[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31962]
[Federal Register: December 28, 1994]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-830]
Final Determination of Sales at Less Than Fair Value: Coumarin
From the People's Republic of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: December 28, 1994.
FOR FURTHER INFORMATION CONTACT:
David J. Goldberger or Louis Apple, Office of Antidumping
Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC. 20230; telephone: (202) 482-
4136 or (202) 482-1769, respectively.
Final Determination:
We determine that courmarin from the People's Republic of China
(PRC) is being, or is likely to be, sold in the United States at less
than fair value (LTFV), a provided in section 735 of the Tariff Act of
1930, as amended (the Act). The estimated margins are shown in the
``Continuation of Suspension of Liquidation'' section of this notice.
The U.S. Department of Commerce (the Department) also determines that
critical circumstances exist for all exporters except Jiangsu Native
Produce Import & Export Corp. (Jiangsu Native).
Case History
Since the preliminary determination on July 24, 1994 (Notice of
Preliminary Determination of Sales at Less Than Fair Value: Courmarin
from the People's Republic of China, 59 FR 3841, July 30, 1994), the
following events have occurred.
During August 1994, respondents submitted revised information on
factors of production. From August 13 through 22, 1994, we verified the
responses of the exporters Jiangsu Native and Tianjin Native Produce
Import & Export Corp. (Tianjin Native); and the manufacturers Changzhou
No. 2 Chemical Factory (Changzhou No. 2) and Tianjin Perfumery Factory
(Tianjin Perfumery). Prior to scheduled verifications, counsel for
Tianjin Chemicals Import & Export Corp. and Gaoyo City Perfumery
Factory advised the Department that these clients would not agree to
verification. On August 18, 1994, counsel withdrew its appearance for
the two respondents.
On August 11, 1994, we received a request from respondents to
postpone the final determination in this investigation, pursuant to 19
CFR 353.20. Accordingly, on August 31, 1994, we did so (59 FR 46618,
September 9, 1994).
Petitioner and respondents filed case briefs on October 19, 1994,
and rebuttal briefs on October 24, 1994. A public hearing was held on
October 26, 1994.
Scope of Investigation
The product covered by this investigation is courmarin. Courmarin
is an aroma chemical with the chemical formula C9H6O2
that is also known by other names, including 2H-1-benzopyran-2-one,
1,2-benzopyrone, cis-o-coumaric acid lactone, courmarinic anhydride, 2-
Oxo-1,2-benzopyran, 5,6-benzo-alpha-pyrone, ortho-hydroxyc innamic acid
lactone, cis-ortho-courmaric acid anhydride, and tonka bean camphor.
All forms and variations of courmarin are included within the scope
of the investigation, such as courmarin in crystal, flake, or powder
form, and ``crude'' or unrefined courmarin (i.e. prior to purification
or crystallization). Excluded from the scope are ethylcourmarins
(C11H10O2) and methylcoumarins (C10H8O2).
Coumarin is classifiable under subheading 2932.21.0000 of the
Harmonized Tariff Schedule of the United States (HTSUS). Although the
HTSUS subheading is provided for convenience and customs purposes, our
written description of the scope of this investigation is dispositive.
Period of Investigation
The period of investigation (POI) is July 1 through December 31,
1993.
Separate Rates
Both of the participating exporters, Jiangsu Native and Tianjin
Native, have requested a separate, company-specific dumping margin.
Their respective business licenses indicate that they are owned ``by
all the people.'' In the Final Determination of Sales at Less Than Fair
Value: Silicon Carbide from the People's Republic of China, 59 FR
22585, (May 2, 1994) (Silicon Carbide), we found that the PRC central
government had devolved control of state-owned enterprises, i.e.,
enterprises ``owned by all the people.'' As a result, we determined
that companies owned ``by all the people'' were eligible for individual
rates, if they met the criteria developed in the Final Determination of
Sales at Less Than Fair Value: Sparklers from the People's Republic of
China 56 FR 20588 (May 6, 1991) (Sparklers) and amplified in Silicon
Carbide. Under this analysis, the Department assigns a separate rate
only when an exporter can demonstrate the absence of both de jure and
de facto governmental control over export activities.
De Jure Analysis\1\
The PRC laws placed on the record of this case establish that the
responsibility for managing companies owned by ``all the people,''
including the respondent companies, has been transferred from the
government to the enterprise itself. These laws include: ``Law of the
People's Republic of China on Industrial Enterprises Owned by the Whole
People,'' adopted on April 13, 1988 (1988 Law); ``Regulations for
Transformation of Operational Mechanism of State-Owned Industrial
Enterprises,'' approved on August 23, 1992 (1992 Regulations); and the
``Temporary Provisions for Administration of Export Commodities,''
approved on December 21, 1992 (Export Provisions). In particular, the
1988 Law states that enterprises have the right to set their own prices
(see Article 26). This principle was restated in the 1992 Regulations
(see Article IX). The Export Provisions list those products subject to
direct government control. Coumarin does not appear on the Export
Provisions list and is not, therefore, subject to the constraints of
those provisions. Consistent with Silicon Carbide, we determine that
the existence of these laws demonstrates that Jiangsu Native and
Tianjin Native, companies owned by ``all the people,'' are not subject
to de jure control.
