[Federal Register Volume 77, Number 108 (Tuesday, June 5, 2012)]
[Notices]
[Pages 33167-33181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13585]
[[Page 33167]]
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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 (the Department) is conducting an
administrative review of the countervailing duty (CVD) order on citric
acid and citrate salts from the People's Republic of China for the
period January 1, 2010, through December 31, 2010. These preliminary
results cover RZBC Group Shareholding Co., Ltd., RZBC Co., Ltd., RZBC
Juxian Co., Ltd., and RZBC Imp. & Exp. Co., Ltd. (collectively, the
RZBC Companies). If these preliminary results are adopted in our final
results of this review, we will instruct U.S. Customs and Border
Protection (CBP) 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 5, 2012.
FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Patricia Tran, AD/
CVD Operations, Office 3, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue NW., Washington, DC 20230; telephone (202) 482-4793
and (202) 482-1503, respectively.
SUPPLEMENTARY INFORMATION:
Background
On May 29, 2009, the Department published a CVD order on citric
acid and certain citrate salts (citric acid) from the People's Republic
of China (PRC).\1\ On May 2, 2011, we published a notice of
``Opportunity to Request Administrative Review'' of the order.\2\
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\1\ 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).
\2\ See Antidumping or Countervailing Duty Order, Finding, or
Suspended Investigation; Opportunity To Request Administrative
Review, 76 FR 24460 (May 2, 2011).
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On May 20, 2011, we received a request to conduct an administrative
review from the RZBC Companies.\3\ On May 27, 2011, we received a
request for administrative review from Yixing Union Biochemical Co.,
Ltd. (Yixing Union Co.) and Yixing Union Cogeneration Co., Ltd.
(Cogeneration) (collectively, the Yixing Union Companies). On May 31,
2011, we received a request for administrative review from Huangshi
Xinghua Biochemical Co., Ltd. (Xinghua). On June 14, 2011, the Yixing
Union Companies withdrew their request for review. In accordance with
19 CFR 351.221(c)(1)(i), we published a notice of initiation of the
review on June 28, 2011, covering the RZBC Companies and Xinghua.\4\
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\3\ This public document and all other public documents and
public versions generated in the course of this proceeding by the
Department and interested parties are available to the public
through Import Administration's Antidumping and Countervailing Duty
Centralized Electronic Service System (IA ACCESS), located in Room
7046 of the main Department building.
\4\ See Initiation of Antidumping and Countervailing Duty
Administrative Reviews and Request for Revocation in Part, 76 FR
37781 (June 28, 2011).
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On July 26, 2011, the Department issued the initial questionnaire
to the Government of the People's Republic of China (GOC), the RZBC
Companies, and Xinghua. On July 27, 2011, Xingua withdrew its review
request. On August 11, 2011, the Department published a partial
rescission of review for Xingua.\5\
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\5\ See Citric Acid and Certain Citrate Salts from the People's
Republic of China: Partial Rescission of Countervailing Duty
Administrative Review, 76 FR 49735 (August 11, 2011).
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On September 27, 2011, the GOC and the RZBC Companies submitted
their responses to the initial questionnaire. Based on a request by
Petitioners,\6\ on October 12, 2011, the Department extended the
regulatory deadline to submit factual information until November 17,
2011. On October 17, 2011, Petitioners submitted comments on the
initial questionnaire responses filed by the GOC and the RZBC
Companies.
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\6\ Petitioners are Archer Daniels Midland Company, Cargill,
Incorporated, and Tate & Lyle Ingredients Americas LLC.
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On November 17, 2011, Petitioners submitted new factual information
concerning world market prices and international freight prices for
steam coal and sulfuric acid as well as internal freight charges for
steam coal. On November 28, 2011, the RZBC Companies submitted new
factual information concerning world prices for sulfuric acid in
response to Petitioners' November 17, 2011, submission. On December 13,
2011, Petitioners replied to the RZBC Companies' November 28, 2011,
submission and submitted additional factual information. On December
15, 2011, the Department issued letters to the RZBC Companies and
Petitioners in which it rejected the factual information contained in
their respective November 28 and December 13, 2011, submissions on the
grounds that the submissions were untimely. On December 21, 2011, the
RZBC Companies submitted a letter objecting to the Department's
decision to reject its factual information. On December 22, 2011,
Department officials met with counsel representing the RZBC Companies
to discuss the Department's decision to reject the November 28, 2011,
new factual information submitted by the RZBC Companies.
On December 30, 2011, the Department published a notice of
postponement for the preliminary results of this review until no later
than May 30, 2012.\7\
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\7\ See Citric Acid and Certain Citrate Salts from the People's
Republic of China: Extension of Time Limit for Preliminary Results
of Countervailing Duty Administrative Review, 76 FR 82275 (December
30, 2011).
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On January 3, 2012, the Department issued a letter to the RZBC
Companies regarding the November 28, 2011, submission, stating that the
companies' arguments were considered, but that the Department continues
to reject the document on the grounds that it was untimely.
On January 9, 2012, the Department issued a supplemental
questionnaire to the RZBC Companies regarding the provision of steam
coal for less than adequate remuneration (LTAR) and provision of
sulfuric acid for LTAR programs. On February 1, 2012, the Department
issued a supplemental questionnaire to the GOC and a second
supplemental to the RZBC Companies. On February 6 and March 2, 2012,
the RZBC Companies submitted their supplemental questionnaire
responses. On February 15 and 29, 2012, the GOC submitted its
supplemental questionnaire responses.
On February 27, 2012, Petitioners submitted deficiency comments on
and filed rebuttal factual information to the GOC's February 15, 2012,
supplemental questionnaire response regarding the provision of steam
coal for LTAR.
On March 8 and 16, 2012, the Department issued supplemental
questionnaires to the GOC and received the GOC's responses on March 23
and 29, 2012. On March 20, 2012, Petitioners submitted deficiency
comments on the RZBC Companies' March 2, 2012, supplemental
questionnaire response. On March 21, 2012, the Department issued a
third supplemental questionnaire to the RZBC Companies and received the
questionnaire response on April 11, 2012.
[[Page 33168]]
On May 18, 2012, Petitioners filed pre-preliminary comments on the
provision of steam coal for LTAR program.
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 CVD Order, 74 FR 25703. 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 CBP that the quantity of
citric acid from the PRC in the commingled merchandise is subject to
the CVD and antidumping orders. We have also instructed 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 January 1, 2010, through December 31, 2010.
Application of the CVD 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)
(Coated Paper from the PRC), and the accompanying Issues and Decision
Memorandum (Coated Paper Decision Memorandum). In Coated Paper 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 Coated Paper Decision Memorandum at Comment 6. The Department has
affirmed its decision to apply the CVD law to the PRC in numerous
subsequent determinations.\8\ Furthermore, on March 13, 2012, Public
Law 112-99 was enacted which makes clear that the Department has the
authority to apply the CVD law to non-market economies (NMEs) such as
the PRC. The effective date provision of the enacted legislation makes
clear that this provision applies to this proceeding.\9\
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\8\ 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.
\9\ See Public Law 112-99, Sec. 1(b), 126 Stat. 265 (2012).
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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
[[Page 33169]]
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).
GOC--Sulfuric Acid
In the July 26, 2011, initial questionnaire, we requested ownership
information from the GOC about the companies that produced the sulfuric
acid purchased by the RZBC Companies.\10\ We notified the GOC that the
Department generally treats producers that are majority owned by the
government or a government entity as controlled by the government and,
hence, as ``authorities'' within the meaning of section 771(5)(B) of
the Act. However, for those majority government-owned companies that
the GOC argues are not ``authorities'' and for each producer that is
not majority owned by the government, we instructed the GOC to answer
all questions in Appendix 5 (Information Regarding Input Producers) and
Appendix 6 (Information on Government and Chinese Communist Party (CCP)
Officials and Representatives).
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\10\ See Department's Initial Questionnaire Issued to the GOC
(July 26, 2011) at II-8.
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With the exception of one sulfuric acid producer, the GOC did not
challenge the Department's ``authority'' practice with regard to
producers that are majority owned by the government or a government
entity. The GOC attempted to provide information to Appendices 5 and 6
for only one of the sulfuric acid producers from which the RZBC
Companies purchased the input during the POR. For that sulfuric acid
producer, the GOC provided a response to some of the questions
contained in Appendix 5, but failed to identify owners, members of the
board of directors, or managers who were also government or CCP
officials or representatives during the POR.\11\ For the same sulfuric
acid producer, the GOC did not respond to any questions contained in
Appendix 6.\12\ To Appendix 6, the GOC stated that the Department's CCP
questions are not relevant to the investigation of the LTAR program and
that, as a matter of PRC law the government cannot interfere in the
management and operation of the sulfuric acid suppliers.\13\ The GOC
stated that, in prior cases, it explained that the CCP, the People's
Congress, and the Chinese People's Political Consultative Conference
are not government bodies.\14\ The GOC also stated that ``because these
organizations are not governmental bodies, the GOC cannot require them
to provide the information requested by the Department.'' \15\
Furthermore, the GOC stated that ``there is no central informational
database to search for the requested information, and the industry and
commerce administrations do not require companies to provide such
information.'' \16\ As such, the GOC claimed that it was unable to
respond to the Department's questions.\17\
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\11\ See GOC's Initial Questionnaire Response (IQR) (September
27, 2011) at II-12.
