calculate the subsidy, we took the difference between the delivered
world market price and what each respondent paid for sulfuric acid,
including delivery charges, during the POR.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 4.83 percent ad valorem in 2008 and 0.59
percent ad valorem in 2009. Yixing Union's countervailable subsidies in
those years were 10.05 percent and 12.17 percent, respectively.
As explained below under ``Programs for Which More Information is
Required,'' we will be requesting RZBC's and Yixing Union's purchases
of sulfuric acid for the period January 2008-August 2008 in order to
calculate a subsidy rate for 2008 using annual data.
K. Provision of Steam Coal for LTAR
The Department is investigating whether Chinese government provided
steam coal to producers of the subject merchandise for LTAR. As
discussed
[[Page 33233]]
under ``Use of Facts Otherwise Available and Adverse Inferences,''
above, we are preliminarily relying on AFA to determine that the
producers of the steam coal purchased by Cogeneration were
``authorities'' within the meaning of section 771(5)(B) of the Act.\13\
Therefore, we preliminarily determine that citric acid producers have
received a financial contribution from the government in the form of
the provision of a good. See section 771(5)(D)(iii) of the Act.
---------------------------------------------------------------------------
\13\ The RZBC companies did not purchase steam coal during the
POR.
---------------------------------------------------------------------------
To determine whether the government's provision of steam coal
conferred a benefit within the meaning of section 771(5)(E)(iv) of the
Act we relied on 19 CFR 351.511(a)(2) to identify an appropriate,
market-determined benchmark for measuring the adequacy of remuneration.
Potential benchmarks are listed in hierarchical order by preference:
(1) Market prices from actual transactions within the country under
investigation (e.g., actual sales, actual imports or competitively run
government auctions) (tier one); (2) world market prices that would be
available to purchasers in the country under investigation (tier two);
or (3) an assessment of whether the government price is consistent with
market principles (tier three). As we explained in Softwood Lumber from
Canada, the preferred benchmark in the hierarchy is an observed market
price from actual transactions within the country under investigation
because such prices generally would be expected to reflect most closely
the prevailing market conditions of the purchaser under investigation.
See Softwood Lumber Decision Memorandum at ``Market-Based Benchmark''
section.
Beginning with tier-one, we must determine whether the prices from
actual sales transactions involving Chinese buyers and sellers are
significantly distorted. As explained in the Preamble:
Where it is reasonable to conclude that actual transaction
prices are significantly distorted as a result of the government's
involvement in the market, we will resort to the next alternative
{tier two{time} in the hierarchy.
See Preamble, 63 FR 65377, (November 25, 1998). The Preamble further
recognizes that distortion can occur when the government provider
constitutes a majority or, in certain circumstances, a substantial
portion of the market. Id.
In the instant review, the GOC reported that Chinese wholly state-
owned or state controlled coal producers accounted for 60.59 and 61.94
percent of gross industry revenue in 21008 and 2009, respectively. The
GOC also reported that domestic coal production accounted for 98.47 and
96.11 percent of all domestic consumption respectively in 2008 and
2009. The fact that Chinese SOEs were responsible for such a large
percentage of domestic production volume, as reflected in their share
of gross industry revenue, and that imports accounted for such a small
share of domestic consumption, makes it reasonable to conclude that
actual transaction prices are significantly distorted as a result of
the government's involvement in the market. See Preamble, 63 FR at
65337. As further evidence of the government's involvement in the
Chinese steam coal market, the GOC reported that the GOC imposed export
quotas and export taxes on all types of coal, including steam coal
during the POR. Such export restraints can discourage exports and
increase the supply of steam coal in the domestic market, and result in
domestic prices that are lower than they would be otherwise. See, e.g.,
Racks Decision Memorandum at 15. The GOC also reported that it imposed
a temporary price ceiling on steam coal for power plant use over six
months of 2008, including the 3 [frac12] months included in the POR,
which would also tend to make domestic prices lower than they would be
otherwise.\14\ For these reasons, we preliminarily determine that
domestic prices charged by privately-owned steam coal producers based
in the PRC may not serve as viable, tier-one benchmark prices. For the
same reasons, we determine that import prices into the PRC cannot serve
as a benchmark.
---------------------------------------------------------------------------
\14\ See GNSAQR at 15.
