[Federal Register Volume 62, Number 96 (Monday, May 19, 1997)]
[Notices]
[Pages 27222-27235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13060]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-847]
Notice of Final Determination of Sales at Less Than Fair Value:
Persulfates From the People's Republic of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
EFFECTIVE DATE: May 19, 1997.
FOR FURTHER INFORMATION CONTACT: James Maeder, Barbara Wojcik-
Betancourt, or Howard Smith, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-3330, (202) 482-0629, or (202) 482-5193, respectively.
THE APPLICABLE STATUTE: Unless otherwise indicated, all citations to
the Tariff Act of 1930, as amended (``the Act'') are references to the
provisions effective January 1, 1995, the effective date of the
amendments made to the Act by the Uruguay Rounds Agreements Act
(``URAA'').
FINAL DETERMINATION: We determine that persulfates from the People's
Republic of China (``PRC'') are being, or are likely to be, sold in the
United States Sales at Less Than Fair Value (``LTFV''), as provided in
section 735 of the Act.
Case History
FMC Corporation (``FMC'') is the petitioner in this investigation.
The respondents in this investigation are, Shanghai Ai Jian Import &
Export Corporation (``AJ''), Sinochem Jiangsu Wuxi Import & Export
Corporation (``Wuxi'') (exporters), Shanghai Ai Jian Reagant Works
(``AJ Works'') (producer for AJ and Wuxi), Guangdong Petroleum Chemical
Import & Export Trade Corporation (``Guangdong'') (exporter), Guangzhou
City Zhujiang Electrochemical Factory (``Zhujiang'') (producer for
Guangdong), ICC Chemical Corporation (``ICC'') 1. Since the
preliminary determination in this investigation (Preliminary
Determination of Sales at Less Than Fair Value and Postponement of
Final Determination: Persulfates From the PRC 61 FR 68232, (December
27, 1996), the following events have occurred:
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\1\ ICC is Guangdong's U.S. customer. ICC submitted responses
in this investigation because it claimed that U.S. price (``USP'')
should be based on its sales to U.S. customers. We have determined
that USP should be based on Guangdong's price to ICC (see Comment
25).
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In December 1996, and January 1997, FMC, AJ Works, AJ and Wuxi
alleged that the Department made a ministerial error in its preliminary
determination (see Comment 8 below). The Department found that there
was an error made in the preliminary determination; however, this error
did not result in a change of at least five absolute percentage points
in, but no less than 25 percent of, the weighted-average dumping margin
calculated in the preliminary determination. Accordingly, no revision
to the preliminary determination was made. (see Ministerial Error
Memorandum from the Team to Jeffrey P. Bialos dated January 17, 1997).
On March 25, 1997, petitioner submitted the Chinese Communist Party
(``CCP'') Circular and requested that the
[[Page 27223]]
Department revisit its policy regarding separate rates (see Comments 1,
2, and 3 in the General Comments section below).
In February and March 1997 we verified the respondents'
questionnaire responses. Additional publicly available information on
surrogate values was submitted by petitioner and respondents on April
4, 1997. Petitioner and respondents submitted case briefs on April 4,
1997, and rebuttal briefs on April 9, 1997 2. A public
hearing was held on April 11, 1997.
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\2\ Counsel for ICC, Zhujiang, and Guangdong did not submit
case briefs, but did submit rebuttal briefs.
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Scope of the Investigation
The products covered by this investigation are persulfates,
including ammonium, potassium, and sodium persulfates. The chemical
formula for these persulfates are, respectively,
(NH4)2S2O8,
K2S2O8, and
Na2S2O8. Ammonium and potassium
persulfates are currently classified under subheading 2833.40.60 of the
Harmonized Tariff Schedule of the United States (``HTSUS''). Sodium
persulfate is classified under HTSUS subheading 2833.40.20. Although
the HTSUS subheadings are provided for convenience and customs
purposes, our written description of the scope of this investigation is
dispositive.
Period of Investigation
The period of this investigation (``POI'') comprises each
exporter's two most recent fiscal quarters prior to the filing of the
petition (i.e., January through June 1996).
Separate Rates
Each of the participating respondent exporters has requested a
separate, company-specific antidumping rate. The claimed ownership
structure of the respondents is as follows: (1) Wuxi and Guangdong are
owned by all the people; (2) AJ is a publicly-held company.
As stated in Silicon Carbide and Furfuryl Alcohol, ownership of a
company by all the people does not require the application of a single
rate. Accordingly, all three are eligible for consideration for a
separate rate. (See Notice of 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''), and Notice of Final
Determination of Sales at Less Than Fair Value: Furfuryl Alcohol From
the People's Republic of China, 60 FR 22544 (May 8, 1995) (``Furfuryl
Alcohol'').
To establish whether a firm is sufficiently independent from
government control to be entitled to a separate rate, the Department
analyzes each exporting entity under a test stated in of the Notice of
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 the separate
rates criteria, the Department assigns separate rates in nonmarket
economy cases only if respondents can demonstrate the absence of both
de jure and de facto governmental control over export activities.
1. Absence of De Jure Control
Respondents have placed on the administrative record a number of
documents to demonstrate absence of de jure control. These documents
include laws, regulations and provisions enacted by the central
government of the PRC, describing the deregulation of Chinese
enterprises as well as the deregulation of the Chinese export trade,
(but for a list of products that may be subject to central government
export constraints which the respondents claim does not involve the
subject merchandise). Specifically, the respondents provided English
translations of the laws and regulations governing their enterprises
(see Comment 3). These laws and regulations authorize these companies
to make their own operational and managerial decisions.
In prior cases, the Department has analyzed the laws which the
respondents have submitted in this record and found that they establish
an absence of de jure control. (See Notice of Final Determination of
Sales at Less Than Fair Value: Certain Partial-Extension Steel Drawer
Slides With Rollers From the People's Republic of China, 60 FR 54472
(October 24, 1995) (``Steel Drawer Slides''); and see also Furfuryl
Alcohol). We have no new information in this proceeding which would
cause us to reconsider this determination (see Comment 1 below).
However, as in previous cases, there is some evidence that the PRC
central government enactments have not been implemented uniformly among
different sectors and/or jurisdictions in the PRC. (See Silicon Carbide
and Furfuryl Alcohol.) Therefore, the Department has determined that an
analysis of de facto control is critical in determining whether
respondents are, in fact, subject to a degree of governmental control
which would preclude the Department from assigning separate rates.
2. Absence of De Facto Control
The Department typically considers four factors in evaluating
whether each respondent is subject to de facto governmental control of
its export functions: (1) whether the export prices (``EP'') 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 and Furfuryl Alcohol).
Each company asserted, and we verified, the following: (1) it
establishes its own export prices; (2) it negotiates contracts, without
guidance from any governmental entities or organizations; (3) it makes
its own personnel decisions; and (4) it retains the proceeds of its
export sales, uses profits according to its business needs and has the
authority to sell its assets and to obtain loans. In addition,
questionnaire responses on the record indicate that pricing was
company-specific during the POI, which does not suggest coordination
among or common control of exporters. During verification proceedings,
Department officials viewed such evidence as sales documents, company
correspondence, and bank statements. This information supports a
finding that there is a de facto absence of governmental control of
export functions. We determined that both Wuxi and AJ had autonomy from
the central government in making decisions regarding the selection of
management. In the case of Wuxi, the general manager was elected by an
employee assembly. We found no involvement by any government entity in
AJ's selection of management. With respect to Guangdong, we found that
the general manager was appointed by the local administering authority,
the Guangdong Heavy and Chemical Industrial Bureau (``GHCIB''). While
this may indicate that Guangdong is subject to the control of the
GHCIB, there is no evidence that any other exporter of the subject
merchandise is currently under the control of the GHCIB, which could
raise the issue of manipulation of the export function to evade
antidumping duties. Therefore, we have concluded that Guangdong is
entitled to a separate
[[Page 27224]]
rate 3. This determination is consistent with our recent
decision in Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People's Republic of China: Final Results and
Partial Termination of Antidumping Duty Administrative Review, 62 FR
6173, 6174 (February 11, 1997) (``Tapered Roller Bearings'').
Consequently, we have determined that Wuxi, AJ, and Guangdong have met
the criteria for the application of separate rates.
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\3\ All non-responding exporters are presumed to be under the
control of the central government. However, there is no basis on
which to conclude that any non-responding exporter is controlled by
the GHCIB.
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China-Wide Rate
U.S. import statistics indicate that the total quantity and value
of U.S. imports of persulfates from the PRC is greater than the total
quantity and value of persulfates reported by all PRC companies that
submitted responses. Furthermore, after sending antidumping
questionnaires to 18 companies identified as potential respondents in
the petition, we received responses from only two producers and three
exporters. Thus, we have concluded that not all exporters of PRC
persulfates responded to our questionnaire. Accordingly, we are
applying a single antidumping deposit rate--the China-Wide rate--to all
exporters in the PRC, other than Wuxi, AJ and Guangdong (Zhujiang, and
AJ Works are producers), based on our presumption that those
respondents who failed to respond constitute a single enterprise under
the common control of the PRC government. See, e.g., Notice of Final
Determination of Sales at Less Than Fair Value: Bicycles from the
People's Republic of China, 61 FR 19026 (April 30, 1996)
(``Bicycles'').
