E5-1612. Glycine From the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to a request from Baoding Mantong Fine Chemistry Co., Ltd. (“Baoding Mantong”), the Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on glycine from the People's Republic of China (“PRC”). This review covers Baoding Mantong. The period of review (“POR”) is March 1, 2003 through February 29, 2004. We preliminarily find that sales have been made below normal value (“NV”). The preliminary results are listed below in the section titled “Preliminary Results of Review.” If these preliminary results are adopted in our final results, we will instruct U.S. Customs and Border Protection (“CBP”) to assess the ad valorem margins against the entered value of each entry of the subject merchandise during the POR. We invite interested parties to comment on these preliminary results. Parties that submit comments are requested to submit with each argument (1) a statement of the issue and (2) a brief summary of the argument(s).

Effective Date:

April 7, 2005.

FOR FURTHER INFORMATION CONTACT:

Matthew Renkey, Catherine Bertrand, or Shannon Fraser, at [phone], [phone], or [phone], respectively; AD/CVD Operations, Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Background

On March 29, 1995, the Department published in the Federal Register an antidumping duty order on glycine from the PRC. See Antidumping Duty Order: Glycine from the People's Republic of China, 60 FR 16116, (March 29, 1995). On March 1, 2004, the Department published a Notice of Opportunity to Request an Administrative Review of Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation, 69 FR 9584 (March 1, 2004). On March 16, 2004, Baoding Mantong requested that the Department conduct an administrative review of its company's sales of subject merchandise to the United States during the POR, in accordance with section 351.213(b) of the Department's regulations. On April 28, 2004, the Department initiated the review for Baoding Mantong. See Initiation of Antidumping and Countervailing Duty Administrative Reviews in Part, 69 FR 23170 (April 28, 2004). On May 26, 2004, the Department issued an antidumping duty questionnaire to Baoding Mantong. On November 9, 2004, we invited interested parties to comment on the Department's surrogate country selection and/or significant production in the other potential surrogate countries and to submit publicly available information to value the factors of production. On February 14, 2005, the Department received comments from Baoding Mantong on surrogate information with which to value the factors of production in this proceeding. With regard to Baoding Mantong, the Department received timely filed original and supplemental questionnaire responses.

Scope of the Order

The product covered by the order is glycine, which is a free-flowing crystalline material, like salt or sugar. Glycine is produced at varying levels of purity and is used as a sweetener/taste enhancer, a buffering agent, reabsorbable amino acid, chemical intermediate, and a metal complexing agent. This review covers glycine of all purity levels. Glycine is currently classified under subheading 2922.49.4020 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheading is provided for convenience and Customs purposes, the written description of the merchandise under the order is dispositive.

Verification

As provided in section 782(i) of the Tariff Act of 1930, as amended (“the Act”) and 19 CFR 351.307, we conducted verification of the questionnaire responses of Baoding Mantong. We used standard verification procedures, including on-site inspection of the production and sales facilities, and an examination of relevant sales and financial records. Our verification results are outlined in the Administrative Review of Glycine from the People's Republic of China: Sales and Factors Verification Report for Baoding Mantong Fine Chemistry Co., Ltd., dated March 31, 2005 (“Baoding Mantong Verification Report”). A public version of this report is on file in the Central Records Unit located in room B-099 of the Main Commerce Building.

Separate Rates

In proceedings involving non-market 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 assigned a single antidumping duty rate unless an exporter can affirmatively demonstrate an absence of government control, both in law (de jure) and in fact (de facto), with respect to its export activities. See Notice of Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, 56 FR 20588 (May 6, 1991) (“Sparklers”). In this review, Baoding Mantong requested a separate company-specific rate. Accordingly, we have considered whether the company is independent from government control, and therefore eligible for a separate rate. The Department's separate rate test to determine whether the 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 the Ukraine: Final Determination of Sales at Less than Fair Value, 62 FR 61754, 61757 (November 19, 1997), and 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 to be entitled to a separate rate, the Department analyzes each entity exporting the subject merchandise under a test arising from Sparklers, as amplified by Notice of Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994) (“Silicon Carbide”). In accordance with the separate rates criteria, the Department assigns separate rates in NME cases only if respondents can demonstrate the absence of both de jure and de facto government control over export activities.