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\1\Evidence supporting, though not requiring, a finding of de
jure absence of central control includes: (1) An absence of
restrictive stipulations associated with an individual exporter's
business and export licenses; (2) any legislative enactments
decentralizing control of companies; or (3) any other formal measure
by the government decentralizing control of companies.
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An additional PRC law concerning foreign exchange was obtained by
the Department during this investigation. During verification,
Changzhou No. 2 submitted a copy of the PRC's ``Provisional Regulations
on Handling the Turnover to the State of Foreign Exchange Quotas,''
issued on January 1, 1991 (Foreign Exchange Regulations). As stated in
these regulations, ``[i]n the case of general commodities, 20 percent
of export exchange earnings shall be turned over gratis to the State.''
We find that these foreign exchange requirements have functioned as an
implied export tax rather than a demonstration of state control over
export activities. Therefore, the existence of these foreign exchange
regulations is not a cause for a finding of de jure government control.
(See Comment 1 for further discussion of this issue).
In light of reports\2\ indicating that laws shifting control from
the government to the enterprises themselves have not been implemented
uniformly, our standard analysis of de facto control becomes critical
in determining whether respondents are, in fact, subject to
governmental control.
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\2\See ``PRC Government Findings on Enterprise Autonomy,'' in
Foreign Broadcast Information Service-China-93-133 (July 14, 1993)
and 1992 Central Intelligence Agency Report to the Joint Economic
Committee Hearings on Global Economic and Technological Change:
Former Soviet Union and Eastern Europe and China, Pt. 2 (102 Cong.,
2d Sess.).
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De Facto Control Analysis\3\
In the course of verification, we confirmed that export prices for
both Jiangsu and Tianjin Native are not set, nor subject to approval,
by any government authority. This point was supported by the companies'
sales documentation and customer correspondence. We also confirmed,
based on examination of documents related to sales negotiations,
written agreements and other correspondence, that respondents have the
authority to negotiate and sign contracts and other agreements
independent of government intervention. We further found that, during
the POI, although required to remit a portion of their foreign exchange
earnings to the government, respondents retained proceeds from their
export sales, net of the ``implied export tax,'' and made independent
decisions regarding disposition of profits and financing of losses. The
respondents' financial statements, accounting records, and bank
statements supported this conclusion.
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\3\The factors considered include: (1) Whether the export prices
are set by or subject to the approval of a governmental authority;
(2) whether the respondent has authority to negotiate and sign
contracts and other agreements; (3) whether the respondent has
autonomy from the government in making decisions regarding the
selection of management; and (4) whether the respondent retains the
proceeds of its export sales and makes independent decisions
regarding disposition of profits or financing of losses (see,
Silicon Carbide).
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Based on our examination of company correspondence files during
verification, we have determined that both Jiangsu Native and Tianjin
Native had autonomy from the central government in making decisions
regarding the selection of management. In the case of Tianjin Native,
the general manager was elected by an employee assembly. We found no
involvement by any government entity in Tianjin Native's selection of
management.
With respect to Jiangsu Native, we found that the general manager
was appointed by the local administering authority, the Jiangsu Council
on foreign Trade and Economic Cooperation (JCOFTEC). While this may
indicate that Jiangsu Native is subject to the control of JCOFTEC,
there is no evidence that any other exporter of the subject merchandise
is currently under the control of JCOFTEC. Therefore, we have concluded
that this does not preclude Jiangsu Native from receiving a separate
rate.\4\ This determination is consistent with our recent decision in
Final Determination of Sales at Less Than Fair Value: Paper Clips from
the People's Republic of China, 59 JR 51168, (October 7, 1994) (Paper
Clips).
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\4\All non-responding exporters are presumed to be under the
control of the central government. There is no basis on which to
conclude that any non-responding exporter is controlled by JCOFTEC.
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Based on the foregoing analysis, we have determined that Jiangsu
Native and Tainjin Native are entitled to separate rates.
Nonmarket Economy
The PRC has been treated as a nonmarket economy country (NME) in
past antidumping investigations (see e.g., Final Determination of Sales
at Less Than Fair Value: Saccharin from the People's Republic of China,
59 FR 58818 (November 15,1994) (Saccharin). No information has been
provided in this proceeding that would lead us to overturn our former
determinations. Therefore, in accordance with section 771(18)(c) of the
Act, we continue to treat the PRC as an NME for purposes of this
investigation.
Surrogate Country
Section 773(c)(4) of the Act requires the Department to value the
NME producers' factors of production, to the extent possible, in one or
more market economy countries that are (1) at a level of economic
development comparable to that of the NME country, and (2) significant
producers of comparable merchandise. The Department has determined that
India is the country most comparable to the PRC in terms of overall
economic development (see Memorandum from David Mueller, Director,
Office of Policy, to Gary Taverman, Director of Division I of Office of
Antidumping Investigations, dated March 10, 1994). In addition, there
is evidence on the record that India is a significant producer of
coumarin.