This China-wide antidumping rate is based on adverse facts
available. Section 776(a)(2) of the Act provides that ``if an
interested party or any other person--(A) withholds information that
has been requested by the administering authority * * *; (B) fails to
provide such information by the deadlines for the submission of the
information or in the form and manner requested, subject to subsections
(c)(1) and (e) of section 782; (C) significantly impedes a proceeding
under this title; or (D) provides such information but the information
cannot be verified as provided in section 782(i), the administering
authority * * * shall, subject to section 782(d), use the facts
otherwise available in reaching the applicable determination under this
title.''
In addition, section 776(b) of the Act provides that, if the
Department finds that an interested party has failed to cooperate by
not acting to the best of its ability to comply with a request for
information, the Department may use information that is adverse to the
interests of that party as the facts otherwise available. The statute
also provides that such an adverse inference may be based on secondary
information, including information drawn from the petition.
Consistent with section 776(b)(1) of the Act, we have applied, as
total facts available, the higher of the average margin from the
petition or the highest rate calculated for a respondent in this
proceeding. In the present case, based on our comparison of the
calculated margins for the respondents in this proceeding to the
average margin in the petition, we have concluded that the petition is
the most appropriate record information to base the dumping
calculations in this investigation. Accordingly, the Department has
based the China-wide rate on information in the petition. In this case,
the average petition rate is 134.00 percent. Section 776(c) of the Act
provides that where the Department relies on ``secondary information,''
the Department shall, to the extent practicable, corroborate that
information from independent sources reasonably at the Department's
disposal. The Statement of Administrative Action (SAA), accompanying
the URAA clarifies that the petition is ``secondary information.'' See
SAA at 870. The SAA also clarifies that ``corroborate'' means to
determine that the information used has probative value. Id. However,
where corroboration is not practicable, the Department may use
uncorroborated information.
In accordance with section 776(c) of the Act, we corroborated the
margins in the petition to the extent practicable. The petitioner based
EPs on price quotes obtained from U.S. importers, reduced by estimated
importer mark-ups and movement charges. We compared the starting prices
used by petitioner less the importer mark-ups against prices derived
from U.S. import statistics and found that the two sets of prices are
consistent. We also compared the movement charges used in the petition
with the surrogate values used by the Department in its margin
calculations and found them to be consistent.
Regarding normal value (``NV''), petitioner used publicly available
information from India to value the factors of production. Petitioner
based factory overhead, selling, general and administrative (``SG&A'')
and profit surrogates on data from an annual report of National
Peroxide Limited (``National Peroxide''), an Indian producer of
hydrogen peroxide. Based on the information on the record regarding
similarities in the production process for hydrogen peroxide and
persulfates, we have determined that it is appropriate to base
surrogate factory overhead, SG&A and profit on National Peroxide's
financial data (see Comment 3). Although we found in the preliminary
determination that the financial data for Sanderson Industries Ltd.
(``Sanderson''), the surrogate company proposed by one respondent, was
more consistent with the financial data we obtained for other Indian
chemical producers, in the final determination we have concentrated our
analysis on product comparability, including similarities in the
production process. Based on our analysis, we have accepted the factory
overhead, SG&A and profit percentages in the petition for the final
determination.
With respect to all other elements of the NV calculation in the
petition (i.e., materials, labor, energy and packing), the Department
corroborated the values used in the petition by comparing them with
values obtained from publicly available information collected in this
and previous nonmarket economy investigations.
Accordingly, we have corroborated, to the extent practicable, the
data contained in the petition.
Fair Value Comparisons
To determine whether respondents' sales of the subject merchandise
to the United States were made at less than fair value, we compared EP
to NV, as described in the ``United States Price'' and ``Normal Value''
sections of this notice.
United States Price
We based USP on EP in accordance with section 772(a) of the Act,
because the persulfates were sold directly to the first unaffiliated
purchaser in the United States prior to importation and constructed
export price methodology was not otherwise indicated by the facts in
this case. In accordance with section 777A(d)(1)(A)(i) of the Act, we
compared POI-wide NVs to POI-wide weighted-average EPs.
We corrected the respondents' data for errors and minor omissions
submitted to the Department and found at verification. We made company-
specific adjustments as follows:
1. Wuxi
We calculated EP in accordance with our preliminary calculations,
except
[[Page 27225]]
that we corrected inland freight expenses, control numbers in the
company's sales listing, and international freight expenses, based on
findings at verification.
2. AJ
We calculated EP in accordance with our preliminary calculations
except that we corrected inland and international freight expenses,
based on findings at verification.
3. Guangdong
We calculated EP based on packed, ex-factory PRC prices to an
unaffiliated purchaser in the United States (see Comment 25). Insofar
as Guangdong claimed that all the movement expenses were paid by the
purchaser, we did not make any adjustments to the starting price for
such expenses.
Normal Value
Factors of Production
We calculated NV based on factors of production cited in the
preliminary determination, making adjustments for specific verification
findings (see Final Valuation Memorandum from the Team to Louis Apple,
Acting Office Director dated May 12, 1997) (``Final Valuation
Memorandum''). To calculate NV, the verified amounts for the factors of
production were multiplied by the appropriate surrogate values for the
different inputs. We have used the same surrogate sources as in the
preliminary determination with the exception of the source for
overhead, SG&A and profit. For the final determination we based the
percentages for overhead, SG&A and profit on the detailed public
version of National Peroxide's financial statement that was placed on
the record of this investigation by the petitioner.
Because Zhujiang, one of the producers in this investigation,
failed to cooperate by not acting to the best of its ability to provide
the weight of packing materials, we have used as the weight of each
type of packing material the greatest weight reported for the material
in the petition or in the public versions of the other respondent
producer's submissions in this investigation. Where the weight for a
particular type of packing material is not on the record, we have
estimated the weight for these materials (see Final Valuation
Memorandum). Also, because Zhujiang failed to provide supplier
distances for packing materials we have used the greatest supplier
distance reported by Zhujiang for any material input as the distance
between the factory and the supplier of each type of packing material.
In addition, AJ Works, the other producer in this investigation,
failed to report certain packing materials. Therefore, we have
estimated the weight for these materials in our calculations for the
final determination (see Final Valuation Memorandum). Also because AJ
Works failed to provide supplier distances for the unreported packing
materials we have used the greatest supplier distance reported by AJ
Works for any packing material as the distance between the factory and
the supplier of each type of unreported packing material.
Verification
As provided in section 782(i) 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.
General Comments
Comment 1: Assigning a Country-Wide Rate to all Respondents
Petitioner alleges that the Notice of the Communist Party of China
Central Committee on Reinforcing and Improving Party Building in State-
Owned Enterprises (``the Circular'') issued by the CCP in January 1997
requires the Department to abandon its entire separate rates analysis
and establish an irrebuttable presumption that all exporters of a
particular product comprise a single exporter under government control.
Petitioner argues that the Circular reasserts complete centralized
state control over state-owned enterprises. Petitioner points out that
the Circular requires generally that an enterprise's activities should
be conducted under the guidance of state planning. Also, petitioner
notes that the Circular imposes central control over decisions
regarding the selection of management and ``capital utilization.''
Based on this Circular, petitioner argues that the CCP has reasserted
both de jure and de facto control over state-owned enterprises and,
thus, the Department should not allow any exporter to rebut the
presumption of state control.
Respondents claim the Circular is hortatory and aspirational and
does not constitute a change either in the legal status or in the de
facto operations of companies in China. Furthermore, respondents claim
the Circular does not apply to the instant investigation because it was
issued six months after the close of the POI. Finally, respondents
argue it would be an error for the Department to ignore the company-
specific information on the record pertaining to independence and rely
on petitioner's speculations regarding the future effect of the
Circular.
DOC Position
We have examined the Circular closely and have carefully considered
the implications in may have for our separate rates analysis. While we
agree with the petitioner that some of the language can be interpreted
to indicate heightened government involvement in SOEs, it is not clear
that the circular nullifies or amends any laws or regulations that
grant operational independence to exporters, or that it will result in
de facto government control over export activities of SOEs at some
time. Moreover, we note that the Circular was issued on January 14,
1997, and submitted to the Department on March 25, 1997. Thus, it was
not before the Department during verification. At verification, we
found that the companies subject to investigation operate independently
with respect to exports and thus qualified for separate rates.
Therefore, on the basis of all of the information in the record, we
cannot conclude that the companies are not entitled to separate rates.
However, we will continue to closely examine the effect, in fact and in
law, of the circular with respect to any reassertion of central
government control of export activities of SOEs. If, in any future
investigation or review, we find that the new party circular results in
government control of export activities, we will not grant companies
separate rates.
