03-3853. Potassium Permanganate from the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Results in the Antidumping Duty Administrative Review of Potassium Permanganate from the People's Republic of China.

SUMMARY:

The Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on potassium permanganate from the People's Republic of China (PRC) in response to a request by Groupstars Chemical LLC (Groupstars LLC), a U.S. importer of potassium permanganate. The review covers potassium permanganate (subject merchandise) exported to the United States by Groupstars LLC's affiliated PRC exporter, Groupstars Chemical Co., Ltd. (collectively Groupstars). The Department has preliminarily determined that Groupstars sold subject merchandise during the period of review (POR) at prices below normal value (NV). If the preliminary results are adopted in our final results of review, we will instruct the U.S. Customs Service (Customs) to assess antidumping duties on all appropriate entries. The Department invites interested parties to comment on these preliminary results.

EFFECTIVE DATE:

February 18, 2003.

FOR FURTHER INFORMATION CONTACT:

John Conniff or Drew Jackson, AD/CVD Enforcement, Office 4, Group II, 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:

Period of Review

The POR is January 1, 2001 through December 31, 2001.

Background

On January 31, 1984, the Department published in the Federal Register (49 FR 3897) the antidumping duty order on potassium permanganate from the PRC. On January 30, 2002, in response to the Department's notice of “Opportunity to Request an Administrative Review,” Groupstars LLC requested that the Department conduct an administrative review of its supplier, Groupstars Chemical Co., Ltd. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 67 FR 56 (January 2, 2002).

On February 26, 2002, the Department published a notice of initiation of an antidumping duty administrative review covering Groupstars' sales of potassium permanganate during the period January 1, 2001 through December 31, 2001. See the notice Initiation of Antidumping and Countervailing Duty Administrative Reviews, 67 FR 8780.^[1]

On March 1, 2002, the Department issued its antidumping questionnaire to Groupstars. Groupstars responded to the Department's questionnaire on April 3, 2002 and April 10, 2002. Additionally, Groupstars submitted responses to the Department's July, August, October, and November 2002 supplemental questionnaires during August, September, October, and November 2002, respectively. On March 7, 2002 and August 23, 2002, interested parties submitted publicly available information and comments for the Department's consideration in valuing factors of production (FOP) in this administrative review.

Pursuant to section 751(a)(3)(A) of the Tariff Act of 1930, as amended (the Act), the Department may extend the deadline for completion of the preliminary results of an administrative review if it determines that it is not practicable to complete the preliminary results of a review within the statutory time limit of 245 days. On August 16, 2002, in accordance with the Act, the Department extended the time limit for the preliminary results of this review until January 31, 2003. See Potassium Permanganate From the People's Republic of China: Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review, 67 FR 54408 (August 22, 2002).

The Department is conducting this administrative review in accordance with section 751 of the Act.

Scope of the Review

Imports covered by this review are shipments of potassium permanganate, an inorganic chemical produced in free-flowing, technical, and pharmaceutical grades. During the review period, potassium permanganate was classifiable under item 2841.61.0000 of the Harmonized Tariff Schedule of the United States (HTSUS).^[2]

Although the HTSUS subheading is provided for convenience and customs purposes our written description of the scope of the order is dispositive.

Verification

As provided in section 782(i) of the Act, we verified sales and FOP information provided by Groupstars using standard verification procedures, including on-site inspection of the manufacturer's facilities, examination of relevant sales and financial records, and selection of relevant source documentation as exhibits. Our verification findings are detailed in the report. See Memorandum from John Conniff and Drew Jackson to the file regarding “Verification of Groupstars Chemical Co. Ltd's responses in the Antidumping Duty Administrative Review of Potassium Permanganate from the People's Republic of China,” dated January 31, 2003 (Verification Report), the public version of which is on file in the Central Records Unit (CRU), room B-099 of the main Commerce building.

