[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10455]


[[Page Unknown]]

[Federal Register: May 2, 1994]


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DEPARTMENT OF COMMERCE
[A-570-824]

 

Notice of Final Determination of Sales at Less Than Fair Value: 
Silicon Carbide From the People's Republic of China

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: May 2, 1994.

FOR FURTHER INFORMATION CONTACT:
Steve Alley or Andrew McGilvray, 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) 482-5288 or (202) 482-0108, 
respectively.

FINAL DETERMINATION: We determine that silicon carbide 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 735 
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 preliminary determination on November 29, 1993, (58 FR 
64549, December 8, 1993), the following events have occurred:
    On December 1, 1993, the Department of Commerce (the Department) 
received a letter from Hainan Feitian Electrontech Company, Limited 
(Hainan), Shaanxi Minmetals (Shaanxi) and Xiamen Abrasive Company 
(Xiamen), three of the six respondents in this investigation, 
requesting that the Department postpone the final determination to not 
later than April 22, 1994, or 135 days after the date of the 
publication of the preliminary determination. The letter from these 
three respondents also requested the Department to (1) collect 
information on third-country sales to use as foreign market value 
(FMV); (2) find that Treibacher and Saint-Gobain do not qualify as 
``interested parties'' in this proceeding, bar them from further 
participation in this case, and re-examine the Department's decision 
that petitioner has standing to file the petition; and (3) verify fully 
respondents' answers to the Department's questionnaire. On the same 
day, the other three respondents in this investigation--Inner Mongolia 
Import and Export Corporation (IMI/E), Qinghai Metals Import and Export 
Corporation (QI/E), and Seventh Grinding Wheel Factory Import and 
Export Corporation (SGW--also requested a disclosure conference and a 
postponement of the final determination.
    On December 7, 1993, Hainan, Shaanxi and Xiamen submitted letters 
alleging ministerial errors in the Department's calculations for the 
preliminary determination. (For specific details of these allegations 
and our analysis of them, see Memorandum from Richard W. Moreland to 
Barbara R. Stafford of December 20, 1993.) One of these exporters, 
Hainan, alleged that the Department made certain errors with respect to 
the valuation of freight rates and packing materials. The Department 
agreed with this one allegation, and in accordance with procedures set 
forth in the proposed regulations, published an amended preliminary 
dumping margin for Hainan (59 FR 570, January 5, 1994).
    On December 29, 1993, petitioner submitted comments on issues 
relating to verification. On December 30, 1993, petitioner submitted 
publicly available information on electricity rates in India and 
Pakistan as well as information on electricity capacity in the PRC. 
Hainan, Shaanxi, and Xiamen submitted additional information on 
December 30 regarding the price and quantity of their U.S. sales and 
the mode of transportation used to transport coal. The Department sent 
verification agendas to all six respondents in this investigation on 
December 30, 1993.
    On January 3, 1994, IMI/E, QI/E, and SGW submitted publicly 
available information about Indian electricity rates and additional 
information regarding freight distances. IMI/E supplemented its freight 
information on January 7, 1994.
    On January 4, 1994, the Department wrote to SGW regarding the 
Department's intention to visit two other exporters during verification 
to confirm that U.S. sales of silicon carbide had been reported for all 
entities related to SGW. We also wrote to Xiamen regarding out 
intention to visit China Abrasives Export Corporation (CAEC), the 
parent corporation of Xiamen, to confirm that all U.S. sales during the 
period of investigation (POI) had been reported. On January 5, 1994, we 
requested the assistance of the Ministry of Foreign Trade and Economic 
Cooperation of the PRC (MOFTEC) in arranging these meetings as well as 
interviews with appropriate MOFTEC officials. WE wrote to MOFTEC again 
on January 13, 1994, to request assistance in arranging additional 
meetings for the verification teams with Quinghai and Inner Mongolia 
provincial government officials and CAEC representatives. The 
Department verified responses in the PRC from January 10 to February 5, 
1994 and its verification reports between February 15 and March 14, 
1994.
    Requests for a public hearing were received by the Department on 
January 5, 1994, from IMI/E, QI/E, and SGW, and on January 10, 1994, 
from Hainan, Shaanxi, and Xiamen.
    On March 1, 1994, petitioner alleged that critical circumstances 
exist with regard to imports of silicon carbide from the PRC. We 
requested shipment data from the six respondents in this investigation 
on March 4, 1994, and received respondents' data on March 17, 18, 21 
and 22. (Because Hainan, Shaanxi, and Xiamen failed to file public 
versions of their original March 11, 1994 submissions of shipment data, 
we rejected these submissions. Hainan, Shaanxi, and Xiamen refiled 
these submissions in proper form on March 17.) On March 31, 1994, we 
issued our preliminary affirmative determination of critical 
circumstances for two respondents in this investigation--Shaanxi and 
Xiamen. The other four respondents were found not to have massive 
increases in imports. In addition, the Department found that critical 
circumstances exist for all exporters who did not participate in this 
investigation (59 FR 16795, April 8, 1994). On April 6, 1994, Shaanxi 
and Xiamen requested that we base our calculations for critical 
circumstances on the date of shipment rather than the date of 
importation into the United States (the date used in the preliminary 
determination of critical circumstances). Petitioner also submitted 
comments on our preliminary affirmative determination of critical 
circumstances on April 6, 1994.
    On March 11, 1994, petitioner filed information concerning the 
Department's surrogate value for electricity. Because this submission 
contained untimely filed new information, we rejected this submission. 
Petitioner filed new submissions regarding electricity valuation on 
March 23, 1994. Certain of these submissions also contained untimely 
filed new information and, therefore, were rejected. Petitioner and 
respondents submitted case briefs on March 30 and rebuttal briefs on 
April 4, 1994. A public hearing was held on April 6, 1994.