Fair Value Comparisons
To determine whether sales of coumarin from the PRC to the United
States by Jiangsu Native and Tianjin Native were made at less than fair
value, we compared the United States price (USP) to the foreign market
value (FMV), as specified in the ``United States Price'' and ``Foreign
Market Value'' sections of this notice.
United States Price
United States price was calculated on the basis of purchase price,
as described in the preliminary determination, in accordance with
section 772(b) of the Act. Pursuant to findings at verification, we
adjusted foreign inland freight for Changzhou No. 2 based on verified
distances between factory and port of exportation. No additional
revisions were made to either exporter's USP.
Foreign Market Value
In accordance with section 773(c) of the Act, we calculated FMV
based on factors of production reported by the factories in the PRC
which produced the subject merchandise for the two participating
exporters. We calculated FMV based on factors of production as cited in
the preliminary determination, making the following adjustments:
For Tianjin Perfumery, we based the value for the
salicylaldehyde input on a weighted-average of self-produced
salicylaldehyde and purchased salicylaldehyde, according to the
proportion of each used during the POI. Labor and energy factors were
prorated between salicylaldehyde and coumarin production based on
verification information. (See Comment 5 for further discussion).
For Changzhou No. 2, we recalculated inland freight
distances between factory and input supplier, based on verified
distances; adjusted the number of direct labor hours upward, on
verified time sheets and included a factor for unreported usage of
plastic bags for packing, which was discovered at verification.
We added input freight values to packing materials for
both producers.
We revised the factor calculations for both producers to
remove water as a separate material input, as the Department is
treating water as part of ``factory overhead'' (see Comment 9 for
further discussion).
To calculate FMV, the verified factor amounts for each company were
multiplied by the appropriate surrogate values for the different input
materials. In determining which surrogate value to use for valuing each
factor of production, we selected, where it was available and was non-
aberrational, publicly available published information (``public
information'') from India. If there were multiple such sources for a
given factor, we selected the value that was (a) most current; (b)
product specific; and (c) tax-exclusive. With regard to those few
factors for which we did not have public information, or where such
values were considered aberrational (as discussed below), we have
relied on price quotes obtained in India and submitted by petitioner.
As a result, we have used the same surrogate values used in the
preliminary determination, with the following exceptions:
For chlorine and hydrochloric acid, we have reassigned
values based on price quotes submitted by petitioner, because we found
that values derived from Indian import statistics are aberrational.
(See Comment 6 for further discussion of this issue.)
For inputs purchased from market-economy countries, we
have assigned the market price to those inputs, if they were purchased
by the manufacturers directly from foreign suppliers in convertible
currency. Inputs purchased from market-economy countries by trading
companies for use by their suppliers, have been assigned the surrogate
value (see Comment 7 for further discussion of this issue).
Finally, with respect to by-product offsets, we have revised our
FMV calculations to offset the cost to manufacture coumarin by the
amount of by-product recovered, which is consistent with Generally
Accepted Accounting Principles (GAAP) and Department practice (see
Final Determination of Sales at Less Than Fair Value: Sebacic Acid from
the PRC, 59 FR 28053 (May 31, 1994)) (``Sebacic Acid''). In the
preliminary determination, we accepted an offset to the cost of
materials for by-product values. For Changzhou No. 2, we have
disallowed the offset for sodium hypochlorite because the company could
not demonstrate than an economic benefit accrued to the firm from the
disposition of this by-product (see Comment 8 for further discussion).
Best Information Available (BIA)
In this investigation, some PRC exporters failed to respond to our
questionnaire or failed to participate in verification. We have
determined that those exporters should receive rates based on BIA. In
addition, because we presume all exporters to be centrally controlled,
absent verified information to the contrary, in accordance with section
776(c) of the Act, we have assigned a margin based on BIA to all
exporters who have not demonstrated their independence from central
control. This determination is consistent with our use of a BIA-based
``All Others'' rate in other recent investigations (see e.g., Silicon
Carbide).
In determining what to use as BIA, the Department follows a two-
tiered methodology, whereby the Department normally assigns less
adverse margins to those respondents that cooperated in an
investigation and more adverse margins for those respondents that did
not cooperate in an investigation. As outlined in the Final
Determination of Sales at Less Than Fair Value: Certain Hot-Rolled
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat
Products, and Certain Cut-to-Length Carbon Steel Plated From Belgium
(58 FR 37083, July 9, 1993), when a company refuses to provide the
information requested in the form required, or otherwise significantly
impedes the Department's investigation, it is appropriate for the
Department to assign to that company the higher of (a) the highest
margin alleged in the petition, (b) the highest calculated rate of any
respondent in the investigation, or (c) the margin from the preliminary
determination for that firm.