Separate Rates Determination

In proceedings involving nonmarket economy (NME) countries, the Department begins with a rebuttable presumption that all companies within the country are subject to government control and thus should be assessed a single antidumping duty deposit rate. It is the Department's policy to assign all exporters of merchandise subject to investigation in a NME country this single rate, unless an exporter can demonstrate that it is sufficiently independent so as to be entitled to a separate rate. Groupstars provided the separate rates information requested by the Department and reported that its export activities are not subject to government control.

We examined the separate rates information provided by Groupstars in order to determine whether it is eligible for a separate rate. The Department's separate rates test, which is used to determine whether an exporter is independent from government control, does not consider, in general, macroeconomic/border-type controls, e.g., export licenses, quotas, and minimum export prices, particularly if these controls are imposed to prevent dumping. The test focuses, rather, on controls over the investment, pricing, and output decision-making process at the individual firm level. See Certain Cut-to-Length Carbon Steel Plate from Ukraine: Final Determination of Sales at Less than Fair Value, 62 FR 61754, 61757 (November 19, 1997); Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 62 FR 61276, 61279 (November 17, 1997).

To establish whether a firm is sufficiently independent from government control of its export activities so as to be entitled to a separate rate, the Department analyzes each entity exporting the subject merchandise under a test arising out of the Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, 56 FR 20588 (May 6, 1991) (Sparklers), as amplified by the Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994) (Silicon Carbide). In accordance with the separate rates criteria, the Department assigns separate rates in NME cases only if the respondents can demonstrate the absence of both de jure and de facto governmental control over export activities.

1. Absence of De Jure Control

The Department considers the following de jure criteria in determining whether an individual company may be granted a separate rate: (1) an absence of restrictive stipulations associated with an individual exporter's business and export licenses; (2) any legislative enactments decentralizing control of companies; and (3) any other formal measures by the government decentralizing control of companies. See Sparklers, 56 FR at 20508 (May 6, 1991).

Groupstars submitted a copy of its business licenses in its questionnaire response. We examined Groupstars' business license at verification and found no inconsistencies with its statement regarding the absence of restrictive stipulations associated with its business license. See memorandum from John Conniff and Drew Jackson to the file regarding PRC Verification of Groupstars Chemical Co. Ltd's responses in the Antidumping Duty Administrative Review of Potassium Permanganate from the People's Republic of China (PRC Verification Report). Furthermore, Groupstars submitted copies of PRC legislation demonstrating the statutory authority for establishing the de jure absence of government control over companies. Thus, we believe that the evidence on the record supports a preliminary finding of absence of de jure governmental control based on: (1) an absence of restrictive stipulations associated with the business licenses of Groupstars; and (2) the applicable legislative enactments decentralizing control of PRC companies.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating whether a respondent is subject to de facto governmental control of its export functions: (1) whether the export prices are set by, or are subject to, the approval of a governmental agency; (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 the disposition of profits or financing of losses. See Silicon Carbide, at 22586-87; see also Notice of Final Determination of Sales at Less Than Fair Value: Furfuryl Alcohol From the People's Republic of China, 60 FR 22544, 22545 (May 8, 1995).

As stated in previous cases, there is some evidence that certain enactments of the PRC central government have not been implemented uniformly among different sectors and/or jurisdictions in the PRC. See Silicon Carbide, at 22587. 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.

Groupstars reported that it determines prices for sales of the subject merchandise based on market principles, the cost of the merchandise, and profit. Moreover, Groupstars stated that it negotiates prices directly with its customers. Also, Groupstars claims that its prices are not subject to review or guidance from any governmental organization. In addition, the record indicates that Groupstars has the authority to negotiate and sign contracts and other agreements. Further, Groupstars claims that its negotiations are not subject to review or guidance from any governmental organization. Finally, there is no evidence on the record to suggest that there is any governmental involvement in the negotiation of Groupstars' contracts.

Furthermore, Groupstars reported that it has autonomy in making decisions regarding the selection of management. Groupstars indicated that its selection of management is not subject to review or guidance from any governmental organization and there is no evidence on the record to suggest that there is any governmental involvement in the selection of the management of Groupstars.

