01-22652. Sulfanilic Acid From the People's Republic of China; Preliminary Results and Preliminary Partial Rescission of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

September 10, 2001.

ACTION:

Notice of Preliminary Results and Preliminary Partial Rescission of Antidumping Duty Administrative Review.

SUMMARY:

The Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on sulfanilic acid from the People's Republic of China. The review covers exports of this merchandise to the United States for the period August 1, 1999, through July 31, 2000, and three firms: Zhenxing Chemical Industry Company (Zhenxing), Yude Chemical Industry Company (Yude), and Baoding Chemical Industry Import and Export Corporation (Baoding). The preliminary results of this review indicate that there are dumping margins only for Zhenxing and the “PRC enterprise.”

We preliminarily find that Baoding acted as Zhenxing's shipping agent in preparing Zhenxing's export documents and coordinating its shipments of subject merchandise to the United States during the POR. Therefore, we are preliminarily rescinding the review of Baoding because we preliminarily find that Baoding was not involved in any sales of sulfanilic acid to the United States other than those reported by Zhenxing. In addition, we are preliminarily rescinding the review with respect to Yude because Yude did not export the subject merchandise to the United States during the period of review (POR). Interested parties are invited to comment on these preliminary results. See Public Comment section of this notice. The dumping margins are listed below in the “Preliminary Results of the Review” section of this notice.

EFFECTIVE DATE:

September 10, 2001.

FOR FURTHER INFORMATION CONTACT:

Sean Carey or Dana Mermelstein, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230 at [phone] or [phone], respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are references to the Tariff Act of 1930 (the Act), as amended. In addition, unless otherwise indicated, all citations to the Department's regulations are to the regulations codified at 19 CFR part 351 (2000).

Background

On August 16, 2000, the Department published in the Federal Register (65 FR 49962) a notice of “Opportunity to Request Administrative Review” of the antidumping duty order on Sulfanilic Acid from the People's Republic of China, for the August 1, 1999, through July 31, 2000, period of review (POR), 57 FR 37524 (August 19, 1992). In accordance with 19 CFR 351.213(b), petitioner, Nation Ford Chemical Company, and respondents, Zhenxing, Yude, Baoding, and PHT International, Inc. (“PHT,” the U.S. importer affiliated with Zhenxing), requested a review for the aforementioned period. On October 2, 2000, we published a notice of “Initiation of Antidumping Review.” See 65 FR 58733. The Department is now conducting this administrative review pursuant to section 751(a) of the Act.

Zhenxing, a Chinese manufacturer described as a joint venture with U.S.-based importer PHT, reported sales of subject merchandise to the United States during the POR in its December 11, 2000, response to Section A (Organization, Accounting Practices, Markets and Merchandise) of the Department's questionnaire. In its response to this questionnaire, Yude reported that it did not make any sales of sulfanilic acid to the United States during the POR. Baoding indicated that it would not be submitting its Section A response. On December 15, 2000, Baoding filed a request to submit an overdue response to Section A of the Department's questionnaire, indicating its interest in seeking a separate rate for Baoding's sales of sulfanilic acid to the United States during the POR. Zhenxing submitted its response to Sections C and D (Sales to the United States and Factors of Production, respectively) on January 8, 2001. On January 10, 2001, the Department granted Baoding's request to submit its overdue Section A response, which was subsequently submitted on January 11, 2001. Baoding submitted its response to Section C on January 24, 2001, and stated that it was not filing a Section D response since all of its sales of subject merchandise to the United States were produced by Zhenxing, and the information was already included in Zhenxing's Section D response.

On December 22, 2000, the Department requested, in a letter to the U.S. Customs Service (Customs), the release of certain Customs documents concerning alleged sales of sulfanilic acid from Zhenxing to an unaffiliated importer other than PHT during the POR. Customs released these documents to the Department on January 26, 2001. On February 2, 2001, the Department filed these Customs documents on the record of this review and invited interested parties to provide comments. Petitioner and respondents filed comments on February 16, 2001, and rebuttal comments on February 20, 2001. On February 27, 2001, petitioner filed a submission to rebut the new factual information included in respondents' February 16, 2001, in accordance with section 351.301(c)(1) of the Department's regulations.

