00-2840. Final Results of Expedited Sunset Review: Sulfanilic Acid From India

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Final Results of Expedited Sunset Review: Sulfanilic Acid from India.

SUMMARY:

On October 1, 1999, the Department of Commerce (“the Department”) initiated a sunset review of the countervailing duty order on sulfanilic acid from India (64 FR 53320) pursuant to section 751(c) of the Tariff Act of 1930, as amended (“the Act”). On the basis of a notice of intent to participate and an adequate response filed on behalf of a domestic interested party and an inadequate response (in this case no response) from respondent interested parties, the Department decided to conduct an expedited (120-day) review. As a result of this review, the Department finds that revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy. The net countervailable subsidy and the nature of the subsidy are identified in the Final Results of Review section of this notice.

EFFECTIVE DATE:

February 8, 2000.

FOR FURTHER INFORMATION CONTACT:

Mark D. Young or Melissa G. Skinner, Office of Policy for Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, D.C. 20230; telephone: [phone] or [phone], respectively.

Statute and Regulations

This review was conducted pursuant to sections 751(c) and 752 of the Act. The Department's procedures for conducting sunset reviews are set forth in Procedures for Conducting Five-year (“Sunset”) Reviews of Antidumping and Countervailing Duty Orders, 63 FR 13516 (March 20, 1998) (“Sunset Regulations”), and 19 CFR Part 351 (1999) in general. Guidance on methodological or analytical issues relevant to the Department's conduct of sunset reviews is set forth in the Department's Policy Bulletin 98:3—Policies Regarding the Conduct of Five-year (“Sunset”) Reviews of Antidumping and Countervailing Duty Orders; Policy Bulletin, 63 FR 18871 (April 16, 1998) (“Sunset Policy Bulletin”).

Scope

The products covered by this order are all grades of sulfanilic acid, which include technical (or crude) sulfanilic acid, refined (or purified) sulfanilic acid and sodium salt of sulfanilic acid (sodium sulfanilate). 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 contains 96 percent minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent maximum alkali insoluble materials. Refined sulfanilic acid contains 98 percent minimum sulfanilic acid, 0.5 percent maximum aniline, and 0.25 percent maximum alkali insoluble materials. Sodium salt of sulfanilic acid (sodium sulfanilate) is a granular or crystalline material containing 75 percent minimum sulfanilic acid, 0.5 percent maximum aniline, and 0.25 percent maximum alkali insoluble materials based on the equivalent sulfanilic acid content. The merchandise is classifiable under Harmonized Tariff Schedule of the United States (“HTSUS”) subheadings 2921.42.22 and 2921.42.24.20. ^[1] Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of the order is dispositive.

This review covers imports from all manufacturers and exporters of sulfanilic acid from India.

History of the Order

The Department published its final affirmative countervailing duty determination on sulfanilic acid from India in the Federal Register on January 8, 1993 (58 FR 3259). In the final determination the Department found an estimated net subsidy, for all manufacturers/producers/exporters of sulfanilic acid from India, of 43.71 percent ad valorem based on four programs: (1) 2.17 percent under the Preferential Export Financing Through Packing Credits; (2) 1.69 percent under the Preferential Post-Shipment Financing; (3) 6.13 percent under the Import Tax Deduction for Exporters (Section 80HHC); and (4) 33.72 percent under the Import Duty Exemptions Available Through Advance Licenses. Receipt of benefits under each of these programs was contingent upon exports.

On March 2, 1993, the Department issued the countervailing duty order, utilizing the subsidy rates found in the original investigation. ^[2] Since the issuance of the order, the Department has not conducted an administrative review.

Background

On October 1, 1999, the Department initiated a sunset review of the countervailing duty order on sulfanilic acid from India (64 FR 53320), pursuant to section 751(c) of the Act. The Department received a Notice of Intent to Participate on behalf of National Ford Chemical Company (“NFC”) on October 18, 1999, within the deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. Pursuant to section 771(9)(C) of the Act, NFC claimed interested party status as a U.S. manufacturer whose workers are engaged in the production of domestic like products. Moreover, NFC claims that it was a petitioner in the original investigation. The Department received a complete substantive response from NFC by November 1, 1999, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). We did not receive a substantive response from any respondent interested party to this proceeding. As a result, pursuant to 19 CFR 351.218(e)(1)(ii)(C), the Department determined to a conduct an expedited, 120-day, review of this order.

