[Federal Register Volume 63, Number 221 (Tuesday, November 17, 1998)]
[Notices]
[Pages 63834-63842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30741]
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DEPARTMENT OF COMMERCE
[A-570-815]
Sulfanilic Acid From the People's Republic of China; Final
Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of the 1996-1997 Antidumping Duty
Administrative Review of Sulfanilic Acid from the People's Republic of
China.
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SUMMARY: On July 13, 1998, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order on sulfanilic acid from the People's Republic of
China (PRC). The review covers the period August 1, 1996 through July
31, 1997, and all PRC exporters of the subject merchandise.
We gave all interested parties an opportunity to comment on our
preliminary results. Based on our review of the comments received, the
margins in the final results have changed from those presented in the
preliminary results.
EFFECTIVE DATE: November 17, 1998.
FOR FURTHER INFORMATION CONTACT: LaVonne Jackson, Doug Campau or Nithya
Nagarajan, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue NW,
Washington, DC 20230; telephone: (202) 482-3793.
SUPPLEMENTARY INFORMATION:
[[Page 63835]]
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
current regulations at 19 CFR part 351 (1998).
Background
On July 13, 1998, the Department of Commerce published in the
Federal Register (63 FR 37528) the preliminary results of its
administrative review of the antidumping duty order on sulfanilic acid
from the PRC (57 FR 37524, August 19, 1992). This review covers exports
of subject merchandise to the United States for the period of August 1,
1996 through July 31, 1997, and all exporters of sulfanilic acid,
including, but not limited to, the following thirteen firms: China
National Chemical Import and Export Corporation, Hebei Branch (Sinochem
Hebei); China National Chemical Construction Corporation, Beijing
Branch; China National Chemical Construction Corporation, Qingdao
Branch; Sinochem Qingdao; Sinochem Shandong; Baoding No. 3 Chemical
Factory; Jinxing Chemical Factory; Zhenxing Chemical Industry Co.
(``Zhenxing''); Mancheng Xinyu Chemical Factory, Shijiazhuang; Mancheng
Xinyu Chemical Factory, Beijing; Hainan Garden Trading Company; Yude
Chemical Industry Company (``Yude'') and Shunping Lile Chemical
Factory. We have now completed the administrative review in accordance
with section 751(a) of the Act.
Scope of Review
Imports covered by this review are all grades of sulfanilic acid,
which include technical (or crude) sulfanilic acid, refined (or
purified) sulfanilic acid and sodium salt of sulfanilic acid.
Sulfanilic acid is a synthetic organic chemical produced from the
direct sulfonation of aniline with sulfuric acid. Sulfanilic acid is
used as a raw material in the production of optical brighteners, food
colors, specialty dyes, and concrete additives. The principal
differences between the grades are the undesirable quantities of
residual aniline and alkali insoluble materials present in the
sulfanilic acid. All grades are available as dry, free flowing powders.
Technical sulfanilic acid, classifiable under the subheading
2921.42.24 of the Harmonized Tariff Schedule (HTS), contains 96 percent
minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent
maximum alkali insoluble materials. Refined sulfanilic acid, also
classifiable under the subheading 2921.42.24 of the HTS, contains 98
percent minimum sulfanilic acid, 0.5 percent maximum aniline and 0.25
percent maximum alkali insoluble materials.
Sodium salt (sodium sulfanilate), classifiable under the HTS
subheading 2921.42.79, is a powder, granular or crystalline material
which contains 75 percent minimum equivalent sulfanilic acid, 0.5
percent maximum aniline based on the equivalent sulfanilic acid
content, and 0.25 percent maximum alkali insoluble materials based on
the equivalent sulfanilic acid content.
Although the HTS subheadings are provided for convenience and
customs purposes, our written description of the scope of this
proceeding is dispositive.
Use of Facts Otherwise Available
Only two firms, Yude and Zhenxing, responded to the Department's
questionnaire and demonstrated that they are entitled to a separate
rate. All firms that have not demonstrated that they qualify for a
separate rate are deemed to be part of a single enterprise under the
common control of the government (the ``PRC enterprise''). Therefore,
all such entities receive a single margin, the ``PRC rate.'' We
preliminarily determined in accordance with section 776(a) of the Act,
that resort to facts otherwise available is appropriate in arriving at
the country-wide rate because companies deemed to be part of the PRC
enterprise for which a review was requested have not responded to the
Department's antidumping questionnaire. Because PRC exporters of this
product did not respond to the Department's questionnaire, the
Department finds that the ``PRC enterprise'' has failed to cooperate by
not acting to the best of its ability to comply with a request for
information.
Where the Department must resort to facts otherwise available
because a respondent fails to cooperate by not acting to the best of
its ability to comply with a request for information, section 776(b) of
the Act authorizes the Department to use an inference adverse to the
interests of that respondent in choosing from the facts available.
Section 776(b) also authorizes the Department to use, as adverse facts
available, information derived from the petition, the final
determination, a previous administrative review, or other information
placed on the record. The Statement of Administrative Action (SAA)
accompanying the URAA clarifies that information from the petition and
prior segments of the proceeding is ``secondary information.'' See H.
Doc. 3216, 103rd Cong. 2d Sess. 870 (1996). If the Department relies on
secondary information as facts available, section 776(c) of the Act
provides that the Department will, to the extent practicable,
corroborate such information using independent sources reasonably at
its disposal. The SAA further provides that ``corroborate'' means
simply that the Department will satisfy itself that the secondary
information to be used has probative value. However, where
corroboration is not practicable, the Department may use uncorroborated
information.