\12\ Id. at II-14 through II-18.
\13\ Id.
\14\ Id. at II-14.
\15\ Id. at II-16.
\16\ Id.
\17\ Id.
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On March 16, 2012, we issued a deficiency questionnaire in which we
asked the GOC to provide a response to those questions in Appendix 5
and Appendix 6, which it did not answer in the initial questionnaire
response.\18\ In its March 23, 2012, response, the GOC did not provide
an answer to the questions, stating ``The GOC has previously provided a
response that it believes appropriately addresses these inquires.''
\19\
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\18\ See Department's Deficiency Questionnaire Issued to the GOC
(March 16, 2012) at 3.
\19\ See GOC's Deficiency Questionnaire Response (March 23,
2012) at 5.
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Regarding the GOC's objection to the Department's questions about
the role of CCP officials in the management and operations of the
sulfuric acid producer, we have explained our understanding of the
CCP's involvement in the PRC's economic and political structure in a
past proceeding.\20\ Public information suggests that the CCP exerts
significant control over activities in the PRC.\21\ This conclusion is
supported by, among other documents, a publicly available background
report from the U.S. Department of State.\22\ With regard to the GOC's
claim that Chinese law prohibits GOC officials from taking positions in
private companies, we have previously found that this particular law
does not pertain to CCP officials.\23\
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\20\ See Memorandum to the File from Patricia M. Tran,
``Additional Documents for the Preliminary Results,'' dated May 30,
2012 (Additional Documents Memorandum) at Attachments II and III
(which include the post-preliminary analysis memorandum from certain
seamless carbon and alloy steel standard, line, and pressure pipe
and a State Department report, both recognizing the significant role
the CCP has in the GOC).
\21\ Id. at Attachment IV.
\22\ Id.; see also Certain Seamless Carbon and Alloy Steel
Standard, Line, and Pressure Pipe from the People's Republic of
China: Final Affirmative Countervailing Duty 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 Comment 7.
\23\ See Seamless Pipe Decision Memorandum at 16.
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Because the GOC did not respond to our requests for information on
this issue, we have no further basis for evaluating the GOC's claim
that the role of the CCP is irrelevant. Thus, the Department finds, as
it has in other PRC CVD proceedings, that the information requested
regarding the role of CCP officials in the management and operations of
the sulfuric acid producer, and in the management and operations of the
producer's owners, is necessary to our determination of whether the
producer is an authority within the meaning of section 771(5)(B) of the
Act. In addition, the GOC did not promptly notify the Department, in
accordance with section 782(c), that it was unable to submit the
information in the requested form and manner, nor did it suggest any
alternative forms for submitting this information. Further, the GOC did
not provide any information regarding the attempts it undertook to
obtain this information, despite the fact that we provided the GOC with
a second opportunity to provide the information. Therefore, we have no
basis to accept the GOC's claim that it is unable to provide this
information. This is particularly appropriate given that the GOC has
claimed that such information regarding the CCP is irrelevant, when the
Department has made it clear on the record of this administrative
review, other segments of this proceeding, as well as other PRC CVD
proceedings that such information is relevant to our analysis of
whether input producers are ``authorities'' under the statute.
Therefore, we preliminarily find that the GOC has withheld
necessary information that was requested of it and, thus, that the
Department must rely on ``facts otherwise available'' in conducting our
preliminary analysis of a sulfuric acid producer.\24\ Moreover, we
preliminarily find that the GOC has failed to cooperate by not acting
to the best of its ability to comply with our request for information.
By stating that the requested information is not relevant, the GOC has
placed itself in the position of the Department, and only
[[Page 33170]]
the Department can determine what is relevant to this administrative
review.\25\ Furthermore, by stating that it is unable to obtain the
information because the CCP is not the government, the GOC is
substantially non-responsive. The GOC would have the Department reach
its determination on the role of the CCP with regard to the government
and the input producer based solely on the conclusory statements of the
GOC without any of the information that the Department considers
necessary for its analysis. As this constitutes a failure to cooperate
to the best of its ability, we find that an adverse inference is
warranted in the application of facts available.\26\ As AFA, we
preliminarily find that the sulfuric acid producer for which the GOC
did not provide complete information is an ``authority'' within the
meaning of section 771(5)(B) of the Act.
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\24\ See section 776(a)(2)(A) of the Act.
\25\ See Ansaldo Componenti, S.p.A. v. United States, 628 F.
Supp. 198, 205 (CIT 1986) (stating that ``{i{time} t is Commerce,
not the respondent, that determines what information is to be
provided''). The Court in Ansaldo criticized the respondent for
refusing to submit information which the respondent alone had
determined was not needed, for failing to submit data which the
respondent decided could not be a basis for the Department's
decision, and for claiming that submitting such information would be
``an unreasonable and unnecessary burden on the company.'' Id. See
also Essar Steel Ltd. v. United States, 721 F. Supp. 2d 1285, 1298-
99 (CIT 2010) (stating that ``{r{time} egardless of whether Essar
deemed the license information relevant, it nonetheless should have
produced it {in{time} the event that Commerce reached a different
conclusion'' and that ``Commerce, and not Essar, is charged with
conducting administrative reviews and weighing all evidence in its
calculation of a countervailing duty margin''); NSK, Ltd. v. United
States, 919 F. Supp. 442, 447 (CIT 1996) (``NSK's assertion that the
information it submitted to Commerce provided a sufficient
representation of NSK's cost of manufacturing misses the point that
`it is Commerce, not the respondent, that determines what
information is to be provided for an administrative review.''');
Nachi-Fujikoshi Corp. v. United States, 890 F. Supp. 1106, 1111 (CIT
1995) (``Respondents have the burden of creating an adequate record
to assist Commerce's determinations.'').
\26\ See section 776(b) of the Act.
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GOC--Steam Coal
In the final results of the first administrative review, the
Department was not able to determine whether steam coal is being
provided by the GOC to a specific industry or enterprise or group of
industries or enterprises, because of insufficient record evidence. See
Citric Acid and Certain Citrate Salts from the People's Republic of
China: Final Results of Countervailing Duty Administrative Review, 76
FR 77206 (December 12, 2011) (Citric Acid First Review), and
accompanying Issues and Decision Memorandum (Citric Acid First Review
ID Memo) at Comment 6. We stated that we would revisit the de facto
specificity of the provision of steam coal for LTAR program in a future
review. Id.
On February 1, 2012, we issued a supplemental questionnaire in
which we requested the GOC to provide the following information
concerning the steam coal industry in the PRC for 2008, 2009, and 2010:
the number of producers of steam coal;
the percentage of total volume and value of domestic production
of steam coal that is accounted for by companies in which the GOC
maintains an ownership or management interest either directly or
through other government entities;
the names and addresses of the top ten steam coal producing
firms--in terms of sales and quantity produced--in which the GOC
maintains an ownership or management interest;
a discussion of what laws or policies govern the pricing of
steam coal, the levels of production of steam coal, or the
development of steam coal capacity; and a list of industries in
China that use steam coal and the volume of steam coal used/consumed
by each industry and submit official documentation to support the
response.
On February 15, 2012, the GOC provided an inadequate response to
the Department's questions regarding steam coal, stating that ``the GOC
only collects information on general coal producers and does not
disaggregate the data it collects about the coal industry by different
segments within that industry.'' \27\ The GOC added that ``most of the
Chinese coal producers also produced steam coal and, thus, the GOC
believes that providing information on general coal producers and the
general coal industry will provide a reasonable indication of nature of
the steam coal industry.'' \28\
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\27\ See GOC's First Supplemental Questionnaire Response--Part A
(February 15, 2012) (GOC Part A SQR) at 1.
\28\ Id.
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Specifically, to the Department's request for the number of
producers of steam coal for 2008, 2009, and 2010, the GOC provided
information on coal producers.\29\ Similarly, to the Department's
request for the percentage of total volume and value of domestic
production of steam coal that is accounted for by companies in which
the GOC maintains an ownership or management interest, the GOC limited
its response to only ``coal producers that are wholly state-owned or
state-controlled'' and submitted those ``companies' share of gross
industry revenue.'' \30\ In response to the Department's request for
the names and addresses of the top ten steam coal producing firms, in
terms of sales and quantity produced, in which the GOC maintains an
ownership or management interest, the GOC provided a list of ten coal
companies for each year, but failed to submit the requested ``sales and
quantity produced'' for the listed companies.\31\ Additionally, to the
Department's request for a list of industries in China that use steam
coal and the volume of steam coal used/consumed by each industry, the
GOC provided a list of industries that purchase steam coal directly
with no associated volume data and no explanation about how the list
was compiled.\32\
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\29\ Id.