Comment 2: Assigning a Country-Wide Rate Based on Affiliation
Petitioner argues that if the Department continues its separate
rates analysis in nonmarket economy cases despite the Circular, it
should assign a single country-wide rate in accordance with its
methodology for evaluating whether affiliated parties should be
collapsed into one entity. Petitioner notes that the Department
considers entities under common control to be affiliated. In such
situations, petitioner alleges, if there is a strong possibility of
price manipulation, the Department will collapse the entities and
assign a single antidumping margin. In light of the Circular
reasserting government control over SOEs, petitioner alleges that it is
clear the respondents are under common control and that the Chinese
government has the authority to control exports and pricing activities.
Thus, in accordance with the Department's affiliated parties
methodology, all respondents should be collapsed into
[[Page 27226]]
one entity and assigned a single country-wide rate.
Respondents claim that Departmental practice shows that the
affiliated party methodology does not apply to the issue of separate
rates (see Tapered Roller Bearings). Also, according to respondents,
the Department's proposed regulations state that the affiliated party
methodology does not address the issue of whether a producer or
exporter in a nonmarket economy country is entitled to an individual
antidumping rate (see the Department's Proposed Regulations, 61 FR 7330
(February 27, 1996)). Therefore, respondents contend the affiliated
party methodology should not be used in the instant case.
DOC Position
We agree with respondents. The Department has a long-standing
methodology for determining whether companies in a nonmarket economy
are entitled to a separate rate. That methodology is separate and
distinct from the ``collapsing'' methodology in both focus and
function. On the one hand, the separate rates test focuses specifically
on whether there is government control of a nonmarket company's export
activities. On the other hand, the ``collapsing'' methodology focuses
on the relationship between two or more affiliated companies, not their
relationship vis-a-vis the government or other entities. There is no
basis for applying a ``collapsing'' analysis in this case.
Comment 3: Assigning a Country-Wide Rate Based on De Jure and De Facto
Control Wuxi and AJ
Petitioner contends that Wuxi failed to place evidence on the
record showing that it was not subject to de jure government control.
Although Wuxi placed on the record certain PRC laws stating that the
responsibility for managing companies ``owned by all the people'' has
been transferred from the government to the companies themselves, it
failed, according to petitioner, to provide documentation showing how
these laws are implemented in Jiangsu Province, and how Wuxi is
affected by them. In addition, petitioner notes that Wuxi failed to
provide documentation demonstrating the absence of export controls on
subject merchandise. Petitioner also points out that Wuxi's charter
states that the company is to carry out the policy of the state and
comply with the provisions of an institute that allegedly is an
instrument of the Chinese government. Further, petitioner states that
Wuxi has failed to demonstrate the absence of de facto government
control. Specifically, petitioner contends that Wuxi failed to: (a)
show that it independently negotiated and signed business contracts;
(b) demonstrate that it had autonomy in selecting management; (c)
demonstrate that it had the authority to borrow freely; and (d) show
how foreign currency and company profits were used. Thus, petitioner
claims Wuxi failed to demonstrate the absence of de facto government
control. Therefore, petitioner maintains that the Department should
assign Wuxi a country-wide rate.
Petitioner claims AJ failed to provide any evidence to support its
assertion that there are no controls on exports of the subject
merchandise to the United States. Petitioner notes that AJ's charter
states that the company should follow state rules which, when read in
conjunction with the Circular, indicates that AJ is subject to de jure
government control.
Petitioner contends that AJ did not establish the absence of de
facto control regarding management selection because the company failed
to identify the shareholders of its parent corporation whose board of
directors appoints and approves AJ's top managers. Because shareholders
of the parent corporation were not identified, petitioner claims the
Department has no way of knowing whether a government entity, as a
shareholder of the parent corporation, has control over the selection
of AJ's top managers. On the basis of de jure and de facto control over
AJ by the PRC government, petitioner maintains the Department should
assign AJ a country-wide rate.
Wuxi and AJ maintain that they established the lack of de jure
government control by submitting copies of various laws and regulations
that were used to establish the absence of such control in past cases.
Specifically, respondents note that they submitted the April 13, 1988,
regulations on industrial enterprises ``owned by all the people,'' the
August 23, 1992, regulations regarding deregulation of state-owned
industrial enterprises, and the December 29, 1993, law governing
publicly held companies. Respondents argue that the implementation of
such laws at the provincial level was established by the absence of de
facto government control. Further, respondents assert that their
charter provisions, which require the companies to comply with state
policies, simply means that the companies must follow the law.
Respondents also assert that the Department found no evidence of export
controls during verification. AJ further claims that the lack of de
jure government control is evidenced by the fact that its parent
company is a publicly traded company. According to AJ, the absence of a
list of its shareholders does not overcome this finding. Regarding de
facto control, respondents claim the Department examined the
disposition of foreign currency and profits and reviewed documentation
relating to sales negotiations, contracts, loans, and management
selection, and found no evidence of government control.
Guangdong and ICC
Petitioner argues that the Department should assign, as adverse
facts available, a single country-wide antidumping duty rate to
Guangdong because Guangdong is owned by the Chinese provincial
government and the company failed to provide evidence demonstrating the
absence of de jure and de facto government control. Regarding de jure
control, petitioner maintains the interim procedures 4 on
export licensing that Guangdong placed on the record merely address the
issuance of export licenses, not the decentralization of government
control of export activities. Petitioner also maintains that Guangdong
failed to provide documentation showing how the ``Company Law of the
People's Republic of China'' and the ``Temporary Provisions for
Administration of Export Commodities'' are implemented in the province
where Guangdong is located. Regarding de facto control, petitioner
claims that the documents Guangdong submitted to prove that it
independently sets prices and negotiates contracts are merely
correspondence between ICC and ICC (Hong Kong) Ltd. (ICC is a customer
of Guangdong) regarding persulfate purchases and do not support a
finding that Guangdong acts independently. Petitioner points out that
Guangdong has absolutely no autonomy in selecting managers because the
Chinese provincial government appoints the general manager who, in
turn, selects all the other managers. According to petitioner, the fact
that the provincial government selects Guangdong's general manager is
enough to require the Department to assign a country-wide antidumping
duty rate to Guangdong (see Notice of Preliminary Determination of
Sales at Less Than Fair Value: Natural Bristle Paint Brushes and Brush
Heads From the People's Republic of China, 61 FR 15037, 15038 (April
14, 1996) (``Natural
[[Page 27227]]
Bristle Paint Brushes and Brush Heads'')). Finally, petitioner claims
Guangdong did not demonstrate its independence from government control
with respect to financial management of the company. Petitioner notes
that the general manager, who is appointed by the Chinese provincial
government, is the only individual who decides how to use company
profits and has access to the company's bank account. Hence, petitioner
urges the Department to apply a country-wide antidumping duty rate to
Guangdong.
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\4\ ``Interim Procedures of the State Import-Export Commission
and the Ministry of Foreign Trade of the People's Republic of China
Concerning the System of Export Licensing''
---------------------------------------------------------------------------
ICC and Guangdong maintain that petitioner's arguments for a single
antidumping duty rate fail for several reasons. First, according to ICC
and Guangdong, the separate rates test does not apply to them because
USP should be based on ICC's prices and ICC is an American-owned
company located in the United States (see Comment 27). Second, even if
the Department bases USP on Guangdong's sales to ICC, Guangdong and ICC
claim petitioner's argument for a single antidumping duty rate fails
because the Department verified the absence of both de jure and de
facto government control of Guangdong. Regarding de jure control,
Guangdong and ICC maintain that the laws they placed on the record
establish the absence of such control. Regarding de facto control,
respondents contend that the record shows that Guangdong sets prices
and negotiates contracts independently of the central and provincial
government. While Guangdong and ICC acknowledge that the Chinese
provincial government owns Guangdong and appoints the company's top
managers, respondents claim the record shows that the provincial
government is not involved in the day-to-day management of Guangdong
and the government's appointment of top managers did not adversely
affect the company's independence in export activities. In addition,
respondents maintain that Natural Bristle Paint Brushes and Brush Heads
did not address the appointment of top management by the provincial
government and, thus, the case does not support petitioner's argument
for a country-wide rate based on the provincial government's
appointment of Guangdong's top managers. Respondents also note that the
Department reversed its position in the preliminary determination of
Natural Bristle Paint Brushes and Brush Heads, cited by petitioner, and
found, in the final determination, that a separate rate was appropriate
because the general manager was selected through a poll of the
employees that was ratified by the provincial government. Thus, that
case is not relevant to this determination. Lastly, Guangdong and ICC
contend that the question before the Department is whether Guangdong is
sufficiently independent from the central government, not the
provincial government. According to respondents, the record shows
Guangdong operates completely independent of the central government.
DOC Position
AJ and Wuxi
We have found that AJ is a publicly held company and Wuxi is
``owned by all the people.'' AJ and Wuxi submitted to the Department
copies of the 1988, 1992, and 1993 laws under which they were
organized. Each of these laws establishes the absence of de jure
control in that they grant these companies the right to negotiate
prices and sell products, make production decisions, make investment
decisions and form joint ventures. Further, the information on the
record relating to provincial and local governments shows that their
activities with regard to AJ, Wuxi, and AJ Works are limited to such
functions as taxation, business licensing, and the collection of export
statistics. During verification, we found no evidence that the
government controlled export prices or interfered with other aspects of
conducting business with the United States.