Baoding Mantong provided complete separate-rate information in its responses to our original and supplemental questionnaires. Accordingly, we performed a separate rates analysis to determine whether it is independent of government control.

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 20589. Our analysis shows that the evidence on the record supports a preliminary finding of de jure absence of government control for Baoding Mantong based on each of these factors. Baoding Mantong has placed on the record a number of documents to demonstrate absence of de jure control, including the “Foreign Trade Law of the People's Republic of China.” See Attachment A-1 of Baoding Mantong's July 14, 2004 submission. The Foreign Trade Law allows the company full autonomy from the central authority in governing its business operations. We have reviewed Article 11 of Chapter II of the Foreign Trade Law, which states “foreign trade dealers shall enjoy full autonomy in their business operation and be responsible for their own profits and losses in accordance with the law.” During verification, Baoding Mantong also provided its “Articles of Association,” “Certificate of Approval for Enterprises with Foreign Trade Rights in the People's Republic of China,” and “Foreign Trade Entity Registration Form.” See Baoding Mantong Verification Report, Exhibit 1. As in prior cases, we have analyzed such PRC laws and approvals and found that they establish an absence of de jure control. See, e.g., Pure Magnesium from the People's Republic of China: Final Results of New Shipper Review, 63 FR 3085, 3086 (January 21, 1998) and Preliminary Results of New Shipper Review: Certain Preserved Mushrooms From the People's Republic of China, 66 FR 30695, 30696 (June 7, 2001). Baoding Mantong also submitted a copy of its business licence in Attachment A-2 of its July 14, 2004 submission. This license was issued by the Agency of Registration, Mancheng County, Industry and Commerce Administrative Bureau. Baoding Mantong indicates that its business operations are limited to the scope of the licence, and that the licence may be revoked if the company acts outside of its business scope, fails to pay taxes, or violates criminal laws. At verification, we reviewed Baoding Mantong's business license and found that it was granted in accordance with the relevant PRC laws. Moreover, the results of verification support the information provided regarding the PRC laws. Therefore, we preliminarily determine that there is an absence of de jure control over the export activities of Baoding Mantong.

Absence of De Facto Control

Typically, the Department considers four factors in evaluating whether a respondent is subject to de facto government control of its export functions: (1) Whether the export prices are set by, or subject to, the approval of a government authority; (2) whether the respondent has authority to negotiate and sign contracts, and other agreements; (3) whether the respondent has autonomy from the government in making decisions regarding the selection of its management; and (4) whether the respondent retains the proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses. See Silicon Carbide, 59 FR at 22587.

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, 59 FR at 22586-22587. 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 government control which would preclude the Department from assigning separate rates.

Baoding Mantong has asserted the following: (1) It is a privately owned limited liability company; (2) there is no government participation in its setting of export prices; (3) its general manager has the authority to bind sales contracts; (4) it does not have to notify any government authorities of its management selection; (5) there are no restrictions on the use of its export revenue; and (6) its management is selected by its board of directors and it does not have to notify any government authorities of its management selection (See July 14, 2004 submission). We have examined the documentation provided and note that it does not suggest that pricing is coordinated among exporters of glycine from the PRC. Furthermore, our analysis of the responses during verification reveals no other information indicating the existence of government control. See Baoding Mantong Verification Report.

Consequently, because evidence on the record indicates an absence of government control, both in law and in fact, over Baoding Mantong's export activities, we preliminarily determine that the company has met the criteria for the application of a separate rate.

Normal Value Comparisons

To determine whether Baoding Mantong's sale of the subject merchandise to the United States was made at a price below NV, we compared its United States price to a normal value, as described in the “United States Price” and “Normal Value” section of this notice.

United States Price

For Baoding Mantong, we based United States price on export price (“EP”) in accordance with section 772(a) of the Act, because the first sale to an unaffiliated purchaser was made prior to importation, and constructed export price was not otherwise warranted by the facts on the record. We calculated EP based on the packed price from the exporter to the first unaffiliated customer in the United States. Although Baoding Mantong reported that its sale was made on an FOB basis, at verification the Department found that Baoding Mantong arranged and paid for the ocean freight from China to the U.S. port and then was reimbursed by the U.S. customer for the amount of freight expense. Accordingly, we have added the amount of freight revenue to the U.S. sales price and deducted the freight cost from the U.S. price. Because the Department verified that Baoding Mantong paid for the freight expense in renminbi, we valued the ocean freight using a surrogate value.

