E7-23573. Sodium Nitrite from the People's Republic of China: Initiation of Countervailing Duty Investigation

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

(December 5, 2007.

FOR FURTHER INFORMATION CONTACT:

Sean Carey or Gene Calvert, AD/CVD Operations, Office 6, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone: [phone] and [phone], respectively.

SUPPLEMENTARY INFORMATION:

Initiation of Investigation:

The Petition

On November 8, 2007, the Department of Commerce (the Department) received a petition filed in proper form by General Chemical LLC (petitioner). On November 14 and November 15, 2007, the Department issued requests for additional information and clarification of certain areas of the petition involving general issues and the countervailable subsidy allegations, respectively. Based on the Department's request, petitioner filed additional information concerning the petition on November 19 and November 20, 2007.

In accordance with section 702(b)(1) of the Tariff Act of 1930, as amended (the Act), petitioner alleges that manufacturers, producers, or exporters of sodium nitrite in the People's Republic of China (the PRC) received countervailable subsidies within the meaning of section 701 of the Act, and that such imports are materially injuring or threatening material injury to an industry in the United States.

The Department finds that petitioner filed this petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(C) of the Act, and petitioner has demonstrated sufficient industry support with respect to the countervailing duty investigation that it is requesting the Department to initiate (see, infra, “Determination of Industry Support for the Petition”).

Period of Investigation

The anticipated period of investigation (POI) is calendar year 2006. See 19 CFR 351.204(b)(2).

Scope of Investigation

The merchandise covered by this investigation is sodium nitrite in any form, at any purity level. In addition, the sodium nitrite covered by this investigation may or may not contain an anti-caking agent. Examples of names commonly used to reference sodium nitrite are nitrous acid, sodium salt, anti-rust, diazotizing salts, erinitrit, and filmerine. The chemical composition of sodium nitrite is NaNO2 and it is generally classified under subheading 2834.10.1000 of the Harmonized Tariff Schedule of the United States (HTSUS). The American Chemical Society Chemical Abstract Service (CAS) has assigned the name “sodium nitrite” to sodium nitrite. The CAS registry number is 7632-00-0. For purposes of the scope of this investigation, the narrative description is dispositive, not the tariff heading, CAS registry number or CAS name, which are provided for convenience and customs purposes.

Comments on Scope of Investigation

During our review of the petition, we discussed the scope with petitioner to ensure that it is an accurate reflection of the merchandise for which the domestic industry is seeking relief. Moreover, as discussed in the preamble to the regulations (Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), we are setting aside a period for interested parties to raise issues regarding product coverage. The Department encourages all interested parties to submit such comments within 20 calendar days of the publication of this notice. Comments should be addressed to Import Administration's Central Records Unit (CRU), Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and to consult with parties prior to the issuance of the preliminary determination.

Consultations

Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department invited representatives of the Government of the People's Republic of China (the GOC) for consultations with respect to the countervailing duty petition. The Department held these consultations in Beijing, China with representatives of the GOC on November 26, 2007. See the Memorandum to the File, entitled, “Consultations with Officials from the Government of the People's Republic of China on the Countervailing Duty Petition: Sodium Nitrite from the People's Republic of China” (November 26, 2007), a public document on file in the CRU.

Determination of Industry Support for the Petition

Section 702(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 702(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (i) at least 25 percent of the total production of the domestic like product; and (ii) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 702(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department shall: (i) poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A), or (ii) determine industry support using a statistically valid sampling method.

Section 771(4)(A) of the Act defines the “industry” as the producers as a whole of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The International Trade Commission (ITC), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (section 771(10) of the Act), they do so for different purposes and pursuant to a separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the like product, such differences do not render the decision of either agency contrary to law. See USEC, Inc. v. United States, 132 F. Supp. 2d 1, 8 (CIT 2001), citing Algoma Steel Corp. Ltd. v. United States, 688 F. Supp. 639, 644 (1988), aff'd 865 F.2d 240 (Fed. Cir. 1989), cert. denied 492 U.S. 919 (1989).

Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this subtitle.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation,” (i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition).

With regard to the domestic like product, petitioner does not offer a definition of domestic like product distinct from the scope of the investigation. Based on our analysis of the information submitted on the record, we have determined that sodium nitrite constitutes a single domestic like product and we have analyzed industry support in terms of that domestic like product. For a discussion of the domestic like product analysis in this case, see the Countervailing Duty Investigation Initiation Checklist: Sodium Nitrite from the People's Republic of China (PRC) (Initiation Checklist), Industry Support at Attachment II, on file in the CRU.