We analyze below the issue of de facto control based on the
criteria set forth in Silicon Carbide.
In the course of verification, we confirmed that AJ's and Wuxi's
prices are not set, or subject to approval, by any government
authority. This point was supported by the companies' sales
documentation and correspondence. Through an examination of sales
documents pertaining to U.S. persulfates sales, we noted that both AJ
and Wuxi have the authority to negotiate contracts, including price,
with its customers without government interference.
We confirmed, through an examination of bank and financial
documents, that both AJ and Wuxi have the authority to borrow funds and
to distribute the proceeds from the export sales freely, independent of
government authority. Further, we have determined that both AJ and Wuxi
have autonomy from the central government in making decisions regarding
the selection of management.
AJ's general manager is selected by the board of directors of AJ's
parent corporation whose shares are publicly traded and widely held. We
found no evidence of government involvement in the selection of
management.
Based on an analysis of all these factors, we have determined that
AJ and Wuxi are not subject to de facto control by governmental
authorities.
Guangdong
Respondent placed copies of laws on the record that established the
absence of de jure control by the central government. The general
manager is appointed by a bureau of the provincial government, not the
central government. As noted above, there are no other exporters under
the control of the provincial government. Thus, we have concluded that
Guangdong is entitled to a separate rate (see Silicon Carbide).
Comment 4: Assigning a Country-Wide Rate to AJ
Petitioner contends the Department should, as adverse facts
available, assign AJ a China-wide rate because, during verification, AJ
did not provide the Department with copies of the long-term contracts
for its sales to the United States. According to petitioner, AJ's
failure to provide the contracts prevented the Department from
verifying the completeness of the company's sales response. Because the
company's failure to cooperate prevented the Department from completing
a critical component of the verification, petitioner argues that the
Department should apply the China-wide rate to AJ.
AJ maintains that the sales confirmations it provided the
Department at verification are the long-term contracts referred to in
its questionnaire responses. In addition, AJ maintains the Department
compared the total quantity and value of its sales with sales reported
in the company's audited financial statement and sales ledger and noted
no discrepancies. AJ also maintains that the Department verified that
during 1996 there were no more sales or shipments to the United States
subsequent to the last reported sale. Thus, AJ claims the Department
verified the completeness of AJ's sales response.
DOC Position
We agree with AJ. Although AJ reported that it sold the subject
merchandise pursuant to long-term contracts, at verification we found
AJ's sales confirmations for each sale to be contracts. To verify sales
completeness we examined sales confirmations, traced the reported sales
to invoices, sales ledgers, and the audited financial statement, and
looked for unreported sales in AJ's 1996 accounting records. We noted
no discrepancies. Therefore,
[[Page 27228]]
the use of adverse facts available for AJ is not warranted.
Comment 5: Assigning Antidumping Duty Rates to Manufacturers
If the Department assigns separate antidumping duty rates in this
investigation, petitioner contends the rates should apply not only to
the exporters but also to the manufacturers whose factors of production
formed the basis for the separate rate. Petitioner maintains that this
approach is appropriate because: (a) it is a logical approach which
avoids the inaccurate assessment of cash deposits when the exporter
enters subject merchandise into the United States that was produced by
other manufacturers; and (b) it prevents other manufacturers from
selling subject merchandise through an exporter with a low antidumping
duty margin. Although petitioner acknowledges that the Department's
recent practice as noted in Coumarin and Lighters has been to assign
antidumping rates only to exporters, petitioner urges the Department to
return to its policy outlined in Sulfur Dyes (see Notice of Final
Determination of Sales at Less Than Fair Value: Coumarin From the
Peoples Republic of China, 59 FR 66895 (December 28, 1994); Notice of
Final Determination of Sales at Less Than Fair Value: Disposable Pocket
Lighters From the People's Republic of China, 60 FR 22359 (May 5,
1995); and Notice of Final Determination of Sales at Less Than Fair
Value: Sulfur Dyes, Including Sulfur Vat Dyes From the People's
Republic of China, 58 FR 7537 (February 8, 1993)). Specifically,
petitioner notes that in Sulfur Dyes the Department determined that any
margin calculated using data from a specific producer and exporter
``would only be representative of transactions involving these two
parties and are only to be applied to imports of the listed
manufacturer or producer which are exported by the listed exporter.''
Petitioner also notes that in Certain Cased Pencils the Department
assigned a zero margin only to imports of subject merchandise that are
sold by the exporter and manufactured by the producers whose factors
formed the basis for the zero margin (see Notice of 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)).
Furthermore, petitioner claims that assigning antidumping duty rates to
manufacturers participating in the investigation prevents non-
participating manufacturers from selling through exporters with
separate rates that are normally lower than the country-wide rates
assigned to non-participants. Petitioner argues that administrative
reviews do not provide an effective remedy to the problem of
manufacturers selling through exporters with a low duty rate because
the first administrative review is not concluded until at least two
years after the final determination in the investigation. During this
time, petitioner contends that the manufacturer can export to the
United States using the lowest rate available. In addition, petitioner
claims it should not bear the burden of assessing whether an exporter
has become a conduit for new manufacturers. Thus, if the Department
assigns separate rates, petitioner requests that the Department assign
an antidumping rate to both the exporter and the manufacturer.
Respondents contend that the Department should assign antidumping
duty rates to the exporters and not the producers in this investigation
because the provision for administrative reviews will prevent the
exporters from selling the merchandise of producers that may have
yielded greater antidumping duty margins than the producers
participating in the investigation. Respondents point out that the
Department's practice is to assign antidumping duty rates only to
exporters.
DOC Position
We agree with respondents. The Department's practice in cases
involving NME countries is to assign rates to exporters rather than
producers because the exporters actually determine the price at which
the subject merchandise is sold to the United States. The Department
does not ``pair'' exporters with producers in our instructions to
Customs except where a company is excluded from an antidumping order
(see, e.g., Pencils,5, Notice of Final Determination of
Sales at Less Than Fair Value: Polyvinyl Alcohol From the People's
Republic of China, 61 FR 14057 (March 29, 1996) (``PVA''), and Notice
of Final Determination of Sales at Less Than Fair Value: Brake Drums
and Brake Rotors From the People's Republic of China, 62 FR 9160,
(February 28, 1997) (``Brake Drums'')). Thus, if ``low-margin''
exporters source from less efficient producers and fail to adjust
prices accordingly, this will be reflected in the assessment and future
cash deposits.
---------------------------------------------------------------------------
\5\ In Pencils, the Department did distinguish between suppliers
for one exporter, and identified separate pairings of suppliers for
that exporter, because the exporter had a zero margin on sales of
merchandise from one supplier.
---------------------------------------------------------------------------
Comment 6: Selecting the Surrogate Producer for Overhead, SG&A and
Profit
Because none of the parties in this investigation, nor the
Department, could obtain financial data for Indian persulfate
producers, petitioner contends the Department should base surrogate
factory overhead, SG&A and profit on the financial data of a hydrogen
peroxide producer because the production processes for hydrogen
peroxide and persulfates are comparable. Specifically, petitioner
proposes valuing surrogate overhead, SG&A and profit using the data of
the Indian company; National Peroxide.
Petitioner claims that most persulfate producers also manufacture
hydrogen peroxide because persulfates are manufactured using the same
electrolytic process by which hydrogen peroxide has historically been
manufactured. According to petitioner, much of the persulfate
production capacity results from conversion of older catalytic hydrogen
peroxide production facilities. Thus, petitioner maintains that many of
the existing persulfate producers have business units which are
organized around peroxygen chemistry and have shared management, sales,
and distribution resources dedicated to both hydrogen peroxide and
persulfates.
Petitioner notes that ``comparable'' merchandise, as defined by the
Department, encompasses a larger set of products than ``such or
similar'' merchandise, and in past cases, the Department has identified
comparable merchandise on the basis of similarities in production
factors (physical and non-physical) and factor intensities. (See Notice
of Final Determination of Sales at Less Than Fair Value: Pure Magnesium
and Alloy Magnesium From the People's Republic of China, 59 Fed. Reg.
55424 (Nov. 7, 1994) (``Pure Magnesium''), and Bicycles).
Petitioner argues that none of the production processes used by the
surrogate company proposed by respondents (Sanderson) have any
similarity to the electrolytic process technology common to hydrogen
peroxide and persulfates. According to petitioner, the production
processes for the products manufactured by Sanderson involve simple
chemical reactions based on the production of sulfuric acid. Further,
petitioner maintains that Sanderson's production processes require very
little, if any, technical support. On the other hand, petitioner notes
that hydrogen peroxide and persulfates have oxidative functions that
require application and process
[[Page 27229]]
technology support to ensure product safety. Accordingly, petitioner
advocates using the data of National Peroxide as a better source of
SG&A, overhead and profit.