In the present case the Department has based the country-wide
margin on the final best information available margin from the
investigation, which was originally based on information from the
petition. Notice of Final Determination of Sales at Less Than Fair
Value, 57 FR 37524 (August 19, 1992). See also Notice of Final
Determination of Sales at Less Than Fair Value: Circular Welded Non-
Alloy Steel Pipe from South Africa, 61 FR 24272 (May 14, 1996). In
accordance with section 776(c) of the Act, we corroborated the data
contained in the petition, as adjusted for initiation purposes, to the
extent possible. The petition data on major material inputs are
consistent with Indian import statistics, and also with price
quotations obtained by the U.S. Embassies in Pakistan and India. Both
of these corroborating sources were placed on the record during the
investigation and have been added to the record of this review. In
addition, we note that the petition used World Bank wage rates which we
have repeatedly found to be a probative source of data. With regard to
the values contained in the petition, the Department was provided no
useful information by the respondent or other interested parties, and
we are aware of no other independent sources of information that would
enable us to further corroborate the margin calculation in the
petition. We note that the SAA at 870 specifically states that where
``corroboration may not be practicable in a given circumstance,'' the
Department may nevertheless apply an adverse inference. Based on these
reasons, we preliminarily find that the information contained in the
petition has probative value.
Accordingly, we have relied upon the information contained in the
petition. We have assigned to all exporters other than Yude and
Zhenxing a margin of
[[Page 63836]]
85.20 percent, the margin in the petition, as adjusted by the
Department for initiation purposes.
Analysis of Comments Received
We invited interested parties to comment on the preliminary
results. We received comments from Yude, Zhenxing, PHT International,
Inc. (``PHT'') (collectively Respondent), and from the Petitioner,
Nation Ford Chemical Company.
Comment 1: Petitioner contends that the Department should apply the
country-wide rate of 85.20 percent as the facts available to calculate
Respondent's dumping margin because Zhenxing and PHT failed to disclose
what they called Respondent's ``affiliation'' with Baoding Import
Export Company (``Baoding''), a PRC trading company, until the
relationship was discovered by the Department during verification.
Petitioner contends that Baoding and the Respondent are affiliated
parties. According to the Petitioner, Zhenxing's U.S. sales of sodium
sulfanilate during the period of review (POR) were made through
Baoding. Petitioner argues that record evidence indicates that Baoding
represented itself as the export agent of Zhenxing and that Respondents
themselves characterized Baoding as a brokerage house to facilitate the
export of sodium sulfanilate. Therefore, Petitioner reasons that
Baoding, acting as Zhenxing's agent, is affiliated with Zhenxing.
Petitioner argues that if Zhenxing and Baoding are affiliated,
Baoding's failure to respond to the Departments original and subsequent
questionnaires constitutes failure of Zhenxing to report all sales made
by themselves and their affiliates.
Petitioner states that Respondent addressed the issue of the PRC
trading company only in post-verification submissions. Petitioner
contends that the Department typically rejects such unsubstantiated,
eleventh hour claims made by Respondent that have failed to disclose
material information in their questionnaire responses. See Certain
Welded Carbon Steel Pipes and Tubes from Thailand; Final Results of
Antidumping Duty Administrative Review, 62 FR 53808, 53813 (Oct. 16,
1997).
Furthermore, Petitioner claims that fees paid by the Respondent to
Baoding for its services are direct selling expenses which the
Department was not able to verify. Consequently, a material part of the
calculation of CEP has not been verified. Therefore, Petitioner
contends that the Department must conclude that the Respondent did not
act to the best of its ability to provide this information and that the
Department cannot use the new information discovered at verification
and provided in post-verification submissions to calculate the margin
because it is not credible and cannot be verified.
Respondent argues that Baoding was not the exporter of the subject
merchandise, is not related to PHT and acted only as the brokerage
house to facilitate the process of moving the goods from the factory to
the port and through export customs in China, and that PHT simply
purchased these services from Baoding. Respondent contends that
Zhenxing only sells the subject merchandise to PHT, and neither sold
nor intends to sell the subject merchandise directly to any
unaffiliated U.S. buyers or to Baoding. Respondent argues that the
criteria set forth in Engineered Process Gas Turbo-Compressor Systems
from Japan, 62 FR 24394 (May 5, 1997), for determining affiliation are
not applicable to this case. Respondent argues that the relationship
between PHT and Baoding was not one of principal and agent within the
context of a sales transaction. Respondent claims that this
relationship was a simple contractual relationship and that Baoding was
not an agent/reseller of sodium sulfanilate because Baoding did not act
as a sales agent in negotiating the price or other terms of sale,
interact with U.S. customers, maintain inventory of the subject
merchandise, take title to the merchandise or bear risk of loss or
process or otherwise add value to the merchandise. Therefore, Baoding
was not required to respond to the Department's questionnaire with
respect to those sales. Finally, Respondent states that its response to
the Department's supplemental questionnaire with respect to Baoding was
timely.