Our review of the data provided in the Petition, supplemental submissions, and other information readily available to the Department indicates that the Petitioner has established industry support. To establish industry support, the Petitioner demonstrated that it was the sole producer of the domestic like product in 2006. Therefore, the Petition established support from domestic producers (or workers) accounting for more than 50 percent of the total production of the domestic like product and, as such, the Department is not required to take further action in order to evaluate industry support (e.g., polling). See Section 702(c)(4)(D) of the Act. In addition, the domestic producers have met the statutory criterion for industry support under 702(c)(4)(A)(i) because the domestic producers (or workers) who support the Petition account for at least 25 percent of the total production of the domestic like product. Finally, the domestic producers have met the statutory criterion for industry support under 702(c)(4)(A)(ii) because the domestic producers (or workers) who support the Petition account for more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the Petition. Accordingly, the Department determines that the petition was filed on behalf of the domestic industry within the meaning of section 702(b)(1) of the Act. See CVD Initiation Checklist at Attachment II (Industry Support).

The Department finds petitioner has filed the petition on behalf of the domestic industry because it is an interested party as defined in sections 771(9)(C) of the Act and it has demonstrated sufficient industry support with respect to the countervailing duty investigation that it is requesting the Department to initiate. See Initiation Checklist at Attachment II.

Injury Test

Because the PRC is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, section 701(a)(2) of the Act applies to this investigation. Accordingly, the ITC must determine whether imports of the subject merchandise from the PRC materially injure, or threaten material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causation

The petitioner alleges that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the subsidized imports of the subject merchandise. The petitioner contends that the industry's injured condition is illustrated by reduced market share, lost sales, reduced production capacity and capacity utilization rate, reduced shipments, underselling and price depressing and suppressing effects, lost revenue, reduced employment, decline in financial performance, and an increase in import penetration. We have assessed the allegations and supporting evidence regarding material injury and causation, and we have determined that these allegations are properly supported by adequate evidence and meet the statutory requirements for initiation. See Initiation Checklist at Attachment III (Injury).

Subsidy Allegations

Section 702(b) of the Act requires the Department to initiate a countervailing duty proceeding whenever an interested party files a petition on behalf of an industry that (1) alleges the elements necessary for an imposition of a duty under section 701(a) of the Act and (2) is accompanied by information reasonably available to the petitioner supporting the allegations. The Department has examined the countervailing duty petition on sodium nitrite from the PRC and found that it complies with the requirements of section 702(b) of the Act. Therefore, in accordance with section 702(b) of the Act, we are initiating a countervailing duty investigation to determine whether manufacturers, producers, or exporters of sodium nitrite in the PRC receive countervailable subsidies. For a discussion of evidence supporting our initiation determination, see Initiation Checklist.

We are including in our investigation the following programs alleged in the petition to have provided countervailable subsidies to producers and exporters of the subject merchandise:

GOC Loan Program

1. Loans and Interest Subsidies Related to the Northeast Revitalization Program

GOC Grant Programs

2. The State Key Technology Renovation Project Fund

3. Grants to Loss-Making State-Owned Enterprises

GOC Provision of Goods or Services for Less than Adequate Remuneration

4. Provision of Electricity to State-Owned Enterprises (SOEs) for Less than Adequate Remuneration

5. Provision of Land to SOEs for Less than Adequate Remuneration

GOC Income Tax Programs

6. Income Tax Exemption for Export-Oriented FIEs

7. Preferential Tax Policies for Foreign Invested Enterprises (FIEs) (Two Free, Three Half Program)

8. Reduced Income Tax Rates for FIEs Based on Location

9. Corporate Income Tax Refund Program for Reinvestment of FIE Profits in Export-Oriented Enterprises

10. Reduced Income Tax Rate for New or High Technology Enterprises

11. Preferential Tax Policies for Research and Development by FIEs

12. Income Tax Credits on Purchases of Domestically Produced Equipment by Domestically Owned Companies

13. Income Tax Credits on Purchases of Domestically Produced Equipment by FIEs

14. Reduced Income Tax Rate for FIEs Under the West Revitalization Program

15. Income Tax Reduction or Exemption for Export-Oriented or High Technology Enterprises under the West Revitalization Program

16. Preferential Tax Policies Under the West Revitalization Program

GOC Indirect Tax Programs and Import Tariff Programs

17. VAT Rebate for FIE Purchases of Domestically Produced Equipment

18. VAT and Tariff Exemptions for FIEs and Certain Domestic Enterprises Using Imported Equipment in Encouraged Industries

Provincial Loan Program

19. Reduced Interest Rate Loans Provided by Liaoning Province

Provincial Grant Programs

20. Provincial Export Interest Subsidies (Guangdong and Zhejiang Provinces)

21. Guangdong Province Funds for Outward Expansion of Industries

Provincial and Local Provision of Goods for Less than Adequate Remuneration

22. Provision of Land for Less than Adequate Remuneration (Jiangsu and Zhejiang Provinces, and Chongqing Municipality)

23. Provision of Electricity for Less than Adequate Remuneration (Jiangsu and Zhejiang Provinces)

24. Provision of Water for Less than Adequate Remuneration (Zhejiang Province)

Provincial and Local Income Tax Programs

25. Income Tax Exemption and Reduction Programs (Provinces of Jiangsu, Zhejiang, Guangdong, and Shandong; Municipalities of Beijing, Tianjin, Shanghai, and Chongqing)For further information explaining why the Department is investigating these programs, see the Initiation Checklist.