Where foreign inland freight, foreign brokerage and handling, or ocean freight were provided by PRC service providers or paid for in renminbi, we valued these services using Indian surrogate values or a U.S. surrogate value, as appropriate. (see “Factors of Production” section below for further discussion). For those expenses that were provided by a market-economy supplier and paid for in market-economy currency, we used the reported expense.

Normal Value

Non-Market-Economy Status

In every case conducted by the Department involving the PRC, the PRC has been treated as an NME country. Pursuant to section 771(18)(C)(i) of the Act, any determination that a foreign country is an NME country shall remain in effect until revoked by the administering authority. See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China: Preliminary Results 2001-2002 Administrative Review and Partial Rescission of Review, 68 FR 7500 (February 14, 2003). None of the parties to this review have contested such treatment. Accordingly, we calculated NV in accordance with section 773(c) of the Act, which applies to NME countries.

Surrogate Country

Section 773(c)(4) of the Act requires the Department to value an NME producer's factors of production, to the extent possible, in one or more market-economy countries that (1) are at a level of economic development comparable to that of the NME country, and (2) are significant producers of comparable merchandise. India is among the countries comparable to the PRC in terms of overall economic development, as identified in the October 15, 2004, Memorandum from the Office of Policy to Alex Villaneuva. See Attachment 1, Memorandum to the File from Shannon Fraser through James Doyle, “Selection of a Surrogate Country,” dated March 31, 2005 (“Surrogate Country Selection Memorandum”). In addition, based on publicly available information placed on the record (e.g., U.S. import data), India is a significant producer of the subject merchandise. Specifically, the United States imported 600,206 kilograms of glycine from India during the POR, making India the largest exporter of glycine to the United States. Accordingly, we considered India the surrogate country for purposes of valuing the factors of production because it meets the Department's criteria for surrogate-country selection. See Surrogate Country Selection Memorandum.

Factors of Production

Section 773(c)(1) of the Act provides that the Department shall determine NV using a factors-of-production methodology if (1) the merchandise is exported from an NME country, and (2) available information does not permit the calculation of NV using home-market prices, third-country prices, or constructed value under section 773(a) of the Act. Factors of production include the following elements: (1) Hours of labor required, (2) quantities of raw materials employed, (3) amounts of energy and other utilities consumed, and (4) representative capital costs. We valued all the input factors using publicly available information.

In accordance with section 351.301(c)(3)(ii) of the Department's regulations, for the final results of an administrative review, interested parties may submit publicly available information to value the factors of production no later than twenty days following the date of publication of these preliminary results.

Factor Valuations

In accordance with section 773(c) of the Act, we calculated NV based on the factors of production which included, but were 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. We used factors of production reported by the producer or exporter for materials, energy, labor, and packing. To calculate NV, we multiplied the reported unit factor quantities by publicly available Indian or U.S. values.

In selecting the surrogate values, we considered the quality, specificity, and contemporaneity of the data, in accordance with our practice. When we used publicly available import data from the Ministry of Commerce of India (“Indian Import Statistics”) for March 2003 through February 2004 to value inputs sourced domestically by PRC suppliers, we added to the Indian surrogate values a surrogate freight cost calculated using the shorter of the reported distance from the domestic supplier to the factory or the distance from the nearest seaport to the factory. This adjustment is in accordance with the Court of Appeals for the Federal Circuit's decision in Sigma Corp. v. United States, 117 F. 3d 1401, 1408 (Fed. Cir. 1997). In instances where we relied on Indian import data to value inputs, in accordance with the Department's practice, we excluded imports from both NME countries and countries deemed to maintain broadly available, non-industry-specific subsidies which may benefit all exporters to all export markets (i.e., Indonesia, South Korea, and Thailand) from our surrogate value calculations. See, e.g., Final Determination of Sales at Less Than Fair Value: Certain Automotive Replacement Glass Windshields from the People's Republic of China, 67 FR 6482 (February 12, 2002) and accompanying Issues and Decision Memorandum at Comment 1. See, also, Notice of Preliminary Determination of Sales at Less Than Fair Value, Postponement of Final Determination, and Affirmative Preliminary Determination of Critical Circumstances: Certain Color Television Receivers From the People's Republic of China, 68 FR 66800, 66808 (November 28, 2003), unchanged in the Department's final results at 69 FR 20594 (April 16, 2004).