Department's Position: We agree with Respondent. On May 1, 1998,
after the conclusion of verification and prior to calculating our
preliminary results of review, the Department issued a supplemental
questionnaire requesting further clarification on the relationship
between Zhenxing, PHT, and Baoding and the services provided by Baoding
for sales of sodium sulfanilate. Respondent submitted their response on
May 14, 1998, stating that Baoding was unaffiliated with either PHT or
Zhenxing. Respondent stated that Zhenxing does not sell the subject
merchandise to Baoding and that Baoding has no function regarding sales
of the subject merchandise. According to the Respondent, Baoding's
function is to facilitate the exportation of the merchandise. Baoding
provides the documents necessary for the exportation and helps to
arrange the delivery of goods to port. In addition, Baoding did not
take title to the subject merchandise nor does Baoding assume the
management, storage or shipment of the subject merchandise. In return
for its brokerage and handling services, Baoding is paid a fee by PHT
consistent with standard industry practice. Based on this information,
the Department determined that Baoding was unaffiliated to either PHT
or Zhenxing for purposes of the preliminary results of review and
adjusted normal value to include the cost of brokerage and handling
expenses incurred by Zhenxing and PHT to make sales via Baoding, valued
in an appropriate market economy surrogate country. For purposes of
these final results of review, the Department has not received any
additional information to indicate that Baoding is affiliated with
either PHT or Zhenxing, therefore, consistent with our findings in the
preliminary results of review, we have adjusted for the additional
brokerage and handling expenses incurred on sales via Baoding.
Comment 2: Petitioner contends that the Department should apply the
country-wide rate of 85.20 percent as the facts available to calculate
Respondent's dumping margin because the Department was unable to verify
a significant portion of the factors of production information
submitted by the Respondent. Petitioner argues that discrepancies found
at verification related to (1) coal usage, (2) electricity usage, and
(3) labor hours understated the Respondent's factors of production and
that new information used to recalculate Respondent's energy usage was
untimely. Petitioner also argues that Respondent never corrected the
usage data either in their supplemental questionnaire response or prior
to the start of the factors of production verification.
Petitioner further contends that the Department's preliminary
results of review correcting said discrepancies is inappropriate
because the discrepancies involve major factors of production, the
record of the review contains no explanation of the reasons for the
discrepancies and the discrepancies that were discovered all favored
Respondent, indicating a pattern of under-reporting.
Respondent argues that neither the Department's observation at
verification of what it perceived to be unreconciled coal purchases in
comparison to total coal usage, nor the difference between total
predicted amount of electricity reported by Zhenxing and Zhenxing's
final electricity consumption is
[[Page 63837]]
significant. Further, Respondent argues that these verification
findings did not create a pattern of under-reporting factors of
production.
Department's Position: The Department agrees with Respondent
regarding the use of verified information for coal usage, electricity,
and labor factors of production. It is the Department's practice to
allow respondents to correct for minor errors during the course of
verification. In the instant case, while conducting the verification,
Department officials noted certain errors in Zhenxing's factors of
production response. Department officials then proceeded to verify and
ensure that they obtained the most accurate factors of products which
tied to the company's actual books and records. At the conclusion of
verification, the Department determined that the errors found were
minor in nature and did not require a revised response to be submitted.
Therefore, in order to ensure that the most accurate factors of
production were used to calculate NV in the preliminary results of
review, the Department utilized the verified factors of production for
coal usage, electricity, and labor. In regard to the Petitioner's
argument that these discrepancies indicated a pattern of under-
reporting, the Department has determined that the errors noted during
verification were insignificant and did not constitute a pattern or
under-reporting on behalf of the Respondent. Contrary to Petitioner's
allegation, not every discrepancy involved favored Respondent. For
purposes of the final results, the Department has therefore continued
to use the verified information for these factors of production.
Comment 3: Petitioner claims that the use of Indian import prices
for aniline as the surrogate value for aniline used by the PRC
Respondent in this case is inappropriate because, it claims, the plain
language of the statute does not permit the Department to use imported
aniline prices when the NME respondents use domestically-sourced
aniline. Petitioner argues that the Department incorrectly based the
surrogate value for aniline on Indian sulfanilic acid production
processes, instead of reported PRC production processes. Petitioner
states that the Department must first identify the NME factors of
production and then, using those same factors, obtain surrogate values
from a market economy at a similar level of economic development.
Petitioner contends that because Respondent uses domestically-sourced
aniline to manufacture sulfanilic acid, the Department must value
aniline using prices for aniline domestically produced in India.
Petitioner argues that the Department has recently stated a clear
preference for using domestic market prices in the surrogate country to
value factors of production. As support for this position, Petitioner
cites Pure Magnesium from the People's Republic of China: Final Results
of Antidumping Duty New Shipper Administrative Review, 63 FR 3085, 3087
(Jan. 21 1998) (``Magnesium''); Final Determination of Sales at Less
Than Fair Value: Certain Cut-to-length Carbon Steel Plate from the
People's Republic of China, 62 FR 61964, 61966 (Nov 20, 1997) (``Carbon
Steel Plate''); 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 9163 (Feb. 28, 1997) (``Brake Drums''). Petitioner also
argues that the profitability of surrogate country producers in export
markets is irrelevant to the Department's valuation of the factors of
production utilized by the NME under investigation.
Petitioner contends that the values for imported aniline used in
the preliminary results cannot be used because these values are based
on subsidized prices and are not an accurate reflection of the price of
aniline. Petitioner cites Brake Drums and Tehnoimportexport v. United
States, 783 F. Supp. 1401 (CIT 1992) (``Tehnoimportexport''). According
to the Petitioner, the Department has determined that the Indian
Advanced License program is a countervailable subsidy under U.S. law.