We are not including in our investigation the following programs alleged to benefit producers and exporters of the subject merchandise in the PRC:

GOC Loan Program

1. Government Policy Lending Program

Petitioner alleges that under the GOC's National Tenth Five-year Plan as well as the Tenth and Eleventh Five-year plans of the Chemical Industry, sodium nitrite producers may benefit from the provision of loans by state-owned commercial banks as part of the GOC's policy to encourage and to advance the chemical industry. In support of its allegation, Petitioner provided translated copies of the “Tenth Five-year Plan for National Economic and Social Development,” and the “Tenth Five-year Plan of the Chemical Industry and Its Development,” and a short, translated excerpt of the “Eleventh Five-year Plan of the Chemical Industry and Its Development.” Our review of these documents did not indicate that financing or loans were available pursuant to the GOC's Chemical Policy. Accordingly, we find that petitioner has not provided sufficient information to warrant initiation of an investigation of this program.

GOC Provision of Goods for Less than Adequate Remuneration

2. Provision of Natural Gas and Water to State-Owned Enterprises (SOEs) for Less than Adequate Remuneration

Petitioner alleges that the GOC provides natural gas and water to SOEs and special industrial sectors at subsidized prices. Petitioner further alleges that end-user prices for natural gas and for water are set by the National Development and Reform Commission, and rarely reflect the true market price of these commodities. For purposes of this initiation, we find that petitioner has not sufficiently alleged the elements necessary for a less than adequate remuneration subsidy, as identified in 19 CFR 351.511. Petitioner has not provided sufficient information demonstrating that the GOC has provided natural gas and water for less than adequate remuneration and that this program is specific. Accordingly, we find that petitioner has not provided sufficient information to warrant initiation of an investigation of these programs.

GOC Indirect Tax Program and Import Tariff Program

3. VAT Exemptions on Exports

Petitioner alleges that the GOC enterprises are exempted from paying import tariffs and VAT payments on imported equipment provided that these goods are not for resale. Petitioner notes that in certain cases, a full 17-percent VAT exemption will apply upon export. Petitioner states that the program, by definition, is conditioned upon export performance, and therefore, is an export subsidy. Petitioner further alleges that this is a prohibited export subsidy if the exemption or reduction of indirect taxes on the exported product exceeds the indirect taxes levied on the inputs into the exported product. We find that Petitioner has not sufficiently alleged the elements necessary for the imposition of a countervailing duty and did not support the allegation with reasonably available information. Therefore, we are not initiating an investigation of this program.

Application of the Countervailing Duty Law to the PRC

The Department has treated the PRC as a non-market economy (NME) country in all past antidumping investigations and administrative reviews. In accordance with section 771(18)(C)(i) of the Act, any determination that a country is an NME country shall remain in effect until revoked by the administering authority. See e.g., Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, (TRBs) From the People's Republic of China: Preliminary Results of 2001-2002 Administrative Review and Partial Rescission of Review, 68 FR 7500, 7500-1 (February 14, 2003), unchanged in TRBs from the People's Republic of China: Final Results of 2001-2001 Administrative Review, 68 FR 70488, 70488-89 (December 18, 2003).

In the final affirmative countervailing duty determination on coated free sheet paper from the PRC, the Department determined that the current nature of the PRC economy does not create obstacles to applying the necessary criteria in the countervailing duty law. See Coated Free Sheet Paper from the People's Republic of China: Final Affirmative Countervailing Duty Determination, 72 FR 60645 (October 25, 2007), and the accompanying Issues and Decision Memorandum, at Comment 1. Therefore, because petitioner has provided sufficient allegations and support of its allegations to meet the statutory criteria for initiating a countervailing duty investigation of sodium nitrite from the PRC, initiation of a countervailing duty investigation is warranted in this case.

Respondent Selection

For this investigation, the Department expects to select respondents based on U.S. Customs and Border Protection (CBP) data for U.S. imports during the POI. We intend to make our decision regarding respondent selection within 20 days of publication of this Federal Register notice. The Department invites comments regarding the CBP data and respondent selection within seven calendar days of publication of this Federal Register notice.

Distribution of Copies of the Petition

In accordance with section 702(b)(4)(A)(i) of the Act, a copy of the public version of the petition has been provided to the GOC. To the extent practicable, we will attempt to provide a copy of the public version of the petition to each exporter named in the petition, as provided under 19 CFR 351.203(c)(2).

ITC Notification

We have notified the ITC of our initiation, as required by section 702(d) of the Act.

Preliminary Determination by the ITC

The ITC will preliminarily determine, within 25 days after the date on which it receives notice of this initiation, whether there is a reasonable indication that imports of subsidized sodium nitrite from the PRC are materially injuring, or threatening material injury to, a U.S. industry. See section 703(a)(2) of the Act. A negative ITC determination will result in the investigation being terminated; otherwise, the investigation will proceed according to statutory and regulatory time limits.

This notice is issued and published pursuant to section 777(i) of the Act.

Dated: November 28, 2007.

David M. Spooner,

Assistant Secretary for Import Administration.