Scope of Investigation

    The product covered by this investigation is silicon carbide, 
regardless of grade or form, containing by weight from 20 to 98 
percent, inclusive, silicon carbide and with a grain size coarser than 
size 325F (as set by the American National Standards Institute), and 
inclusive of split sizes. Silicon carbide covered by this investigation 
typically contains additional impurities: iron, aluminum, silica, 
silicon, and carbon as well as calcium and magnesium. Silicon carbide 
is currently classifiable under subheadings 2849.20.10 and 2849.20.20 
of the Harmonized Tariff Schedule (HTS). The HTS numbers are provided 
for convenience and customs purposes. The written description is 
dispositive.

Period of Investigation

    The POI is January 1, 1993, through June 30, 1993.

Best Information Available (BIA)

    As stated in the preliminary determination, the Department must 
receive an adequate questionnaire response from each entity requesting 
a separate dumping margin rate before a separate rate can be applied. 
Consequently, all non-respondent entities, as well as respondents that 
fail to demonstrate eligibility for a separate rate, must receive a 
single ``All Other'' rate. We have based our ``All Other'' rate on BIA.
    In determining what to use as BIA, the Department follows a two-
tiered methodology, whereby the Department normally assigns lower 
margins to those respondents who cooperated in an investigation and 
margins based on more adverse assumptions for those respondents who did 
not cooperate in an investigation or who failed to qualify for a 
separate rate. According to the Department's two-tiered BIA methodology 
outlined in the Final Determination of Sales at Less Than Fair Value: 
Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled 
Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel 
Plate From Belgium, 58 FR 37083 (July 9, 1993), 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.
    In this case, where some PRC exporters failed to respond to our 
questionnaire and, thus, are uncooperative, we are assigning an ``All 
Other'' rate of 406.00 percent (the highest margin calculated in the 
amendment petition) as BIA to the uncooperative exporters. The 406.00 
percent rate also applies to all other exporters that are ineligible 
for separate rates.