Where we could not obtain publicly available information contemporaneous with the POR to value factors, we adjusted the surrogate values using the Indian Wholesale Price Index (“WPI”) as published in the International Financial Statistics (“IFS”) of the International Monetary Fund (“IMF”), for those surrogate values in Indian rupees. We made currency conversions, where necessary, pursuant to section 351.415 of the Department's regulations, to U.S. dollars using the applicable average exchange rate for the POR. We based the average exchange rates on exchange rate data from the Import Administration Web site at http://ia.ita.doc.gov/​exchange/​index.html. See Surrogate Values Used for the Preliminary Results of the 3/1/03-2/29/04 Administrative Review of Glycine from the People's Republic of China “Factor Valuation Memo”.

We valued the factors of production as follows:

Material and Packing Inputs

To value the inputs of acetic acid, sulfur, liquid ammonia, formaldehyde, methyl alcohol, paper bags, and plastic liners, we used the weighted-average unit import value derived from Indian import statistics, as published in the World Trade Atlas for the period March 1, 2003 through February 29, 2004. To value the input of liquid chlorine, we relied upon the average of two liquid chlorine prices, as obtained from the April 1, 2002 through March 31, 2003 financial statements of two Indian chemical companies, Bihar Caustic & Chemicals Limited and Kanoria Chemicals & Industries Limited.

Energy

We valued electricity using the reported price for electricity in India in dollars per kilowatt hour for the year 2000 as reported by the International Energy Agency (IEA) in Key World Energy Statistics (2003), and we inflated the value for the POR by using the WPI for India. To value water, we relied upon public information from the Municipal Corporation of Greater Mumbai's Web site. See http://www.mcgm.gov.inStat%20&​%20Fig/​Revenue.htm. The Web site notes that the Municipal Corporation of Greater Mumbai's data is for 2000 through 2001. Because this data is not contemporaneous with the POR, an adjustment has been made for inflation using the WPI for India. To value coal, we used the weighted-average unit import value derived from Indian import statistics in the World Trade Atlas for the period March 1, 2003 through February 29, 2004.

By-Products

Baoding Mantong reported that it produced two by-products in its production of subject merchandise: Hydrochloric acid and ammonium chloride. At verification, we confirmed that Baoding Mantong made sales of these by-products. Accordingly, we adjusted the material cost downward to reflect a by-product offset to the material cost included in the normal value. We valued ammonium chloride by using the weighted-average unit import values derived from Indian import statistics in the World Trade Atlas for the period March 1, 2003 through February 29, 2004. We valued hydrochloric acid by using price information obtained from Chemical Weekly from March 1, 2003 through February 29, 2004.

Labor

For labor, we used the PRC regression-based wage rate at the Import Administration's home page, Import Library, Expected Wages of Selected NME Countries, updated on November 15, 2004. See http://ia.ita.doc.gov/​wages /02wages/ 02wages.html. Because of the variability of wage rates in countries with similar per capita gross domestic products, section 351.408(c)(3) of the Department's regulations requires the use of a regression-based wage rate. The source of these wage rate data on the Import Administration's web site is the Yearbook of Labour Statistics 2002, International Labour Office (Geneva: 2002), Chapter 5B: Wages in Manufacturing.

Factory Overhead, Selling, General, and Administrative (“SG&A”) Expenses, and Profit

To value factory overhead, SG&A, and profit, we used the financial information obtained from the 2003-2004 financial statement of an Indian pharmaceutical producer, Torrent Pharmaceuticals Limited (“Torrent”). The factory overhead ratio was calculated as a percentage of total manufacturing costs (which includes materials, labor, and energy). The SG&A ratio was calculated as a percentage of total factory overhead and total manufacturing costs. The profit ratio was calculated as a percentage of factory overhead, SG&A, and total manufacturing costs.