We consider all PRC exporters that did not respond, failed to
participate in verification, or otherwise did not participate in the
investigation, to be uncooperative and are assigning to them the
highest margin based on information submitted in the petition, as
recalculated by the Department. In recalculating the petition rate, we
reassigned the value of salicylaldehyde based on the average unit value
for the Indian import statistics category that includes
salicylaldehyde. We did not adjust the petition margins for chlorine
and hydrochloric acid values, because these are inputs used in
salicylaldehyde production, and the petition's margin methodology was
not based on the input values for salicylaldehyde. When applying BIA
from the petition, Department practice is not to revise the information
accepted at initiation, except where the petition includes erroneous or
grossly aberrational data (see e.g., Final Determination of Sales at
Less Than Fair Value: Certain Cased Pencils from the People's Republic
of China, 59 FR 55625, November 8, 1994) (Pencils). In this instance,
the surrogate value cited for salicylaldehyde, the principal raw
material, was fair in excess of any other value for the material
obtained in the course of this investigation. Therefore, we revised the
petition calculation using the same value for salicylaldehyde that we
are using in our company-specific FMV calculations. The recalculated
petition rate applies to all exporters other than those responding
exporters that are receiving separate rates.
Critical Circumstances
In our preliminary determination, we found that critical
circumstances exist with respect to imports of coumarin from Tianjin
Native and ``all other'' exporters in the PRC. We also found that
critical circumstances did not exist with respect to imports of
coumarin from Jiangsu Native.
Pursuant to section 733(e)(1) of the Act and 19 CFR 353.16, we
based that preliminary determination on a finding of (1) an imputed
knowledge of dumping to the importers because the estimated dumping
margins were in excess of 25 percent, and (2) massive imports of
coumarin over a relatively short period, based on an analysis of
respondents' shipment data. We used BIA as the basis for our
determination of critical circumstances for non-respondent exporters.
Because information submitted for the preliminary determination has
been verified, and no additional information was submitted since that
determination, the Department affirms the analysis as explained in its
preliminary finding. Accordingly, we determine that critical
circumstances exist with respect to imports of coumarin from Tianjin
Native and firms covered by the ``All Others'' rate. Regarding imports
of coumarin from Jiangsu Native, we determine that critical
circumstances do not exist, as we did at the preliminary determination.
Verification
As provided in section 776(b) of the Act, we verified the
information submitted by respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and production records, and original
source documents provided by respondents.
Interested Party Comments
Comment 1: Separate Rates Eligibility--The petitioner argues that
the Department should find that Jiangsu Native and Tianjin Native are
subject to de jure and de facto control by the central government in
the PRC. The respondents argue that ``the totality of the information
on the record'' demonstrates that the respondent companies are not
subject to de jure and de facto state control.
De Jure Analysis Comments
The petitioner argues that the laws submitted by the respondents in
this investigation ``evince significant governmental control over these
companies.'' As an example, the petitioner cites to Chapter VI, Article
55, of the 1988 Law, which states that ``[t]he government, or the
government department in charge, shall * * * uniformly issue mandatory
plans to enterprises * * * examine and approve plans submitted by
enterprises * * * appoint or remove from office or reward or penalize
factory directors.'' The petitioner also cites to the Foreign Exchange
Regulations, as evidence that enterprises in the PRC are subject to
significant foreign currency surrender requirements and other
restrictions on access to foreign currency earnings. Specifically, the
petitioner cites to Article 1, Section 3 of the Foreign Exchange
Regulations which states that ``[i]n the case of general commodities,
20% of export exchange earnings shall be turned over gratis to the
State.'' Finally, the petitioner cites to a 1994 World Bank report,
China Foreign Trade Reform (World Bank Report), which describes a
foreign trade contract system in the PRC which has ``the effect of
holding local authorities and FTCs (foreign trade companies) to what
are in effect mandatory export targets.''
The respondents argue that the Department has reviewed the 1988 Law
in previous PRC investigations, and has consistently rejected that
document as a basis for a finding of de jure control. The respondents
further argue that mandatory plans and foreign trade contracts are
reserved for controlled industries or products in the PRC, as listed in
the Export Provisions list--and that coumarin is not one of the
controlled products. The respondents also argue that the Department has
recognized the limited scope of mandatory plans in the PRC, and cite to
a verification report in Silicon Carbide which reported that ``[a]fter
1988, the central government was not in the internal workings of
companies. In particular, there were no mandatory plans, with the
exception of critical elements of the national economy,'' * * * such as
``grain, cotton, and coal.'' (See, Silicon Carbide, Verification Report
of Meeting at Ministry of Foreign Trade and Economic Cooperation
(MOFTEC), February 15, 1994). With respect to the Foreign Exchange
Regulations, the respondents argue that these regulations reflect the
``complex foreign exchange system'' relating to Chinese currency and
foreign exchange credits in the PRC, but that the regulations ``do not
require that the respondents give a portion of their sales revenues to
the government.''
De Facto Control Comments
The petitioner argues that an examination of the factors considered
by the Department in assessing evidence of de facto control, leads to a
finding of government control of export functions. According to the
petitioner, respondent companies: (1) Do not freely establish export
prices nor have unrestricted autonomy to negotiate and sign contracts,
because of the restrictions and controls imposed by the foreign trade
contract system as outlined in the World Bank Report; (2) do not have
autonomy regarding selection of management, because the general manager
of Jiangsu Native was appointed by the JCOFTEC; and (3) do not retain
all proceeds of their export sales because of significant restrictions
on access to foreign currency earnings, and, in the case of Tianjin
Native, the respondent's proceeds from export sales are deposited into
an account labeled ``China Native,'' the national trading company known
as China Native Produce Import & Export Corporation.