Finally, Groupstars reported that it retains the proceeds of its export sales, and its management determines how to use profits. Groupstars stated that it operates in accordance with market principles and calculates profits and losses in a normal commercial manner. There is no evidence on the record to suggest that there is any governmental involvement in Groupstars' decisions regarding the disposition of profits or financing of losses.

Therefore, we find that the evidence on the record, including the verification findings, which are consistent with the separate rates information reported by Groupstars, supports a preliminary finding of absence of de facto governmental control based on record statements and supporting documentation showing that: (1) Groupstars sets its own export prices independent of the government and without the approval of a government authority; (2) Groupstars has the authority to negotiate and sign contracts and other agreements; (3) Groupstars has adequate autonomy from the government regarding the selection of management; and (4) Groupstars retains the proceeds from its sales and makes independent decisions regarding the disposition of profits or financing of losses.

The evidence placed on the record of this review by Groupstars demonstrates an absence of government control, both in law and in fact, with respect to its exports of the merchandise under review, in accordance with the criteria identified in Sparklers and Silicon Carbide. Therefore, for the purposes of these preliminary results, we are granting a separate rate to Groupstars.

Fair Value Comparisons

To determine whether Groupstars' sales of subject merchandise were made at prices less than NV, we compared the constructed export price (CEP) to NV, as described in the Constructed Export Price and Normal Value sections of this notice, below.

Constructed Export Price

In accordance with section 772(b) of the Act, the Department calculated a CEP for all sales by Groupstars to the United States because the first sale to an unaffiliated purchaser occurred after the subject merchandise was imported into the United States. We calculated CEP based on the packed prices from Groupstars LLC to the first unaffiliated U.S. customer. In accordance with section 772(c) of the Act, we deducted from the starting price, where appropriate, movement charges including foreign inland freight, foreign brokerage and handling, ocean freight, marine insurance, U.S. Customs duties, U.S. brokerage and handling, U.S. inland freight, and U.S. warehousing charges. Foreign inland freight, foreign brokerage and handling, and ocean freight, were provided by NME vendors, and thus, we based the deductions for these movement charges on the surrogate values identified in the “Normal Value” section of this notice below. Groupstars' shipments of subject merchandise were insured through a market-economy marine insurance provider and the provider was paid using a market-economy currency. Therefore, pursuant to 19 CFR 351.408(c)(1), we used the actual price paid for marine insurance as a deduction from the starting price. In accordance with 772(d)(1) of the Act, we deducted from the starting price those selling expenses that related to economic activity in the United States. In accordance with section 772(d)(3) of the Act, we deducted from the starting price an amount for profit. For additional information regarding these adjustments, see the calculation memorandum from Drew Jackson to the File dated January 31, 2003 which is in the CRU public file (Calculation Memorandum).

Normal Value

For exports from NME countries, section 773(c)(1) of the Act provides that the Department shall determine NV using a FOP methodology if: (1) the subject merchandise is exported from a NME country, and (2) available information does not permit the calculation of NV using home-market prices, third-country prices, or constructed value pursuant to section 773(a) of the Act. Section 351.408 of the Department's regulations sets forth the methodology used by the Department to calculate the NV of merchandise exported from NME countries. In every case conducted by the Department involving the PRC, the PRC has been treated as a NME. Because none of the parties to this proceeding contested such treatment, we calculated NV in accordance with section 773(c)(3) and (4) of the Act and section 351.408(c) of the Department's regulations.

In accordance with section 773(c)(3) of the Act, the FOP utilized in producing potassium permanganate include, but are not limited to: (1) hours of labor required; (2) quantities of raw materials employed; (3) amounts of energy and other utilities consumed; and (4) representative capital costs, including depreciation. In accordance with section 773(c)(4) of the Act, the Department valued the FOP, to the extent possible, using the costs of the FOP in a market economy that is (1) at a level of economic development comparable to the PRC, and (2) a significant producer of comparable merchandise. We determined that India is comparable to the PRC in terms of per capita gross national product and the national distribution of labor. Furthermore, India is a significant producer of comparable merchandise. See Memorandum from Jeffrey May, Director, Office of Policy, to Holly Kuga, Senior Office Director, AD/CVD Enforcement, dated February 28, 2002, which is in the CRU public file.

