[Federal Register Volume 59, Number 103 (Tuesday, May 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13126]
[[Page Unknown]]
[Federal Register: May 31, 1994]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-825]
Notice of Final Determination of Sales at Less Than Fair Value:
Sebacic Acid From the People's Republic of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: May 31, 1994.
FOR FURTHER INFORMATION CONTACT: Brian C. Smith, Office of Antidumping
Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
1766.
FINAL DETERMINATION: We determine that sebacic acid from the People's
Republic of China (PRC) is being, or is likely to be, sold in the
United States at less than fair value, as provided in section 733 of
the Tariff Act of 1930, as amended (the Act). The estimated margins are
shown in the ``Suspension of Liquidation'' section of this notice.
Case History
Since the December 28, 1993, issuance of the preliminary
determination (59 FR 565, January 5, 1994), the following events have
occurred.
On January 3, 1994, Sinochem International Chemical Company (SICC),
Tianjin Chemical Import & Export Corporation (Tianjin), Sinochem
Jiangsu Import & Export Corporation (Jiangsu), and Guangdong Chemical
Import & Export Corporation (Guangdong) (collectively referred to as
respondents) withdrew their claim that the sebacic acid industry in the
PRC is a market-oriented industry (MOI). On January 4, 1994, the
Department issued to respondents a request for clarification of
previously provided information, as well as for additional, published
information. On January 5, 1994, respondents' counsel requested a
hearing and asked for an extension to submit its clarification comments
on previously provided published information and to submit additional
published information. On January 7, 1994, the Department granted the
extension. On January 11, 1994, petitioner, which is Union Camp
Corporation, requested a hearing. On January 14, 1994, the Department
sent to the respondents verification agendas. On January 25, 1994, the
Department issued to petitioner and respondents a questionnaire asking
for the material requirements for producing sebacic acid. On January
31, 1994, respondents indicated that they could not provide any
additional published information for the period of investigation (POI).
On February 2, 1994, petitioner alleged that India was not the proper
surrogate country in this investigation. On February 3, 1994,
respondents' counsel submitted financial statements for three of the
four factories under investigation. On February 8, 1994, petitioner and
respondents submitted their responses to the January 25, 1994, material
requirements questionnaire. On February 14, 1994, petitioner submitted
its verification comments. From February 21 to March 19, 1994,
Department officials conducted verifications of four trading companies
and four factories and met with officials from the Ministry of Foreign
Trade and Economic Cooperation (MOFTEC) and other government agencies
in the PRC. From March 24 to April 2, 1994, the Department issued the
verification reports. On April 8, 1994, petitioner and respondents
submitted hearing briefs. On April 13, 1994, the parties submitted
rebuttal briefs. On April 15, 1994, a public hearing was held.
Scope of Investigation
The products covered by this investigation are all grades of
sebacic acid, a dicarboxylic acid with the formula
(CH2)8(COOH)2, which include but are not limited to CP
Grade (500ppm maximum ash, 25 maximum APHA color), Purified Grade
(1000ppm maximum ash, 50 maximum APHA color), and Nylon Grade (500ppm
maximum ash, 70 maximum ICV color). The principal difference between
the grades is the quantity of ash and color. Sebacic acid contains a
minimum of 85 percent dibasic acids of which the predominant species is
the C10 dibasic acid. Sebacic acid is sold generally as a free-
flowing powder/flake.
Sebacic acid has numerous industrial uses, including the production
of nylon 6/10 (a polymer used for paintbrush and toothbrush bristles
and paper machine felts), plasticizers, esters, automotive coolants,
polyamides, polyester castings and films, inks and adhesives,
lubricants, and polyurethane castings and coatings.
Sebacic acid is currently classifiable under subheading
2917.13.00.00, of the Harmonized Tariff Schedule of the United States
(HTSUS). Although the HTSUS subheading is provided for convenience and
customs purposes, our written description of the scope is dispositive.
Period of Investigation
The period of investigation is January 1, 1993, through June 30,
1993.
Separate Rates
The respondents have each requested that they be assigned separate
rates. Their business licenses indicate that they are ``owned by all
the people.'' As stated in the Final Determination of Sales at Less
Than Fair Value: Silicon Carbide from the People's Republic of China
(PRC) (59 FR 22585, May 2, 1994) (``Silicon Carbide''), ``ownership of
a company by all the people does not require the application of a
single rate.'' Accordingly, SICC, Tianjin, Jiangsu, and Guangdong are
eligible for consideration for separate rates.
To establish whether a company is sufficiently independent to be
entitled to a separate rate, the Department analyzes each exporting
entity under a test established in the Final Determination of Sales at
Less Than Fair Value: Sparklers from the PRC (56 FR 20588, May 6, 1991)
(``Sparklers''), as amplified in Silicon Carbide. Under the separate
rates test, the Department assigns separate rates only where
respondents can demonstrate the absence of both de jure and de facto
government control over export activities.
1. Absence of De Jure Government Control
Three PRC laws that have been placed on the record in this case
indicate that the responsibility for managing these enterprises ``owned
by all of the people'' is with the enterprises themselves and not with
the government. These are the ``Law of the People's Republic of China
on Industrial Enterprises Owned by the Whole People,'' adopted on April
13, 1988 (1988 Law); ``Regulations for Transformation of Operational
Mechanism of State-Owned Industrial Enterprises,'' approved on August
23, 1992 (1992 Regulations); and the ``Temporary Provisions for
Administration of Export Commodities,'' approved on December 21, 1992
(Export Provisions). The 1988 Law and 1992 Regulations shifted
government control to the enterprises themselves. The 1988 Law provides
that enterprises owned ``by the whole people'' shall make their own
management decisions, be responsible for their own profits and losses,
choose their own suppliers and purchase their own goods and materials.