Preliminary Affirmative Countervailing Duty Determination: Sulfanilic
Acid From India, 57 FR 35785 (Aug. 11, 1992); Countervailing Duty
Order: Sulfanilic Acid From India, 58 FR 12026 (Mar. 2, 1993). Under
this program, the normal 85% duty on imported aniline is not collected
if sulfanilic acid produced with imported aniline is subsequently
exported. Petitioner contends that Indian sulfanilic acid producers
receive a government subsidy to the extent that they pay duty-free
prices for imported aniline.
Petitioner states that the Department is precluded from using
prices for imported aniline due to the reasons stated above. Petitioner
argues that the statute requires the Department to use, instead,
published domestic price information reported in Chemical Business and
Chemical Weekly to value aniline in this review. Petitioner maintains
that these publications are reliable sources, as evidenced by the
Department's use of these sources in several antidumping investigations
and reviews involving PRC products. 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, 19030 (Apr. 30, 1996)
(``Bicycles''). Petitioner also argues that the Department used
Chemical Weekly data as the surrogate value for another input, sulfuric
acid, in the preliminary results of this case. Petitioner states that
the domestic prices are contemporaneous, product specific, tax
exclusive and publicly available and are therefore a reliable basis for
use as a surrogate value.
Respondent argues that the Department correctly valued aniline
using Indian import statistics because Indian sulfanilic producers used
imported aniline to produce sulfanilic acid for export. Respondent
refers to the initial investigation and the 1993-94 and 1994-95
administrative reviews of this case, in which the Department previously
used Indian import statistics for valuing aniline. Respondent cites
Nation Ford Chemical Co. v. United States, 985 F. Supp. 133 (CIT 1997)
and Nation Ford Chemical Co. v. United States, 985 F. Supp. 138 (CIT
1997), in which the Court of International Trade (CIT) affirmed the
Department's determinations in the 1993-94 and 1994-95 reviews,
respectively, to use Indian import values as a surrogate for PRC
aniline costs. Respondent also contends that the CIT determined that
Petitioner's argument that the Department must use the Indian domestic
price for aniline because Chinese producers use domestic aniline was
erroneous because there was no basis in the statute for arguing that
the factors of production must be ascertained in a single fashion.
Nation Ford Chemical Co., 985 F. Supp. at 136 (citing Lasko Metal
Prod., Inc. v. United States, 43 F.3d 1442, 1446 (Fed. Cir. 1994)
(``Lasko'') and 19 U.S.C. 1677b(c)(3)). In addition, Respondent
contends that the CIT further stated that it was reasonable for the
Department to conclude that Indian domestic prices were not adequately
representative of the situation in the PRC. Respondent contends that
the Court also notes that although a surrogate value must be
representative of the situation in the non-market economy (NME), that
does not mean that the Department must duplicate the exact production
experience at the expense of choosing a surrogate value that most
accurately represents what would be the fair market value of aniline in
a market-economy PRC.
Respondent contends that the CIT has determined that the Indian
subsidy program would have no impact on the price of imported aniline,
and therefore
[[Page 63838]]
rejected the identical subsidy argument Petitioners are making in this
review. Respondent relies upon the CAFC's statement in Lasko that, in
the underlying case, the best available information on what the
supplies used by the Chinese manufacturers would cost in a market
economy country was the price charged for those supplies on the
international market. Respondent argues that, similarly, the best
available information on the value of aniline used by the Indian
producers to make sulfanilic acid for export is the import price for
aniline, which reflects the cost of aniline on the international
market.
Respondent also cites Tehnoimportexport, in which the CIT
acknowledged that the Department has frequently used import statistics
in NME country cases. Respondent argues further that the Department
uses import statistics for at least one factor in almost every dumping
case against China, even though the Chinese producers source the
product from a domestic manufacturer in China. See Notice of Final
Determination of Sales at Less Than Fair Value: Sebacic Acid from the
People's Republic of China, 59 FR 28053 (May 31, 1994); Bicycles, and
Brake Drums.
Respondent contends that the issue is which surrogate value from
India best represents what the cost of aniline would be in China to the
Chinese producer if the price were set by market forces. Respondent
argues that the CIT states in Tehnoimportexport, 783 F. Supp. at 1406,
that when the Department is faced with the decision between two
reasonable alternatives and one alternative is favored over the other,
the Department has the discretion to choose. Respondent also relies
upon Union Camp v. United States, 941 F. Supp. 108, 116 (CIT 1996),
remand aff'd, 963 F. Supp. 1212 (CIT 1997), and Magnesium Corp. of
America v. United States, 938 F. Supp. 870 (CIT 1996) for the
proposition that the Department has such discretion. Finally,
Respondent argues that the Department's antidumping regulations
published on May 19, 1997, state that aberrational surrogate input
values should be disregarded. Respondent further argues that the
Department has determined that the domestic price for aniline was
aberrational because it did not reflect a market price for aniline but,
instead, a price which has been inflated by India's protection of its
national aniline industry.
Department's Position: We agree with Respondent that the Indian
import values for aniline provide a better approximation than Indian
domestic prices of what the aniline used by the Chinese manufacturers
would cost were the PRC a market economy country. Evidence on the
record of this review indicates that a two-tier pricing system for
aniline exists in India as a result of the combination of an 85% tariff
on imports of aniline and the effects of the Advanced Licence Program,
which waives that tariff when imported aniline is used in the
production of sulfanilic acid for export. Thus, Commerce had two main
options in selecting a surrogate value for aniline: the Indian domestic
price paid by the Indian producers of sulfanilic acid for the domestic
market and the duty-free, Indian import price for aniline paid by
Indian producers of sulfanilic acid for the export market. As the CIT
has recognized with respect to prior reviews, the Department reasonably
used the average Indian import price because the Indian price for
domestically-produced aniline is artificially inflated due to a
protective tariff that bears no relationship to the situation governing
the aniline respondents source domestically in the PRC. Furthermore,
because the costs constructed using the surrogate methodology are the
costs for Chinese production for the export market, the costs incurred
by Indian producers manufacturing sulfanilic acid for the export market
are a better surrogate than are the costs incurred by Indian producers
in manufacturing sulfanilic acid for their domestic market.