In accordance with section 773(c)(1) of the Act, for purposes of calculating NV, we attempted to value the FOP using surrogate values that were in effect during the POR. However, when we were unable to obtain surrogate values in effect during the POR, we adjusted the values, as appropriate, to account for inflation or deflation between the effective period and the POR. We calculated the inflation or deflation adjustments for all factor values, except labor, using the wholesale price indices (WPI) for India as published in the International Monetary Fund's (IMF) publication, International Financial Statistics. We valued the FOP as follows:

(1) We valued the following materials using available Indian import data from the publication Monthly Statistics of the Foreign Trade of India, Volume II--Imports (Indian Import Statistics) for the period January through December 2001: manganese ore, potassium hydroxide, limestone, silicon dioxide, salt, pallets, steel drums, polyethylene bags, woven plastic bags and coal.^[3] See Memorandum from Drew Jackson to the File Regarding Surrogate Values Used for the Preliminary Results of the Administrative Review of Potassium Permanganate from the People's Republic of China (Surrogate Value Memorandum), dated January 31, 2003, which is in the CRU public file.

(2) We valued plastic drums using 2001 data found on the Economic Times of India website.

(3) We valued electricity using 2000-2001 data from the Annual Report on the Working of State Electricity Boards & Electricity Departments, published in June 2001 by the Power and Energy Division of the Planning Commission of the Government of India.

(4) We valued water using the Indian value reported in the publication Second Water Utilities Data Book (1997), published by the Asian Development Bank.

(5) We valued labor using a regression-based wage rate, in accordance with 19 CFR 351.408(c)(3). This rate is identified on the Import Administration's web site under “Expected Wages of Selected NME Countries.” See http://ia.ita.doc.gov/​wages.

(6) We derived ratios for factory overhead, selling, general and administrative (SG&A) expenses, and profit using 1992-1993 information reported in the Reserve Bank of India Bulletin of January 1997. There is no information on the record regarding the factory overhead, SG&A expenses, and profit for Indian producers of potassium permanganate. However, the Reserve Bank of India Bulletin maintains data for an Indian industry group that includes companies that process and manufacture chemicals. Therefore, we have used this source to value factory overhead, SG&A expenses, and profit for the preliminary results. Using the information from the Reserve Bank of India Bulletin, we were able to calculate factory overhead as a percentage of direct materials, labor, and energy expenses; SG&A expenses as a percentage of the total cost of manufacturing; and profit as a percentage of the sum of the total cost of manufacturing and SG&A expenses.

(7) We used the following sources to value ocean, truck, and rail freight services. Truck and rail freight services were incurred to transport the finished product to the port and direct materials, packing materials, and coal from the suppliers of the inputs to Groupstars:

Truck Freight: We valued truck freight services using the 1999 rate quotes reported by Indian freight companies and used in the less than fair value investigation of bulk aspirin from the PRC. See Notice of Final Determination of Sales at Less Than Fair Value: Bulk Aspirin From the People's Republic of China, 65 FR 33805 (May 25, 2000).

Rail Freight: We valued rail freight services using July 1999-2000 rates published in the Reserve Bank of India Bulletin in July 2001.

Ocean Freight: We valued ocean freight services using the regional rates calculated in the 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).

(8) We valued foreign brokerage and handling using the average of the foreign brokerage and handling expenses reported in the public versions of the U.S. sales listing submitted in the antidumping duty review of Certain Stainless Steel Wire Rod from India: Final Results of the Administrative and New Shipper Review, 64 FR 856 (January 6, 1999).

For further discussion of the surrogate values used in this review, see the Surrogate Value Memorandum.