The 1988 Law also has other provisions which indicate that enterprises
have management independence from the government. The 1992 Regulations
provide that these same enterprises can, for example, set their own
prices (Article IX); make their own production decisions (Article XI);
use their own retained foreign exchange (Article XII); allocate profits
(Article II); sell their own products without government interference
(Article X); make their own investment decisions (Article XIII);
dispose of their own assets (Article XV); and hire and fire their
employees without government approval (Article XVII).
The Export Provisions designate those export products specifically
under government control. Sebacic acid does not appear on the lists in
Export Provisions and, therefore, is not subject to export constraints.
The existence of these laws indicates the respondents are not de
jure subject to control. However, there is some evidence that the
provisions of the above-cited laws and regulations have not been
implemented uniformly among different sectors and/or jurisdictions in
the PRC (see ``PRC Government Findings on Enterprise Autonomy,'' in
Foreign Broadcast Information Service-China-93-133 (July 14, 1993).
Therefore, it is critical that we conduct a de facto analysis to
determine whether these respondents were, in fact, subject to
governmental control.
2. Absence of De Facto Government Control
The Department has considered four factors in evaluating whether
each respondent is subject to de facto government control: (1) Whether
the export prices are set by or subject to the approval of a
governmental 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 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).
During verification, we examined bank account records, sales
contracts, fixed assets on the financial statements, management
selection practices and tax records for each respondent. Based on our
examination, we find that each respondent:
(1) Establishes its own export prices; (2) negotiates its own sales
without guidance from any government entities; (3) selects its own
management without interference from any government entities; and (4)
retains its own proceeds from the sale of the subject merchandise. (See
May 20, 1994, final concurrence memorandum, and individual verification
reports for further discussion.)
3. Conclusion
Given that the record of this investigation demonstrates an absence
of de jure or de facto governmental control over the export functions
of SICC, Tianjin, Jiangsu, and Guangdong, we determine that these
companies are eligible for separate rates. See comments 1 and 2 for
further discussion.
Surrogate Country
Section 773(c) of the Act requires the Department to value the
factors of production, to the extent possible, in one or more market
economy countries that are at a level of economic development
comparable to that of the non-market economy country, and that are
significant producers of comparable merchandise. The Department has
determined that India and Pakistan are comparable to the PRC in terms
of overall economic development, per capita gross national product
(GNP), the national distribution of labor and growth rate in per capita
GNP. (See memorandum from David P. Mueller to David L. Binder, dated
September 29, 1993.) Though it is possible that India may no longer be
a producer of the subject merchandise, the Department has determined
that India is a significant producer and exporter of comparable
merchandise (see comment 5 for further discussion). Therefore, because
India fulfills both requirements outlined in the statute, India is the
preferred surrogate country for purposes of valuing the factors of
production used in producing the subject merchandise. Except for one
factor of production, we have used publicly available published values
obtained in India. For that one factor, we used information from
Pakistan. We have relied upon publicly available published information
wherever possible.
Fair Value Comparisons
To determine whether sales of sebacic acid from the PRC to the
United States were made at less than fair value, we compared the United
States price (USP) to the foreign market value (FMV), as specified in
the ``United States Price'' and ``Foreign Market Value'' sections of
this notice.
United States Price
We based USP on purchase price, in accordance with section 772(b)
of the Act, because the subject merchandise was sold to unrelated
purchasers in the United States prior to importation and because
exporter's sales price methodology was not otherwise indicated.
For those exporters that responded to the Department's
questionnaire, we calculated purchase price based on packed, CIF prices
to unrelated purchasers in the United States. We made deductions for
foreign inland freight, ocean freight, marine insurance, and foreign
brokerage and handling expenses.
For foreign inland freight, we based the deduction on freight rates
in India and on the verified distance from the factory to the port of
exportation (see comment 18 for further discussion). For ocean freight,
the respondents all used PRC transportation services in incurring this
charge during the POI. Therefore, we based the deduction for ocean
freight on the current tariff rate in the Asia North America Eastbound
Rate Agreement.
For foreign brokerage and handling expenses and marine insurance,
we used publicly summarized versions of these two expenses reported in
the antidumping duty investigation of Sulfur Dyes, Including Sulfur Vat
Dyes, from India (see memorandum to the file dated December 27, 1993).
Foreign Market Value
We calculated FMV based on the verified factors of production used
by the factories which produced the subject merchandise for the four
respondents (see comments 4 and 11 for further discussion). In
accordance with section 773(c)(3) of the Act, the factors to value
include materials, labor, energy and capital costs (e.g., factory
overhead), and we have valued these factors in this case. To calculate
FMV, the verified factors of production were multiplied by the
appropriate surrogate values for the different inputs. (For a complete
analysis of the surrogate values used and a detailed discussion of the
source publications referred to in this notice, see the May 20, 1994,
final concurrence memorandum.)
In determining which surrogate value to use for valuing each factor
of production, we selected, where possible, the publicly available
published value which was: (1) An average non-export value; (2)
representative of a range of prices within the POI if submitted by an
interested party, or most contemporaneous with the POI; (3) product-
specific; and (4) tax-exclusive. We have expressed a preference for
prices representative of the POI because these prices more closely
reflect the prices paid for inputs in the surrogate during the POI.