\30\ Id. at 1-2
\31\ Id. at 2-4.
\32\ Id. at 5 and Exhibit 2.
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On March 8, 2012, we issued a second supplemental questionnaire in
which we again asked the GOC to provide a response to the provision of
steam coal questions.\33\ In its March 29, 2012, response, the GOC
explained that after receiving the February 1, 2012, questionnaire, the
government contacted the National Bureau of Statistics of China (NBSC)
to obtain information on the steam coal industry, but the NBSC stated
that it did not have such information.\34\ The GOC stated that it also
consulted with the China National Coal Association (CNCA), which
responded that:
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\33\ See Department's Supplemental Questionnaire Issued to the
GOC (March 8, 2012).
\34\ See GOC's Second SQR (March 29, 2012) (GOC Second SQR) at
1.
``At present, relevant Chinese agencies and institutions have
not collected information on the total number of steam coal
producers. At present, almost all coal producers produce both steam
coal and coking coal. Until now, there is not a single coal producer
that produces solely coking coal. Therefore {the total number of
Chinese coal producers{time} should be the total number of Chinese
steam coal producers.'' \35\
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\35\ Id.
As such, the GOC stated that it submitted information on the steam
coal industry/production in its February 15, 2012, response and had no
additional information to provide to the Department.\36\ Concerning the
Department's second request for a list of industries in China that use
steam coal and the volume of steam coal used/consumed by each industry,
the GOC, in its March 29, 2012, response stated that ``this information
has already been provided by the GOC, to the best of its ability'' in
its February 15, 2012, response.\37\ However, in response to the
Department's request for this data, in its February 15, 2012, response,
the GOC simply submitted a list of industries that
[[Page 33171]]
it claims purchase steam coal directly and failed to submit the
requested volume data.\38\ The GOC also failed to provide documentation
supporting its response that those listed industries actually purchase
steam coal.\39\
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\36\ Id.
\37\ Id. at 4.
\38\ See GOC Part A SQR at 5 and Exhibit 2.
\39\ Id.
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With respect to the GOC's failure to provide the information
requested about steam coal, we preliminarily find that necessary
information is not available on the record and that the GOC has
withheld necessary information that was requested of it and, thus, the
Department must rely on facts otherwise available.\40\ Concerning the
PRC steam coal industry/production, we preliminarily find that the GOC
acted to the best of its ability in responding to the Department's
information request. The GOC provided a detailed explanation of the
efforts it took to obtain information regarding steam coal. Because the
GOC's explanation is sufficient to determine that it acted to the best
of its ability, we are relying on the ``facts available'' on the record
and are not applying an adverse inference for the preliminary finding
on whether PRC prices from actual transactions involving Chinese buyers
and sellers are significantly distorted by the involvement of the GOC.
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\40\ See sections 776(a)(1) and (a)(2)(A) of the Act.
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As noted above, the GOC submitted information for the coal industry
and stated that the information on general coal producers and the
general coal industry can provide a reasonable indication of the steam
coal industry. We, therefore, are relying on that general coal
information to determine whether the PRC steam coal market is distorted
by the involvement of the GOC. In its February 15, 2012, supplemental
questionnaire response, the GOC reported that Chinese wholly state-
owned or state controlled coal producers accounted for 60.59, 61.94,
and 59.13 percent of gross industry revenue in 2008, 2009, and 2010,
respectively.\41\ The fact that Chinese state-owned enterprises were
responsible for such a large percentage of domestic production volume,
as reflected in their share of gross industry revenue, we preliminarily
find that it is reasonable to conclude that actual transaction prices
are significantly distorted as a result of the government's involvement
in the market. See Preamble to Countervailing Duty Regulations, 63 FR
65348, 65377 (November 25, 1998) (Preamble); see also ``Provision of
Steam Coal for LTAR,'' below.
---------------------------------------------------------------------------
\41\ See GOC Part A SQR at 2.
---------------------------------------------------------------------------
We preliminary find, however, that the GOC failed to cooperate by
not acting to the best of its ability in responding to the Department's
information request about the PRC industries that use steam coal and
the volume of steam coal used/consumed by each of those industries.
Despite two opportunities to submit volume data for the industries
reported to purchase steam coal, the GOC chose to not provide such data
to the Department. The GOC did not notify the Department, in accordance
with section 782(c) of the Act, that it was unable to submit the
information in the requested form and manner, nor did it suggest any
alternative forms of data. As a result, the record is void of any
evidence that would allow the Department to conduct an analysis to
determine whether there is predominant or disproportionate use of steam
coal by an industry(ies) reported by the GOC. Consequently, we
preliminarily find that an adverse inference is warranted in the
application of facts available with regard to the specificity of the
provision of steam coal for LTAR.\42\ As AFA, we preliminarily find
that the provision of steam coal for LTAR is de facto specific. See
``Provision of Steam Coal for LTAR,'' below.
---------------------------------------------------------------------------
\42\ See section 776(b) of the Act.
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GOC--Other Subsidies
The financial statements submitted by the RZBC Companies indicated
that they received potentially countervailable subsidies in the form of
grants. Consequently, we sought further information from the companies
about these grants, and also asked the GOC to provide information about
the programs under which the grants were provided.\43\
---------------------------------------------------------------------------
\43\ See Department's Supplemental Questionnaires Issued to the
GOC on February 1 and March 16, 2012, and Supplemental
Questionnaires Issued to the RZBC Companies on February 1 and March
21, 2012.
---------------------------------------------------------------------------
The Department normally relies on information from the government
to assess program specificity; however, the GOC did not submit such
information in all instances. Where the RZBC Companies submitted
information which showed the specificity of a program, we relied upon
that information to make our preliminary finding. Where neither the
RZBC Companies nor the GOC provided information that would allow us to
determine the specificity of a program, we relied upon AFA to make our
preliminary finding. For those particular programs, we preliminarily
find that the GOC withheld necessary information that was requested of
it and, thus, the Department must rely on facts available for these
preliminary results. See section 776(a)(2)(A) of the Act. Moreover, we
preliminarily find 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 RZBC Companies received grants, 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, 73 FR 7708.
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 33172]]
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).
The RZBC Companies
The RZBC Companies consist of the RZBC Group Shareholding Co. Ltd.
(RZBC Group),\44\ RZBC Co., Ltd. (RZBC Co.), RZBC (Juxian) Co., Ltd.
(RZBC Juxian), and RZBC Imp. & Exp. Co., Ltd. (RZBC IE). All companies
are domestically owned PRC companies. RZBC Co., RZBC Juxian, and RZBC
IE 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
producers of the subject merchandise; RZBC IE is the exporter of the
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.
---------------------------------------------------------------------------
\44\ During the POR, there was a name change from ``RZBC Group
Co., Ltd.'' to ``RZBC Group Shareholding Company.'' See RZBC
Companies' IQR (September 27, 2011) at ``RZBC Group'' page III-7.
---------------------------------------------------------------------------
In its initial questionnaire response, the RZBC Companies also
reported their ownership history and affiliations prior to the POR, but
since the cut-off date of December 11, 2001. RZBC Co. reported that the
company ``Sisha'' was a prior owner.\45\ In the first administrative
review of this order, the Department determined that Sisha Co., Ltd.
(Sisha) was cross-owned with RZBC Co. and instructed the company to
file a response on behalf of Sisha.\46\ See Citric Acid First Review ID
Memo at ``Attribution of Subsidies--RZBC.'' The Department found that
Sisha received a countervailable, allocable subsidy in 2003. See Citric
Acid First Review ID Memo at ``Enterprise Development Fund from Zibo
City Financial Bureau.''
---------------------------------------------------------------------------
\45\ Id. at ``RZBC Co. Ltd.'' page III-5.
\46\ In the first administrative review, the Department also
found that the company ``HTI'' was a prior owner of RZBC Co. and,
thus, was cross-owned with the RZBC Companies. See Citric Acid First
Review ID Memo at ``Attribution of Subsidies--RZBC.'' All subsidies
received by HTI that the Department found to be countervailable were
expensed. See Citric Acid First Review ID Memo at ``Shandong
Province Financial Special Fund for Supporting High and New
Technology Industry Development Project.''
---------------------------------------------------------------------------
Consistent with the Citric Acid First Review, we continue to find
that Sisha was cross-owned with RZBC Co. (see 19 CFR 351.525(b)(6)(vi))
and have attributed the allocable benefit for Sisha's grant to the RZBC
Companies for the POR. For more information, see ``Enterprise
Development Fund from Zibo City Financial Bureau,'' below.
Also, RZBC IE 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.\47\ 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 the 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.\48\ In this
review, we have not issued CVD questionnaires to the unaffiliated
producers of citric acid whose merchandise was exported by RZBC IE,
because such merchandise was not exported to the United States during
the POR. Also, we have removed the sales of these products from RZBC
IE's 2010 sales to derive the denominator for purposes of calculating
countervailable subsidy rates for the RZBC Companies. This approach is
consistent with the Department's treatment of RZBC IE's exports of
subject merchandise produced by unaffiliated companies in Citric Acid
First Review. See Citric Acid First Review ID Memo at ``Attribution of
Subsidies--RZBC.''