AJ Works argues that the Department should base surrogate factory
overhead, SG&A, and profit on data for the Indian metals and chemicals
industry because none of the companies proposed as surrogates actually
produce the subject merchandise. Because the proposed surrogate
companies do not produce the subject merchandise, AJ Works contends
their financial data may not be representative of the industry of which
AJ Works is a part. Moreover, AJ Works maintains that recent
Departmental practice in PRC cases is to value factory overhead, SG&A,
and profit using the metals and chemicals industry data from the
Reserve Bank of India Bulletin (``RBI''). (see e.g. Coumarin, Notice of
Final Determination of Sales at Less Than Fair Value: Saccharin from
the People's Republic of China (``Saccharin''), Notice of Final
Determination of Sales at Less Than Fair Value: Sebacic Acid from the
People's Republic of China (``Sebacic Acid''), and Notice of Final
Determination of Sales at Less Than Fair Value: Certain Paper Clips
from the People's Republic of China, (``Paper Clips'')). However, AJ
Works argues that if the Department decides to base surrogate overhead,
SG&A, and profit rates on the data of a single company, the Department
should continue to use Sanderson's financial data, because Sanderson
uses a production process similar to the one used to produce
persulfates. AJ Works claims there is no justification for using
National Peroxide's financial data because there are significant
differences between the production process of hydrogen peroxide and
persulfates. Zhujiang argues that the Department should continue to
base surrogate factory overhead, SG&A, and profit on Sanderson's
financial statements rather than National Peroxide's data because
Sanderson's and Zhujiang's operations are comparable. Further, Zhujiang
contends that its operation is quite lean compared to petitioner's
description of persulfate producers with business units organized
around peroxygen chemistry and shared management, sales, and
distribution resources dedicated to hydrogen peroxide. Therefore,
Zhujiang claims it would be inappropriate to base its factory overhead,
SG&A and profit on values derived from the National Peroxide hydrogen
peroxide. Finally, Zhujiang argues that the Department would double-
count SG&A if it bases its SG&A on National Peroxide's financial data
because, unlike Zhujiang, National Peroxide has a huge array of sales
and distribution staff. Specifically, Zhujiang notes that it relies on
ICC for sales and distribution services and the Department has already
accounted for ICC's SG&A in its analysis of U.S. price. Hence, Zhujiang
argues the Department will double-count SG&A if surrogate values are
obtained from a producer that does not conduct business in a manner
similar to Zhujiang.
DOC Position
Based on the submitted information, verification findings, and the
Department's own research, we agree with petitioner that the financial
data from National Peroxide's Annual Report for the fiscal year-ending
March 31, 1995, is the most appropriate surrogate information available
to use for our final determination. The record indicates that the
production process for hydrogen peroxide most closely resembles the
production process for persulfates. Both products require large capital
outlays for production, storage, technical support and special safety
requirements. Although we found in the preliminary determination that
National Peroxide's financial information, particularly SG&A expenses,
were inconsistent with that of certain other Indian chemical producers,
we have no information showing that the production processes of those
producers resemble the production process for persulfates. Thus, we
have determined that inconsistencies between the financial data for
National Peroxide and these other Indian producers does not provide a
basis for rejecting National Peroxide's financial data. In addition, we
have no information showing that National Peroxide's financial data is
inconsistent with that of other producers of hydrogen peroxide.
Further, because both production processes have similar characteristics
(e.g., large capital outlays, special safety requirements) which may
impact SG&A, it is reasonable to conclude that National Peroxide's SG&A
is comparable to that of a company producing persulfates (see Final
Valuation Memorandum for further discussion regarding the similarities
of the production process for hydrogen peroxide and persulfates). In
addition, the product line of the respondents resembles the product
line of National Peroxide. As in the preliminary determination, the
Department made an extensive attempt in the final determination to
obtain the financial statements for an Indian persulfates producer.
However, the only known, existing persulfates producers are privately
held. Consequently, they do not issue public financial data about their
operations. We did not use data for the Indian metals and chemicals
industry from the RBI to value factory overhead and SG&A because the
more industry-specific data (i.e., National Peroxide) is preferable to
a broad RBI data, which includes metals as well as chemicals producers.
Thus, following, the Department's past practice of valuing factory
overhead, SG&A and profit using surrogate values for the industry-
specific experience closest to that of the subject merchandise, we used
National Peroxide's financial data in the final determination because
we concluded that National Peroxide's production is closer to that of
the subject merchandise than Sanderson's production. (See e.g., Notice
of Final Determination of Sales at Less Than Fair Value: Ferrovanadium
and Nitrided Vanadium From the Russian Federation, 60 FR 27957, (May
20, 1995) (``Ferrovanadium''); and Notice of Final Determination of
Sales at Less Than Fair Value: Magnesium from Ukraine 60 FR 16432,
(March 30, 1995) (``Magnesium from Ukraine'')).
Comment 7: Using Skill-Specific Labor Rates
Petitioner maintains that the Department should not have used
skill-specific labor rates from Coumarin in the preliminary
determination because the Department's current practice is to assign to
skilled, semi-skilled, and unskilled workers the single labor rate
reported in the Yearbook of Labor Statistics (``YLS''). Petitioner
contends a single labor rate has been used for different skill levels
in every PRC investigation and administrative review since PVA.
Furthermore, petitioner argues for the use of a single labor rate
because the two producers in this investigation classified laborers at
different skill levels. Petitioner contends this inconsistency between
the producers calls into question the skill levels reported by
respondents. Thus, petitioner urges the Department to use a single
labor rate for all skill levels rather than the separate rates used in
the preliminary determination.
Zhujiang, which reported that all its workers were skilled, did not
comment on this issue.
AJ Works maintains that it reported different skill levels for its
workers and the Department should use this information in its analysis.
DOC Position
We agree with petitioner. Although we used the skill-specific rates
derived in Coumarin in the preliminary
[[Page 27230]]
determination, recent Departmental practice has been to apply the labor
rate from the YLS to all reported labor skill levels because skill
levels are not identified in the YLS. (see Brake Drums). In Coumarin
the Department followed the methodology adopted in the Final
Determination of Sales at Less Than Fair Value: Certain Helical Spring
Lock Washers From the People's Republic of China (``Helical Spring Lock
Washers'') (58 FR 48833 (September 20, 1993)) . In the Helical Spring
Lock Washers investigation the parties agreed to treat the labor rate
from the YLS as a semi-skilled rate which was then adjusted to derive a
skilled and unskilled rates. However, in the instant case there is no
agreement among the parties to assume that YLS's labor rate is
representative of any particular skill level. Therefore, there is no
basis on which to calculate the skilled and unskilled labor rate.
Therefore, for the final determination, we have used one labor rate for
all reported skill levels.
Comment 8: Additional Packing Materials
AJ
Petitioner requests that the Department include all additional
packing material identified at verification in the factors of
production for AJ Works.
AJ Works maintains its factors of production should include only
the additional packing materials that were identified in the company's
revisions presented at verification, not the additional ``unreported''
packing materials identified in the Department's verification report.
AJ Works claims it does not use the ``unreported'' packing materials
and thus, these materials should not be added to the factors of
production.
Zhujiang
Petitioner maintains the factors of production should include the
unreported packing material discovered at verification.
Zhujiang did not comment on this issue.
DOC Position
We agree with petitioner. Section D of the Department's
questionnaire concerning the factors of production request for
information requires the respondent to report ``each type of packing
material * * * used to pack the subject merchandise for export to the
United States''.
Because AJ Works and Zhujiang failed to report all the packing
materials as requested by the Department, for the final determination,
we have included the unreported packing material in the factors of
production (see the Final Valuation Memorandum; also see the Memorandum
to the File reporting the results of the verification of AJ Works dated
March 31, 1997).
Company Specific Comments
AJ Works
Comment 9: Recalculating Factors of Production for Sodium Persulfate
Petitioner asserts that AJ Works' reported incorrect factors of
production for sodium persulfate because the reported factors were only
for the production of sodium persulfate exported to the United States
rather than for the total production of sodium persulfate. Petitioner
claims that reporting factors solely for exported subject merchandise
is contrary to the instructions in the Department's questionnaire and,
in the instant case, has resulted in inaccurate reporting.
Specifically, petitioner claims that the Departments' questionnaire
contemplates that the supplier will base per-unit factor amounts on
total production. Petitioner claims this intent is evidenced by the
questionnaire requirement that producers with multiple production
facilities must report factors for each facility even if the exported
subject merchandise is only produced in one facility.
Petitioner also claims that AJ Works' reporting methodology
resulted in inaccuracies because the company reported the factors of
production for export grade sodium persulfate without having the
capability to ensure that only export grade sodium persulfates were
shipped to the United States during the POI. Elaborating on this claim,
petitioner notes that AJ Works' export and domestic grade sodium
persulfates differ in that AJ Works used internally-produced ammonium
persulfate to produce export grade sodium persulfate and purchased
ammonium persulfate to produce domestic grade sodium persulfate.
Although the Department found that AJ Works' differentiated between
export and domestic grade sodium persulfate in its production records,
petitioner maintains that the company demonstrated no method for
physically distinguishing between export and domestic grade sodium
persulfate. In fact, petitioner claims export and domestic grade sodium
persulfates were commingled in AJ Works' finished goods warehouse.
Because the type of ammonium persulfate used to produce sodium
persulfate has a significant impact on margin calculations and AJ Works
cannot ensure that only sodium persulfates produced with internally-
produced ammonium persulfate were shipped to the United States,
petitioner claims that it would be incorrect to base NV for sodium
persuflate solely on factors for export grade subject merchandise.