Petitioner submitted a letter to the Department on March 5, 2001, requesting that the Department effectively end its review and resort to adverse facts available in assigning a dumping margin. In this letter, petitioner claimed that the Customs documents indicated that information provided in the questionnaire responses was inaccurate and misleading. In an April 13, 2001, submission, respondents indicated that they were prepared to file a consolidated sales response on behalf of Zhenxing and Baoding that would encompass all of “Zhenxing's” sales of sulfanilic acid during the POR, to related and unrelated importers in the United States. According to respondents, their decision was made in light of the Department's determination made in the prior administrative review that Baoding's sales to an unrelated importer were Zhenxing's sales. See Sulfanilic Acid from the People's Republic of China; Final Results of Administrative Review, 66 FR 15837 (March 21, 2001) and accompanying Decision Memo at Comment 1, on file in the Department's Central Records Unit (CRU) located in room B-099 of the Department's main building. On May 2, 2001, petitioner filed a letter to the Department again requesting an immediate end to the review and the use of adverse facts available. Petitioner also stated that if the Department chose not to terminate the review, the Department must request that respondents provide a consolidated response for all of Zhenxing's sales to the United States of subject merchandise (including Baoding's U.S. sales of sulfanilic acid), and that respondents address certain deficiencies in their responses that included contradictory and misleading statements which should be verified by the Department. On June 26, 2001, respondents submitted their response to the Department's supplemental questionnaire, which consolidated all sales of subject merchandise and attributed all of the reported sales to Zhenxing as a result of Zhenxing's role in sales negotiations with both the related and unrelated importer. Because Baoding acted only as a shipping agent for Zhenxing in facilitating the exportation of subject merchandise to the United States, and because, in response to the Department's supplemental questionnaire, Baoding consolidated its previously reported “own” sales with those of Zhenxing (See Respondents” supplemental questionnaire response dated June 26, 2001), we are preliminarily rescinding the review of Baoding.

Scope of Review

Imports covered by this review are all grades of sulfanilic acid, which include technical (or crude) sulfanilic acid, refined (or purified) sulfanilic acid and sodium salt of sulfanilic acid.

Sulfanilic acid is a synthetic organic chemical produced from the direct sulfonation of aniline with sulfuric acid. Sulfanilic acid is used as a raw material in the production of optical brighteners, food colors, specialty dyes, and concrete additives. 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, classifiable under the subheading 2921.42.22 of the Harmonized Tariff Schedule (HTS), contains 96 percent minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent maximum alkali insoluble materials. Refined sulfanilic acid, also classifiable under the subheading 2921.42.22 of the HTS, contains 98 percent minimum sulfanilic acid, 0.5 percent maximum aniline and 0.25 percent maximum alkali insoluble materials.

Sodium salt (sodium sulfanilate), classifiable under the HTS subheading 2921.42.90, is a powder, granular or crystalline material which contains 75 percent minimum equivalent sulfanilic acid, 0.5 percent maximum aniline based on the equivalent sulfanilic acid content, and 0.25 percent maximum alkali insoluble materials based on the equivalent sulfanilic acid content.

Although the HTS subheadings are provided for convenience and customs purposes, our written description of the scope of this proceeding is dispositive.

Period of Review

The review period is August 1, 1999 through July 31, 2000.

Verification

As provided in section 782(i) of the Act, we verified information provided by the respondents using standard verification procedures, including on-site inspection of the manufacturer's facilities, and the examination of relevant sales and financial records.