The respondents argue that the evidence on the administrative
record in this investigation, ``overwhelmingly'' supports a finding of
a de facto lack of state control. The respondents assert that (1) the
Department examined the exporter's purchase orders, invoices, and
correspondence files, and these documents demonstrated that the
exporters freely negotiate prices with customers; (2) JCOFTEC's
``recommendation'' of a general manager was done according to law; and
(3) China Native does not have any access or control over Jiangsu
Native's bank account, and respondents were able to retain earnings in
the amount invoiced to customers at the Renminbe converted rate. In
addition, the respondents argue that the Department examined
respondents' correspondence and financial files at verification and
found no evidence of mandatory business plans.
DOC Position: Regarding mandatory plans, we agree with the
respondents that the provision in the 1988 Law for mandatory export
plans applies to controlled industries or products, as identified in
the Export Provisions list. Coumarin is not identified in the list. The
business plans obtained from respondent companies at verification,
which were prepared by the respondents and submitted to the local
administering authorities, consisted of export targets based on company
growth from previous years. We find that these business plans do not
demonstrate mandatory government planning or government interference in
the respondents' export activities.
With respect to the foreign trade contract system described in the
World Bank Report, we find respondents' statement that such contracts,
which fix export quantities for specific products, only apply to
controlled industries as identified in the Export Provisions list, to
be consistent with the evidence of record. We find that there is no
evidence on the record indicating that a government entity controlled
Jiangsu Native's or Tianjin Native's report activities during the POI
through a foreign trade contract. To the contrary, we verified that the
companies negotiated and signed contracts and other agreements without
interference from any government entity. Although business plans are
part of the foreign trade contracting system as discussed above, we do
not find these plans demonstrate government interference in the
respondents' exporting activities.
Regarding the foreign currency requirements cited by petitioner, we
agree with the World Bank Report which refers to the PRC's foreign
exchange system as a ``very substantial tax burden on Chinese
exports,'' and an ``implied export tax.'' Absent the foreign currency
requirements, an exporter would have realized a greater portion of the
income associated with its export sales. This income reduction is
comparable to a tax payment. We found that during the POI, Jiangsu
Native retained proceeds from its export sales, net of the ``implied
export tax,'' and made independent decisions regarding the disposition
of profits.
As stated in the ``Separate Rates'' section of this notice, we have
determined that both Jiangsu Native and Tianjin Native had autonomy
from the central government in making decisions regarding the selection
of management. With respect to Jiangsu Native, although JCOFTEC may
exercise some control through the appointment of the general manager,
there is no evidence that any other exporter of the subject merchandise
is currently under the control of JCOFTEC. Therefore, Jiangsu Native
remains eligible for a separate rate.
Comment 2: Separate Rates for Suppliers--The respondents argue that
manufacturing respondents should be assigned the same rate as their
respective exporters, and not the ``all others'' rate. The respondents
urge the Department to issue instructions to Customs that clarify that
the calculated rates apply to the particular manufacturers. In support
of this argument, the respondents cite Departmental practice outlined
in Final Determination of Sales at Less Than Fair Value: Sulfur Dyes,
Including Sulfur Vat Dyes, from the People's Republic of China (58 FR
7543, February 8, 1993) (Sulfur Dyes), where the Department listed LTFV
margins for specific exporters paired with the PRC factory which
supplied that exporter. The respondents argue further that because the
manufactures in this investigation were ``cooperative,'' it would be
``contrary to the statute and judicial precedent to assign a BIA margin
to these companies.''
Also relying on Sulfur Dyes, the petitioner agrees with the
respondents to the extent that it is appropriate for the Department to
assign the margin calculated for a given exporter to that exporter and
its supplying factory. However, the petitioner argues that the
Department should not assign the responding manufacturer separate rates
because: (1) the companies have not responded to the Department's
separate rates questionnaire and, therefore, have not demonstrated that
they are entitled to any rate other than the ``all others'' rate; and
(2) separate rates should only apply to the producer/exporter pair on
whom that rate was based. The petitioner cites to Paper Clips where the
Department found that companies that had claimed that they had no
shipments during the POI could not receive any rate other than the
country-wide BIA rate because those companies had not replied to the
Department's separate rates questionnaire.
DOC Position: As noted by the petitioner, Department practice is to
examine sales by exporters. We have determined that exporters and
producers should not be ``paired'' in our instructions to Customs.
Although exporters and producers were paired in Sulfur Dyes, recent
Department practice has been to assign rates only to exporters, and in
the case of multiple suppliers, margins have been based on weight-
averaged FMVs (see, e.g., Final Determination of Sales at Less Than
Fair Value: Certain Cut-to-length Carbon Steel Plate from Poland (58 FR
27205, July 9, 1993), Pencils,\5\ and Preliminary Determination of
Sales at Less Than Fair Value: Magnesium from the People's Republic of
China, 59 FR 55420, November 7, 1994). In this investigation, the
manufacturing respondents did not export coumarin to the United States.