---------------------------------------------------------------------------
\47\ See RZBC Companies' IQR at ``RZBC IE'' page III-6.
\48\ 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.''
---------------------------------------------------------------------------
Sales Denominators
We preliminarily determine that multiple sales denominators are
appropriate for use in the attribution of subsidies to the RZBC
Companies. To attribute a subsidy received by RZBC Co., RZBC Juxian, or
RZBC IE, we used as the denominator the total consolidated sales of all
three companies, exclusive of sales among affiliated companies, for
2010. To attribute a subsidy received by RZBC Group, we used as the
denominator the total consolidated sales of RZBC Group, RZBC Co., RZBC
Juxian, and RZBC IE, exclusive of sales among affiliated companies, for
2010. Lastly, to attribute an export subsidy received by a company, we
used as the denominator the 2010 export sales of RBZC IE, exclusive of
sales of merchandise produced by unaffiliated companies.
Benchmarks and Discount Rates
The Department is investigating loans received by the RZBC
Companies 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.
Short-Term 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 as a benchmark.\49\ If the firm did not have
any comparable commercial loans during the period, the Department's
regulations provide that we ``may use a national average interest rate
for comparable commercial loans.'' \50\
---------------------------------------------------------------------------
\49\ See 19 CFR 351.505(a)(3)(i).
\50\ 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. For the reasons explained in
Coated Paper from the PRC,\51\ 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. Because of
this, any loans received by respondents from private Chinese or
foreign-owned banks would be unsuitable for use as benchmarks under 19
CFR 351.505(a)(2)(i). Similarly, 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
[[Page 33173]]
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.\52\
---------------------------------------------------------------------------
\51\ See Coated Paper Decision Memorandum at Comment 10.
\52\ 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 Canada), and
accompanying Issues and Decision Memorandum (Softwood Lumber
Decision Memorandum) at ``Analysis of Programs, Provincial Stumpage
Programs Determined to Confer Subsidies, Benefit.''
---------------------------------------------------------------------------
In past proceedings involving imports from the PRC, we calculated
the external benchmark using the methodology first developed in Coated
Paper from the PRC \53\ and more recently updated in Thermal Paper from
the PRC.\54\ Under that methodology, we first determine which countries
are similar to the PRC in terms of gross national income, based on the
World Bank's classification of countries as: Low income; lower-middle
income; upper-middle income; and high income. As explained in Coated
Paper from the PRC, this pool of countries captures the broad inverse
relationship between income and interest rates. For 2001 through 2009,
the PRC fell in the lower-middle income category.\55\ Beginning in
2010, however, the PRC is in the upper-middle income category.
Accordingly, as explained further below, we are using the interest
rates of upper-middle income countries to construct the 2010 benchmark.
---------------------------------------------------------------------------
\53\ See Coated Paper Decision Memorandum at Comment 10.
\54\ See Lightweight Thermal Paper from the People's Republic of
China: Final Affirmative Countervailing Duty Determination, 73 FR
57323 (October 2, 2008) (Thermal Paper from the PRC), and
accompanying Issues and Decision Memorandum (Thermal Paper Decision
Memorandum) at 8-10.
\55\ See The World Bank Country Classification, http://econ.worldbank.org/.
---------------------------------------------------------------------------
After identifying the appropriate interest rates, the next step in
constructing the benchmark has been to incorporate an important factor
in interest rate formation, the strength of governance as reflected in
the quality of the countries' institutions. The strength of governance
has been built into the analysis by using a regression analysis that
relates the interest rates to governance indicators. In each of the
years from 2001-2009, the results of the regression analysis reflected
the intended, common sense result: stronger institutions meant
relatively lower real interest rates, while weaker institutions meant
relatively higher real interest rates. For 2010, however, the
regression does not yield that outcome for the PRC's income group.
This contrary result for a single year in ten does not lead us to
reject the strength of governance as a determinant of interest rates.
As confirmed by the Federal Reserve, ``there is a significant negative
correlation between institutional quality and the real interest rate,
such that higher quality institutions are associated with lower real
interest rates.'' \56\ However, for 2010, incorporating the governance
indicators in our analysis does not make for a better benchmark.
Therefore, while we have continued to rely on the regression-based
analysis used since Coated Paper from the PRC to compute the benchmarks
for loans taken out prior to the POI, for the 2010 benchmark we are
using an average of the interest rates of the upper-middle income
countries. Based on our experience for the 2001-2009 period, in which
the average interest rate of the lower-middle income group did not
differ significantly from the benchmark rate resulting from the
regression for that group, use of the average interest rate for 2010
does not introduce a distortion into our calculations.
---------------------------------------------------------------------------
\56\ See Additional Documents Memorandum at Attachment I for
Federal Reserve Consultation Memorandum.
---------------------------------------------------------------------------
Many of the countries in the World Bank's upper-middle and lower-
middle income categories reported lending and inflation rates to the
International Monetary Fund, and they 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 ``upper middle income'' by the
World Bank for 2010 and ``lower middle income'' for 2001-2009. First,
we did not include those economies that the Department considered to be
non-market economies for antidumping 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 each year the
Department calculated an inflation-adjusted short-term benchmark rate,
we have also excluded any countries with aberrational or negative real
interest rates for the year in question.
The resulting inflation-adjusted benchmark lending rates are in the
Department's Interest Rate Benchmark Memorandum.\57\ Because these
rates are net of inflation, we adjusted the benchmark to include an
inflation component.
---------------------------------------------------------------------------
\57\ See Memorandum to the File from Patricia M. Tran,
International Trade Analyst, AD/CVD Operations, Office 3, regarding
``Preliminary Results Interest Rate Benchmark Memorandum,'' dated
May 30, 2012 (Interest Rate Benchmark Memorandum).
---------------------------------------------------------------------------
Long-Term RMB-Denominated Loans
The lending rates reported in the IFS represent short- and medium-
term lending, and there are not sufficient publicly available long-term
interest rate data upon which to base a robust benchmark for long-term
loans. 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.\58\
---------------------------------------------------------------------------
\58\ See, e.g., Light-Walled Rectangular Pipe and Tube from
People's Republic of China: Final Affirmative Countervailing Duty
Investigation Determination, 73 FR 35642 (June 24, 2008)
(Rectangular Pipe from the PRC), and accompanying Issues and
Decision Memorandum (Rectangular Pipe Decision Memorandum) at 8.
---------------------------------------------------------------------------
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.\59\ Finally, because these long-term rates are
net of inflation as noted above, we adjusted the benchmark to include
an inflation component.
---------------------------------------------------------------------------
\59\ See Citric Acid and Certain Citrate Salts from the People's
Republic of China: Final Affirmative Countervailing Duty
Determination, 74 FR 16836 (April 13, 2009) (Citric Acid
Investigation), and accompanying Issues and Decision Memorandum
(Citric Acid Investigation ID Memo) at Comment 14.
---------------------------------------------------------------------------
Foreign Currency-Denominated Loans
To calculate benchmark interest rates for foreign currency-
denominated loans, the Department is again following the methodology
developed over a number of successive PRC investigations. For US dollar
short-term loans, the Department used as a benchmark the one-year
dollar London Interbank Offering Rate (LIBOR), plus the average spread
between LIBOR and the one-year corporate bond rates for companies with
a BB rating. Likewise, for any loans denominated in other foreign
[[Page 33174]]
currencies, we used as a benchmark the one-year LIBOR for the given
currency plus the average spread between the LIBOR rate and the one-
year corporate bond rate for companies with a BB rating.
For any 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.
Discount Rate Benchmarks
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.
The resulting interest rate benchmarks that we used in the
preliminary calculations are provided in the Preliminary Results
Interest Rate Benchmark Memorandum.
Analysis of Programs
I. Programs Preliminarily Determined To Be Countervailable
A. Shandong Province Policy Loans Program
In the underlying investigation and Citric Acid First Review, the
Department found that the Shandong Province Development Plan of
Chemical Industry during ``Tenth Five-Year Plan'' Period identifies
objectives and goals for the development of the citric acid industry
and calls for lending to support these objectives and goals. See Citric
Acid Investigation ID Memo at ``Policy Lending,'' and Citric Acid First
Review ID Memo at ``Shandong Province Policy Loans Program.'' Moreover,
loan documents, reviewed by the Department in the first administrative
review, 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 Citric Acid and Certain Citrate Salts
from the People's Republic of China: Preliminary Results of
Countervailing Duty Administrative Review, 76 FR 33219, 33228 (June 8,
2011) (Citric Acid First Review Prelim), unchanged in the final
results.