Where we could not obtain a POI-representative price for an input, we
have selected a value in accordance with the remaining criteria
mentioned above and which is closest in time to the POI.
In accordance with this selection methodology, we have obtained
more current values for eight material inputs since the preliminary
determination. In addition, for four of those eight materials, we
reassigned values based on additional product-specific information. We
also established a POI price range for the publicly available published
values that we used and which were submitted by the respondents (see
comment 6 for further discussion). As a result of applying the
selection methodology noted above, we changed the values used in the
preliminary determination for the following nine materials: Castor oil,
cresol, activated carbon, a substitute for activated carbon, steam
coal, electricity, one type of packing material, glycerine, and fatty
acid. In addition, we valued a substitute for cresol as a result of our
verification findings.
In the case of material inputs, we also used surrogate
transportation rates to value the transportation of inputs to the
factories. In those cases where a respondent provided incorrect
transportation distances, we valued the verified distances (see comment
10 for further discussion).
To value castor oil, we used publicly available published
information from The Times of India because this source provided a non-
export price during the POI. We calculated an average price
representative of the POI based on prices submitted by respondents and
prices we obtained from the U.S. embassy in India. We did not have the
necessary information to deduct taxes from these prices (see comment 6
for further discussion).
To value caustic soda, sodium chloride, zinc oxide, and phenol, we
used publicly available published information from Chemical Business.
This source provided a representative range of non-export prices during
the POI which did not include Indian excise or provincial sales taxes.
For caustic soda, we used a price for liquid caustic soda for all four
factories. We did not adjust the selected value to account for
different percentage strengths of the solution used by the factories
because the selected value did not indicate a percentage strength for
the solution (see comment 12 for further discussion).
To value sulfuric acid, cresol, and caproyl alcohol, we used
publicly available published information from Chemical Weekly. This
source provided a representative range of non-export prices during the
POI which was inclusive of taxes. We did not have the necessary
information to deduct taxes from these prices. In the case of cresol,
we calculated an average price of the three types of cresol used by the
factories (see comment 14 for further discussion). In addition, we used
the factories' verified cresol amounts (see comments 13 and 15 for
further discussion). In the case of caproyl alcohol (which is also
called octanol-2), we used a price for octanol (see comment 8 for
further discussion).
To value activated carbon, fatty acid, substitutes for cresol and
activated carbon, and steam coal, we used more recent publicly
available published information from the Monthly Statistics of the
Foreign Trade of India (Monthly Statistics). With the exception of
steam coal, this source was the only one we found which provided
publicly available published price information for these material
inputs. For steam coal, we used an import value from Monthly Statistics
rather than the domestic value from the publication OECD IEA
Statistics, because the import value was more contemporaneous with the
POI (see comment 19 for further discussion). For fatty acid, we used
the price for a general type of fatty acid (see comment 8 for further
discussion).
To value glycerine, we used a value for crude glycerine in the
publication Monthly Statistics of the Foreign Trade of India and not
the value for industrial water grade glycerine in the Indian
publication Chemical Business, because the value in Monthly Statistics
was more product-specific (see comment 7 for further discussion).
To value electricity, we used publicly available published
information from the Asian Development Bank (ADB). We used a 1990 value
from the ADB publication instead of a published POI Pakistani
industrial usage value because the ADB value was specific to industrial
usage in India and because India is the first-choice surrogate country.
In the ADB publication, there are three types of electricity rates
(e.g., low-tension, high-tension and power-intensive). In this case, we
took an average of the low-tension and high-tension rates provided in
the ADB publication because we could not ascertain whether the sebacic
acid industry in the PRC incurs a low-tension or high-tension rate. We
were able to ascertain that the PRC sebacic acid industry does not
incur power-intensive rates because the electricity used by the sebacic
acid factories in the PRC did not account for a major portion of the
production cost.
To value water, we used a public cable from the U.S. consulate in
Pakistan which was originally provided in the investigation of
Sulfanilic Acid from the PRC. We used this cable because we could not
locate a value for water in any Indian or Pakistani publication.
For all material and energy prices we used that were for a period
prior to the POI, we adjusted the factor values to account for
inflation between the time period in question and the POI using
wholesale price indices (WPIs) published in International Financial
Statistics (IFS) by the International Monetary Fund (IMF).
To value labor costs, we used the International Labor Office's 1992
Yearbook of Labor Statistics. To determine the number of hours in an
Indian workday, we used the Country Reports: Human Rights Practices for
1990. Because the published labor rate was prior to the POI, we
adjusted the factor values to account for inflation between the time
period in question and the POI using the consumer price indices
published in IFS by the IMF. In addition, for one factory in question,
we considered the additional labor amounts to be indirect labor and a
part of factory overhead (see comment 16 for further discussion).
To value factory overhead, selling, general and administrative
expenses, and profit, we calculated percentages based on elements of
industry group income statements from The Reserve Bank of India
Bulletin. We did not include an amount for energy in our factory
overhead calculation or inflate the percentages to the POI.
To calculate the FMV for one metric ton of sebacic acid, we added
each of the costs derived above. We also added to FMV, where
appropriate, an amount for packing labor based on the appropriate
Indian wage rate, and an amount for packing materials based on more
current Indian prices than those values previously used from the
Monthly Statistics of the Foreign Trade of India. Since the packing
material prices were also prior to the POI, we used WPIs from IFS to
inflate the values to the POI. We made no adjustments for selling
expenses. Finally, we added surrogate freight costs for the delivery of
inputs and packing materials to the factories producing sebacic acid.