Preliminary Rescission of Review With Respect to Yude

In the last administrative review, the Department did not reach the issue of whether to collapse Zhenxing and Yude due to our determination to assign the PRC-wide rate to Yude and Zhenxing as adverse facts available. See Sulfanilic Acid from the People's Republic of China; Final Results of Administrative Review, 66 FR 15837 (March 21, 2001) and accompanying Decision Memo at Comment 10, on file in the CRU. For purposes of this review, the Department did not analyze the issue of whether to collapse Yude and Zhenxing because we are rescinding the review with respect to Yude, as Yude did not export the subject merchandise to the United States during the POR.

Separate Rate Analysis for Zhenxing

It is the Department's standard policy to assign to all exporters of the merchandise subject to review in non-market economy countries a single 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 exports. See Mitsubishi Heavy Industries, Ltd., v. U.S., 1999 CIT, Lexis 39, 54 F.Supp 2d 1183, Slip Op. 99-46 (1999). To establish whether a company is sufficiently independent to be entitled to a separate, company-specific rate, the Department analyzes each exporting entity in a non-market economy (“NME”) country under the test established in the Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, 56 FR 20588 (May 6, 1991) (“Sparklers”), as amplified by the Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994) (“Silicon Carbide”). Evidence supporting, though not requiring, a finding of de jure absence of government control includes: (1) An absence of restrictive stipulations associated with an individual exporter's business and export licenses; (2) any legislative enactments decentralizing control of companies; or (3) any other formal measures by the government decentralizing control of companies. De facto absence of government control with respect to exports is based on four criteria: (1) Whether the export prices are set by or subject to the approval of a government authority; (2) whether each exporter retains the proceeds from its sales and makes independent decisions regarding the disposition of profits and financing of losses; (3) whether each exporter has autonomy in making decisions regarding the selection of management; and (4) whether each exporter has the authority to sign contracts and other agreements.

Zhenxing and Baoding both initially requested separate, company-specific rates. However, since we are preliminarily rescinding the review with respect to Baoding, we have only analyzed the separate rate claim made by Zhenxing. In its questionnaire response, Zhenxing stated that it is an independent legal entity.

1. Absence of De Jure Control

With respect to the absence of de jure government control over the export activities of Zhenxing, evidence on the record indicates that Zhenxing is not controlled by the government. In its questionnaire response, Zhenxing stated that it is an independent legal entity. Zhenxing submitted evidence of its legal right to set prices independent of all government oversight. The business license and customs registration certificate of Zhenxing also indicate that it is a joint venture and is permitted to engage in the exportation of sulfanilic acid. We find no evidence of de jure government control restricting Zhenxing from the exportation of sulfanilic acid.

2. Absence of De Facto Control

With respect to the absence of de facto control over export activities, the information provided and reviewed at verification indicates that the management of Zhenxing, itself, is responsible for the determination of export prices, profit distribution, marketing strategy, and contract negotiations. Our analysis indicates that there is no government involvement in the daily operations or the selection of management for this company. In addition, we have found that the respondent's pricing and export strategy decisions are not subject to any outside entity's review or approval, and that there are no governmental policy directives that affect these decisions.

There are no restrictions on Zhenxing's use of its export earnings. The company's general manager has the right to negotiate and enter into contracts and may delegate this authority to other company employees. There is no evidence that this authority is subject to any level of governmental approval. Zhenxing has stated that its management is selected by the general manager in consultation with its board of directors and that there is no government involvement in this selection process.

Consequently, because evidence on the record indicates an absence of government control, both in law and in fact, over its export activities, we preliminarily determine that a separate rate should be applied to Zhenxing. For further discussion of the Department's preliminary determination regarding the issuance of separate rates, see Separate Rates Decision Memorandum for Barbara Tillman, Director, Office of AD/CVD Enforcement VII, dated August 31, 2001. A public version of this memorandum is on file in the CRU.