On the record of the instant review, the GOC reported that there
were no changes to this program during the POR.\60\ Therefore,
consistent with the Citric Acid Investigation and Citric Acid First
Review, we preliminarily find that Shandong Province policy loans from
state-owned commercial banks constitute financial contributions from
``authorities'' within the meaning of sections 771(5)(B) and
771(5)(D)(i) of the Act. Further, pursuant to section 771(5)(E)(ii) of
the Act, such financing provides a benefit equal to the difference
between what the recipients paid on the loans and the amount they would
have paid on comparable commercial loans. We also preliminarily find
that the loans are de jure specific within the meaning of section
771(5A)(D)(i) of the Act because of the Government of Shandong's policy
to develop the citric acid industry.
---------------------------------------------------------------------------
\60\ See GOC's IQR at II-2.
---------------------------------------------------------------------------
RZBC Co., RZBC Juxian, and RZBC IE reported that they had loans and
bank acceptance notes outstanding during the POR, which were provided
by state-owned commercial banks. To calculate the benefit under this
program, we compared the amount of interest each company paid on their
outstanding loans to the amount of interest they would have paid on
comparable commercial loans. See 19 CFR 351.505(a). In conducting this
comparison, we used the interest rates described in the ``Benchmarks
and Discount Rates'' section above. We have attributed benefits under
this program to the total consolidated sales of RZBC Co., RZBC Juxian,
and RZBC IE (exclusive of inter-company sales), as discussed in the
``Attribution of Subsidies'' section above. On this basis, we
preliminarily find that the RZBC Companies received a countervailable
subsidy of 0.40 percent ad valorem.
B. Export Seller's Credit for High- and New-Technology Products
RZBC IE also reported having outstanding loans from the Export-
Import Bank of China (EXIM) during the POR, which were provided under
this program. In the underlying investigation and Citric Acid First
Review, the Department found that loans under this program conferred a
countervailable subsidy. See Citric Acid Investigation ID Memo at
``Policy Lending,'' and Citric Acid First Review ID Memo at ``Export
Seller's Credit for High- and New-Technology Products.''
On the record of the instant review, the GOC reported that that
there were no changes to the program during the POR.\61\ Therefore,
consistent with the Citric Acid Investigation and Citric Acid First
Review, we preliminarily find 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.
---------------------------------------------------------------------------
\61\ Id. at II-3.
---------------------------------------------------------------------------
To calculate the benefit under this program, we compared the amount
of interest RZBC IE paid on the outstanding loans to the amount of
interest the company would have paid on comparable commercial loans.
See 19 CFR 351.505(a). In conducting this comparison, we used the
interest rates described in the ``Benchmarks and Discount Rates''
section above. We divided the total benefit amount by the RZBC
Companies' export sales during the POR. On this basis, we preliminarily
find that the RZBC Companies received a countervailable subsidy of 0.74
percent ad valorem.
C. Reduced Income Tax Rate for High or New Technology Enterprises
In the Citric Acid First Review, the Department found this program
to be countervailable. See Citric Acid First Review ID Memo at
``Reduced Income Tax Rate for High or New Technology Enterprises.'' As
discussed in the preliminary results of the first review, Article 28.2
of the Enterprise Income Tax Law (EITL) authorizes a reduced income tax
rate of 15 percent for high- and new-technology enterprises (HNTEs).
See Citric Acid First Review Prelim, 76 FR at 33229-30. The criteria
and procedures for identifying eligible HTNEs are provided in the
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). Id. 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. Id.
The annex of the Measures on Recognition of HNTEs lists eight high-
[[Page 33175]]
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. Id.
On the record of the instant review, the GOC reported that there
were no changes to this program during the POR.\62\ RZBC Co. and RZBC
Juxian reported that they received tax savings under this program on
their 2009 income tax returns filed during the POR.
---------------------------------------------------------------------------
\62\ Id. at II-6, 7.
---------------------------------------------------------------------------
Consistent with the Citric Acid First Review, we preliminarily find
that the reduced income tax rate paid by RZBC Co. and RZBC Juxian is a
financial contribution in the form of revenue foregone by the GOC, 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)(1). We also
preliminarily find, consistent with the Citric Acid First Review, 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 compared the income tax rate that RZBC
Co. and RZBC Juxian would have paid in the absence of the program (25
percent) to the income tax rate that the companies actually paid. We
treated the income tax savings realized by RZBC Co. and RZBC Juxian as
a recurring benefit, consistent with 19 CFR 351.524(c)(1) and divided
the company's tax savings received during the POR by the consolidated
sales (excluding inter-company sales) for RZBC Co., RZBC Juxian, and
RZBC IE for the POR, pursuant to 19 CFR 351.525(b)(6)(iii) and 19 CFR
351.525(c). On this basis, we preliminarily find that the RZBC
Companies received a countervailable subsidy of 0.91 percent ad
valorem.
D. Income Tax Credits on Purchases of Domestically Produced Equipment
In the underlying investigation and Citric Acid First Review, the
Department found that this program provided countervailable subsidies.
See Citric Acid Investigation ID Memo at ``Income Tax Credits on
Purchases of Domestically Produced Equipment,'' and Citric Acid First
Review ID Memo at ``Income Tax Credits on Purchases of Domestically
Produced Equipment.''
As discussed in the preliminary results of the first reivew,
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. See Citric Acid First Review Prelim, 76 FR 33230.
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. Id.
On the record of the instant review, the GOC reported that that
there were no changes to this program during the POR.\63\ RZBC Co. and
RZBC Juxian reported that they received tax savings under this program
on their 2009 income tax returns filed during the POR.
---------------------------------------------------------------------------
\63\ Id. at II-4.
---------------------------------------------------------------------------
Consistent with the prior segments of this proceeding and prior CVD
determinations,\64\ we preliminarily find 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 find 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.
---------------------------------------------------------------------------
\64\ 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.
---------------------------------------------------------------------------
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 the consolidated sales
(excluding inter-company sales) for RZBC Co., RZBC Juxian, and RZBC IE
for the POR, pursuant to 19 CFR 351.525(b)(6)(iii) and 19 CFR
351.525(c). On this basis, we preliminarily find that the RZBC
Companies received a countervailable subsidy of 1.36 percent ad
valorem.
E. Provision of Sulfuric Acid for LTAR
The Department is examining the provision of sulfuric acid to the
RZBC Companies. In the first administrative review of this order, the
Department found that this program provides countervailable subsidies.
See Citric Acid First Review ID Memo at ``Provision of Sulfuric Acid
for LTAR.''
In the July 26, 2011, initial questionnaire issued to the GOC in
this review, we informed the GOC that the Department would not
reevaluate the countervailability of this program. However, if there
were any changes to the operation of the program during the POR, then
the GOC was instructed to explain the changes and answer all relevant
questions in Appendix 1.\65\ In its September 27, 2011, initial
questionnaire response, the GOC did not report any changes to the
operation of the program during the POR and did not answer the
questions in Appendix 1.\66\ As such, the Department continues to find
that this program is specific, within the meaning of section
771(5A)(D)(iii)(I) of the Act.
---------------------------------------------------------------------------
\65\ See Department's Initial Questionnaire Issued to the GOC
(July 26, 2011) at ``Provision of Sulfuric Acid for LTAR.''
\66\ See GOC's IQR at II-9 and II-10.
---------------------------------------------------------------------------
As discussed under ``Use of Facts Otherwise Available and Adverse
Inferences,'' above, we are relying on AFA to determine that one
producer of sulfuric acid, from whom the RZBC Companies made purchases,
is an ``authority'' within the meaning of section 771(5)(B) of the Act.
Therefore, we preliminarily find that the RZBC Companies received a
financial contribution in the form of the provision of a good. See
section 771(5)(D)(iii) of the Act.
In the Citric Acid First Review, the Department found that actual
transaction prices for sulfuric acid in China are significantly
distorted by the government's involvement in the market. As such, we
determined that domestic prices in the PRC cannot serve as viable, tier
one benchmark prices. For the same reasons, we determined that import
prices into the PRC cannot serve as a benchmark. See Citric Acid First
Review ID Memo at ``Provision of Sulfuric Acid for LTAR.'' No new
evidence has presented in this review that would call into question
that finding. Accordingly, to determine
[[Page 33176]]
whether the provision of sulfuric acid conferred a benefit within the
meaning of section 771(5)(E)(iv) of the Act, consistent with the Citric
Acid First Review, we applied a tier two benchmark, i.e., world market
prices available to purchasers in the PRC (see 19 CFR
351.511(a)(2)(ii)).
Petitioners placed on the record export values for sulfuric acid
from Canada, the European Union (EU), Thailand, India, and the United
States for the year 2010, taken from trade statistics compiled by
Canadian Customs, Eurostat, Thai Customs, U.S. International Trade
Commission, and Global Trade Atlas.\67\
---------------------------------------------------------------------------
\67\ See Petitioners' Submission of Factual Information
(November 17, 2011) (Petitioners' Factual Information) at 3-4 and
Exhibit 4. Where we could, we extracted from the pricing data export
prices to China.
---------------------------------------------------------------------------
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. 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.
Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of
remuneration under 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 EU, Thailand, India, and the United States to
Shanghai, submitted by Petitioners.\68\ We also added inland freight in
the PRC based on the RZBC Companies' sulfuric acid purchase
information,\69\ import duties as reported by the GOC, and the VAT
applicable to imports of sulfuric acid into the PRC.\70\ Both RZBC Co.
and RZBC Juxian reported the prices that they paid for sulfuric acid
inclusive of inland freight and VAT.
---------------------------------------------------------------------------
\68\ See Petitioners' Factual Information at 4-5 and Exhibit 5.
\69\ See RZBC Companies' SQR (February 6, 2012) at Exhibit 10
(RZBC Co.) and Exhibit 2 (RZBC Juxian).
\70\ For import duties and VAT, see GOC's Third SQR (March 23,
2012) at 3.
---------------------------------------------------------------------------
To derive 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.\71\
---------------------------------------------------------------------------
\71\ 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.
---------------------------------------------------------------------------
Comparing the adjusted benchmark prices to the prices paid by RZBC
Co. and RZBC Juxian for sulfuric acid, we preliminarily find 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). To
calculate the benefit, we took the difference between the delivered
world market price and the price that the companies paid for sulfuric
acid, including delivery charges, and divided the sum of the price
differentials by the total consolidated sales of RZBC Co., RZBC Juxian,
and RZBC IE (exclusive of inter-company sales). On this basis, we
preliminarily determine that the RZBC Companies received a
countervailable subsidy of 1.29 percent ad valorem in 2010.
F. Provision of Steam Coal for LTAR
The Department is examining whether the RZBC Companies purchase
steam coal for LTAR during the POR. On the record of the instant
review, the GOC reported that the RZBC Companies purchased steam coal
from state-owned enterprises during the POR.\72\ Therefore, we
preliminarily determine that the RZBC Companies received a financial
contribution from government authorities in the form of the provision
of a good, pursuant to section 771(5)(D)(iii) of the Act.
---------------------------------------------------------------------------
\72\ See GOC's IQR at II-9.
---------------------------------------------------------------------------
Regarding specificity, in the final results of the first
administrative review, the Department was not able to determine whether
steam coal is provided to a specific industry or enterprise or group of
industries or enterprises because of insufficient evidence. See Citric
Acid First Review ID Memo at Comment 6. The Department stated that it
would revisit the de facto specificity of this program in a future
review. Id. As discussed under ``Use of Facts Otherwise Available and
Adverse Inferences,'' above, we are relying on AFA to preliminarily
determine that the provision of steam coal for LTAR is specific because
the GOC failed to provide information, which was requested of it on two
occasions, regarding the industries that used/consumed steam coal and
the associated volume data for the years 2008, 2009, and 2010.
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 in the hierarchy.'' See
Preamble, 63 FR 65377. 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, we are relying on the facts available
regarding the general coal industry to determine whether the PRC steam
coal market is distorted by the involvement of the GOC. As discussed in
the ``Use of Facts Otherwise Available and Adverse Inferences,''
section above, the GOC reported that Chinese wholly state-owned or
state controlled coal producers accounted for 60.59, 61.94, and 59.13
percent of gross industry revenue in 2008, 2009, and 2010,
[[Page 33177]]
respectively.\73\ The fact that Chinese state-owned enterprises were
responsible for such a large percentage of domestic production volume,
as reflected in their share of gross industry revenue, makes it
reasonable to conclude that actual transaction prices are significantly
distorted as a result of the government's involvement in the market.
Id. For this reason, we preliminarily determine that domestic prices
charged by privately-owned steam coal producers based in the PRC and
import prices into the PRC may not serve as viable, tier one benchmark
prices.
---------------------------------------------------------------------------
\73\ See GOC Part A SQR at 2.
---------------------------------------------------------------------------
Turning to tier two benchmarks, i.e., world market prices available
to purchasers in the PRC, we received steam coal benchmark pricing data
from Petitioners.\74\ Petitioners submitted monthly steam coal prices
for January 2010, through December 2010, reported by the International
Monetary Fund (IMF) for Australia (Newcastle) and from the Platts
International Coal Report (Platts Report) for Colombia, Poland, Russia,
Australia (Gladstone), Japan and Korea.\75\ The Department's
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.
---------------------------------------------------------------------------
\74\ See Petitioners' Factual Information at 2 and Exhibit 1.
\75\ Id.
---------------------------------------------------------------------------
Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of
remuneration under 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 included
international freight and inland freight. The international ocean
freight rates used are an average of the freight rates submitted on the
record by Petitioners. Petitioners placed on the record ocean freight
pricing data from Platts and the Baltic Panamax Index, for the POR,
pertaining to shipments of steam coal from various world ports (in
Australia, Colombia, Poland, and Russia) to Qingdao, China.\76\ We
averaged the international freight rates to derive the amount included
in our benchmark.
---------------------------------------------------------------------------
\76\ Id. at 2-3 and Exhibit 2.
---------------------------------------------------------------------------
For inland freight, we relied on information submitted by
Petitioners, who provided inland freight charges based on the
transportation cost of steam coal calculated from the Qingdao Port to
the respondent's location.\77\ To derive the monthly inland freight
charges, Petitioners used data published by Haver Analytics and the
2010 average freight costs of another energy producer in China.\78\
Petitioners first divided the average freight cost per metric ton by
the average cost of rail transportation per metric ton kilometer to
determine the average distance shipped. Petitioners next divided the
monthly average freight charge by the average distance shipped to
determine the monthly average freight charge per metric ton kilometer.
Petitioners then multiplied that rate by the kilometer distance between
Qingdao and RZBC and added 17 percent VAT to arrive at the inland
freight charges, which we include in the monthly benchmark prices.\79\
---------------------------------------------------------------------------
\77\ Id. at 3 and Exhibit 3.
\78\ Id.
\79\ Id.
---------------------------------------------------------------------------
Additionally, to derive the benchmark, we included import duties
and the VAT applicable to imports of steam coal into the PRC as
reported by the GOC.\80\ We did not include marine insurance. In prior
CVD investigations involving the PRC, the Department 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.
---------------------------------------------------------------------------
\80\ See GOC's Third SQR at 3.
---------------------------------------------------------------------------
Comparing the adjusted benchmark prices to the prices paid by RZBC
Co. and RZBC Juxian for steam coal during the POR, we preliminarily
find 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 price and the price that the companies paid. See
19 CFR 351.511(a). To calculate the benefit, we took the difference
between the delivered world market price and the price that the
companies paid for steam coal, including delivery charges, and divided
the sum of the price differentials by the total consolidated sales of
RZBC Co., RZBC Juxian, and RZBC IE (excluding inter-company sales). On
this basis, we preliminarily determine that the RZBC Companies received
a countervailable subsidy of 0.19 percent ad valorem in 2010.
G. Science and Technology Export Innovation Support
According to the RZBC Group it received a subsidy from Rizhao City,
Donggang District, the purpose of which is to encourage export
development.\81\
---------------------------------------------------------------------------
\81\ RZBC Companies' March 2, 2012 supplemental questionnaire
response (SQR) at Exhibit 6.
---------------------------------------------------------------------------
Because the financial assistance was pursuant to, ``Rizhao City
Financial Support for Encouraging Export Development{s{time} Policy,''
we preliminarily determine that the program is specific within the
meaning of section 771(5A)(B) of the Act. We preliminarily determine
that the grants received by RZBC Group constitute a financial
contribution and a benefit under sections 771(5)(D)(i) and 771(5)(E) of
the Act, respectively.
The grant that RZBC Group received during the POR was less than 0.5
percent of the exports sales for the POR. Therefore, pursuant to 19 CFR
351.524(b)(2), we expensed the grant amount to the POR. On this basis,
we preliminarily determine that the RZBC Companies received a
countervailable export subsidy of 0.01 percent ad valorem in 2010.
H. Donggang Finance Bureau IPO Preparation Subsidy
RZBC Group reported that it received a grant from Rizhao City
Donggang District during the POR because it was preparing to make an
initial public offering.\82\
---------------------------------------------------------------------------
\82\ See RZBC Companies' IQR at ``RZBC Group'' page III-23.
---------------------------------------------------------------------------
We preliminarily determine that the grant received by RZBC Group
constitute a financial contribution and a benefit under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively. Regarding
specificity, because the grant is limited to firms undertaking an
initial public offering, we preliminarily determine the grants to be
specific under section 771(5A)(D)(i) of the Act.
The grant that RZBC Group received during the POR was less than 0.5
percent of the total consolidated sales of RZBC Group, RZBC Co., RZBC
Juxian, and RZBC IE (excluding inter-company sales) for the POR.
Therefore, pursuant to 19 CFR 351.524(b)(2), we expensed the grant
amounts to the POR. On this basis, we preliminarily determine that the
RZBC Companies received a countervailable subsidy of 0.02 percent ad
valorem.