Petitioner cites Magnesium, Carbon Steel Plate and Brake Drums for
the proposition that domestic prices are preferred unconditionally to
import prices for factor valuation purposes. However, the three cases
cited above refer to ``tax-exclusive domestic prices,'' and together
with the Department's position above on the tariff problem, suggest
that domestic prices are preferred only if both domestic and import
prices are available on a tax-and duty-exclusive basis, all else being
equal. When this is not the case, the Department must decide on a case-
by-case basis which price is more appropriate for factor valuation
purposes. In this case, because of the tariff problem discussed above,
as well as uncertainty about the indirect taxes, if any, that the
domestic price reflects, the Department has determined that the import
price is more appropriate.
Petitioner's claim that the ``factor of production'' to be valued
is ``domestic aniline,'' such that the statute requires the value of
this factor to be assigned based on aniline produced domestically in
India, has no support in law or fact. There is no indication on the
record that the aniline used by the Chinese producers, which their
public response indicates is locally sourced rather than imported, is
physically or chemically different from the aniline that is produced in
India or imported into India, or that the sulfanilic acid ``production
process'' is different in either China or India depending upon whether
imported or domestically sourced aniline is used. There is no reason
why the Department must base its valuation on ``domestic'' (Indian-
produced) aniline simply because the PRC factories use ``domestic''
(PRC-produced) aniline. Aniline is a generic, fungible input, not
altered by whether it is imported or sourced in the same country in
which it is used. The factor to be valued in this case is not
``domestic aniline'' but simply ``aniline.''
Nor is the Department compelled to use Indian domestic values
simply because some domestic market exists. The CIT has long recognized
that the Department has often used import statistics (to value both
inputs imported into NME countries and imports sourced locally in NME
countries) and that import prices into the surrogate country are an
acceptable reflection of the value of that input in the surrogate
country. See, e.g., Tehnoimportexport and the Nation Ford cases cited
above. In this case, as in prior reviews of this order, the prices for
domestically produced aniline on the record of this review are not
suitable for use as surrogates for the PRC cost of aniline, because
these prices are artificially high due to India's 85% import tax.
With respect to the question of whether Indian producers could
profitably produce sulfanilic acid for export using Indian-sourced
aniline, we note that we have not based our choice of surrogate value
for aniline on Respondent's suggestion that this would not be possible.
No such finding is necessary. The aniline purchase choices of
Indian manufacturers of sulfanilic acid (as reflected in the record)
are relevant primarily as an indication that the price of aniline, when
used for production of sulfanilic acid for sale in India, is unusually
high, and thus, inappropriate for purposes of valuation of PRC export
production costs for sulfanilic acid.
Petitioner's argument that the aniline import values are
``subsidized prices'' which therefore cannot be used as surrogate
values misses the mark. Assuming, for the purposes of argument, that
the Indian Advanced License program identified in 1992 as constituting
a subsidy to Indian-produced sulfanilic acid would still be found to be
countervailable, this
[[Page 63839]]
program would constitute a subsidy to Indian-produced sulfanilic acid,
not to aniline imported into India from other countries. Thus, Commerce
would avoid using, as a surrogate value, the export value of Indian-
produced sulfanilic acid, but not the import value of aniline. The
Indian Import Statistics used by the Department to value aniline are
pre-tariff prices, which are unaffected by whether or not subsequently
added duties charged to the importer are waived on a given shipment.
The sort of subsidy the Department is concerned with when it uses
import prices is a producer-country subsidy that would artificially
lower the import price. India has no interest in subsidizing aniline
produced in other countries and imported into India. Because any
subsidy which may be associated with the importation of aniline under
the Advanced License Program for purposes of producing sulfanilic acid
for export is a subsidy not to aniline but to sulfanilic acid, it does
not provide a reason for rejecting aniline import values for purposes
of serving as surrogates for the cost of aniline (not sulfanilic acid)
to PRC producers. Therefore, for the purposes of these final results,
the Department has continued to use Indian import prices as the
surrogate value for aniline.
Finally, there is no merit to Petitioner's inference that prices
published in certain Indian periodicals can only be rejected as
surrogate values for Chinese prices if the periodicals are found to be
unreliable sources of data. The problem with this data is not its
reliability as to Indian prices, but the inappropriateness in this case
of Indian domestic price data for aniline as a surrogate value for
aniline sourced in China by the Chinese respondent.
Comment 4: Petitioner argues, alternatively, that the Department
should adjust the import statistics to include import duties and an
importers' mark-up in order to reflect what they call the true cost of
imported aniline. Petitioner contends that the Indian Advance License
program is similar to duty drawback. In the case of duty drawback, the
customs duty refunded to the importer would be added to the U.S. price
under 19 U.S.C. 1677a(d)(1)(B) if the Respondent could show that the
importer took advantage of the duty drawback program. Petitioner argues
that there is no evidence that any of the Indian producers of
sulfanilic acid took advantage of the Advanced License program.