United States Price

Zhenxing reported as constructed export price (“CEP”) the U.S. sales made by PHT on behalf of Zhenxing, and as export price (“EP”) the U.S. sales made to an unaffiliated U.S. importer. We calculated CEP based on FOB prices to unaffiliated purchasers in the United States. We made deductions for foreign inland freight, foreign brokerage and handling, ocean freight, marine insurance, U.S. customs duties, U.S. transportation, credit, warehousing, repacking in the United States, indirect selling expenses, including inventory carrying costs, and constructed export price profit, as appropriate, in accordance with sections 772(c) and (d) of the Act.

The EP calculation for Zhenxing's sales to an unaffiliated importer is in accordance with section 772(a) of the Act, and is based on packed FOB, or where appropriate, C&F prices to the first unaffiliated purchaser in the United States. Where appropriate, we made deductions from the starting price (gross unit price) for inland freight from the plant to the port of exportation, ocean freight, marine insurance, and any brokerage and handling charges incurred by Zhenxing.

For those domestic factors provided by NME companies and used in the calculation of Zhenxing's CEP and EP sales (such as inland freight, insurance, brokerage and handling), we valued those factors using surrogate rates from India. Where appropriate, we calculated expenses which were incurred in U.S. dollars based on the actual U.S. dollar amounts paid for such expenses.

Normal Value

Section 773(c)(1) of the Act provides that the Department shall determine normal value (“NV”) using a factors of production methodology if (1) the merchandise is exported from a non-market economy (NME) country, and (2) the 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.

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), any determination that a foreign country is an NME country shall remain in effect until revoked by the administering authority. None of the parties to this proceeding has contested such treatment in this review. Accordingly, we treated the PRC as an NME country for purposes of this review and calculated NV by valuing the factors of production as set forth in section 773(c)(3) of the Act in a comparable market economy country which is a significant producer of comparable merchandise. Pursuant to section 773(c)(4) of the Act, we determined that India is comparable to the PRC in terms of per capita gross national product (“GNP”), the growth rate in per capita GNP, and the national distribution of labor; and that India is a significant producer of comparable merchandise. The Department has selected India as the surrogate country in the investigation and all prior administrative reviews of this order. See Final Determination of Sales at Less Than Fair Value: Sulfanilic Acid from the People's Republic of China, 57 FR 9409, 9412 (March 18, 1992). For further discussion of the Department's selection of India as the primary surrogate country, see Memorandum from Jeffrey May, Director, Office of Policy, to Barbara Tillman, Director, Office of AD/CVD Enforcement VII, dated June 11, 2001; “Surrogate Values Memorandum” dated August 31, 2001; and the Preliminary Analysis Memorandum dated August 31, 2001, which are on file in the CRU.

For purposes of calculating NV, we valued PRC factors of production in accordance with section 773(c)(1) of the Act. In examining surrogate values, we selected, where possible, the publicly available value which was: (1) An average non-export value; (2) representative of a range of prices within the POR or most contemporaneous with the POR; (3) product-specific; and (4) tax-exclusive. For those surrogate values not contemporaneous with the POR, we adjusted for inflation where appropriate, using the Indian wholesale price indices (WPI) and U.S. producer price indices (PPI) published in the IMF's International Financial Statistics. When necessary, we adjusted the values for certain inputs reported in Chemical Weekly to exclude sales and excise taxes. In accordance with our practice, we added to CIF import values from India a surrogate inland freight cost using a simple average of the reported distances from either the closest PRC port to the factory, or from the domestic input supplier to the factory. See Final Determination of Sales at Less than Fair Value: Certain Cut-to-Length Carbon Steel Plate from the People's Republic of China, 62 FR 61964 at 61977 (November 20, 1997). In accordance with this methodology, we valued the factors of production as follows:

To value aniline used in the production of sulfanilic acid, we used the rupee per kilogram value for sales in India during the POR as reported in Chemical Weekly, excluding any amounts assessed for the Indian excise tax and sales tax. We made adjustments to include costs incurred for freight between the Chinese aniline suppliers and the Zhenxing factory, or the Zhenxing factory to the port, as appropriate.