---------------------------------------------------------------------------
Turning to tier two benchmarks, i.e., world market prices available
to purchasers in the PRC, we received benchmark data from Petitioners
and from Yixing Union. Petitioners submitted monthly steam coal data
published by the International Monetary Fund (``IMF'') for Australia
and South Africa, as well as data from Platts International Coal
Report, Issue 986 at 1 (August 30, 2010) (``Platts Report'') for
Colombia, Poland, Russia, Australia, Japan and Korea. See Benchmark
Submission and Yixing Union Submission. These monthly benchmark data
cover the entire 2009 calendar year. Yixing Union placed on the record
monthly steam coal export data for Indonesia obtained from the World
Trade Atlas, which covers the entire POR. Regarding the IMF and Platts
price data, we note that the Department has relied on pricing data from
industry publications in prior CVD proceedings involving the PRC. See,
e.g., Seamless Pipe from the PRC, OCTG from the PRC, CWP Decision
Memorandum at 11, and LWRP Decision Memorandum at 9.
Our regulations at 19 CFR 351.511(a)(2)(ii) state that where there
is more than one commercially available world market price, the
Department will average the prices to the extent practicable.
Therefore, where more than one benchmark price was submitted for a
given month, we averaged those prices to calculate the single benchmark
price for that month. For the remaining months where only one benchmark
price was on the record, we used that price for that month.
Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of
remuneration under tier one or tier two, the Department will adjust the
benchmark price to reflect the price that a firm actually paid or would
pay if it imported the product, including delivery charges and import
duties. Accordingly, in deriving the benchmark prices, we ensured that
ocean freight and inland freight were included. The ocean freight rates
we used were an average of the freight rates submitted on the record by
both Yixing Union and Petitioners. Yixing Union provided estimated
ocean freight rates for steam coal from Indonesia to Guangzhou, China.
See Yixing Union's April 15, 2011 submission (``Yixing Union April
Submission'') at Exhibit 7. Petitioners placed on the record ocean
freight pricing data from Platts and the Baltic Exchange pertaining to
shipments of steam coal from Australia to China. See PNSA2 at 14 and
Exhibit 29. We averaged the two sets of freight rates to derive the
amount included in our benchmark. For inland freight, we relied on
information submitted by Petitioners and Yixing Union. Petitioners
provided inland freight charges based on the transportation costs
calculated from the Shanghai Deepwater Port (``SDP'') to Yixing. In
deriving these monthly inland freight charges, Petitioners used data
collected from Haver Analytics Report, China National Bureau of
Statistics, freight costs of another energy producer in China, and
Google Maps. See Benchmark Submission at Exhibit 3. Yixing Union
disputed the distance between the SDP and Yixing provided by
Petitioners and submitted its own value to represent this distance. We
averaged the two distances for our calculation and added the applicable
VAT rate to arrive at the total inland shipping charge. We also
included import duties and the VAT applicable to
[[Page 33234]]
imports of steam coal into the PRC as reported by the GOC.
In deriving the benchmark we did not include marine insurance. In
prior CVD investigations involving the PRC, the Department has found
that while the PRC customs authorities impute an insurance cost on
certain imports for purposes of levying duties and compiling
statistical data, there is no evidence to suggest that PRC customs
authorities require importers to pay insurance charges. See, e.g., PC
Strand Decision Memorandum at Comment 13. Further, we have not added
separate brokerage, handling, and documentation fees to the benchmark
because we find that such costs are already reflected in the ocean
freight costs submitted by Petitioners and Yixing Union.
Comparing the adjusted benchmark prices to the prices paid by
Cogeneration for its steam coal, we preliminarily determine that the
GOC provided steam coal for less than adequate remuneration, and that a
benefit exists in the amount of the difference between the benchmark
and what the respondent paid. See 19 CFR 351.511(a).
Finally, with respect to specificity, the third subsidy element
specified under the Act, the GOC provided a list of industries that
purchase steam coal directly. Using the Industrial Classification for
National Economic Activities published by the National Bureau of
Statistics, the GOC identifies users in the PRC that purchase steam
coal directly in the six major industrial categories of Mining;
Manufacturing; Electric Power, Gas and Water Production and Supply;
Construction; Transport, Storage and Post; and finally Wholesale and
Resale Trades, Hotels and Catering Services. Distributed among the
first three major categories are 40 more specific categories including
Production and Supply of Electric Power and Heat Power under the major
category of Electric Power, Gas and Water Production and Supply. While
numerous companies may comprise the listed industries, section
771(5A)(D)(iii)(I) of the Act clearly directs the Department to conduct
its analysis on an industry or enterprise basis. Based on our review of
the data and consistent with our past practice, we determine that the
industries named by the GOC are limited in number and, hence, the
subsidy is specific. See section 771(5A)(D)(iii)(I) of the Act. See
LWRP Decision Memorandum at Comment 7; see also Racks Decision
Memorandum at ``Provision of Wire Rod for Less Than Adequate
Remuneration.''