Petitioner contends that the burden is on the Respondent to show Indian
sulfanilic acid producers either did not pay customs duties or received
refunds of customs duties payable on imports of aniline upon the
exportation of finished sulfanilic acid. Petitioner also argues that
the fact that the Indian Advanced License program has been found to be
a countervailable subsidy under U.S. law provides another reason why
the Department should add the import duties to the import values used
as the surrogate value of aniline. Petitioner also argues that based on
the absence of evidence on record that Indian sulfanilic acid producers
purchased imported aniline directly and not through importers the
Department should conclude that importer/middlemen import aniline and
re-sell to sulfanilic acid producers with a mark-up added. Petitioner
contends that the appropriate rate for the importers' mark-up is 28.44
percent of the CIF value. This rate is based upon information placed on
record by the Petitioner establishing profit rates for Indian import
trading companies. Petitioner contends that the Department should add
28.44 percent of the CIF value to the surrogate cost of aniline.
Respondent contends that, in the two Nation Ford cases cited above,
the CIT determined that the Department was justified in not adding
import duties and an importer mark-up to import prices because there
was evidence on the record that Indian producers did not pay import
duties on the aniline used to produce sulfanilic acid for export and
there was no evidence on the records of an importer's markup.
Respondent argues that the Court stated that the Department's refusal
to add import duties or markups on imported aniline given the absence
of proof that Indian producers paid import duties or markups on
imported aniline was supported by the record.
Department's Position: We agree with Respondent that we should not
add to the Indian import values an amount corresponding to the 85% tax
levied by the Indian government on imported aniline which is not
subsequently used in the manufacture of another product for export.
Because these Indian import duties do not represent costs that a PRC
producer would pay if the PRC were a market economy, it is the
Department's practice to refrain from including any such duties in an
NME surrogate price. See, e.g., Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From the People's Republic of China;
Final Results of Antidumping Duty Administrative Review and Revocation
in Part of Antidumping Duty Order, 62 FR 6173, 6177 (February 11, 1997)
(Comment 3); Certain Helical Spring Lockwashers from the PRC, 58 FR
48833, 48843 (September 20, 1993) (Comments 12 and 13). In this case,
there are also two additional reasons for not adding on the amount of
the import tax. The 85% tax at issue is not only unique to India; it is
also abnormally high for an import tax, and is, furthermore, not even
paid by producers of sulfanilic acid for the export market.
Respondent has placed on the record of this review published Indian
government materials describing the operation of the Advance License
system and its use to avoid payment of duties on aniline used to
produce sulfanilic acid for export from India. Respondent has also
placed on the record, inter alia, a letter from an Indian sulfanilic
acid exporter explaining in detail how it imports aniline duty free,
works with an Indian sulfanilic acid producer to produce sulfanilic
acid from the imported aniline, and then exports the sulfanilic acid
without paying duty on the imported aniline, and a letter from an
Indian sulfanilic acid producer stating that it uses imported aniline
to produce sulfanilic acid. Thus, Petitioner's claim that there is no
evidence on the record of this review that Indian producers of
sulfanilic acid used the Advance License program and thus avoided
payment of the 85% duty is without basis.
Also without basis is Petitioner's claim that the Department must
add the 85% import tax to the import values absent the same type of
evidence required to support a duty drawback adjustment to U.S. price.
The PRC Respondent in this review is not seeking a duty drawback
adjustment to a United States price for sulfanilic acid exports from
India (the country granting the duty drawback), and is not privy to the
confidential documents of the Indian sulfanilic acid companies
involved. What we are attempting to determine in this case is a
surrogate value for Chinese aniline. The question of whether particular
Indian exporters of sulfanilic acid imported sufficient aniline to
qualify for duty drawback might be relevant if we were determining the
U.S. price of Indian sulfanilic acid. However, it is simply immaterial
to the question of the value of Chinese aniline.
Finally, Petitioner has no basis for insisting that the 85% duty be
added onto the aniline import value because of an alleged subsidy to
the price of imported aniline. As explained above, any subsidy that may
exist is a subsidy to Indian-produced sulfanilic acid, not to aniline
produced elsewhere and imported into India.
The record also provides no support for Petitioner's contention
that we must add to the constructed valuation of the cost of the
Chinese aniline an amount corresponding to an importer's markup.
[[Page 63840]]
The Chinese producers of sulfanilic acid source their aniline directly,
not through a middleman. Furthermore, the record contains no indication
that Indian producers of sulfanilic acid for exportation pay an
importer's markup. Indeed, the only arrangement reflected in the record
involves a tolling arrangement rather than purchase of aniline from an
importer. In the Nation Ford cases, the CIT rejected a similar claim by
petitioner. Because the record of this review involves similar facts,
we again determine that it is not appropriate to increase the cost of
aniline by the cost of a hypothetical importer's markup.
Comment 5: Respondent, relying upon the Department's verification
findings in this review, contends that the Department used incorrect
factors of production (FOP) for aniline and sulfuric acid when
calculating the material costs for producing crude sulfanilic acid.
Respondent states that the factors verification report accurately
reported the consumption of raw materials and production of crude
sulfanilic acid, but that these values were not carried over into the
computer programs.
Petitioner argues that, in the preliminary results, the Department
used the aniline and sulfuric acid usage amounts Respondent originally
reported in its questionnaire response and that the Department, acting
on its own initiative, corrected the denominator of the calculations to
use the appropriate yield data. However, Respondent did not correct the
numerators of the calculations in its supplemental questionnaire
response or prior to the start of the production verification.
Petitioner contends that Respondent brought these alleged errors to the
Department's attention for the first time in its case brief.