The surrogate freight rates used in the calculation of transportation costs for material inputs and subject merchandise were based on price quotes for truck freight rates from six different Indian trucking companies which were used in the Final Determination of Sales at Less than Fair Value: Bulk Aspirin from the People's Republic of China, 65 FR 33805 (May 25, 2000) (Bulk Aspirin). We used rail freight rates also from Bulk Aspirin that were quoted by two Indian rail freight transporters. Both the trucking and rail freight rates were contemporaneous with the POR and therefore, not inflated.

To value sulfuric acid used in the production of sulfanilic acid, we used the rupee per kilogram value for sales in India during the POR as reported in Chemical Weekly, excluding the amounts assessed for the Indian excise tax and the Maharastra sales tax. We made additional adjustments to include costs incurred for freight between the Chinese sulfuric acid supplier and the Zhenxing factory in the PRC.

To value sodium bicarbonate used in the production of sodium sulfanilate, we used the rupee per kilogram value for sales in India during the POR as reported in Chemical Weekly, excluding the amounts assessed for the Indian excise tax and the Maharastra sales tax. We made additional adjustments to include costs incurred for freight between the Chinese sodium bicarbonate supplier and Zhenxing factory in the PRC.

Consistent with our final results in the 1997-1998 administrative review (see Sulfanilic Acid from the People's Republic of China; Final Results of Administrative Review, 65 FR 13366 (March 13, 2000), we used public price quotes to value activated carbon, which are specific to the type and grade of activated carbon used in the production of sulfanilic acid. See NFC's Initial Submission of Surrogate Value Information dated August 17, 2001. We made adjustments to include costs incurred for inland freight between the Chinese activated carbon supplier and Zhenxing's factory in the PRC.

To value the inner and outer bags used as packing materials, we used import information from Indian Import Statistics for the period April 1998-March 1999. Using the Indian rupee wholesale prices index (WPI) data obtained from International Financial Statistics, we adjusted these values to account for inflation in India during the POR. We adjusted these values to include freight costs incurred between the Chinese plastic bag suppliers and Zhenxing's factory in the PRC.

To value coal, we used the price of steam coal in 1996 for industries in India as reported in Energy, Prices and Taxes, First Quarter 1999 published by the International Energy Agency. This price was adjusted for inflation to be concurrent with the POR and has been placed on the record of this review.

To value electricity, we used the price of industrial electricity in India in 1997 reported in Energy, Prices, and Taxes, First Quarter 1999 published by the International Energy Agency. This price was adjusted for inflation to be concurrent with the POR.

The Department's regulations, at 19 CFR 351.408(c)(3), state that “[f]or labor, the Secretary will use regression-based wage rates reflective of the observed relationship between wages and national income in market economy countries. The Secretary will calculate the wage rate to be applied in nonmarket economy proceedings each year. The calculation will be based on current data, and will be made available to the public.” To value the factor inputs for labor, we used the wage rates calculated for the PRC in the Department's “Expected Wages of Selected Non-Market Economy Countries—1998 Income Data” as updated in May 2000, and made public by the Department on its world-wide web site for Import Administration at www.ia.ita.doc.gov.

Following our practice from prior administrative reviews of sulfanilic acid from the PRC, for factory overhead, we used information reported in the January 1997, Reserve Bank of India Bulletin (“Bulletin”). From this information, we were able to determine factory overhead as a percentage of total cost of manufacturing.

To value brokerage and handling, we used the average of the foreign brokerage and handling expenses reported in the U.S. sales listing of the questionnaire response submitted in Certain Stainless Steel Wire Rod From India; Preliminary Results of Antidumping Duty Administrative and New Shipper Reviews (63 FR 48184, September 9, 1998). This average value was used in prior reviews of the crawfish antidumping duty order. See, for example, Notice of Preliminary Results of Antidumping Duty Administrative Review and New Shipper Reviews, Partial Rescission of the Antidumping Duty Administrative Review, and Rescission of a New Shipper Review: Freshwater Crawfish Tail Meat From the People's Republic of China, 65 FR 60399 (October 11, 2000). We adjusted the value for brokerage and handling for inflation during the POR using Indian rupee WPI data published by the IMF.