Our separate rates determinations apply only to the exporters of the
subject merchandise who have responded to the Department's
questionnaire and were verified on this issue. Therefore, we are not
assigning rates to the suppliers.
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\5\In Pencils, the Department calculated a zero rate for one
exporter based upon the factors of production provided by the
suppliers of the exporter. The Department determined that the zero
rate applied only to the exporter's sales of merchandise produced by
those suppliers, and that, if the exporter sold merchandise produced
by other suppliers, that merchandise would be subject to the ``All
Others'' rate. However, in the same case, the Department gave
another exporter that had multiple suppliers, and did not have a
zero rate, a single margin based on the weighted-average FMV of all
suppliers.
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Comment 3: Exporters' SG&A and Profit--The petitioner argues that
the Department must include SG&A expenses and profit of the exporters,
as well as the suppliers, to arrive at the FMV of the subject
merchandise. The resulting FMV would be based on the SG&A and profits
associated with sales of coumarin to the United States during the POI.
The petitioner cites Department practice in Final Determination of
Sales at Less Than Fair Value: Fresh and Chilled Atlantic Salmon from
Norway (56 FR 7665, February 25, 1991) (Norwegian Salmon), which stated
that the Department ``combined the SG&A of the farmer and the exporter
for the statutory ten percent test.'' The petitioner argues that
because responding exporters did not report SG&A expenses, the
Department should rely on the manufacturers' SG&A, as well as profit,
rates and apply them to the exporters' costs.
The respondents argue that the Department followed its normal
practice in the preliminary determination, in that the surrogate value
for SG&A includes all selling expenses necessary to sell chemical
products in the home market (see e.g., Paper Clips, Preliminary
Determination of Sales at Less Than Fair Value: Silicomanganese from
the People's Republic of China (59 FR 31199, June 17, 1994), Sebacic
Acid, and Silicon Carbide). The respondents further assert that the
petitioner has incorrectly interpreted Norwegian Salmon because in that
case, the Department included the SG&A expenses of the exporters
because the farmers had no selling expenses, and the case involved the
use of third country sales as FMV. The respondents claim that the
petitioner's suggested calculation for SG&A and profit would deviate
from the Department's normal practice, and would result in double-
counting.
DOC Position: We find the petitioner's reliance on Norwegian Salmon
to be misplaced because of the differences in fact patterns in the
investigations, as cited by the respondents. Therefore, consistent with
Department practice in NME cases, as cited by the respondents, we find
that SG&A and profit of the exporters should not be included in the
calculation of FMV. The statute and regulations provide for valuation
of factors used in the production of (emphasis added) the subject
merchandise. As stipulated in Sec. 353.52(c) of the Department's
regulations, FMV is calculated ``using constructed value based on
factors of production incurred in the home market country in producing
(emphasis added) the subject merchandise.'' Therefore, we have only
used the SG&A and profit of the manufacturers.
Comment 4: Captively-produced Inputs--The petitioner argues that
the Department should value only inputs used in the coumarin production
process, and, therefore, should not base the FMV of coumarin on the
value of the factors of production of the captively-produced
intermediate product, salicylaldehyde. The petitioner argues that
coumarin is the merchandise under investigation, and not
salicylaldehyde. According to the petitioner, valuation of only the
subject merchandise, is consistent with section 773 of the Act. The
petitioner further argues that, since the Department did not value the
factors of production for captively-produced phenol, the Department
must be consistent and not value factors for any captively-produced
input.
The respondents argue that section 773 of the Act requires that FMV
be based on ``the value of the factors of production utilized in
producing'' coumarin. In this case, the respondents contend that there
are two production stages utilized in producing coumarin: (1)
Salicylaldehyde production, and (2) finishing production of coumarin.
Therefore, they argue that both stages should be valued. Further, the
respondents cite the antidumping investigation concerning refined
antimony trioxide as establishing Departmental practice of valuing
significant input materials in all stages of the production process,
including intermediate stages (see Final Determination of Sales at Less
Than Fair Value: Refined Antimony Trioxide from the People's Republic
of China, 57 FR 6801, February 28, 1992) (Refined Antimony).
DOC Position: We agree with the respondents that under section 773
of the Act it is appropriate to value all of the factors of production,
including intermediate inputs captively-produced by the responding
producer. Further, this methodology is consistent with Department
practice in NME cases (see e.g., Refined Antimony, and the Calculation
Memorandum for the Final Determination of Sales at Less Than Fair
Value: Sulfanilic Acid from the People's Republic of China, 57 FR
29705, July 6, 1992). Regarding Changzhou No. 2's captively-produced
phenol, we will not value its factors of production because phenol
accounts for an insignificant percentage of materials, based on
quantity and value, required to produce coumarin.