Transportation Expenses

To value inland truck freight costs, we used freight prices published in the April 26, 2002 edition of the Iron & Steel Newsletter, which cites http://www.INFreight.com,, which is an Indian logistics Web site that tracks freight rates for all of India. The Department averaged the rates from three points of origin (Mumbai, Dehli, and Calcutta) to all destinations for which distances were published by http://www.mapsofindia.com. Since the rate was not contemporaneous with the POR, we adjusted the rate for inflation using the WPI for India. To value ocean freight cost, we used information obtained from a U.S. international shipping company for a delivery from Baoding Mantong's reported port of export to the reported U.S. port of importation. See Memorandum to the File, “Selection of Ocean Freight Cost,” dated March 31, 2005.

Preliminary Results of Review

We preliminary determine that the following dumping margin exists:

Manufacturer/export	Time period	Margin
Baoding Mantong Fine Chemistry Co., Ltd	3/1/03-2/29/04	76.72%

Assessment Rates

Upon completion of this administrative review, the Department shall determine, and U.S. Customs and Border Protection (“CBP”) shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR 351.212(b)(1), for assessment purposes, we will calculate importer-specific assessment rates for glycine from the PRC. We divide the total dumping margin for the reviewed sales by the total entered value of the reviewed sales for each importer during the POR. Upon completion of this review, we will direct CBP to assess antidumping duties based on a percentage of entered value equivalent to the company-specific dumping margin established in this review for each entry of subject merchandise made by Baoding Mantong during the POR. The Department will issue appropriate assessment instructions directly to CBP within 15 days of publication of the final results of this administrative review.

Cash-Deposit Requirements

The following cash-deposit rates will be effective upon publication of the final results of this review for all shipments of glycine 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) For subject merchandise exported by Baoding Mantong, the cash deposit rate will be that established in the final results of this review, except if the rate is less than 0.50 percent and, therefore, de minimis within the meaning of the 19 CFR 351.106(c)(1), in which case the cash deposit rate will be zero; (2) for previously investigated or reviewed companies not listed above that have separate rates, the cash-deposit rate will continue to be the company-specific rate published for the most recent period; (3) the cash-deposit rate for all other PRC exporters will be the PRC-wide rate which is currently 155.89 percent; and (4) the cash-deposit rate for all other non-PRC exporters will be the rate applicable to the PRC exporter that supplied that exporter. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Schedule for Final Results of Review

The Department will disclose calculations performed in connection with the preliminary results of this review within five days of the date of publication of this notice in accordance with section 351.224(b) of the Department's regulations. Any interested party may request a hearing within 30 days of publication of this notice in accordance with section 351.310(c) of the Department's regulations. Any hearing would normally be held 37 days after the publication of this notice, or the first workday thereafter, at the U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to request a hearing must submit a written request within 30 days of the publication of this notice in the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Requests for a public hearing should contain: (1) The party's name, address, and telephone number; (2) the number of participants; and (3) to the extent practicable, an identification of the arguments to be raised at the hearing.

Unless otherwise notified by the Department, interested parties may submit case briefs within 30 days of the date of publication of this notice in accordance with section 351.309(c)(ii) of the Department's regulations. As part of the case brief, parties are encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited. Rebuttal briefs, which must be limited to issues raised in the case briefs, must be filed within five days after the case brief is filed. If a hearing is held, an interested party may make an affirmative presentation only on arguments included in that party's case brief and may make a rebuttal presentation only on arguments included in that party's rebuttal brief. Parties should confirm by telephone the time, date, and place of the hearing no later than 48 hours before the scheduled time. The Department will issue the final results of this review, which will include the results of its analysis of issues raised in the briefs, not later than 120 days after the date of publication of this notice.

Notification to Importers

This notice also serves as a preliminary reminder to importers of their responsibility under section 351.402(f) of the Department's regulations to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during these review periods. 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 administrative review and this notice are published in accordance with sections 751(a)(2)(B) and 777(i)(1) of the Act.

Dated: March 31, 2005.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.