I. Shandong Province Science and Technology Development Fund
The GOC reported that this program was established in 2004,
pursuant to the Provisional Measures on Shandong
[[Page 33178]]
Province Applied Technology Research and Development Fund (the
Provisional Measures), to facilitate the development of science and
technology in Shandong Province.\83\ The program is jointly
administered by the Shandong Province Department of Finance and
Shandong Province Science and Technology Department.\84\
---------------------------------------------------------------------------
\83\ See GOC's First SQR--Part II (February 29, 2012) at 9.
\84\ Id.
---------------------------------------------------------------------------
The GOC provided a copy of the Provisional Measures which, at
Article 2, states that the fund is to promote technological development
and strengthen technological application.\85\ As stated in Article 8,
the fund will cover the project fees and plan management fees, i.e.,
labor, equipment, energy, and travel costs.\86\
---------------------------------------------------------------------------
\85\ Id. at Exhibit 2.
\86\ Id.
---------------------------------------------------------------------------
RZBC Co. reported that it received a subsidy under this program
during the POR. The GOC stated that RZBC Co. received assistance for
its ``continuous-analog-moving-bed lactic acid production technology''
project.\87\
---------------------------------------------------------------------------
\87\ Id. at 12.
---------------------------------------------------------------------------
We preliminary find that the grants received by RZBC Co. under
Shandong Province's Applied Technology Research and Development Fund
constitute a financial contribution, in the form of a direct transfer
of funds from the government, which bestows a benefit equal to the
amount of the grant within the meaning of sections 771(5)(D)(i) and
771(5)(E) of the Act. We also preliminarily find that, because the
receipt of assistance under the program is limited in law to certain
enterprises, i.e., companies with science and technological development
projects, the program is de jure specific within the meaning of section
771(5A)(D)(i) of the Act.
To calculate the benefit in the instant review, we divided the
grant amount approved by the total consolidated sales of RZBC Co., RZBC
Juxian, and RZBC IE (excluding inter-company sales) for the year in
which the grant was approved and found that the amount was less than
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are
expensing the total amount of the grant to the year of receipt, which
is the POR. On this basis, we preliminarily determine that the RZBC
Companies received a countervailable subsidy of 0.01 percent ad
valorem.
J. First Industrial Enterprises Development Budget in District Level
RZBC Co. reported that it received a grant from Donggang District
Economic and Trade Bureau and the Donggang District Financial Bureau
during the POR because it promoted the development of the industrial
enterprises in the district.\88\ RZBC Co. stated that the company
applied and underwent the approval process in order to receive the
funds.
---------------------------------------------------------------------------
\88\ Id. at III-24 and Exhibit 14 of RZBC Companies' March 2,
2012 supplemental questionnaire response (SQR).
---------------------------------------------------------------------------
We preliminarily determine that the grant received by RZBC Co.
constitute a financial contribution and a benefit under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively.
As discussed under ``Use of Facts Otherwise Available and Adverse
Inferences,'' above, the Department is relying on AFA to preliminarily
determine that the grant program is specific because the GOC failed to
provide information, which was requested of it on two occasions,
regarding the details of the government assistance.
To calculate the benefit in the instant review, we divided the
grant amount approved by the total consolidated sales of RZBC Co., RZBC
Juxian, and RZBC IE (excluding inter-company sales) for the year in
which the grant was approved and found that the amount was less than
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are
expensing the total amount of the grant to the year of receipt, which
is the POR. On this basis, we preliminarily determine that the RZBC
Companies received a countervailable subsidy of 0.02 percent ad
valorem.
K. First and Second Industrial Enterprises Development Budget in City
Level
According to RZBC Co., it received grants from Rizhao City, the
purpose of which is to encourage technical improvement and innovation.
Each grant is linked to a specific area of achievement and the approval
documents name the companies that received the grants. We preliminarily
determine that the grants received by RZBC Co. constitute a financial
contribution and a benefit under sections 771(5)(D)(i) and 771(5)(E) of
the Act, respectively. As discussed under ``Use of Facts Otherwise
Available and Adverse Inferences,'' above, the Department is relying on
AFA to preliminarily determine that the grant program is specific
because the GOC failed to provide information, which was requested of
it on two occasions, regarding the details of the government
assistance. To calculate the benefit in the instant review, we divided
the grant amount approved by the total consolidated sales of RZBC Co.,
RZBC Juxian, and RZBC IE (excluding inter-company sales) for the year
in which the grant was approved and found that the amount was less than
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are
expensing the total amount of the grant to the year of receipt, which
is the POR. On this basis, we preliminarily determine that the RZBC
Companies received a countervailable subsidy of 0.04 percent ad
valorem.
L. Award for Contribution to City and People
RZBC Co. reported that it received a grant from Rizhao City during
the POR because of the company's outstanding contribution to the
commercial development of the district.\89\ The company did not apply
for this grant.
---------------------------------------------------------------------------
\89\ See RZBC Companies' IQR at III-28.
---------------------------------------------------------------------------
We preliminarily determine that the grant received by RZBC Co.
constitutes a financial contribution and a benefit under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively. As discussed under
``Use of Facts Otherwise Available and Adverse Inferences,'' above, the
Department is relying on AFA to preliminarily determine that the grant
program is specific because the GOC failed to provide information,
which was requested of it on two occasions, regarding the details of
the government assistance.
The grant that RZBC Co. received during the POR was less than 0.5
percent of the total consolidated sales of RZBC Co., RZBC Juxian, and
RZBC IE (excluding inter-company sales) for the POR. Therefore,
pursuant to 19 CFR 351.524(b)(2), we expensed the grant amount to the
POR. On this basis, we preliminarily determine that the RZBC Companies
received a countervailable subsidy of 0.01 percent ad valorem.
M. Award for Enterprise Technology Improvement Project
RZBC Co. reported that it received a grant from Rizhao City during
the POR because it operated a technology improvement project.\90\ RZBC
Co. stated that the company did not apply for this grant program.
---------------------------------------------------------------------------
\90\ Id. at III-30.
---------------------------------------------------------------------------
We preliminarily determine that the grant received by RZBC Co.
constitutes a financial contribution and a benefit under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively. Regarding
specificity, because the grant is limited to firms operating technology
improvement projects within the city,
[[Page 33179]]
we preliminarily determine the grants to be specific under section
771(5A)(D)(i) of the Act.
The grant that RZBC Co. received during the POR was less than 0.5
percent of the total consolidated sales of RZBC Co., RZBC Juxian, and
RZBC IE (excluding inter-company sales) for the POR. Therefore,
pursuant to 19 CFR 351.524(b)(2), we expensed the grant amount to the
POR. On this basis, we preliminarily determine that the RZBC Companies
received a countervailable subsidy of 0.01 percent ad valorem.
N. Special Fund for Pollution Control of Three Rivers, Three Lakes, and
the Songhua River \91\
---------------------------------------------------------------------------
\91\ In its questionnaire response, RZBC Juxian referred to this
program as ``Resource Conservation and Environmental Protection.''
See RZBC Companies' IQR at ``RZBC Juxian'' page III-20.
---------------------------------------------------------------------------
The Department found this program to be countervailable in the
Citric Acid First Review. See Citric Acid First Review ID Memo at
``Other Subsidies Received by RZBC'' and ``Special Fund for Pollution
Control of Three Rivers, Three Lakes, and the Songhua River.'' On the
record of the instant review, the GOC stated that it does not challenge
the Department's countervailable finding for this program.\92\ RZBC
Juxian reported that it received a benefit under this program during
the POR for a sewage treatment project.\93\
---------------------------------------------------------------------------
\92\ See GOC's SQR (February 29, 2012) at 2.
\93\ See RZBC Companies' IQR at ``RZBC Juxian'' page III-19
through III-21, and March 2, 2012, SQR at ``RZBC Juxian'' Exhibit
20.
---------------------------------------------------------------------------
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.'' Id. The program is administered by the Shandong Finance
Department and the Shandong Environmental Protection Bureau. Id. 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.
Id.
Because the fund is limited to enterprises located in these
designated areas, the Department determined in the first administrative
review that the program is specific within the meaning of section
771(5A)(D)(iv) of the Act. Id. The Department also found 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 under 19 CFR 351.504(a). Id. at ``Other Subsidies Received
by RZBC.''
To calculate the benefit in the instant review, we divided the
grant amount approved by the total consolidated sales of RZBC Co., RZBC
Juxian, and RZBC IE (excluding inter-company sales) for the year in
which the grant was approved and found that the amount was less than
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are
expensing the total amount of the grant to the year of receipt, which
is the POR. On this basis, we preliminarily determine that the RZBC
Companies received a countervailable subsidy of 0.16 percent ad
valorem.
O. Shandong Self-Innovation Subsidy
The GOC reported that this program was established in 2007,
pursuant to the Measures on Shandong Province Self-Innovation Results
Commercialization Special Fund (the Measures), to promote the
commercialization of self-innovation results to facilitate the
development of high technology industries with intellectual property
rights, to guide economic growth and to improve the competitiveness of
Shandong Province.\94\ The program is jointly administered by the
Shandong Province Department of Finance and Shandong Province Science
and Technology Department.\95\
---------------------------------------------------------------------------
\94\ See GOC's First SQR--Part II (February 29, 2012) at 2.