Based on the above, we preliminarily determine that the GOC
conferred a countervailable subsidy on Yixing Union through the
provision of steam coal for less than adequate remuneration. To
calculate the subsidy, we took the difference between the delivered
world market price and what Cogeneration paid for steam coal, including
delivery charges, during the POR.
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.78 percent ad valorem in 2008
and 21.51 percent ad valorem in 2009.
As explained below under ``Programs for Which More Information is
Required,'' we will be requesting Cogeneration's purchases of steam
coal for the period January 2008-August 2008 in order to calculate a
subsidy rate for 2008 using annual data.
L. Land-Use Rights Extension in Yixing City
In 1996, Yixing Heat and Power Plant (``HPP'') (Cogeneration's
predecessor) contributed land-use rights as part of its investment in
the establishment of a joint venture, Cogeneration. HPP received its
shares in the company and continued to hold the land-use rights. In
2003, Cogeneration applied to the Land Resources Bureau to have the
land-use rights transferred and received a granted land-use rights
certificate. The certificate that was issued set the term of the land-
use rights as 50-years from 2003 (i.e., until 2053) rather than 50
years from 1996, the year in which the land-use rights were contributed
to the joint venture.
In the Investigation, the Department found the additional seven
years of land-use rights conferred a countervailable subsidy on
Cogeneration. In this review, Yixing Union and the GOC responded that
there have not been any changes in the operation of this program since
it was last analyzed. See Cogeneration's November 8, 2011, Initial
Questionnaire Response at 14, and GQR at 15. Therefore, consistent with
the Investigation, we preliminarily determine that Cogeneration
received a financial contribution in the form of revenue foregone by
the GOC on the seven additional years included on the land-use rights
certificates, and a benefit in the amount of the foregone revenue. See
section 771(5)(D)(ii) of the Act. Further, because industrial land-use
rights in the PRC are granted for 50 years and Cogeneration received
its rights for 57 years, we preliminarily determine the additional
seven years to be specific to Cogeneration within the meaning of
section 771(5A)(D)(i) of the Act.
To calculate the benefit, we divided the initial value of the land
by 50 years to derive a per-year amount paid for the land-use rights.
We then multiplied this amount by seven years and treated the result as
the amount of the revenue foregone. In accordance with 19 CFR
351.524(b)(2), we conducted the ``expense'' test by dividing the grant
amount by Yixing Union Co.'s and Cogeneration's total sales in 2003,
and found that the benefit was greater than 0.5 percent.\15\
Accordingly, we are allocating the benefit over the ten-year AUL, using
the discount rate described in the ``Benchmarks and Discount Rates''
section above. We divided the allocated amount by Yixing Union's
consolidated sales during the POR, pursuant to 19 CFR
351.525(b)(6)(iii).
---------------------------------------------------------------------------
\15\ We note that we did not have inter-company sales between
Yixing Union and Cogeneration in 2003 to subtract. However, the
result would not have changed.
---------------------------------------------------------------------------
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.07 percent ad valorem in 2008
and 0.06 percent in 2009.
Other Subsidies Received by RZBC
As discussed above under ``Use of Facts Otherwise Available and
Adverse Inferences: GOC--RZBC's and Yixing Union's Other Subsidies,''
the financial statements and tax returns submitted by the responding
companies indicated that they received grants. Further, for certain of
the programs, information submitted by the GOC and/or the responding
companies was sufficient to analyze the programs' specificity. Where
the information was not sufficient, we are employing an adverse
inference and preliminarily determining the programs to be specific.
For RZBC, we identified 16 different grant programs with measurable
benefits during the POR among these ``other subsidies.''
We preliminarily determine that these grants are direct transfers
of funds within the meaning of section 771(5)(D)(i) of the Act and that
they providing a benefit in the amount of the grant. See 19 CFR
351.504(a). Our specificity findings are described below.
M. Fund for Optimizing Import and Export Structure of Mechanical
Electronics and High and New Technology Products
This program was established on July 25, 2007, pursuant to the
Provisional Measures on the Fund for Optimizing Import and Export
Structure of Mechanical Electronics and High and New Technology
Products. The purpose of the program is to optimize the import
[[Page 33235]]
and export structure of high and new technology products. According to
the GOC, the program is administered by the national Ministries of
Finance and Commerce.
Although the GOC responded that export performance or potential is
not considered, the implementing measures state, inter alia, that they
(the measures) are being formulated ``to improve the quality and
benefits of exports. Also, RZBC's March 28, 2011 response states with
respect to the two grants it received under this program that ``the
company must be an exporting company and have export products'' (at
first Section III, App 1). Therefore, we preliminarily determine that
the program is specific within the meaning of section 771(5A)(B) of the
Act.