Separate Rates

    Respondents Xiamen, Hainan, and Shaanxi have requested that they be 
assigned separate rates. For Xiamen, we cannot consider eligibility for 
a separate rate because it failed to submit consolidated responses, 
including information on separate rates, for affiliated companies which 
it has stated are related to it within the meaning of section 771(13) 
of the Act. (See Memorandum dated April 22, 1994, from Richard W. 
Moreland to Barbara R. Stafford.)
    For Hainan and Shaanxi, we were unable to verify certain 
information in their separate rates responses. Specifically, these 
respondents did not make available to us the bank records necessary to 
verify that they retain the proceeds from their export sales. Given our 
inability to verify Hainan's and Shaanxi's separate rate submissions, 
we cannot consider applying separate rates to them. (See Ibid.)
    In addition to Xiamen, Hainan, and Shaanxi, respondents IMI/E, QI/
E, and SGW have also requested that the Department issue to each of 
them a separate rate. These respondents have submitted completed and 
verified responses regarding their eligibility for separate rates.
    We have analyzed the record in this investigation and agree that it 
is appropriate to assign separate rates to IMI/E, QI/E, and SGW. In 
making this determination, we have modified our separate rates policy, 
previously set forth in Final Determination of Sales at Less Than Fair 
Value; Certain Compact Ductile Iron Waterworks Fittings and Accessories 
Thereof From the People's Republic of China (``CDIW'') (58 FR 37908, 
July 14, 1993) and Final Determination of Sales at Less Than Fair 
Value: Certain Helical Spring Lock Washers from the People's Republic 
of China (``Lock Washers'') (58 FR 48833, September 20, 1993). In CDIW, 
we took the position that state-ownership (i.e. ``ownership by all the 
people'') ``provides the central government the opportunity to 
manipulate the [exporter's] prices whether or not it has taken 
advantage of that opportunity during the period of investigation.'' 
Thus, we concluded in CDIW that state-owned enterprises would not be 
eligible for separate rates.
    However, based upon further analysis and information developed in 
the course of this investigation, we find that the ownership of IMI/E, 
QI/E, and SGW ``by all the people,'' in and of itself, cannot be 
considered as dispositive in determining whether those companies can 
receive separate rates. At verification, Mr. Zhang Yuqing, the Division 
Chief of the Department of Treaty and Law of MOFTEC (the Ministry of 
Foreign Trade and Economic Cooperation), explained that the designation 
on these respondents' business licenses that they are ``owned by all 
the people'' does not mean that the central, provincial, or local 
governments control these companies. Instead, ``ownership by the 
people'' signifies that ``no individual can take the company; it cannot 
become a private company.'' The company ``belongs to the community'' 
and the company's employees are entrusted with the management of the 
company. (See Memorandum from Andrew McGilvray, to Gary Taverman, dated 
February 15, 1994.)
    A recent analysis by the Central Intelligence Agency supports 
MOFTEC's statement that ownership ``by all the people'' is not 
synonymous with central government control. (See 1992 report to the 
Joint Economic Committee, Hearings on Global Economic and Technological 
Change: Former Soviet Union and Eastern Europe and China, Pt. 2 (102 
Cong., 2d Sess), 143, 196 (hereinafter, ``CIA report''). The report 
states that a state-owned enterprise was subject to central government 
control prior to 1980, but that ``[t]he reform decade of the 1980s 
brought significant changes to this scheme'' and that the central 
government devolved control of enterprises owned ``by all the people''. 
We have, therefore, come to the conclusion that ownership ``by all the 
people'' does not require the application of a single rate. Thus, we 
believe a PRC respondent may receive a separate rate if it establishes 
on a de jure and de facto basis that there is an absence of 
governmental control. We have, therefore, adapted and amplified the 
test set out in Final Determination of Sales at Less Than Fair Value: 
Sparklers From the People's Republic of China (56 FR 20588, May 6, 
1991) to determine whether the respondents in this case are entitled to 
separate rates.

1. Absence of De Jure Control

    Three enactments that have been placed on the record in this case 
indicate that the responsibility for managing state-owned enterprises 
has been shifted from the government to the enterprise itself. 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 states that enterprises have the 
right to set their own prices (see Article 26). This principle is 
restated in the 1992 Regulations (see Article IX). The Export 
Provisions list those products subject to direct government control. 
Silicon carbide does not appear on this list and is not, therefore, 
subject to the constraints of these provisions.
    The existence of these laws indicate that respondents IMI/E, QI/E, 
and SGW are not subject to de jure control. However, there is publicly 
available information indicating that the PRC central government has 
acknowledged 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).
    Given this report of uneven implementation of the PRC government's 
laws on devolution of government control, it is critical that we 
conduct a de facto analysis to determine whether these respondents 
were, in fact, not subject to governmental control.

2. Absence of De Facto Control

    For the reasons stated below, we have determined that these 
respondents are not de facto controlled by the central, provincial or 
municipal governments. In conducting this analysis, we are aware that 
the CIA report stated that the central government has ``decentralized 
the supervision and planning control over most state enterprises to 
provincial or municipal authorities.'' As elaborated below and in the 
responses to Comments 1 and 2, we have verified that these respondents 
are not, in fact, subject to provincial control. Municipal control is 
not an issue in this case as there is no tie between these companies 
and any municipality.
    We have taken the following factors into account in our 
determination of absence of de facto control: First, the respondents' 
export prices are not set by, nor subject to approval by, a 
governmental authority. Second, the respondents also have authority to 
negotiate and sign contracts and other agreements. These points were 
confirmed by examination of correspondence files and other 
documentation relating to sales negotiations, as noted in the 
verification reports.
    Third, we have determined, based on our investigation, that the 
respondents have autonomy from the central government in making 
decisions regarding selection of management, based on our examination 
of management election/evaluation forms completed by employees. Lastly, 
we have determined that the respondents retain the proceeds of their 
export sales and make independent decisions regarding disposition of 
profits or financing of losses. This last point was confirmed through 
examination of bank records, and company accounting records relating to 
investment and other activities. (See also Concurrence Memorandum and 
various verification reports.)

3. Conclusion

    Given that the record of this investigation demonstrates a de jure 
and de facto absence of governmental control over the export functions 
of IMI/E, QI/E, and SGW, we determine that IMI/E, QI/E, and SGW are 
eligible for separate rates.