In this investigation, we have verified that the factories produce
three subsidiary products (glycerine, fatty acid, and capryl alcohol)
in the course of producing sebacic acid.
We have used the same methodology established in the preliminary
determination to determine whether each of the three products in
question are by-products or co-products.
However, for the final determination, we have not considered the
factories' costs and profits because we have not found an MOI, and we
have obtained more current values than those used in the preliminary
determination for sebacic acid, glycerine, and fatty acid. Consistent
with the preliminary determination and after incorporating these values
into the analysis, we still find that fatty acid is a by-product
because the overall value of fatty acid is insignificant compared to
the relative value of the ``subsidiary'' products and the subject
merchandise. As a by-product, we subtracted the sales revenue of fatty
acid from the production costs of sebacic acid. This treatment of by-
products is consistent with generally accepted accounting principles.
(See Cost Accounting: A Managerial Emphasis (1991) at pages 539-544).
We also find that glycerine and caproyl alcohol are co-products.
The value of glycerine for two of the four factories and the value of
caproyl alcohol for all four factories is significant compared to the
relative value of all of the products manufactured as a result of, or
during, the process of manufacturing sebacic acid. We also find that
the quantity of glycerine production is subject to manipulation by
management based on the variation in the quantity yield among the four
factories, and because there is no information on the record which
indicates other reasons for why the quantity would vary.
Therefore, we have allocated the factor inputs, (e.g., materials
used to produce glycerine and caproyl alcohol), based on the relative
quantity of output of these two products and sebacic acid. In addition,
we have used the production times necessary to complete each production
stage of sebacic acid as a basis for allocating the amount of labor,
energy usage and factory overhead among the products (see May 20, 1994,
concurrence memorandum, memorandum to the file dated May 9, 1994, and
comment 9 for further discussion). This treatment of co-products is
consistent with generally accepted accounting principles. (See Cost
Accounting: A Managerial Emphasis (1991) at pages 528-533).
Best Information Available (BIA)
As stated in the preliminary determination, the Department must
receive an adequate questionnaire response from an entity requesting a
separate dumping margin rate before a separate rate can be applied to
that entity. Non-respondent entities must receive a PRC country-wide
rate. We have based the PRC country-wide rate on BIA.
Section 776(c) of the Act provides that whenever a party refuses or
is unable to produce information requested in a timely manner and in
the form required, or otherwise significantly impedes an investigation,
the Department shall use BIA. We have done so in this investigation
with regard to the non-responding entities.
In determining what to use as BIA, the Department follows a two-
tiered methodology based on the degree of respondents' cooperation.
According to the Department's two-tiered BIA methodology, when a
company refuses to provide the information requested in the form
required, or otherwise significantly impedes the Department's
investigation, it is appropriate for the Department to assign to that
company the higher of (a) the highest margin alleged in the petition,
or (b) the highest calculated rate of any respondent in the
investigation. This methodology for assigning BIA has been upheld by
the U.S. Court of Appeals for the Federal Circuit. (See Allied-Signal
Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir. 1993); see
also Krupp Stahl AG et al. United States, 822 F. Supp. 789 (CIT 1993).)
We find those PRC exporters which refused to answer the Department's
questionnaire to have been uncooperative in this investigation. As BIA
for these exporters, we are assigning the highest margin alleged in the
petition (243.40 percent) as the PRC country-wide rate, in accordance
with the two-tiered BIA methodology under which the Department imposes
the most adverse rate upon those respondents who refuse to cooperate or
otherwise significantly impede the proceeding. We made no adjustment to
petitioner's amended calculations.
Consistent with our preliminary determination, no ``All Others''
rate will be established for the PRC. Instead, a country-wide rate is
applied to all imports of sebacic acid from the PRC for those PRC
exporters which were unable to demonstrate that they were entitled to a
separate rate. Because we are assigning a country-wide rate in this
situation, there is no need to assign an ``All Others'' cash deposit
rate for PRC entities.
Verification
As provided in section 776(b) of the Act, we verified information
provided by respondents by using standard verification procedures,
including on-site inspection of the manufacturers' facilities,
examination of relevant sales and financial records, and selection of
original source documentation containing relevant information.
Analysis of Comments Received
Comment 1: Petitioner contends that the four respondents should not
receive separate rates because each is a state-owned company subject to
central control by the PRC government.
Respondents contend that the issue determining separate rates is
not state-ownership but government control. Therefore, respondents
request that the Department return to its policy set forth in the
Sparklers to determine if the PRC trading companies are entitled to
separate rates. Respondents maintain that if the Sparklers criteria is
applied, there can be no question that the four trading companies
should receive separate rates.
DOC Position: As described in the ``Separate Rates'' section above,
we have found that the four responding exporters ``owned by all the
people'' are not controlled by the central government. Further, the
information on the record relating to provincial and local governments
shows that their activities with regard to the four respondents are
limited to such functions as taxation, business licensing, and the
collection of export statistics. There is no evidence that these
governments (1) manipulate export prices or (2) interfere with other
aspects of conducting business with the United States. Therefore, we
have found that the four respondents are not subject to government
control of their sebacic acid exports.