\95\ Id. at 3.
---------------------------------------------------------------------------
The GOC provided a copy of the Measures which, at Article 8, states
that the fund is to strictly adhere to the strategic plan of Shandong
Province's medium- and long-term technology development plan and focus
on the development of 15 high-tech industry groups.\96\ As stated in
Article 10, depending on the characteristics of the project and
enterprise, assistance under the fund consists of direct funding of
projects, equity investment, discount loans, financial rewards, and
reimbursable aid.\97\
---------------------------------------------------------------------------
\96\ Id. at Exhibit 1.
\97\ Id. at Exhibit 1.
---------------------------------------------------------------------------
RZBC Juxian reported that it received a subsidy under this program
during the POR.\98\ The GOC stated that RZBC Juxian received assistance
for its ``citric acid bio-manufacturing key technology development and
application'' project.\99\
---------------------------------------------------------------------------
\98\ See RZBC Companies' IQR at ``RZBC Juxian'' page III-24 and
III-25.
\99\ See GOC's First SQR--Part II at 6.
---------------------------------------------------------------------------
We preliminarily find that the grant received by RZBC Juxian under
Shandong Province's Self-Innovation Results Commercialization Special
Fund constitutes a financial contribution, in the form of a direct
transfer of funds from the government, which bestows a benefit equal to
the amount of the grant within the meaning of sections 771(5)(D)(i) and
771(5)(E) of the Act. We also preliminarily find that, because the
receipt of assistance under the program is limited in law to certain
enterprises, i.e., 15 high-tech industry groups, the program is de jure
specific within the meaning of section 771(5A)(D)(i) of the Act.
To calculate the benefit, we divided the grant amount approved by
the total consolidated sales of RZBC Co., RZBC Juxian, and RZBC IE
(excluding inter-company sales) for the year in which the grant was
approved and found that the amount was less than 0.5 percent.
Therefore, in accordance with 19 CFR 351.524(b)(2), we are expensing
the grant to the POR, the year of receipt. On this basis, we
preliminarily determine that the RZBC Companies received a
countervailable subsidy of 0.03 percent ad valorem.
P. Enterprise Development Supporting Fund From Zibo City Financial
Bureau
In Citric Acid First Review, the Department found that Sisha, RZBC
Co.'s prior cross-owned parent company, received a countervailable
subsidy under this program in 2003. See Citric Acid First Review ID
Memo at ``Enterprise Development Fund from Zibo City Financial
Bureau.'' The Department determined to use Sisha's consolidated sales
as reported by Sisha as the denominator for the 2003 allocation test
pursuant to 19 CFR 351.524(b)(2). Id. We found that the 2003 grant was
greater than 0.5 percent of the reported consolidated sales for 2003.
Id. Thus, because the 2003 grant was a non-recurring benefit consistent
with 19 CFR 351.524(c)(2)(iii), we allocated the benefit over the 10-
year AUL.
Because RZBC Co. and Sisha ceased to be cross-owned after March
2008, we applied a Sisha/RZBC Co. sales ratio to compute the benefit
attributable to the RZBC Companies during the POR; this approach is
consistent with the Department's decision in Citric Acid First Review.
Id. We then divided that benefit amount by RZBC Co.'s, RZBC IE's, and
RZBC Juxian's total combined sales (excluding inter-company sales) for
2010 to obtain the ad valorem subsidy rate. On this basis, we
preliminary find that the RZBC Companies received a countervailable
subsidy of 0.07 percent ad valorem.
[[Page 33180]]
II. Programs Preliminarily Determined Not To Provide Countervailable
Benefits During the POR
A. Award of Financial Construction
RZBC Juxian reported that it received a benefit under this program
during the POR.\100\ We preliminarily determine that the benefit from
this program results in a net subsidy rate that is less than 0.005
percent ad valorem. Consistent with our past practice, we preliminarily
have not included this program in our net countervailing duty rate
calculations. See, e.g., Coated Paper Decision Memorandum at ``Analysis
of Programs, Programs Determined Not To Have Been Used or Not To Have
Provided Benefits During the POI for GE;'' see also Certain Steel
Wheels from the People's Republic of China: Final Affirmative
Countervailing Duty Determination, Final Affirmative Critical
Circumstances Determination, 77 FR 17017 (March 23, 2012) (Steel Wheels
from the PRC), and accompanying Issues and Decision Memorandum (Steel
Wheels Decision Memorandum) at ``Income Tax Reductions for Firms
Located in the Shanghai Pudong New District.''
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\100\ See RZBC Companies' IQR at ``RZBC Juxian'' page III-22 and
III-23.
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III. Programs Preliminarily Determined Not To Be Used \101\
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\101\ In this section, we refer to programs preliminarily found
to be not used by the RZBC Companies.
---------------------------------------------------------------------------
We preliminarily find that the RZBC Companies did not use the
following programs during the POR:
Reduced Income Tax Rates to Foreign Invested Enterprises (FIEs)
Based on Location
Reduced Income Tax Rate for Tech or Knowledge Intensive FIEs
Two Free, Three Half Tax Program for FIEs
Local Income Tax Exemption & Reduction Program for Productive FIEs
VAT Rebate on Purchases by FIEs of Domestically Produced Equipment
Famous Brands--Yixing City
Anqui City Energy & Water Savings Grant
Land for LTAR in Anqui Economic Development Zone
Land-Use Rights Extension in Yixing City
National Government Policy Lending
Fund for Optimizing Import and Export Structure of Mechanical
Electronics and High and New Technology Products
International Market Development Fund Grants for Small and Medium
Enterprises
Fund for Energy-saving Technological Innovation
Jiangsu Province Energy Conservation and Emissions Reduction Program
Rizhao City: Subsidies to Encourage Enterprise Expansion
Rizhao City: Subsidy for Antidumping Investigations
Rizhao City: Special Fund for Enterprise Development
Rizhao City: Technological Innovation Grants
Rizhao City: Technology Research and Development Fund
Shandong Province: Special Fund for the Establishment of Key
Enterprise Technology Centers
Shandong Province: Subsidy for Antidumping Investigations
Shandong Province: Award Fund for Industrialization of Key Energy-
saving Technology
Shandong Province: Environmental Protection Industry R&D Funds
Shandong Province: Waste Water Treatment Subsidies
Yixing City: Leading Enterprise Program
Yixing City: Tai Lake Water Improvement Program
Loans Provided to the Northeast Revitalization Program
State Key Technology Renovation Project Fund
National Level Grants to Loss-making State-Owned Enterprises (SOEs)
Income Tax Exemption Program for Export-Oriented FIEs
Tax Benefits to FIEs for Certain Reinvestment of Profits
Preferential Income Tax Rate for Research and Development for FIEs
Preferential Tax Programs for Encouraged Industries
Preferential Tax Policies for Township Enterprises
Provincial Level Grants to Loss-making SOEs
Reduced Income Tax Rates for Encouraged Industries in Anhui Province
Provision of Land for Less Than Adequate Remuneration in Anhui
Province
Funds for Outward Expansion of Industries in Guangdong Province
Income Tax Exemption for FIEs Located in Jiangsu Province
Administration Fee Exemption in the Yixing Economic Development Zone
(YEDZ)
Tax Grants, Rebates, and Credits in the YEDZ
Provision of Construction Services in the YEDZ for LTAR
Grants to FIEs for Projects in the YEDZ
Provision of Electricity in the YEDZ for LTAR
Provision of Water in the YEDZ for LTAR
Provision of Land in the YEDZ for LTAR
Provision of Land to SOEs for LTAR
Torch Program--Grant
Discounted Loans for Export-Oriented Industries
Provision of Land in the Zhuqiao Key Open Park for LTAR
Special Funds for Energy Saving and Recycling Program
Water Resource Reimbursement Program
Shandong Province: Energy Saving Award
VAT and Import Duty Exemptions on Imported Equipment
Ecology Compensation Subsidy Funds \102\
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\102\ This program discovered during the course of the review
was expensed prior to the POR.
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Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated a subsidy
rate for the RZBC Companies, the only producer/exporter covered by this
administrative review. We preliminarily determine that the total
estimated net countervailable subsidy rate for the RZBC Companies is
5.27 percent ad valorem for 2010.
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
subject merchandise by the RZBC Companies entered or withdrawn from
warehouse, for consumption from January 1, 2010, through December 31,
2010, at the applicable rate.
Cash Deposit Instructions
The Department also intends to instruct CBP to collect cash
deposits of estimated countervailing duties in the amounts calculated
for year 2010. 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. Case and rebuttal briefs must be
submitted to the Department electronically using IA ACCESS. 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 by electronically filing the request
via IA ACCESS. 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.
[[Page 33181]]
Dated: May 30, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-13585 Filed 6-4-12; 8:45 am]
BILLING CODE 3510-DS-P