Determination

In accordance with section 751(c)(1) of the Act, the Department conducted this review to determine whether revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy. Section 752(b) of the Act provides that, in making this determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the program which gave rise to the net countervailable subsidy has occurred and is likely to affect that net countervailable subsidy. Pursuant to section 752(b)(3) of the Act, the Department shall provide to the International Trade Commission (“the Commission”) the net countervailable subsidy likely to prevail if the order is revoked. In addition, consistent with section 752(a)(6), the Department shall provide to the Commission information concerning the nature of the subsidy and whether it is a subsidy described in Article 3 or Article 6.1 of the 1994 WTO Agreement on Subsidies and Countervailing Measures (“Subsidies Agreement”).

The Department's determinations concerning continuation or recurrence of a countervailable subsidy, the net countervailable subsidy likely to prevail if the order is revoked, and nature of the subsidy are discussed below. In addition, NFC's comments with respect to each of these issues are addressed within the respective sections.

Continuation or Recurrence of a Countervailable Subsidy

Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act (“URAA”), specifically the Statement of Administrative Action (the “SAA”), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order-wide basis (see section III.A.2 of the Sunset Policy Bulletin). Additionally, the Department normally will determine that revocation of a countervailing duty order is likely to lead to continuation or recurrence of a countervailable subsidy where (a) a subsidy program continues, (b) a subsidy program has been only temporarily suspended, or (c) a subsidy program has been only partially terminated (see section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this policy are provided where a company has a long record of not using a program (see section III.A.3.b of the Sunset Policy Bulletin).

In addition to considering the guidance on likelihood cited above, section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of an order is likely to lead to continuation or recurrence of a countervailable subsidy where a respondent interested party waives its participation in the sunset review. Pursuant to the SAA, at 881, in a review of a countervailing duty order, when the foreign government has waived participation, the Department shall conclude that revocation of the order would be likely to lead to a continuation or recurrence of a countervailable subsidy for all respondent interested parties.^[3] In the instant review, the Department did not receive a response from the foreign government or from any other respondent interested party. Pursuant to section 351.218(d)(2)(iii) of the Sunset Regulations, this constitutes a waiver of participation.

In its substantive response, NFC argues that revocation of the countervailing duty order on sulfanilic acid from India will result in the continuation or recurrence of a countervailable subsidy. Citing the SAA, at 888, NFC asserts that continuation, or temporary or partial termination, of a subsidy program will be highly probative of the likelihood of continuation or recurrence of countervailable subsidies, absent significant evidence to the contrary (see November 1, 1999, Substantive Response of NFC regarding sulfanilic acid from India at 6). NFC asserts that there is no indication that the Indian government's subsidy programs have been modified or eliminated (see November 1, 1999, Substantive Response of NFC regarding sulfanilic acid from India at 8). NFC argues as support the fact that the order has never been subject to an administrative review, nor has any evidence been submitted to the Department demonstrating the termination of these programs that conferred countervailable subsidies. Therefore, NFC adds, it is reasonable to assume that these programs continue to exist and are utilized. Moreover, NFC notes that section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of an order is likely to lead to continuation or recurrence of a countervailable subsidy where a respondent interested party waives its participation in the sunset review.

As stated above, the continued use of a program is highly probative of the likelihood of continuation or recurrence of countervailable subsidies if the order were revoked. Additionally, the presence of programs that have not been used, but have also not been terminated, is also probative of the likelihood of continuation or recurrence of a countervailable subsidy. Absent argument or evidence to the contrary, we find that countervailable programs continue to exist and be used. Therefore, because countervailable programs continue to exist and be used, the foreign government and other respondent interested parties waived their right to participate in this review before the Department, and absent argument to the contrary, the Department concludes that revocation of the order would be likely to lead to a continuation or recurrence of a countervailable subsidy for all respondent interested parties.^[4]

Net Countervailable Subsidy

In the Sunset Policy Bulletin, the Department stated that, consistent with the SAA and House Report, the Department normally will select a rate from the investigation as the net countervailable subsidy likely to prevail if the order is revoked, because that is the only calculated rate that reflects the behavior of exporters and foreign governments without the discipline of an order or suspension agreement in place. The Department noted that this rate may not be the most appropriate rate if, for example, the rate was derived from subsidy programs which were found in subsequent reviews to be terminated, there has been a program-wide change, or the rate ignores a program found to be countervailable in a subsequent administrative review.^[5]

NFC, citing the SAA, notes that the Administration intends that Commerce normally will select the rate from the investigation as the net countervailable subsidy likely to prevail if the order is revoked, because that is the only calculated rate that reflects the behavior of exporters and foreign governments without the discipline of an order in place (see November 1, 1999, Substantive Response of NFC regarding sulfanilic acid from India at 8). Therefore, NFC argues that the Department should determine that the net countervailable subsidy likely to prevail is 43.71 percent, the rate set forth in the original investigation.