To calculate the benefit, we divided the grants by RZBC Co. and
RZBC I&E's export sales in the year of approval and found that the
amount was less than 0.5 percent. Therefore, in accordance with 19 CFR
351.524(b)(2), we are allocating the total amount of the subsidy to the
year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.03 percent ad valorem in 2008 and a
subsidy of 0.02 percent ad valorem in 2009.
N. International Market Development Fund Grants for Small and Medium
Enterprises (``SMEs'')
This program was established on October 24, 2000, pursuant to the
Measures for Administration of International Market Developing Funds of
Small- and Medium-sized Enterprises (Cai Qi No. 467 of 2000) and
implemented under the Rules for the Implementation of the Measures for
Administration of International Market Developing Funds of Small- and
Medium-sized Enterprises (Wai Jing Mao Ji Cai Fa (2001) No. 270). The
program provides funds for supporting the international market
exploration of small- and medium-sized enterprises. According to the
GOC, the program is administered by the national Ministries of Finance
and Commerce.
Although the GOC responded that the export performance or potential
are not considered, the establishing measures clearly include export
promotion: ``to encourage small- and medium-sized enterprises to join
in the competition of international markets'' and the funds are to be
``used to help the small- and medium-sized enterprises open up the
international markets.'' Moreover, the Department found this program to
be a countervailable export subsidy in Narrow Woven Ribbons from the
PRC. See Narrow Woven Ribbons with Woven Selvedge from the People's
Republic of China: Final Affirmative Countervailing Duty Determination,
75 FR 41801 (July 19, 2010). Therefore, we preliminarily determine that
the program is specific within the meaning of section 771(5A)(B) of the
Act.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s and RZBC I&E's export sales in the year of receipt and found that
the amount was less than 0.005 percent. Therefore, the subsidy yields
no measurable benefit.
O. Shandong Province: Special Fund for the Establishment of Key
Enterprise Technology Centers
The fund was established pursuant to Development Guidelines of
Shandong on New Type Industrialization and Opinion on Incubation of One
Hundred Key Enterprises' Technical Centers and Improvement of their
Initiatives, with distributions occurring under the Interim Measures on
the Special Fund for the Establishment of Key Enterprise Technology
Centers in Shandong Province. It is administered by the Shandong
Finance Department and the Shandong Economic and Trade Commission. The
fund's purpose is to support the establishment of technical centers by
key enterprises by providing funds for the purchase of equipment,
training, technical cooperation and communication.
Because the fund is limited to ``key enterprises,'' with the
establishing legislation indicating there would only be 100, we
preliminarily determine that the program is specific within the meaning
of section 771(5A)(D)(i) of the Act.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's combined sales in the year of
approval and found that the amount was less than 0.5 percent.
Therefore, in accordance with 19 CFR 351.524(b)(2), we are allocating
the total amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.13 percent ad valorem in 2008.
P. Special Fund for Pollution Control of Three Rivers, Three Lakes, and
the Songhua River
This program was established pursuant to the State Council's
Comprehensive Work Plan on Energy Conservation and Emission Reduction
(Guo Fa 2007 No. 7115) and the State Council's mandate to ``strengthen
pollution control of Three Rivers, Three Lakes, and the Songhua
River.'' It was implemented under the Provisional Measure on Special
Fund for Pollution Control of Three Rivers, Three Lakes and the Songhua
River promulgated by the Ministry of Finance on November 23, 2007.
According to the GOC, the program is administered by the Shandong
Finance Department and the Shandong Environmental Protection Bureau.
The purpose of the program is to enhance pollution control efforts by
financing projects affecting the Huaihe River, Haihe River, Liaohe
River, Taihu Lake, Chaohu Lake, Dianchi Lake and the Songhua River.
Because the fund is limited to enterprises located in these
designated areas, we preliminarily determine that the program is
specific within the meaning of section 771(5A)(D)(iv) of the Act.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year of approval and
found that the amount was less than 0.5 percent. Therefore, in
accordance with 19 CFR 351.524(b)(2), we are allocating the total
amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.31 percent ad valorem in 2009.
Q. Rizhao City: Subsidies to Encourage Enterprise Expansion
According to RZBC it received grants from Rizhao City the purpose
of which is to encourage enterprise expansion in order to increase tax
revenues. Each grant is linked to a specific area of achievement and
the approval documents name the companies that received the grants.
Because the grants were given to a limited number of enterprises,
we preliminarily determine that the program is specific within the
meaning of section 771(5A)(D)(iii)(I) of the Act.