Comment 2: Petitioner maintains that the respondents in this case
do not meet the Department's criteria for separate rates because they
have not demonstrated that they are independent of government ownership
or control, and therefore, the Department must presume central
government control. Petitioner also maintains that evidence on the
record demonstrates that the respondents are subject to certain types
of control by the central and provincial governments (e.g., government
approval is necessary for companies to receive bank loans and companies
can only use their profits if they have increased the value of their
assets). Further, petitioner states that various provisions of PRC law
demonstrate that respondents, whose business licenses state that they
are owned by ``the whole people,'' are subject to state control. In
addition, petitioner contends that there is evidence that shows that
the provincial or municipal governments regulate prices between the
domestic producers and the four respondents and the prices between
domestic producers and their suppliers. In conclusion, petitioner
states that, based on the record of this investigation, respondents are
ineligible for separate rates.
Respondents state that the Department should apply the Sparklers
criteria and find them eligible for separate dumping margins.
Respondents state that they have cooperated completely in this
investigation and have provided information indicating a lack of
control by the PRC central government. Moreover, respondents assert
that they are not owned by the central government because the
appropriate test of ownership is control of property rather than simple
legal title. Respondents state that the record also provides evidence
of a de facto absence of central control with respect to exporters.
DOC Position: During verification, we found no evidence that
respondents are controlled by the central government. On the contrary,
we found evidence that the respondents are not controlled by the PRC
government. Such evidence included the laws on the record of this
proceeding, an examination of the respondents' bank accounts, and
documentation showing the financial independence of each of the
respondents. In addition, we did not find that respondents had to seek
approval from the central government to receive loans or had to report
their profits to the central government before using them. As discussed
at length in the ``Separate Rates'' section above, respondents are
eligible for separate rates.
Finally, petitioner's concerns regarding the ability of provincial
or municipal governments to regulate prices between domestic producers
and exporters are not relevant to these respondents' eligibility for
separate rates. The Department's separate rates analysis focuses on
governmental control over the respondents' export activities. The
Department's separate rates analysis does not focus on the prices
between domestic producers and exporters or on the prices between the
domestic producers and their suppliers.
Comment 3: Respondents contend that the Department's PRC policy is
not based on the antidumping statute or regulations. Therefore, the
Department has no basis for disallowing separate rates to PRC trading
companies.
Petitioner contends that since Congress never provided for a
separate rates provision in the 1988 amended statute, Congress in
effect approved the Department's policy of issuing country-wide rates
in NME antidumping investigations. Therefore, the lack of legislative
and regulatory provisions indicates that the Department does not have
the authority to issue separate rates in NME antidumping
investigations.
DOC Position: The statute does not contain specific guidelines for
issuing separate rates. The NME provision of the statute only contains
guidelines for calculating a foreign market value. It does not address
how U.S. price should be established in NME cases. Therefore, it has
been left to the Department to determine the circumstances in which
separate rates should be calculated. In an NME, the government
exercises a significant degree of control over economic activity. Given
the nature of NMEs, we have determined that a respondent ``owned by all
the people'' should receive a country-wide rate unless it can
demonstrate that it is not subject to de facto or de jure government
control. As discussed in the ``Separate Rates'' section and in comments
1 and 2 above, four companies in this proceeding have demonstrated
their independence from de jure and de facto government control and, as
such, are entitled to separate rates. PRC exporters that did not
respond and, therefore, did not demonstrate eligibility for separate
rates, are presumed to be part of state-controlled operations and will
receive the PRC country-wide rate.
Comment 4: Petitioner contends that Tong Liao has been repeatedly
late and unresponsive to the Department's requests for information
throughout the course of this investigation. In addition, Tong Liao has
exhibited an extreme lack of cooperation by not bringing to the
verification site requested documentation which would have enabled the
Department to tie Tong Liao's response to its financial statements.
Finally, the errors found in Tong Liao's response at verification were
numerous. Therefore, the Department should use BIA for Tong Liao.
Respondents contend that the raw material inputs reported by Tong
Liao factory were in fact verified by the Department. Therefore, Tong
Liao's factor information should be used in the final determination.
DOC Position: We find that Tong Liao has not been unresponsive in
the course of this proceeding. With the exception of its financial
statements, Tong Liao provided information requested by the Department
in a timely manner.
Regarding whether Tong Liao has been cooperative during this
investigation, the verification team was able to tie 11 out of 13
factor amounts reported in Tong Liao's response to actual consumption
and production reports which Tong Liao brought to verification. Even
though the verification team was not provided the financial statements
so that it could tie the amounts to those statements, the verification
team was able to establish that the reports recorded actual consumption
amounts of materials and actual production of the subject merchandise
and its subsidiary products because the reports were authentic and kept
by the factory in the ordinary course of business. Therefore, we have
used Tong Liao's verified factors for the final determination.
For the two factors which were unverified (e.g., labor and coal),
we have used as BIA the higher of (1) the highest amount verified for
any of the other three factories, or (2) the amount reported by Tong
Liao.
Comment 5: Petitioner contends that the Department should not use
India as the surrogate country for valuing the factors of production of
sebacic acid because India may not be a producer of sebacic acid.
Respondents contend that the Department should continue to use
India as the surrogate country because there is no evidence on the
record that India did not produce sebacic acid during the POI.
DOC Position: We agree with respondents. The statute directs us to
select a country that is comparable economically to the PRC. Based on
the list of possible surrogate countries, we find that India is a
comparable economy to the PRC. The countries that we were able to
confirm still produce sebacic acid, such as Japan and the United
States, do not have economies comparable to the PRC. Even though we are
not certain whether sebacic acid was produced in India during the POI,
we still find that India was a significant producer of comparable
merchandise (e.g., oxalic acid) during the POI. Though sebacic acid and
oxalic acid have different end uses, both are dicarboxylic acids. In
addition, many of the inputs used to produce sebacic acid are also used
to produce oxalic acid. Therefore, we find that India fulfills both
requirements of the statute.