To value marine insurance, we used marine insurance data collected in the Tenth Administrative Review of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China (TRBs X). See, Memorandum to the File: Marine Insurance Rates (June 30 1998). We adjusted this value for inflation during the POR using the U.S. dollar PPI data published by the IMF.

To value ocean freight, we used a value for ocean freight provided by the Federal Maritime Commission used in the Final Determination of the Antidumping Administrative Review of Sebacic Acid from the PRC, 62 FR 65674 (December 15, 1997). We adjusted the value for ocean freight for inflation during the POR using the U.S. dollar PPI data published by the IMF.

For selling, general and administrative (SG&A) expenses, we used information obtained from the January 1997 Bulletin. We calculated an SG&A rate by dividing SG&A expenses as reported in the Bulletin by the cost of manufacturing.

Finally, to calculate a profit rate, we used information obtained from the January 1997 Bulletin. We calculated a profit rate by dividing the before-tax profit by the sum of those components pertaining to the cost of manufacturing plus SG&A as reported in the Bulletin.

For a complete discussion of the Department's selection of surrogate values and copies of source documents relating to their valuation, see the Department's “Surrogate Values Memorandum” dated August 31, 2001, and NFC's Initial Submission of Surrogate Value Information,” dated August 17, 2001.

Preliminary Results of the Review

We preliminarily determine the weighted average dumping margin for Zhenxing for the period August 1, 1999 through July 31, 2000 to be 54.50 percent.

Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of publication of this notice. Pursuant to 19 CFR 351.309, interested parties may submit written comments in response to these preliminary results. Normally, case briefs are to be submitted within 30 days after the date of publication of this notice, and rebuttal briefs, limited to arguments raised in case briefs, are to be submitted no later than five days after the time limit for filing case briefs. However, for purposes of this review, the Department will notify parties of the schedule for submission of these briefs. Parties who submit arguments in this proceeding are requested to submit with the argument: (1) A statement of the issues, and (2) a brief summary of the argument. Case and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f).

Also, pursuant to 19 CFR 351.310, within 30 days of the date of publication of this notice, interested parties may request a public hearing on arguments to be raised in the case and rebuttal briefs. Unless the Secretary specifies otherwise, the hearing, if requested, will be held two days after the date for submission of rebuttal briefs. Representatives of parties to the proceeding may request disclosure of proprietary information under administrative protective order no later than ten days after the representative's client or employer becomes a party to the proceeding, but in no event later than the date case briefs are due. The Department will publish the final results of this administrative review, including the results of its analysis of issues raised in any case or rebuttal brief.

Duty Assessments and Cash Deposit Requirements

The Department shall determine, and the Customs Service shall assess, antidumping duties on all appropriate entries. Upon completion of this review, the Department will issue appraisement instructions directly to the Customs Service. Furthermore, the following deposit rates will be effective with respect to all shipments of sulfanilic acid from the PRC entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this review, as provided for by section 751(a)(2)(C) of the Act: (1) The cash deposit rate for the reviewed company listed above will be the rate for that firm established in the final results of this review; (2) for companies previously found to be entitled to a separate rate and for which no review was requested, the cash deposit rate will be the rate established in the most recent review of that company; (3) for all other PRC exporters of subject merchandise, the cash deposit rate will be the PRC-wide rate of 85.20 percent; and (4) the cash deposit rate for non-PRC exporters of subject merchandise from the PRC will be the rate applicable to the PRC supplier of that exporter. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification of Interested Parties

This notice serves as a preliminary reminder to importers of their responsibility under section 351.402(f)(2) of the Department's regulations to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

This administrative review and notice are in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: August 31, 2001.

Bernard T. Carreau,

Acting Assistant Secretary for Import Administration.