To calculate the benefit for 2008, for RZBC Group, we divided the
amount approved by the combined sales of RZBC in the year of approval
and found that the amount was less than 0.5 percent. For 2008, for RZBC
Co., we divided the amount approved by RZBC Co.'s, RZBC I&E's, and RZBC
Juxian's sales in the year of approval and found that the amount was
less than 0.5 percent. For 2009, for RZBC Co., we divided the amount
approved by RZBC Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year
of approval and found that the amount was less than 0.5 percent.
Therefore, in accordance with 19 CFR 351.524(b)(2), we are allocating
the total amount of the subsidy to the year of receipt.
[[Page 33236]]
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.05 percent ad valorem in 2008 and 0.04 in
2009.
R. Rizhao City: Subsidy for Antidumping Investigations
According to RZBC, it received grants from Rizhao City due to
RZBC's involvement in foreign antidumping investigations. RZBC's
response indicates that in awarding the grants, the government
considered whether the company made export sales and cooperated in the
antidumping investigations. In its March 28, 2011 supplemental
questionnaire response at Exhibit CVDS2-40, RZBC submitted an approval
document from a local authority that demonstrates this program targets
firms that cooperate in antidumping investigations.
Because the grants were contingent upon exportation, we
preliminarily determine that this program is specific within the
meaning of section 771(5A)(B) of the Act.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s and RZBC I&E's export sales in the year of approval and found
that the amount was less than 0.5 percent. Therefore, in accordance
with 19 CFR 351.524(b)(2), we are allocating the total amount of the
subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.01 percent ad valorem in 2008.
S. Shandong Province: Subsidy for Antidumping Investigations
As with the Rizhao City program relating to antidumping
investigations, RZBC stated that that in awarding the grants, the
government considered whether the company made export sales and
cooperated in the antidumping investigations. In its March 28, 2011,
supplemental questionnaire response at Exhibit CVDS2-24, RZBC submitted
an approval document from a local authority that demonstrates this
program targets firms that cooperate in antidumping investigations.
Because the grants were contingent upon exportation, we
preliminarily determine that this program is specific within the
meaning of section 771(5A)(B) of the Act.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s and RZBC I&E's export sales in the year of approval and found
that the amount was less than 0.5 percent. Therefore, in accordance
with 19 CFR 351.524(b)(2), we are allocating the total amount of the
subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.04 percent ad valorem in 2008.
T. Subsidy for Technique Improvement
The grant approval documents describing this program are
proprietary information. See Memorandum from Seth Isenberg to File:
RZBC Preliminary Calc Memo, dated May 31, 2011, for further discussion.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s and RZBC I&E's relevant sales in the year of approval and found
that the amount was less than 0.5 percent. Therefore, in accordance
with 19 CFR 351.524(b)(2), we are allocating the total amount of the
subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.04 percent ad valorem in 2008.
For the programs listed below, the submitted information was not
sufficient to conduct a specificity analysis.
U. Fund for Energy-Saving Technological Innovation
This program was established on August 10, 2007, pursuant to the
Circular on the Issuance of Interim Measures on Financial Award Funds
to Energy-saving Technological Innovation. Under the program,
enterprises whose energy-saving innovation project results in energy
savings that exceed 10,000 tons of coal will receive an award. The
standard award is RMB 200 per ton of coal for the eastern Chinese
provinces and RMB 250 per ton of saved coal for the mid-western
provinces. The purpose of the program is to encourage reduced energy
consumption. According to the Circular, the program was set to
terminate on December 31, 2010. The program is administered by the
national Ministry of Finance and the NDRC.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year of approval and
found that the amount was less than 0.5 percent. Therefore, in
accordance with 19 CFR 351.524(b)(2), we are allocating the total
amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.10 percent ad valorem in 2009.
V. Shandong Province: Award Fund for Industrialization of Key Energy-
saving Technology
This program was established pursuant to the Provisional Measures
Shandong Special Fund for Energy and Water Saving, and implemented on
November 8, 2007, under the Circular of the Shandong Finance Department
and Shandong Economic and Trade Commission establishing Provisional
Measures on Shandong Award Fund for Industrialization of Key Energy-
saving Technology (Lu Cai Jian {2007{time} No. 68). The purpose of the
program is to encourage reductions in energy consumption and to
accelerate the industrialization of key energy-saving technologies in
Shandong Province. According to the GOC, the program is administered by
the Shandong Finance Department.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year of approval and
found that the amount was less than 0.5 percent. Therefore, in
accordance with 19 CFR 351.524(b)(2), we are allocating the total
amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.07 percent ad valorem in 2008.