Thus, petitioner recommends calculating per-unit factors of production
for sodium persulfate using the factor and production quantities for
total production.
In calculating NV for sodium persulfate from total production
amounts, petitioner recommends, as adverse facts available, that the
Department value both purchased and internally-produced ammonium
persulfate using the Indian surrogate price. In the alternative,
petitioner recommends calculating a weighted-average NV for sodium
persulfate based on the percentage of sodium persulfate produced using
purchased ammonium persulfate and the percentage produced using
internally-produced ammonium persulfate. If the Department uses
petitioner's alternative recommendation, petitioner urges the
Department to include the factor of production, the packing material,
and the labor required to pack and transport internally-produced
ammonium persulfates within AJ Work's factory.
AJ Works argues that it maintains an excellent method, which was
verified by Department officials, for keeping track of the products
produced using internally-produced ammonium persulfate and purchased
ammonium persulfate in both its accounting system and at the production
site. Further, AJ Works states that because it uses internally-produced
ammonium persulfate to produce sodium persulfates for the export market
and purchased ammonium persulfate to produce sodium persulfate for the
domestic market, it must separately track the amounts produced for each
market. Thus, it is not necessary to resort to a surrogate value to
value the internally-produced ammonium persulfate used to produce
sodium persulfate for export. Rather, the Department should continue to
calculate the NV for sodium persulfate based on AJ Works' factors of
production for internally-produced ammonium persulfate.
DOC Position
We agree with petitioner and applied the same methodology used in
past Department cases (see e.g., Coumarin) for the final determination.
We determined that the weighted-average cost is more representative of
the company's cost of production during the
[[Page 27231]]
POI than to assume that it produced all of the input material. Because
the reported data for the persulfates sold in the PRC includes inputs
which have a different cost than the input for exported subject
merchandise, the reported data for the factors of production used to
calculate the margin would be skewed if only factors for exported
merchandise were used. Further, since AJ Works tracks its use of
internally produced ammonium persulfate in its accounting system but
not in its production system, there is no way to prove which ammonium
persulfate, the internally-produced or purchased, was used in the
production of the sodium persulfate exported to the United States.
Accordingly, to calculate the antidumping margin we used the
weighted-average cost of factors of production for subject merchandise.
Comment 10: Surrogate value for purchased ammonium persulfate
Petitioner requests that, in order to calculate the NV for subject
merchandise, the Department should continue to value purchased ammonium
pursulfate using the ammonium persulfate value provided to the
Department by the petitioner in its July 11, 1996, submission because
it is a publicly available quote of the domestic price from an Indian
producer of ammonium persulfate in India (Rajendra Chemicals (P) Ltd.)
Insofar as petitioner points out that it did not solicit this price
quote, petitioner claims that this source is both reliable and
contemporaneous with the POI. (See Memorandum from Dave Muller, Office
of Policy to Louis Apple dated August 1, 1996).
AJ Works argues that the Department should not use the surrogate
value information from India to value a raw material input such as
ammonium persulfate used to produce potassium persulfate because the
value submitted from the Chemical Weekly by petitioner is an export
price and is artificially high. AJ Works contends that, according to
the Department's past practice, see, e.g., Furfuryl Alcohol, and
Coumarin, the Department's first preference in determining normal value
in a nonmarket economy investigation is the calculation of the value of
factors of production. Since the Department has verified the actual
factor inputs used to produce ammonium persulfates, surrogate values
for those inputs is the most accurate way to value ammonium persulfate
to calculate normal value for all three products under investigation.
DOC Position
We agree with petitioner. In accordance with the statute's
direction to measure and value ``the factors of production utilized in
the production of the merchandise'' (see Section 773(c)(1) of the Act)
and the Department's practice to value inputs which were purchased in a
non-market economy using surrogate values from a market economy at a
similar stage of development (see, e.g., Coumarin, and Brake Drums), we
continued to treat the purchased ammonium persulfate used in the
production of potassium persulfates as a completed input and we valued
it on the basis of a surrogate. Further, the Department has made
significant independent efforts throughout the investigation to obtain
publicly available information for ammonium persulfate and was unable
to obtain such information. Thus, for both the preliminary and final
determinations, our selection of surrogate values was based on the only
information on the record, which was a price quote from an Indian
producer of persulfates (see Final Valuation Memo).
Comment 11: Normal Value for Sodium Persulfate
Petitioner contends that the Department should value sodium
persulfate using the constructed value in the petition because Zhujiang
failed to demonstrate at verification that it used internally-produced,
rather than purchased, ammonium persulfate in the production of sodium
persulfate. Because the verifiers noted Chinese-labeled bags of
ammonium persulfate at the sodium persulfate production facility,
petitioner concludes that some of the ammonium persulfate used to
produce sodium persulfate was purchased from other persulfate factories
in China. Thus, as adverse facts available, petitioner urges the
Department to value sodium persulfate using the constructed value in
the petition. However, if the Department uses Zhujiang's factors of
production to value sodium persulfate, petitioner requests that the
Department include as factors the packing material and labor required
to transport ammonium persulfate within Zhujiang's factory.
Zhujiang maintains that there is no record evidence showing it
produced sodium persulfate using ammonium persulfate purchased from
outside companies. According to Zhujiang, it used Chinese-labeled bags
for production that was either consumed within the factory or sold in
the domestic market. Thus, Zhujiang states there was no need to label
the bags in English. Zhujiang argues that Chinese labels provide no
indication that it purchased ammonium persulfate from another factory.
Moreover, Zhujiang maintains that the Department thoroughly examined
factory records and found no evidence of purchases of ammonium
persulfate. Lastly, Zhujiang points out that the petitioner's
affidavit, indicating Zhujiang used purchased ammonium persulfate to
produce sodium persulfate, referred to production that occurred well
before the POI.
DOC Position
We agree with Zhujiang. At verification we found that the labeling
on the Chinese-labeled bags in question was the same as the labeling on
bags used to pack internally produced ammonium persulfate. Moreover, we
found no evidence of ammonium persulfate purchases in Zhujiang's
accounting records. Therefore, for the final determination, we valued
sodium persulfate using surrogate values.
However, we agree with petitioner that Zhujiang failed to report
factors of production for the materials used to pack the internally
produced ammonium persulfate used in sodium persulfate production.
Therefore, for the final determination, we have included these packing
materials in the factors of production for sodium persulfate. We did
not include additional factors for the labor required to transport
internally produced within Zhujiang's factory because this labor is
already included in the reported labor factors.
Comment 12: Average Surrogate Prices
Respondents argue that, in the preliminary determination, the
average surrogate values that the Department calculated from Indian
prices were simply a function of the Chemical Weekly issues the
Department happened to have on hand and they did not reflect the
average price during the POI. Respondents recommend that the Department
calculate average POI surrogate prices by dividing monthly prices for
the POI by the number of months in the POI.
Petitioner contends that, contrary to respondents' assertion, in
the preliminary determination, the Department correctly derived average
surrogate values by dividing monthly prices by the number of months for
which the prices were provided. Because this methodology eliminates
distortions and is precisely the methodology recommended by
respondents, petitioner urges the Department to continue using this
methodology in the final determination.
[[Page 27232]]
DOC Position
We agree with petitioner. In the preliminary determination the
Department calculated average surrogate prices for certain factors
using prices from all of the Chemical Weekly issues on the record,
which were provided by both parties and acquired through the
Department's research. Although respondents claim the Department's
calculation of average surrogate values is skewed because the Chemical
Weekly issues used in the average may be issues from months with the
highest prices, respondents failed to place Chemical Weekly issues on
the record which supported their assertion. Further, the average price
the respondents calculated from Indian Chemical Weekly prices did not
differ materially from the prices the Department calculated from
information on the record. Therefore, in the final determination, we
will rely on the information on the record.
Comment 13: Correction of a ministerial error
AJ requests that, for the final determination, the Department
include one U.S. transaction that the Department inadvertently omitted
from the calculation of average U.S. price when making its preliminary
determination.
Petitioner did not comment on this issue.
DOC Position
We agree with respondent. As noted in the Ministerial Error
Memorandum, the Department inadvertently omitted one transaction when
calculating the average U.S. price for the preliminary determination.
We have corrected for this error in the final determination.
Comment 14: Electricity Consumption
As adverse facts available, petitioner urges the Department to base
electricity consumption for AJ Works on amounts contained in the
petition rather than the amounts AJ Works reported to the Department
because the company failed to support the accuracy of the reported
consumption. Petitioner notes that AJ Work's electricity meter readings
had to be multiplied by an adjustment factor of either 120, 360, or 30
to derive the actual amount of electricity consumed because the
capacity of the meters prevented the full amount of electricity used by
the factory to flow through the meters. Petitioner claims AJ Works
failed to demonstrate the reasonableness of the adjustment factors and,
thus, the Department should base electricity consumption on information
contained in the petition.