Use of Partial Facts Available

Pursuant to section 776(a)(2)(D) of the Act, the Department may use facts available when an interested party provides information but the information cannot be verified. In the instant review, Groupstars was unable to substantiate the consumption quantity reported for pallets. See PRC Verification Report. Therefore, the Department has resorted to the use of facts available with respect to this factor. Specifically, as facts available, the Department calculated the consumption quantity of pallets by dividing the total number of pallets purchased by Groupstars during the POR by the total quantity of subject merchandise exported during the POR. For further details, see the Calculation Memorandum.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the following weighted-average percentage dumping margin exists for the period January 1, 2001 through December 31, 2001:

Exporter/Manufacturer	Margin (percent)
Groupstars Chemical Co., Ltd.	13.31%

The Department will disclose to parties to this proceeding the calculations performed in reaching the preliminary results within 10 days of the date of announcement of the preliminary results. Interested parties may request a hearing within 30 days of publication of the preliminary results. See 19 CFR 351.310(c). Interested parties may submit written comments (case briefs) in accordance with 19 CFR 351.309(c)(1)(ii) and rebuttal comments (rebuttal briefs), which must be limited to issues raised in the case briefs in accordance with 19 CFR 351.309(d). Case briefs must be submitted within 30 days after the date of publication of this notice. Rebuttal briefs must be submitted within five days after the time limit for filing case briefs. Parties who submit arguments are requested to submit with the argument (1) a statement of the issue, (2) a brief summary of the argument and (3) a table of authorities. Further, the Department requests that parties submitting written comments provide the Department with a diskette containing the public version of those comments. We will issue a memorandum identifying the date of a hearing, if one is requested. The Department will issue the final results of this administrative review, including the results of our analysis of the issues raised by the parties in their comments, within 120 days of publication of the preliminary results.

The final results of this review shall be the basis for the assessment of antidumping duties on entries of merchandise covered by this review and for future deposits of estimated duties.

Assessment Rates

Upon completion of this administrative review, the Department will determine, and Customs shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR 351.212(b)(1), we calculated importer-specific assessment rates for merchandise subject to this review. We divided the total dumping margin (calculated as the difference between NV and CEP) for the importer by the total entered value of the reviewed sales. Where the importer-specific assessment rate is above de minimis, we will direct Customs to assess the resulting ad valorem rate against the entered value of the entry of the subject merchandise by that importer during the POR. The Department will issue appropriate assessment instructions directly to Customs within 15 days of publication of the final results of review. If these preliminary results are adopted in the final results of review, we will direct Customs to assess the resulting assessment rates, calculated as described above, on each of the importer's entries during the review period.

Cash Deposit Requirements

The following deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of potassium permanganate from the PRC entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(1) of the Act: (1) the cash deposit rate for the reviewed company named above will be the rate for that firm established in the final results of this administrative review; (2) for any previously reviewed PRC or non-PRC exporter with a separate rate not covered in this review, the cash deposit rate will be the company-specific rate established for the most recent period; (3) for all other PRC exporters, the cash deposit rates will be the PRC-wide rate in effect; and (4) the cash deposit rates for non-PRC exporters of subject merchandise from the PRC will be the rates applicable to the PRC supplier of that exporter. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Interested Parties

This notice serves as a preliminary reminder to importers of their responsibility under section 351.402(f)(2) of the Department's regulations 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.

We are issuing and publishing this determination in accordance with sections section 751(a)(1) and 777(i)(1) of the Act.

Dated: January 31, 2003.

Bernard T. Carreau,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  Although Groupstars Chemical LLC is the company listed in the notice of initiation, as noted above, Groupstars Chemical LLC is the U.S. importer of subject merchandise while Groupstars Chemical Co. Ltd. is the PRC exporter of the subject merchandise.

2.  The scope reflects the correct HTSUS subheading currently in effect. The HTSUS number in the Department's two previous reviews was incorrect.

3.  For some of the FOP, we were unable to find Indian import statistics for March 2001. We will attempt to find the March 2001 statistics for the final results of review.