W. Shandong Province: Environmental Protection Industry R&D Funds
This program was established on September 24, 2007, under the
Circular on the Issuance of Administrative Rules on Special Funds for
Technology R&D Projects of the Environmental Protection Industry of
Shandong Province. It is administered by Shandong Province Finance
Department and Shandong Environmental Protection Bureau. The purpose of
the program is to promote pollution-preventing technologies and
environmental product development, and to strengthen the innovation
capability and market competitiveness of the environmental protection
industry in Shandong Province.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year of approval and
found that the amount was less than 0.5 percent. Therefore, in
accordance with 19 CFR 351.524(b)(2), we are allocating the total
amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.03 percent ad valorem in 2008.
[[Page 33237]]
X. Rizhao City: Special Fund for Enterprise Development
No further descriptive information was submitted.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year of approval and
found that the amount was less than 0.5 percent. Therefore, in
accordance with 19 CFR 351.524(b)(2), we are allocating the total
amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.04 percent ad valorem in 2009.
Y. Rizhao City: Technological Innovation Grants
No further descriptive information was submitted.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year of approval and
found that the amount was less than 0.5 percent. Therefore, in
accordance with 19 CFR 351.524(b)(2), we are allocating the total
amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.01 percent ad valorem in 2008.
Z. Rizhao City: Technology Research and Development Fund
No further descriptive information was submitted.
To calculate the benefit, we divided the amount approved by RZBC
Co.'s, RZBC I&E's, and RZBC Juxian's sales in the year of approval and
found that the amount was less than 0.5 percent. Therefore, in
accordance with 19 CFR 351.524(b)(2), we are allocating the total
amount of the subsidy to the year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.01 percent ad valorem in 2009.
AA. Shandong Province: Waste Water Treatment Subsidies
No further descriptive information was submitted.
To calculate the benefit, we divided the amounts approved for each
year by the RZBC Co.'s, RZBC I&E's, and RZBC Juxian's sales for each
the year of approval. We found that for all years but 2009, each amount
was less than 0.5 percent. Therefore, in accordance with 19 CFR
351.524(b)(2), we are allocating the total amount of the subsidy to the
year of receipt.
On this basis, we preliminarily determine that RZBC received a
countervailable subsidy of 0.02 percent ad valorem in 2009.
Other Subsidies Received by Yixing Union
As discussed above under ``Use of Facts Otherwise Available and
Adverse Inferences: GOC--RZBC's and Yixing Union's Other Subsidies,''
the financial statements and tax returns submitted by the responding
companies indicated that they received grants. Further, for certain of
the programs, information submitted by the GOC and/or the responding
companies was sufficient to analyze the programs' specificity. Where
the information was not sufficient, we are employing an adverse
inference and preliminarily determining the programs to be specific.
For Yixing Union, we identified three different grant programs with
measurable benefits during the POR among these ``other subsidies.''
We preliminarily determine that these grants are direct transfers
of funds within the meaning of section 771(5)(D)(i) of the Act and that
they provide a benefit in the amount of the grant. See 19 CFR
351.504(a). Our specificity findings are described below.
BB. Yixing City: Leading Enterprise Program
According to Yixing Union, it received grants from Yixing City
because it is a leading enterprise.
Because the grants were given to ``leading'' enterprises, we
preliminarily determine that the program is specific within the meaning
of section 771 (5A)(D)(iii)(I) of the Act.
To calculate the benefit, we divided the amount approved by Yixing
Union Co.'s sales in the year of approval and found that the amount was
less than 0.5 percent. Therefore, in accordance with 19 CFR
351.524(b)(2), we are allocating the total amount of the subsidy to the
year of receipt.
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.01 percent ad valorem in 2009.
CC. Yixing City: Tai Lake Water Improvement Program
According to Yixing Union, grants under this program are limited to
companies located around Tai Lake.
Because the grants under this program are limited to enterprises
located in a designated geographic area, we preliminarily determine
that the programs is specific within the meaning of section
771(5)(D)(iv).
To calculate the benefit, we divided the amount approved by Yixing
Union's consolidated sales in the year of approval and found that the
amount was less than 0.5 percent. Therefore, in accordance with 19 CFR
351.524(b)(2), we are allocating the total amount of the subsidy to the
year of receipt.
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.01 percent ad valorem in 2009.
For the program listed below, the submitted information was not
sufficient to conduct a specificity analysis.
DD. Jiangsu Province Energy Conservation and Emissions Reduction
Program
No further descriptive information was provided.
To calculate the benefit, we divided the amount approved by Yixing
Union's consolidated sales in the year of approval and found that the
amount was less than 0.5 percent. Therefore, in accordance with 19 CFR
351.524(b)(2), we are allocating the total amount of the subsidy to the
year of receipt.