AJ Works claims the Department should use the reported and verified
factors of production to calculate electricity costs. AJ Works points
out that it is common practice in the electricity industry to use a
multiplier to calculate total electricity consumption from electricity
meter readings. Thus, AJ Works maintains the use of the adjustment
factor was reasonable, accurate, and resulted in a verified consumption
figure.
DOC Position
We agree with respondent. The Department verified the total amount
of the electricity consumed. Further, the Department contacted an
independent energy specialist, who confirmed that an adjustment factor
is commonly used in the electrical industry (see Memorandum to the File
dated April 18, 1996, for further discussion of this subject).
Therefore, in our final determination, we included the verified amount
of electricity consumed in the factors of production and used the
adjustment factor.
Comment 15: Adjusting Caustic Soda Prices
AJ Works contends that, in the preliminary determination, the
Department incorrectly adjusted the surrogate price for caustic soda
because it incorrectly assumed that the surrogate price was for a
caustic soda solution with a 48 percent concentration. AJ Works
contends the surrogate price, which was from India's Chemical Weekly,
is the price per kilogram of caustic soda, not the price of a caustic
soda solution. AJ Works claims that if the price was for a solution, it
would be critical for Chemical Weekly to identify the concentration of
the solution. However, AJ Works notes that the publication did not do
so. In keeping with past Departmental practice, AJ Works maintains the
Department should not assume the surrogate price was for anything less
than a 100 percent concentration (see page 2 of the Factor Values
Memorandum in Antidumping Investigation of Polyvinyl Alcohol From
China) (``PVA Factors Values Memorandum''). Thus, AJ Works recommends
calculating the surrogate cost for caustic soda by multiplying the
surrogate unit price by the reported consumption and the actual
concentration used in production.
Petitioner did not comment on this issue.
DOC Position
We agree with respondent. We adjusted the concentration level of
the caustic soda priced in Chemical Weekly in the preliminary
determination calculation. Based on further analysis, and in accordance
with Departmental practice, for the final determination we assumed that
the chemical concentration is 100 percent, because there is no
information on the record specifying the chemical concentration.
Therefore, we derived chemical input values by multiplying the
surrogate price by the concentration and amount used in production.
(See PVA Factors Values Memorandum).
Comment 16: Correcting Control Numbers
Wuxi requests that for the final determination, the Department
correct control numbers in the company's sales listing, which were
inadvertently reversed through its own clerical error.
Petitioner did not comment on this issue.
DOC Position
We agree with respondent. Verification findings confirmed that Wuxi
inadvertently reversed control numbers in its sales listing, and we
have corrected for this error in the final determination.
AJ
Comment 17: International Freight Expenses
Petitioner maintains that the Department should use, as adverse
facts available, the highest international freight expense incurred by
AJ during the POI to value international freight expenses for several
invoices because AJ was unable to explain the methodology used to
determine the freight expenses for those invoices. According to
petitioner the Department was unable to verify the international
freight expenses for the invoices in question.
Respondents argue that, other than the invoices cited by
petitioner, the Department verified international freight expenses for
all of the invoices examined. Consequently, the Department should
accept the reported international freight amounts for all transactions.
Respondents also argue that, even though company officials could not
explain how international freight was allocated to the invoices in
question, the allocation was performed in the ordinary course of
business and, thus, it should be accepted. However, respondents suggest
that if the Department rejects the allocation methodology presented
during the verification, it has in its verification exhibits the total
freight expense and the total tonnage for the invoices in question,
which it can use to allocate the international freight expenses
[[Page 27233]]
among the invoices on a strict per-ton basis.
DOC Position
We agree with respondents that there is no need to resort to
adverse facts available to value international freight for the invoices
in question. Section 776(b) of the Act provides that the Department may
use an inference that is adverse to the interests of a party in
selecting among facts otherwise available if the party failed to
cooperate by not acting to the best of its ability to comply with
requests for information. In the instant case AJ attempted, to the best
of its ability, to explain how international freight was allocated to
the invoices in question; however it was unable to support its
explanation. Therefore, for the final determination, the Department
allocated the freight among the invoices in question on a per-ton
basis.
Comment 18: Inland Freight, Brokerage and Handling
Petitioner notes that although Wuxi reported freight and handling
charges two days before the preliminary determination, the Department
made no adjustments to Wuxi's U.S. sales for those charges. Petitioner
contends that although the Department did not adjust U.S. price for
those charges in the preliminary determination, the Department should
make an adjustment to U.S. price for inland freight and brokerage and
handling in the final determination because the Department verified
that Wuxi incurred such charges. Petitioner notes that the Department's
policy as outlined in Brake Drums is to strip all movement charges,
including foreign inland freight, from the U.S. price being compared to
normal value. In addition, petitioner claims the Department should use
adverse facts available to value the charges Wuxi reported for
emergency loading, and highway and bridge fees which are separate fees
from brokerage and handling charges.
Respondent states that the Department should make adjustments to
U.S. price for inland freight and brokerage and handling based on the
factors submitted by Wuxi and verified by the Department. Wuxi
maintains the use of adverse facts available with regard to emergency
loading and highway and bridge fees is not called for because such fees
are included in inland freight fees.
DOC Position
We agree with petitioner and respondent, in part. Petitioner is
correct that the Department should make an adjustment to U.S. price for
inland freight and brokerage and handling. Further, due to the fact
that these amounts were reported in PRC currency and were based on an
NME service provider, in accordance with the Department practice in an
NME case, for the final determination, we used a surrogate value for
inland freight transportation and brokerage and handling for certain
fees reported by Wuxi. We agree with respondent that the emergency
loading expense is included in inland freight fees (see Final Valuation
Memo).
Comment 19: Value for Ammonia
Petitioner requests that the Department reject the Indian ammonia
pricing information submitted to the Department by the respondents ICC,
Zhujian and Guangdong in their April 4, 1997, submission. Petitioner
points out that this pricing information is not representative of
prices during the POI because it only covers three weeks and, as the
respondents stated in their April 4, 1997 letter, ammonia prices
fluctuate substantially. Thus, as petitioner maintains, given that the
price for ammonia fluctuates substantially, three weeks is not an
accurate indicator of the average value for ammonia during the six-
month POI. Therefore, petitioner requests that the Department use
petitioner's information because it's the most representative of prices
during the POI.
Respondents did not comment on this issue.
DOC Position
We agree with petitioner. The Department used the Indian values
provided by the petitioner because these values are most representative
of surrogate prices for ammonia during the POI.
Comment 20: Ammonium Persulfate Spoilage
Petitioner maintains that spoilage of ammonium persulfate used in
the production of sodium persulfate should have been included in the
reported production factors for sodium persulfate. Petitioner notes
that, at verification, the Department identified unreported amounts for
ammonium persulfate spoilage in Zhujiang's overhead expense accounts.
Because this was spoilage of ammonium persulfate used to produce sodium
persulfate, petitioner requests that the Department include the amount
of the spoilage in the total amount of ammonium persulfate consumed to
produce sodium persulfate.
Respondents did not comment on this issue.
DOC Position
We agree with petitioner. Ammonium persulfate is a direct material
used to produce sodium persulfate. Thus, spoilage of this product
should be included in the cost of production of sodium persulfate.
Hence, for the final determination, we included the amount of ammonium
persulfate spoilage in the factors of production for sodium persulfate.
Comment 21: Adjustments for By-Products
According to petitioner, the Department should not adjust
persulfate factors of production to account for by-products because the
by-products are discarded. Petitioner notes that at verification the
Department found that all the by-products generated from producing the
subject merchandise are waste that are neither sold nor used in further
production. Because the by-products are not sold, petitioner claims
that the Department should not adjust the factors of production to
account for by-products.
Respondents did not comment on this issue.
DOC Position
We agree with petitioner. The record shows that Zhujiang did not
use or sell the by-products it generated from producing persulfates.
Thus, there is no economic benefit associated with the by-products.
Therefore, in accordance with past practice, for the final
determination we did not adjust factors of production for by-products
(see Notice of Final Determination of Sales at Less Than Fair Value:
Pure Magnesium From Ukraine 60 FR 16432, 16435 (March 30, 1995), and
Coumarin).
Comment 22: Sulfuric Acid Used in Sodium Persulfate Production
Petitioner asserts that sulfuric acid should have been reported in
Zhujian's response as a factor of production for sodium persulfate
because it is an input in the sodium persulfate production process.
Petitioner bases its assertion on company officials' statement at
verification that sulfuric acid is used to absorb ammonia gas (a by-
product) generated from producing sodium persulfate. Thus, petitioner
contends sulfuric acid is a material input in the sodium persulfate
production process.
Zhujiang claims it reported sulfuric acid as a factor of production
and the Department verified the amount reported.
[[Page 27234]]
DOC Position
We agree with Zhujiang. Zhujiang reported sulfuric acid as one of
the inputs used in sodium persulfate production and we included the
amount reported in our NV calculation in the final determination.
Comment 23: Water Used in Sodium and Ammonium Persulfate Production
Petitioner requests that the Department base the quantity of water
consumed in production on adverse facts available because Zhujiang
failed to report water consumption in its submissions and did not
provide water consumption figures in response to Department officials'
request at verification.