As noted above, the Department has not conducted an administrative review of this order. Thus, we have never found that substantive changes have been made to any of the Indian subsidy programs. Therefore, absent any argument or evidence to the contrary, the Department determines that the net countervailable subsidy that would be likely to prevail in the event of revocation of the order would be 43.71 percent. This rate is for all producers and exporters of the subject merchandise from India.

Nature of the Subsidy

In the Sunset Policy Bulletin, the Department states that, consistent with section 752(a)(6) of the Act, the Department will provide to the Commission information concerning the nature of the subsidy, and whether the subsidy is a subsidy as described in Article 3 or Article 6.1 of the Subsidies Agreement. NFC did not address this issue in its substantive response of November 1, 1999.

Because the receipt of benefits provided by the Government of India under all four of the programs are contingent on exports, these programs fall within the definition of an export subsidy under Article 3.1(a) of the Subsidies Agreement. Therefore, the Department is providing the Commission with the following program descriptions.

1. Preferential Export Financing Through Packing Credits

The Reserve Bank of India, through commercial banks, provides “packing” credits or pre-shipment loans to exporters. With these pre-shipment loans, exporters may purchase raw materials to produce goods for export based on the presentation of a confirmed purchase order. In general, the pre-shipment loans are granted for a period of up to 180 days. Because only exporters are eligible for these pre-shipment loans, they are countervailable to the extent that they are provided at preferential rates.

2. Preferential Post-Shipment Financing

The Reserve Bank of India, through commercial banks, provides post-shipment financing loans to exporters. The purpose of post-shipment financing is to enable exporters to extend favorable payment terms such as deferred payment, to the foreign purchaser. Post-shipment financing loans may not exceed a period of 180 days. Because only exporters are eligible for the post-shipment loans, they are countervailable to the extent that they are provided at preferential interest rates.

3. Import Tax Deduction for Exporters (Section 80HHC)

For tax returns filed during the period of investigation, the Indian government allowed exporters to claim a tax deduction related to their export sales. This tax deduction was calculated by dividing export sales by total sales and then multiplying the resulting figure by the exporter's profit as shown in the tax return. This amount is then deducted from taxable profits. Because this program is only available to exporters, we determine it to be countervailable.

4. Import Duty Exemptions Available Through Advance Licenses

Advance licenses are available to exporters, to enable them to import raw material inputs used in the production of exports duty-free. Recipients of advance licenses are obligated under the terms of the license to export the products produced with the duty-free imports. The amount of imports allowed under an advance license is closely linked to the amount of exports to be produced. We consider the use of the advance licenses to be equivalent to a duty drawback program insofar as customs duties are not paid on physically incorporated, imported products used in the production of exports. However, where imported inputs are not physically incorporated into the exported product, we consider the duty savings afforded by the advance license to be a countervailable export subsidy.

Final Results of Review

As a result of this review, the Department finds that revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy at the rates listed below:

Manufacturer/exporter	Margin (percent)
All manufacturers/producers/exporters	47.31

This notice serves as the only 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 of the Department's regulations. Timely notification of return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.

This five-year (“sunset”) review and notice are in accordance with sections 751(c), 752, and 777(i)(1) of the Act.

Dated: January 31, 2000.

Holly A. Kuga,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  HTSUS subheadings for sulfanilic acid and sodium salts of sulfanilic acid have changed since the issuance of this order. The petitioner asserts that the HTSUS subheading for sulfanilic acid was 2921.42.24.20 in 1993 and has remained at 2921.42.22 since 1994.

2.  See Countervailing Duty Order: Sulfanilic Acid From India, 58 FR 12026 (March 2, 1993).

3.  See 19 CFR 351.218(d)(2)(iv).

4.  See 19 CFR 351.218(d)(2)(iv).

5.  See section III.B.3 of the Sunset Policy Bulletin.