On this basis, we preliminarily determine that Yixing Union
received a countervailable subsidy of 0.05 percent ad valorem in 2009.
II. Programs Preliminarily Determined To Be Not Countervailable
Jiangsu Province Policy Lending
In this administrative review, the Department has re-examined an
allegation made in the investigation that a program of policy lending
to the citric acid exists in Jiangsu Province. As with their allegation
of a national policy lending program, Petitioners contend that the GOC
itself considers citric acid to be a ``new biochemical product'' or
otherwise among food additive and fine chemical products encouraged by
various plans. With regard to lending in Jiangsu Province, Petitioners
claim that citric acid is among the ``biochemical products'' and
``special fine chemicals'' encouraged in the Jiangsu Province 11th Five
Year Plan--Chemical (``Jiangsu Chemical FYP'').
The GOC and Yixing Union deny that there is preferential lending
program in Jiangsu Province that benefits citric acid producers. As
discussed above regarding the national policy lending program, the GOC
states that while there are no official criteria that the NDRC uses to
determine what constitutes a ``new biochemical product,'' the NDRC has
indicated that citric acid ``is not considered a new biochemical
product because it has been in existence for years.'' See GNSASQR1,
Part 1 (April 27, 2011) at 6. The GOC states that if the
[[Page 33238]]
NDRC expressly interprets plans in a certain way, the local authorities
must follow the interpretation. However, if no NDRC interpretation
exists, the GOC indicates that local officials might make their own
interpretation of what is covered in plan. Id.
With respect to the question of how the Jiangsu provincial
government classifies citric acid, we asked Yixing Union to report any
product certifications it had received from either local or national
governments. Yixing Union reported receiving a ``High Technology
Product Certificate'' in 2009. See Supplemental Questionnaire Response
of Yixing Union Biochemical Co., Ltd. and Yixing Union Cogeneration
Co., Ltd. (May 16, 2011) at 1-2 and Exhibit 1. Yixing Union stated that
it did not receive any benefit as a result of receiving the certificate
other than the intangible benefits of improving its reputation. Id.
Moreover, because of possible ambiguity in the product coverage of
the Jiangsu Chemical FYP, we examined closely a sample of loan
documentation obtained from Yixing Union. These documents provide no
indication that any of the provincial plans were a factor in awarding
the loans to Yixing Union.
Accordingly, we preliminarily determine that Jiangsu Province does
not provide policy loans to the citric acid industry there.
We note that beginning in 2009, we are countervailing loans
received by Yixing Union based on our preliminary determination that a
national policy lending program exists for the fermentation industry
(see ``National-Level Government Preferential Lending Program,''
above).
III. Programs Preliminarily Determined Not to Confer a Measurable
Benefit During the POR
Regarding programs listed below, benefits from these programs
result in net subsidy rates that are less than 0.005 percent ad valorem
or constitute benefits that were fully expensed prior to the POR.
Consistent with our past practice, we therefore have not included these
programs in our net countervailing duty rate calculations. See, e.g.,
CFS Decision Memorandum at ``Analysis of Programs, Programs Determined
Not To Have Been Used or Not To Have Provided Benefits During the POI
for GE.''
A. Special Funds for Energy Saving and Recycling Program (Yixing Union)
\16\
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\16\ Yixing SQR1 at 9 and Exhibit SS-8.
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B. Water Resource Expense Reimbursement Program (Cogeneration) \17\
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\17\ Yixing SQR1 at 10 and Exhibit SS-14.
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C. Shandong Province: Energy-Saving Award
IV. Programs Preliminarily Determined Not To Be Used\18\
---------------------------------------------------------------------------
\18\ In this section we refer to programs preliminarily
determined to be not used by the two participating respondent
companies.