Comment 6: Respondents contend that the published information from
India submitted by respondents was what was reasonably available to
them. Since the published data contains Indian chemical prices for
various inputs and subsidiary products during the POI, the Department
should use them. The Department should not use Indian import values
when it has actual POI domestic input prices.
Petitioner contends that since respondents were unable to provide
the Department with Indian published information which was more
representative of the POI, the Department should resort to BIA and rely
on the published information provided in the petition.
DOC Position: For the three chemicals (sulfuric acid, capryl
alcohol, glycerine), we obtained late December 1992 prices from the
same periodical submitted by respondents (see ``FMV section'' for
further discussion). Therefore, we were able to establish a price range
during the POI for the three chemicals listed above and we have used
them in the final determination in accordance with the selection
methodology outlined in the FMV section of this notice.
For castor oil, we obtained additional POI prices from the U.S.
embassy in India, and these prices were from the same periodical from
which respondents obtained their prices. Therefore, we were also able
to establish a price range during the POI for castor oil. To calculate
an average POI price for castor oil, we have used the January 1993
prices from respondents and the April and June 1993 prices obtained
from the U.S. embassy in India.
Comment 7: Petitioner contends that the Department should not value
the glycerine produced at the factories using the Indian published
value for industry water grade glycerine. Instead, the Department
should use the value for crude grade glycerine.
DOC Position: We agree with petitioner. Based on verification, we
have determined that the factories produce crude glycerine and not
industry water grade glycerine during the sebacic acid production
process. Therefore, we have selected a more product-specific Indian
published value for crude glycerine.
After reassigning a value to glycerine, we still find that
glycerine is not a by-product, but a co-product, of the sebacic acid
production process (see May 20, 1994, concurrence memorandum for
further discussion).
Comment 8: Petitioner contends that the Department should not value
the amount of fatty acid or capryl alcohol produced by the factories
because respondent did not provide product-specific values for the two
products. Therefore, if values must be assigned to these subsidiary
products, then the Department should assign the correct values and not
use values which do not reflect the actual products.
Respondents contend that values should be assigned to fatty acid
and capryl alcohol. Therefore, the Department should continue to value
fatty acid and capryl alcohol using the Indian published values from
the preliminary determination.
DOC Position: We agree with respondents. We find that octanol-1 and
capryl alcohol (i.e., octanol-2) share very similar molecular formulae
though they are not identical products. We were able to obtain an
Indian price for octanol-1. We were unsuccessful in locating a price
for octanol-2 either in Indian publications or in publications from our
other recommended surrogate countries.
Therefore, because we cannot find an exact Indian price for capryl
alcohol, we have relied on the price of octanol-1, in valuing this
factor. To properly value this capryl alcohol, we must assign a value
to this subsidiary product. Since product-specific price information is
not available from our recommended surrogate countries, we must rely on
the price of the closest product we could obtain to value capryl
alcohol.
As for fatty acid, the factories do not produce a fatty acid which
is classifiable. The only thing we could establish through verification
is that this fatty acid results from producing a carboxylic acid and is
used to make soap. Throughout the course of this investigation, neither
we nor respondents could establish the specific type of fatty acid
produced by the factories. The problem is that the factories' fatty
acid is comprised of many different acids (e.g., oleic, palmitic, etc.)
and the percentage concentrations can vary.
As in the case of capryl alcohol, we have relied on the price of
the closest Indian product we could obtain to value fatty acid.
Comment 9: Petitioner contends that it is unclear based on the
description of the sebacic acid production process how much energy,
labor, and overhead should be allocated to the production of glycerine
and capryl alcohol. Therefore, the Department should not allocate any
non-material amounts to the subsidiary products.
Respondents contend that the Department should also allocate
amounts for energy, labor, and overhead to glycerine and capryl alcohol
since the production process is continuous and it is possible to
identify an amount for factors associated specifically with sebacic
acid and each of the subsidiary products.
DOC Position: We agree with respondents. For two of the four
factories, we established at verification the amount of time required
to perform each stage of the sebacic acid production process. This
information now provides us with the means for devising a method which
reasonably allocates amounts for labor, coal, electricity and factory
overhead to glycerine and capryl alcohol production at each factory.
For the two factories where we did not examine production times, we
used the information from the factories (where we did establish
production times) to calculate an average time for each production
stage. We applied the average times to the two factories where we did
not examine production times to determine the amount of labor, coal,
electricity, and factory overhead associated with glycerine and capryl
alcohol production at those two factories. We did not allocate
materials, energy, labor, or factory overhead amounts to fatty acid
because it is a by-product, and as such, we simply subtracted its
assigned value from the cost of manufacture of sebacic acid.
Comment 10: Petitioner contends that in instances where the
respondents have misreported distances or not reported certain factors
of production or sales expenses, the Department should use BIA. The
Department should use as BIA the longest freight distance reported by a
given factory for determining the freight expense associated with each
input reported by that same factory.
Respondents contend that the Department should use the verified
amounts for factors and distances in the final determination.
DOC Position: We agree with respondents. We obtained the correct
distances at verification. Respondents satisfactorily explained that
the mistakes in their data were the result of providing estimated
distances to the Department. In addition, we find that the correction
of the mistakes has had a negligible impact on the amount calculated
for delivery charges for each factory. Therefore, we have used the
correct distances in the final determination.