Comment 5: Purchased Salicylaldehyde--The petitioner argues that,
since Tianjin Perfumery purchased significant quantities of its
salicylaldehyde from outside suppliers, the Department should calculate
the value of this input based on a weighted-average of the self-
produced and purchased salicylaldehyde. The petitioner contends that
the purchased portion of salicylaldehyde, and not the inputs into its
production, should be valued in a surrogate country, including
additional cost for inland freight. As such, this methodology would be
consistent with Department practice, cited in Final Results of
Antidumping Duty Administrative Review: Silicon Metal from Brazil, 59
FR 42806 (August 19, 1994), which holds that ``it is inappropriate to
specifically identify inputs obtained at a lower cost to a particular
product or production run.''
The respondents argue that, because the factory was able to satisfy
its salicylaldehyde input needs for coumarin sold to the U.S. during
the POI with its self-produced amounts, there is no need to ignore the
factory's production factors for valuing all of the salicylaldehyde
factor. Thus, it is not necessary to resort to surrogate values because
the factory was able to cover its input needs.
DOC Position: We agree with the petitioner that the salicylaldehyde
value for Tianjin Perfumery should be based on a weighted-average of
Tianjin Native's own factors and the purchased salicylaldehyde, because
the company both self-produced and purchased the salicylaldehyde during
the POI. While this situation does not occur often, where it does
(e.g., Preliminary Determination of Sales at Less Than Fair Value:
Furfuryl Alcohol from the People's Republic of China, signed on
December 9, 1994), we use the weighted-average. This methodology
recognizes the additional economic cost to a producer when it
substitutes outside purchases for an input it normally produces. The
weighted-average cost is thus more representative of the company's cost
of production during the POI than to assume that it produced all of the
input material.
Comment 6. Chlorine--The respondents contend that the surrogate
value for chlorine applied at the preliminary determination is
aberrational and unrealistic. The respondents compare the value derived
from Indian import statistics, which was used for the preliminary
determination, to numerous examples of alternative price sources,
including Indian price quotes submitted by the petitioner. According to
their analysis, the Indian import value is several times higher than
these other values. While acknowledging the Department's preference for
public information such as the Indian import statistics, the
respondents cite Silicon Carbide where the Department has tested the
reasonableness of its surrogate values and rejected those it found to
be aberrational. For the final determination, the respondents argue
that the Department should value chlorine using the petitioner's Indian
price quote, or values based on either Indonesian import statistics or
U.S. export statistics.
The petitioner responds that the Department properly followed its
practice of utilizing public information for valuing chlorine in India
based on import statistics rather than the unpublished price quote, and
should continue to do so for the final determination.
DOC Position: We agree with the respondents that, although the
Indian import value is preferable according to our methodology, this
value is aberrational. We note that, in addition to Silicon Carbide,
the Department specifically rejected surrogate values for chlorine and
hydrochloric acid in Saccharin (materials common to saccharin and
coumarin production) derived from Indian import statistics because
these values were aberrational when compared against data derived from
export statistics from five countries (Canada, Germany, Japan, South
Korea, and the United States) that exported the materials to India. The
only other Indian values for chlorine and hydrochloric acid properly
submitted for the record in this investigation are the petitioner'
price quotes. Therefore, we value both chlorine and hydrochloric acid
using these Indian price quotes.
Comment 7: Inputs from Market-Economy Countries--The petitioner
argues that raw material inputs that manufacturers purchased from PRC
trading companies in PRC currency should be valued in a surrogate
country, even though the inputs were purchased by the trading companies
from market economy sources in convertible currency. The petitioner
points out that the convertible currency prices were paid by the
trading companies and not the manufacturers, and that prices paid by
the manufacturer to the trader were in nonconvertible currency.
Therefore, the petitioner contends that these factors should be
assigned surrogate values.
The respondents contend that the Department should use the actual
import prices for these inputs, as it did in the preliminary
determination. As the respondents explain, these purchases were made by
the trading companies on behalf of the producers because of the trading
companies' access to foreign currency. The producers reimbursed the
trading companies for the imported goods in RMB. The respondents add
that there is no support for the petitioner's position in Departmental
practice. They cite Paper Clips where market prices for imported goods
were used to value certain inputs that were obtained by PRC
manufacturers through their suppliers.
DOC Position: We agree with the petitioner. Department practice
allows for the valuation of inputs in NME cases based on market prices
paid by the manufacturer for goods obtained from a market economy
source because these prices reflect commercial reality (see e.g.,
Saccharin and Final Determination of Sales at Less Than Fair Value:
Oscillating Fans and Ceiling Fans from the PRC (56 FR 55271, October
25, 1991) (Fans). In this case, some of the transactions are conducted
by the trading companies and not the manufacturers. Thus, the
manufacturer obtained the input from a PRC source (the trading company)
and paid for the input in PRC currency. This is not the type of
situation encountered in Saccharin or Fans where we have accepted the
actual prices paid. (We note that the respondents' cite to Paper Clips
is incorrect; we did not use the import prices in the situation cited.)
Accordingly, for those market economy-source inputs that were
exclusively obtained by PRC trading companies and resold to the
manufacturers, we have applied the appropriate surrogate value.