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A. Discounted Loans for Export-Oriented Industries
B. Loans Provided to the Northeast Revitalization Program
C. State Key Technology Renovation Project Fund
D. National Level Grants to Loss-Making SOEs
E. Income Tax Exemption Program for Export-Oriented FIEs
F. Tax Benefits to FIEs for Certain Reinvestment of Profits
G. Preferential Income Tax Rate for Research and Development at FIEs
H. Preferential Tax Programs for Encouraged Industries
I. Preferential Tax Policies for Township Enterprises
J. Reduced Income Tax Rates for Encouraged Industries in Anhui Province
K. Income Tax Exemption for FIEs Located in Jiangsu Province
L. VAT Rebate on Purchases by FIEs of Domestically Produced Equipment
M. Provincial Level Grants to Loss-Making SOEs
N. ``Famous Brands'' Program--Yixing City
O. Funds for Outward Expansion of Industries in Guangdong Province
P. Administration Fee Exemption in the Yixing Economic Development Zone
(``YEDZ'')
Q. Tax Grants, Rebates, and Credits in the YEDZ
R. Provision of Construction Services in the YEDZ for LTAR
S. Grants to FIEs for Projects in the YEDZ
T. Provision of Land in the YEDZ for LTAR
U. Provision of Electricity in the YEDZ for LTAR
V. Provision of Water in the YEDZ for LTAR
W. Provision of Land in the Zhuqiao Key Open Park for LTAR
X. Provision of Land in Anhui Province for LTAR
Y. Provision of Land to SOEs for LTAR
Z. Exemption from Land-use Fees and Provision of Land for LTAR in
Jiangsu Province for LTAR
AA. Torch Program--Grant
BB. Anqui City Energy and Water Savings Grant
CC. Provision of Land in the Anqui Economic Development Zone (``AEDZ'')
for LTAR
V. Programs for Which More Information Is Required
In our questionnaires, we requested partial data for 2008 for the
various lending programs and the sulfuric and steam coal LTAR programs.
For the final results, we intend to request and analyze full-year data
for 2008, consistent with the Department's practice in this regard.
See, e.g., Final Results of Countervailing Duty Administrative Review:
Certain Hot-Rolled Carbon Steel Flat Products from India, 69 FR 26549
(May 13, 2004), and accompanying Issues and Decision Memorandum at page
1, footnote 1. We will also request that Respondents report separately
their interest payments for 2008 and 2009.
Further, as discussed above, the Department is investigating RZBC's
creditworthiness and will be seeking information from the RZBC. The
Department also intends to seek additional information regarding
potential subsidies to RZBC Co.'s prior parent companies, the ownership
of Cogeneration during the 2004 and 2005 calendar years, and further
clarification regarding the responding companies' notes payable.
Finally, for the Shandong Province: Construction Fund for Promotion of
Key Industries program, RZBC reported that it received assistance from
fund aimed at ``key enterprises.'' We need additional sales information
from RZBC to calculate the subsidy conferred by this program.
The Department plans to issue a post-preliminary analysis, as
warranted, presenting its analysis of issues not addressed in these
preliminary results.
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated
individual subsidy rates for RZBC and Yixing Union, the producers
covered by this administrative review. We preliminarily determine that
the total estimated net countervailable subsidy rate for RZBC for 2008
is 6.96 percent ad valorem and for 2009 is 4.04 percent ad valorem. We
preliminarily determine that the total estimated net countervailable
subsidy rate for Yixing Union for 2008 is 13.80 percent ad valorem and
for 2009 is 35.93 percent ad valorem.
If these preliminary results are adopted in our final results of
this review, 15 days after publication of the final results of this
review the Department will instruct CBP to liquidate shipments of
citric acid by RZBC and Yixing Union entered or
[[Page 33239]]
withdrawn from warehouse, for consumption from September 19, 2008,
through Jan 16, 2009, and May 29, 2009, through December 31, 2009, at
the applicable rates. Entries during the period January 17, through May
29, 2009, were not suspended for CVD purposes due to the termination of
provisional measures.
Cash Deposit Instructions
The Department also intends to instruct CBP to collect cash
deposits of estimated countervailing duties in the amounts calculated
for year 2009. For all non-reviewed firms, we will instruct CBP to
collect cash deposits of estimated countervailing duties at the most
recent company-specific or all-others rate applicable to the company.
These rates shall apply to all non-reviewed companies until a review of
a company assigned these rates is requested. These cash deposit
requirements, when imposed, shall remain in effect until further
notice.
Public Comment
Interested parties may submit written arguments in case briefs
within 30 days of the date of publication of this notice. Rebuttal
briefs, limited to issues raised in case briefs, may be filed not later
than five days after the date of filing the case briefs. Parties who
submit briefs in this proceeding should provide a summary of the
arguments not to exceed five pages and a table of statutes,
regulations, and cases cited. Copies of case briefs and rebuttal briefs
must be served on interested parties in accordance with 19 CFR
351.303(f).
Interested parties may request a hearing within 30 days after the
date of publication of this notice. Unless otherwise specified, the
hearing, if requested, will be held two days after the scheduled date
for submission of rebuttal briefs.
The Department will publish a notice of the final results of this
administrative review within 120 days from the publication of these
preliminary results.
We are issuing and publishing these results in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: May 31, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-14027 Filed 6-6-11; 8:45 am]
BILLING CODE 3510-DS-P