As for the unreported factor of production (e.g., packing material
amounts), we obtained at verification the factor amounts which we could
not previously value. At verification, we found that respondents'
failure to include these amounts in their responses was simply an
oversight. Therefore, we have valued the additional packing materials
in accordance with the publicly available published information
selection methodology noted above.
Finally, the Department has used surrogate values for all of the
respondents' sales expenses. Therefore, we have not used the sales
expense amounts reported by the respondents.
Comment 11: Respondents contend that material inventory write-offs
recorded in the factory's inventory ledgers should be treated as losses
in inventory and not included in the amount of materials necessary to
produce sebacic acid. Instead, the Department should consider the
write-offs as a general and administrative expense.
Petitioner contends that the material losses should be considered
as additional factors of production.
DOC Position: We agree with respondents. Two factories in this
investigation recorded in their inventory ledgers material losses
either before or after the material was transferred to the workshop
producing sebacic acid. In both cases, we find that the workshop at
each factory did not actually incur material losses in producing the
subject merchandise. Specifically, we find that the losses did not
result from the production process, nor did they represent a production
yield loss. Rather, the losses resulted from factors such as leakage
which are unrelated to the production process. Therefore, we have
considered the material losses as a part of factory overhead rather
than part of the general and administrative expense and have not
assigned values to the material losses.
Comment 12: Petitioner contends that the different strengths of
caustic soda used by respondents should be valued differently. In
addition, for those factories that purchase solid caustic soda and then
dilute it, the Department should consider the costs of converting the
solid to a liquid form. In addition, the Department should use the
value of solid caustic soda for those factories.
Respondents contend that the Department should continue to use the
values for liquid caustic soda because the factories reported factors
for liquid caustic soda and this is the input actually used in the
production process.
DOC Position: We agree with respondents. First, the published
values we examined do not indicate a percentage of purity. Therefore,
we would have to make an assumption concerning the purity percentage of
the published value we select. Based on the information on the record,
we have no basis for determining the percentage of purity of a
published value for which no percentage is indicated.
Second, even if we assigned an arbitrary purity percentage figure
to the published value we select, we would have to make an additional
assumption regarding which multipliers we should use to adjust the
value to account for different purity percentages. Based on testimony
at our April 15, 1994, hearing, even petitioner was unsure as to the
correct multipliers we should use.
Finally, we consider the usage amounts reported by the factories to
be for liquid caustic soda, and as such, we have valued them
accordingly. Since the factories used liquid caustic soda, we do not
find it appropriate to use a value for solid caustic soda.
Comment 13: Petitioner contends that because there was a
discrepancy between the amounts of cresol recorded in Nangong factory's
detailed subledger for chemical materials and Nangong's sebacic acid
workshop ledger, the Department should use the cresol amount from the
workshop ledger.
Respondents request that the Department accept the reported and
verified amount in the final determination.
DOC Position: We have used the verified amounts. As we stated in
the verification report, the purity of the cresol stored in the
warehouse was different from the purity of the cresol used by the
workshop. Since we do not have a published price for cresol which
indicates the purity percentage, we have no means of determining
whether the cresol price we are using corresponds more closely to the
type of cresol transferred from the warehouse or more closely to the
type of cresol used by the workshop. Therefore, we have accepted
Nangong factory's reported cresol factor.
Comment 14: Respondents contend that an Indian published value for
mixed cresol should be used rather than a value for a specific type of
cresol because officials from all four factories stated at verification
that they use a mixture of cresol to produce sebacic acid.
DOC Position: We agree with respondents. First, we established that
the prices for cresol in the publication Chemical Weekly, which were
submitted by respondents, were representative of a price range
throughout the POI. Second, we calculated an average Indian POI value
based on the values of three types of cresol (e.g., ortho, para, and
meta) listed in Chemical Weekly. Finally, we used this average price to
value the cresol used by the factories.
Comment 15: Petitioner contends that because the factories recover
cresol used in the production process, the Department should consider
the cresol recovery costs when determining the cost of manufacture.
Respondents contend that the Department captured the costs of
recovering the cresol after establishing the factor for cresol at
verification.
DOC Position: We agree with respondents. We have valued the amounts
of cresol the factories actually used in producing sebacic acid based
on the factories' production records. We find that these amounts used
in production included amounts for recycled cresol. As in the case of
caustic soda, we also have considered any costs associated with
recovering cresol to be included in factory overhead since we did not
discover at verification any unreported and quantifiable factors
associated with the cresol recovery process.
Comment 16: Respondents contend that the additional labor amounts
unreported by Handan factory should be considered as indirect labor,
that is, part of factory overhead, and not production-related.
Petitioner contends that since Handan factory considers such labor
to be part of its cost of manufacture, the Department should value the
additional labor as direct labor in the production process. Petitioner
also cites to a decision made in the Final Determination of Sales at
Less Than Fair Value: Certain Helical Spring Lock Washers from the PRC,
58 FR 48833 (September 20, 1993) (HSLW) in support of its argument.
DOC Position: We agree with respondents. The antidumping
questionnaire instructs responding factories to include in their labor
factors the direct hours associated with producing the subject
merchandise. Handan reported only the direct skilled and unskilled
labor hours associated with producing and packing the subject
merchandise during the POI. As a result of verification, we do not
consider the unreported labor such as work performed by the plant
managers to be direct labor. Rather, we consider the unreported labor
to be indirect labor because such labor is not directly associated with
producing or packing sebacic acid.