Comment 8: By-Products--The petitioner argues that all subsidiary
products generated in the production of coumarin should be classified
as by-products, rather than co-products, due to the insignificance of
by-product sales values when compared to the subject merchandise.
Nonetheless, the petitioner goes on to argue that no by-product offsets
should be made to FMV in this investigation because: (1) Hydrochloric
acid, alcohol, and sodium hypochlorite are by-products of
salicylaldehyde production and no coumarin production; (2) insufficient
information was provided by the respondents on product held in
inventory; therefore, the Department should assume that the
manufacturers did not sell coumarin by-products, and GAAP allows for
by-product adjustments only for product sold; (3) there is insufficient
information on the record to substantiate that the coumarin production
facilities at Changzhou No. 2 benefit from the sodium hypochlorite that
was given away by the manufacturer; and (4) the respondents failed to
provide the Department with sufficient information regarding the grade,
quality, purity, and after-separation costs of the by-products.
The respondents agree that all subsidiary products recovered during
the production of coumarin should be classified as by-products.
However, regarding valuation of the by-products, the respondents argue
that the petitioner's suggestions are erroneous because: (1) GAAP allow
for by-product offsets on the basis of production quantities, as well
as sales quantities; (2) there is ample information on the record to
demonstrate that the factories sell recovered by-products, except for
product held in inventory; (3) Changzhou No. 2 does not retain sodium
hypochlorite for its own use, but disposes of it in a manner that
yields an economic benefit to the company; and (4) the respondents
reported all necessary physical parameters of the by-products,
including concentration levels, and the record indicates that no after-
separation costs are incurred by the factories in the sale of the by-
products.
DOC Position: In this investigation, we find that alcohol, acetic
acid and hydrochloric acid, are produced as a result of the production
of coumarin, and that these products have low sales values compared
with the sales value of coumarin. Therefore, we find these products to
be by-products, and that the cost to manufacture coumarin should be
offset by the value of by-product recovered, except for sodium
hypochlorite, adjusted for concentration levels. Such treatment is
consistent with GAAP and previous Department practice (see e.g.,
Sebacic Acid). We agree with the respondents that GAAP allows for by-
product offsets on the basis of production quantities. We have also
verified the respondent's reported sales of by-products, including
concentration levels, and that thee are no after-separation costs
associated with the by-products. We determined that no offset should be
made for the sodium hypochlorite recovered and disbursed by Changzhou
No. 2, because the company could neither demonstrate that any economic
benefit accrued to the firm, nor that the benefit was linked to
coumarin production.
Comment 9: Water--The respondents argue that the Department erred
in its preliminary determination, in calculating a cost for water,
separate from factory overhead. The respondents cite to Department
practice that includes water costs in factory overhead, i.e., Paper
Clips and Silicon Carbide.
The petitioner argues that the Indian survey data from the metals
and chemicals market sector used to calculate factory overhead
contained water costs associated with administrative functions. The
petitioner further argues that there is no evidence in the record
indicating that water used for production purposes is included in the
factory overhead category of ``other manufacturing expense.''
DOD Position: The facts in this case are very similar to those in
Saccharin with respect to water consumption. In Saccharin we found that
it is normal practice to include water in factory overhead, and that it
is reasonable to presume that water is included in the Indian surrogate
value overhead percentage. Accordingly, we have revised FMV
calculations for both producers and not valued water as a separate
input.
Continuation of Suspension of Liquidation
In accordance with sections 733(d)(1) and 735(c)(4)(B) of the Act,
we are directing the Customs Service to continue to suspend liquidation
of all entries of coumarin from the PRC, that are entered, or withdrawn
from warehouse, for consumption on or after the date of publication of
this notice in the Federal Register. The Customs Service shall require
a cash deposit or posting of a bond equal to the estimated amount by
which the FMV exceeds the USP as shown below. These suspension of
liquidation instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
Manufacturer/producer/ average
exporter margin Critical circumstances
percentage
------------------------------------------------------------------------
Jiangsu Native Produce I/E 15.04 Negative.
Corp.
Tianjin Native Produce I/E 50.35 Affirmative.
Corp.
All Others................... 160.80 Affirmative.
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (ITC) of our determination. As our final
determination is affirmative, the ITC will determine whether these
imports are causing material injury, or threat of material injury, to
the industry in the United States, within 45 days. If the ITC
determines that material injury, or threat of material injury, does not
exist, the proceeding will be terminated and all securities posted will
be refunded or cancelled. If the ITC determines that such injury does
exist, the Department will issue an antidumping duty order directing
Customs officials to assess antidumping duties on all imports of the
subject merchandise entered, or withdrawn from warehouse, for
consumption on or after the effective date of the suspension of
liquidation.
Notification to Interested Parties
This notice serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to
comply is a violation of the APO.
This determination is published pursuant to section 735(d) of the
Act and 19 CFR 353.20(a)(4).
Dated: December 19, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-31962 Filed 12-27-94; 8:45 am]
BILLING CODE 3510-DS-M