Petitioner argues that pursuant to NTN Bearing Corp. v. United
States, 74 F.3d 1204 (Fed. Cir. 1995), the Department's policy is to
correct a respondent's alleged clerical errors that are brought to the
Department's attention for the first time in the respondent's case
brief only if all applicable criteria are met. Petitioner refers to the
Department's decisions Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four
Inches or Less In Outside Diameter, and Components Thereof, From Japan;
Final Results of Antidumping Duty Administrative Reviews and
Termination in Part, 63 FR 20585, 20611 (Apr. 27, 1998), citing Certain
Fresh-Cut Flowers From Columbia; Final Results of Antidumping Duty
Administrative Reviews, 61 FR 42833 (Aug. 19, 1996). Petitioner argues
that the alleged errors fail to meet at least three of the criteria
outlined in the Department's policy: Respondent has not established
that the alleged error is a clerical error and not an error in
judgement or a substantive error, the Respondent did not avail itself
of the earliest possible time to correct the alleged error, and the
alleged clerical errors entail a substantial revision of the
Respondent's response. Petitioner concludes that these alleged errors
entail a substantial revision of the Respondent's data and may not be
corrected under the Department's policy.
Department's Position: We agree with Respondent and have corrected
the FOP data for aniline and sulfuric acid used to calculate material
costs for producing crude sulfanilic acid. When it issued the
preliminary results of this review, the Department intended to correct
both the FOP and the yield to reflect verified totals. However, when
making this correction, we inadvertently did not substitute the
original FOP for the verified FOP. Respondent noted this error based on
the preliminary analysis memo dated July 6, 1998. In accordance with
Sec. 351.224(a) of the Department's regulations, the Department
disclosed the calculation of material costs for producing crude
sulfanilic acid in the preliminary analysis memo. In response, the
Respondent brought the errors to the Department's attention.
Comment 6: Petitioner contends that, in the preliminary results,
the Department failed to calculate and deduct from the CEP starting
price the inventory carrying costs incurred by PHT during the time
between the exportation of the subject merchandise from the PRC and the
delivery to the first unaffiliated customer in the United States.
Petitioner argues that the costs of carrying inventory during the time
of exportation from the PRC and delivery to the first unaffiliated
customer in the United States were not related to Zhenxing's sales to
PHT. Therefore, those expenses must be calculated and deducted from the
CEP starting price pursuant to 19 CFR 351.402(b) because they relate to
the sale to the first unaffiliated customer in the United States.
Respondent cites Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, Germany, Italy, Japan,
Romania, Singapore, Sweden, and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews, 63 FR 33320, 33344 (June 18,
1998), in which the Department stated that its regulations clearly
direct that any expense that is related solely to the sale to an
affiliated importer in the United States should not be deducted from
the starting price. Respondent argues that, similarly, the inventory
carrying costs in this case should not be deducted from the starting
price.
Department's Position: The Department agrees with Petitioner in
part. Pursuant to 19 CFR 351.402, the Department, in calculating the
CEP, deducts from the starting price those expenses associated with
economic activity in the United States. Inventory carrying costs
between Zhenxing and PHT are not associated with economic activities in
the United States because, they are not associated with PHT's sales to
unaffiliated U.S. parties. Therefore, the Department has not deducted
the inventory carrying costs between Zhenxing and PHT from the starting
price in calculating CEP. However, Petitioner is correct in arguing
that the Department should adjust the U.S. price for inventory carrying
costs incurred by PHT prior to its sale and delivery to unaffiliated
U.S. customers. The Department has corrected the final CEP calculation
for these inventory carrying costs. (See Final Analysis Memo dated
November 10, 1998.)
Comment 7: Petitioner contends that the Department failed to
calculate an assessment rate applicable to PHT. Petitioner states that
this failure is contrary to the Department's regulations, which state
the assessment rate for each importer of the subject merchandise under
review will normally be calculated by dividing the dumping margin found
for the subject merchandise examined by the entered value of such
merchandise for normal customs purposes. 19 CFR 351.212(b)(1).
Department's Position: We agree with the Petitioner. The Department
has calculated an importer specific assessment rate for PHT and has
included a reference to this calculation in the final results of this
review.
Comment 8: Petitioner contends that the Department's preliminary
calculation of electricity usage by Zhenxing contained critical errors.
Petitioner states that the number of kilowatt hours of electricity
reported in Zhenxing's records did not reconcile to the actual
electricity bills and, as a result, the Department used, as facts
otherwise available, the number of kilowatt hours reported on the
electricity bills. Petitioner adds that because the August 1996 bill
was missing the Department stated that it would use ``the highest
monthly amount recorded on the available electricity
[[Page 63841]]
bills.'' Petitioner contends that the Department used an incorrect
number of hours (the number for March 1997) as the facts available for
the missing August 1996 number of hours. Additionally, Petitioner
states the Department did not use the correct number of hours reported
on the July1997 bill in its calculation. Petitioner concludes that the
Department should require Respondent to submit all of the actual
electricity bills for the record and actual amounts should be used to
calculate energy usage.
Respondent argues that the Department's calculation of electricity
usage is accurate and that the Department was correct in selecting the
March 1997 figure as a surrogate value for August 1996, because the
March figure is truly the highest monthly amount recorded on the
available electric bills.
Department's Position: We agree with the Respondent in part.