In the HSLW decision, the Department did not differentiate between
direct and indirect labor when analyzing this issue. Instead, we based
our decision on the fact that the additional laborers were considered
by the factory to be part of the workshop producing the subject
merchandise. In this case, we have distinguished between direct and
indirect labor. We have found that Handan's additional labor is
indirect labor and have considered the additional labor a part of
factory overhead.
Comment 17: Petitioner contends that the material yield amounts
reported by the factories in their submissions are not chemically
possible. Therefore, the Department should resort to the amounts stated
in the petition for BIA.
Respondents contend that the data of the Chinese producers have all
been verified. Therefore, the Department should use the producers' data
in the final determination.
DOC Position: We agree with respondents. Based on our verification
findings, each factory on the whole correctly reported all of the
materials it used to produce the subject merchandise during the POI. We
checked each factory's reported material amounts at verification using
standard verification procedures such as: (1) Examining the factories'
production cost and consumption usage reports; (2) examining entries in
each factory's material inventory ledger to determine whether the
factory underreported its material usage; (3) examining material draw
tickets from the workshop producing the subject merchandise to
determine actual usage; (4) tying the material inventory ledger to the
factory's financial statements; and (5) examining sales invoices to
determine whether the factories should have included additional
material amounts in their reported material amounts.
In addition to employing standard verification procedures, we
examined two of the four factories' Chinese sebacic acid production
manuals (one was published; the other was not). These manuals
illustrated the general prescribed method for producing sebacic acid in
the PRC. After careful analysis of our verification findings and of
information provided by all the parties to this proceeding, we found no
evidence to support petitioner's contention that the material yield
amounts reported by the factories are inaccurate.
Comment 18: Petitioner contends that since Guangdong underreported
the distance used to determine the foreign inland freight expense, the
Department should use as BIA, in calculating the U.S. price, the
longest distance reported by any of the other three trading companies
to determine the deduction to U.S. price for Guangdong's foreign inland
freight expense.
Respondents contend that the Department should use the verified
amounts for factors and distances in the final determination.
DOC Position: We agree with respondents. We obtained the correct
distance at verification. Therefore, we have used the correct distance
to calculate Guangdong's foreign inland freight in the final
determination.
Comment 19: Respondents contend that the Department should not use
Indian import values to value the factors of production because neither
the Chinese nor the Indian producers use imported inputs to produce the
subject merchandise. Instead, the Department should use Indian domestic
prices to value the factors of production.
DOC Position: We disagree in part with respondents. We have
selected both published import and domestic prices (e.g., non-export
values) to value the factors of production in accordance with the
publicly available published information selection methodology noted in
the ``Foreign Market Value'' section of this notice. If the published
value was representative of a price range within the POI or more
contemporaneous with the POI, product-specific, and tax-exclusive, we
selected that value over all other values regardless of whether the
value was an import or domestic value. In only one case (e.g., steam
coal) has this resulted in the selection of an import value over a
domestic value. We selected the import value because it was one month
outside the POI whereas the domestic value was about three years prior
to the POI and the import value was, therefore, more contemporaneous
with the POI.
Suspension of Liquidation
In accordance with section 733(d)(1) of the Act, we are directing
the Customs Service to continue to suspend liquidation of all entries
of sebacic acid from the PRC, as defined in the ``Scope of
Investigations'' section of this notice, that are entered, or withdrawn
from warehouse, for consumption on or after January 5, 1994, which is
the date of publication of our preliminary determination in the Federal
Register.
The Customs Service shall require a cash deposit or posting of a
bond equal to the estimated amount, with respect to the subject
merchandise, by which the FMV of the merchandise subject to this
investigation exceeds the U.S. price, as shown below. The weighted-
average dumping margins are as follows. The PRC country-wide rate
applies to all PRC companies not specifically listed below. This
suspension of liquidation will remain in effect until further notice.
------------------------------------------------------------------------
Weighted-
average
Manufacturer/Producer/Exporter margin
percentage
------------------------------------------------------------------------
Sinochem Jiangsu Import & Export Corporation............... 85.45
Tianjin Chemicals Import & Export Corporation.............. 59.67
Guangdong Chemicals Import & Export Corporation............ 57.00
Sinochem International Chemicals Company................... 43.72
PRC country-wide rate...................................... 243.40
------------------------------------------------------------------------
International Trade Commission (ITC) Notification
In accordance with section 735(d) of the Act, we will notify the
ITC of our determination. The ITC will make its determination whether
these imports materially injure, or threaten material injury to, a U.S.
industry within 45 days of the publication of this notice. If the ITC
determines that material injury or threat of material injury does not
exist, the proceeding will be terminated and all securities posted as a
result of the suspension of liquidation will be refunded or cancelled.
However, if the ITC determines that such injury does exist, we will
issue an antidumping duty order directing Customs officers to assess an
antidumping duty on sebacic acid from the PRC entered, or withdrawn
from warehouse, for consumption on or after the date of suspension of
liquidation, equal to the amount by which the foreign market value of
the merchandise exceeds the United States price.
Notification to Interested Parties
This notice also serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility covering
the return or destruction of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Failure to comply is a
violation of the APO.
This determination is published pursuant to section 735(d) of the
Act (19 U.S.C. 1673d(d)), and 19 CFR 353.20(a)(4).
Dated: May 20, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-13126 Filed 5-27-94; 8:45 am]
BILLING CODE 3510-DS-P