Zhujiang states that the Department's well-established practice is
to consider water consumption part of factory overhead (see Coumarin
Comment 9 and Saccharin). In the instant case, Zhujiang urges the
Department not to divert from its normal treatment of water
consumption.
DOC Position
The Department's normal practice is to presume, absent evidence to
the contrary, that the surrogate value for factory overhead includes
water consumption (see Sulfanilic Acid From the People's Republic of
China: Final Results of Antidumping Duty Administrative Review 61 FR
53711, 53716 (October 15, 1996)). However, in the instant case, the
record shows that the cost of water was not included in the expenses
used to compute surrogate factory overhead. Therefore, we have included
a factor for water in Zhujiang's factors of production. In addition,
because Zhujiang failed to provide the requested water consumption
figures, and Section 776(b) of the Act provides that adverse inferences
may be used against a party that has failed to cooperate, as adverse
facts available, we have based the amount of water consumption on the
greatest reported POI per-unit water consumption figures in the
petition or in the public versions of the other respondent producers
submissions in this investigation.
Comment 24: Supplier Distances
According to petitioner, during verification Zhujiang failed to
support the percentage of inputs purchased from each supplier. Thus,
petitioner argues that the Department cannot use the reported distances
between suppliers and the factory because the Department does not know
what percentage of the input came from each supplier. Petitioner
therefore urges the Department to use as adverse facts available for
Zhujiang, the greatest reported distance between the factory and a
supplier of an input as the distance between the factory and all
suppliers of that input.
Respondents did not comment on this issue.
DOC Position
We agree with petitioner. Section 776(a)(2)(D) of the Act provides
that if an interested party provides information that cannot be
verified, the Department shall, subject to Section 782(d) of the Act,
use facts otherwise available in reaching the applicable determination.
In addition, Section 776(b) of the Act provides that adverse inferences
may be used against a party that has failed to cooperate by not acting
to the best of its ability to comply with requests for information.
Department officials made numerous requests over the course of the
verification for documentation supporting the reported percentage of
inputs purchased from each supplier. Despite the requests, Zhujiang
failed to provide supporting documentation. Therefore, for the final
determination, we have used the greatest reported distance between the
factory and a supplier of an input as the distance between the factory
and all suppliers of that input.
Guangdong
Comment 25: Identifying the Appropriate Sales for USP--Knowledge of
Destination
Petitioner claims Guangdong's sales to ICC must serve as the basis
for calculating USP because the sales meet the definition of export
price sales. Specifically, petitioner notes that the transaction
between Guangdong and ICC constitutes the first sale of subject
merchandise to an unaffiliated purchaser in the United States. In
addition, petitioner notes that most of the persulfates that Guangdong
sold to ICC were shipped to the United States entered the customs
territory of the United States. According to petitioner, merchandise
within the scope of a proceeding that is entered into the customs
territory of the United States is subject to antidumping duties. Thus,
petitioner asserts that Guangdong cannot claim its sales to ICC are not
U.S. sales simply because ICC resold some of the merchandise to
customers outside the United States. Moreover, petitioner maintains
that the ultimate destination of the merchandise in question is
irrelevant in the instant case because the merchandise first entered
the customs territory of the United States. Alternatively, petitioner
argues that there is ample evidence that Guangdong knew the destination
of the merchandise it sold to ICC.
ICC argues that the entry into the customs territory of the United
States is not sufficient to create a U.S. sale. ICC argues that it is
in the same position as a third-country reseller of merchandise
purchased from Guangdong and that the Department's reseller methodology
should apply. ICC argues that it imports the merchandise into its
warehouse in New Jersey, but then resells the merchandise. It may
resell it to a customer in the United States, or it may resell the
merchandise to a customer outside the United States. ICC argues that
because it functions as a reseller in this manner, the Department
should determine who had knowledge that the merchandise was destined
for customers in the United States. Because Guangdong had no knowledge
of the ultimate destination of the merchandise, ICC asserts, the
Department should use ICC's prices to its customers in the United
States as the U.S. price.
DOC Position
We disagree with ICC that it is in the same position as a third-
country reseller. EP is based on the first sale, prior to importation,
to an unaffiliated purchaser in or for exportation to the United
States. Because ICC is an unaffiliated purchaser in the United States,
whether the merchandise is resold by ICC to a U.S. customer or to a
customer outside the United States is immaterial. The Department cannot
disregard U.S. sales based on the destination of merchandise after it
is sold to an unaffiliated purchaser in the United States. Therefore,
we will use as EP the price ICC paid Guangdong for merchandise entering
the United States for consumption. Where there is a direct sale to an
unaffiliated purchaser in the United States there is no issue of
knowledge. Guangdong sold the merchandise directly to an unaffiliated
purchaser (ICC) in the United States. Thus we have determined that
Guangdong is the appropriate respondent in this investigation. Because
sales from Guangdong to ICC are the relevant transactions, we did not
summarize or address issues raised regarding ICC's U.S. sales.
We also note that entry into the Customs territory is not
sufficient to constitute a U.S. sale; merchandise must be entered for
consumption before it may considered a U.S. sale (see Titanium Metals
Corporation v. United States, 901 F. Supp. 362 (CIT 1995). According to
ICC, it would have to pay cash deposits when its merchandise enters the
United States; under this
[[Page 27235]]
condition it is being entered for consumption and being re-exported
later.
Comment 26: Adjusting USP for Transportation Expenses
Petitioner contends that the Department should reduce USP by the
expenses the Zhujiang factory incurs to transport persulfates from the
plant to the factory's warehouse where ICC takes possession of the
merchandise. Petitioner claims that reducing USP by these
transportation expenses is in accordance with the Department's policy
outlined in Brake Drums. Because Zhujiang did not submit factors for
these expenses, petitioner requests that the Department use, as facts
available, the greatest amounts incurred by any respondent in this
investigation for inland freight and brokerage and handling.
Respondents argue that USP should not be adjusted by intra-factory
transportation expenses because these expenses are part of factory
overhead. Respondents maintain that intra-factory transportation costs
are inherently part of factory overhead and it would be very unusual
for the Department to reduce USP by such costs, particularly without
determining whether the costs have been excluded from the surrogate
value for factory overhead. Further, respondents claim Brake Drums does
not support petitioner's position because in that case the Department
reduced factory overhead by the surrogate cost of transportation
expenses before deducting foreign inland freight costs from USP.
Respondents also note that the facts in the instant case are similar to
the facts in Titanium Sponge From Russia where the Department did not
reduce USP by foreign inland freight expenses (see Titanium Sponge From
the Russian Federation: Notice of Final Results of Antidumping Duty
Administrative Review FR 61 58525, 58529 (November 15, 1996)
(``Titanium Sponge From Russia'')). Specifically, respondents note that
like the instant case, in Titanium Sponge From Russia, the non-market
economy producer, who did not know the ultimate destination of the
subject merchandise, incurred foreign inland freight expense selling
the subject merchandise to a market economy exporter who took physical
possession of the merchandise. Thus, respondents contend the Department
should not reduce USP by intra-factory transportation expenses.
DOC Position
We agree with respondents that USP should not be reduced by intra-
factory transportation expenses. Section 772 (c)(2)(A) of the Act
states that USP should be reduced by expenses which are included in USP
and ``incident to bringing the subject merchandise from the original
place of shipment in the exporting country to the place of delivery in
the United States'' (emphasis added). When a reseller is the exporter
rather than the producer, it is the Department's practice to consider
the place from which the reseller shipped the merchandise as the
``original place of shipment'' (see Titanium Sponge From Russia).
Hence, in the instant case the ``original place of shipment'' is
Zhujiang's warehouse because the reseller/exporter, Guangdong, shipped
the subject merchandise from that point. Thus, transportation costs
incurred to bring the merchandise from the plant to the factory's
warehouse should not be deducted from USP.
Continuation of Suspension of Liquidation
In accordance with section 735(c)(1) of the Act, we are directing
the Customs Service to continue to suspend liquidation of all entries
of persulfates from the PRC that are entered, or withdrawn from
warehouse, for consumption on or after the date of publication of our
notice of the preliminary determination in the Federal Register. We
will instruct the Customs Service to require a cash deposit or posting
of bond equal to the weighted-average amount by which the NV exceeds EP
as indicated in the chart below. This suspension of liquidation will
remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weight-
average
Manufacturer/producer/exporter margin
percentage
------------------------------------------------------------------------
Sinochem Jiangsu Wuxi Import & Export Corporation........... 40.97
Shanghai Ai Jian Import & Export Corporation................ 42.18
Guangdong Petroleum Chemical Import & Export Trade
Corporation................................................ 43.93
China-wide Rate............................................. 134.00
------------------------------------------------------------------------
The China-wide rate applies to all entries of subject merchandise
except for entries from exporters that are identified individually
above.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our final determination is affirmative,
the ITC will determine, within 45 days, whether these imports are
causing material injury, or threat of material injury, to an industry
in the United States. 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 canceled. 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.
This determination is published pursuant to section 735(d) of the
Act.
Dated: May 12, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-13060 Filed 5-16-97; 8:45 am]
BILLING CODE 3510-DS-P