Consistent with the preliminary results of this case, as facts
available we have used the number of kilowatt hours reported on
Respondent's actual electric bills in determining the quantities of
electricity used. Additionally, as facts available, we used the highest
monthly kilowatt usage recorded on a verified electric bill (i.e., that
for March 1997) as the electricity consumption factor for August 1996,
for which the electricity bill could not be located.
We agree with Petitioner that the Department made an error in the
process of transferring to the energy usage portion of its computer
program the verified number of kilowatt hours billed for July 1997. The
Department has corrected this error in calculating the final results.
Comment 9: Respondent contends that, with respect to the credit
expenses incurred on U.S. sales, the Department should have calculated
a daily interest rate using a 365 day year rather than a 360 day year.
Respondent cites the Department's Antidumping Manual, which states that
the imputed credit costs are calculated using 365 days unless a firm
uses 360 days as a credit base rather than 365 days, in which case 360
days would be used in the calculation. Respondent argues that the
Department did not state in the preliminary results that the Respondent
uses 360 days as a credit base.
Petitioner contends that Respondent's argument that the Department
must use 365 days in the U.S. credit expense calculation because it did
not state in the disclosure arguments that Respondent uses 360 days as
a credit base is incorrect. Petitioner argues that the burden to
establish the appropriate credit base was on the Respondent and that
Respondent has no standing to contest the Department's use of 360 days
instead of 365 days in the credit expense calculation.
Department's Position: We agree with the Respondent. The
Department's normal practice is to calculate credit costs by dividing
the number of days between shipment and payment by 365, then
multiplying by the interest rate and unit price. Only if the record
shows that a firm uses 360 days as the credit base do we divide the
number of days by 360. In this case there is no indication that either
Zhenxing or PHT used a 360 day credit base. Therefore, the Department
has corrected its final calculation of imputed credit costs utilizing
365 days rather than 360 days.
Clerical Errors
Petitioner contends that the Department's preliminary calculation
of the materials cost of crude sulfanilic acid contained a clerical
error which understates the constructed value of the subject
merchandise. Respondent agrees with the Petitioner that the Department
should correct the clerical error in the calculation of crude
sulfanilic acid. We agree and have corrected the calculation of the
materials cost of crude sulfanilic acid.
Respondent argues that the Department erred when it used a
conversion factor of 2.2 pounds per kilogram rather than the factor of
2.204623 provided in The New International Webster's Comprehensive
Dictionary of the English Language for converting values expressed in
dollars per kilogram to dollars per pound in the calculation of net
U.S. prices and dumping margins for PHT's sales. Petitioner states in
its rebuttal brief that it does not object to the Department's use of a
more precise factor. The Department has revised its preliminary
calculations to reflect the conversion value of 2.204623 pounds per
kilogram.
Respondent argues that the Department compounded the preceding
error when it attempted to convert values expressed in dollars per
kilogram to dollars per pound by multiplying dollars by the incorrect
factor rather than dividing the dollars per kilogram by the correct
factor. Petitioner does not object to the correction of this error. The
Department has corrected the final values to reflect the correct
conversion formula.
Final Results of Review
As a result of our review of the comments received, we have
determined that the following margins exist:
------------------------------------------------------------------------
Margin
Manufacturer/producer/exporter Time period (percent)
------------------------------------------------------------------------
Yude Chemical Industry, Co./Zhenxing
Chemical Industry, Co.................... 8/1/96-7/31/97 .29
PRC Rate\1\............................... 8/1/96-7/31/97 85.20
------------------------------------------------------------------------
\1\ This rate will be applied to all firms other than Yude and Zhenxing,
including all firms which did not respond to our questionnaire
requests.
* Exporters Yude and Zhenxing have been collapsed for the purposes of
this administrative review. See Sulfanilic Acid from the People's
Republic of China: Preliminary Results of Antidumping Administrative
Review, 63 FR 37528 (July 13, 1998).
The Department will instruct the Customs Service to assess
antidumping duties on all appropriate entries. The Department will
issue appraisement instructions directly to the Customs Service.
Because the number of transactions involved in the review and other
simplification methods prevent entry-by-entry assessments, we have
calculated exporter/importer-specific assessment rates by dividing the
total dumping margins for the reviewed sales by the total entered value
of those reviewed sales for each importer. We will direct Customs to
assess the resulting percentage margins against the entered Customs
values for the subject merchandise on each of that importer's entries
under the relevant order during the review period. While the Department
is aware that the entered value of the reviewed sales is not
necessarily equal to the entered value of entries during the POR
(particularly for CEP sales), the use of the entered value of sales as
the basis of the assessment rate permits the Department to collect a
reasonable approximation of the antidumping duties which would have
been determined if the Department had reviewed those sales.
The following deposit requirements will be effective upon
publication of these final results for all shipments of sulfanilic acid
from the PRC entered, or withdrawn from warehouse, for consumption on
or after the publication date, as provided for by section 751(a)(2)(c)
of the Act: (1) No cash deposit will be required for Yude and Zhenxing
as the rate above is de minimis (i.e., less than .5 percent); (2) the
cash deposit rate for all other PRC exporters (i.e., the PRC rate) will
be 85.20%; and (3) the cash deposit rate for non-PRC exporters of
subject merchandise from the PRC will be the
[[Page 63842]]
rate applicable to the PRC supplier of that exporter. These deposit
requirements shall remain in effect until publication of the final
results of the next administrative review.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 351.402(f) to file a certificate regarding
the reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 351.305. Timely written notification of
the return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 351.211.
Dated: November 10, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-30741 Filed 11-16-98; 8:45 am]
BILLING CODE 3510-DS-P