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 the most comparable to the PRC 
in terms of overall economic development, based on per capita gross 
national product (``GNP''), the national distribution of labor, and 
growth rate in per capita GNP. (See memorandum from the Office of 
Policy to Gary Taverman, dated August 17, 1993, on file in room B-099 
of the Main Commerce Department Building.) Because India fulfills both 
requirements outlined in the statute, India is the preferred surrogate 
country for purposes of calculating the factors of production used in 
producing the subject merchandise. Accordingly, for this final 
determination, we have used the values for the factors of production, 
as appropriate, from Indian sources. As in our preliminary 
determination, we have used a world market price in one instance where 
no appropriate surrogate value was available. We have obtained and 
relied upon published, publicly available information, wherever 
possible.

Fair Value Comparisons

    To determine whether sales of silicon carbide from the PRC to the 
United States were made at less than fair value for those exporters 
deemed eligible to receive a separate rate, we compared the United 
States price (USP) to FMV, as specified in the ``United States Price'' 
and ``Foreign Market Value'' sections of this notice.

United States Price

    United States price was calculated on the same basis as in the 
preliminary determination. Minor adjustments were made to the reported 
U.S. prices of IMI/E and SGW, pursuant to finding at verification. We 
also adjusted foreign inland freight based on verification findings. 
(See Calculation Memorandum, attached to the Department's Concurrence 
Memorandum of April 22, 1994, on file in room B-099 of the Main 
Commerce Department Building.)

Foreign Market Value

    We calculated FMV based on factors of production cited in the 
preliminary determination, making adjustments for specific verification 
findings (see Calculation Memorandum). To calculate FMV, the verified 
amounts for factors of production were multiplied by the appropriate 
surrogate values for the different inputs. We have used the same 
surrogate values as in the preliminary determination with the exception 
of the value for electricity.
    In our November 29, 1993, preliminary determination, we had used 
publicly available information for Pakistan regarding electricity rates 
for industrial use during the POI. We did so because the publicly 
available information at the time for India either was out of date or 
was not necessarily specific to industrial use. After the preliminary 
determination, petitioner's December 30, 1993, submission provided new 
publicly available information from the Asian Development Bank (ADB) 
showing Indian electricity prices for industrial use in FY1990. Since 
this new ADB data shows recent electricity rates specific to industrial 
use for India (our first-choice surrogate), we have used the ADB data 
for the final determination in preference to data for Pakistan (our 
second-choice surrogate). (For a complete analysis of surrogate values, 
see Calculation Memorandum.)

Verification

    As provided in section 776(b) of the Act, we verified all the 
information relied upon for this final determination.

Critical Circumstances

    In our preliminary affirmative determination of critical 
circumstances of March 31, 1994, we found that critical circumstances 
exist for two respondents in this investigation--Shaanxi and Xiamen. We 
also preliminary determined that critical circumstances exist for all 
exporters who did not participate in this investigation.
    Pursuant to section 733(e)(1) of the Act, we based that preliminary 
determination on a finding of 1) a history of dumping of silicon 
carbide in the European Community (EC), and 2) massive imports of 
silicon carbide over a relatively short period by examining 
respondents' shipment data. Because the timing of petitioner's 
allegation (after the completion of verification) precluded on-site 
verification of this information, the Department also referred to U.S. 
Customs IM-115 entry data to corroborate respondents' reported shipment 
information, pursuant to section 771(18)(E) of the Act. (See 59FR 
16795, April 8, 1994).
    For the final determination, we have continued to use BIA as the 
basis for our determination of critical circumstances for non-
respondent exporters. The BIA margin (406.00 percent) for those 
exporters exceeds the 25 percent threshold for imputing a knowledge of 
dumping to the importers of the merchandise. In addition, we have 
adversely assumed, as BIA, a massive increase in imports from these 
non-respondent exporters. We, therefore, determine that critical 
circumstances exist for all non-respondent exporters in this 
investigation.
    Since the preliminary determination of critical circumstances, we 
have determined that Hainan, Shaanxi and Xiamen are ineligible for 
rates separate from non-respondent PRC exporters. Because Hainan, 
Shaanxi and Xiamen are ineligible for rates separate from non-
respondent exporters, we must extend to them the same BIA-based 
determination of critical circumstances applied to the non-respondent 
exporters.
    For respondents IMI/E, QI/E, and SGW, we determine that critical 
circumstances do not exist. The shipment data for these respondents, 
which we have corroborated using U.S. Customs IM-115 entry data, shows 
that there has been no massive increase in shipments from these 
respondents in the period following the filing of the petition (See 
Preliminary Affirmative Determination of Critical Circumstances).

Interested Party Comments

    Because respondents Hainan, Shaanxi, and Xiamen, are not eligible 
for calculated separate rates, we have not addressed comments made by 
these parties regarding calculations for this determination.
    Comment 1: Petitoner maintains that the Department cannot assign 
separate rates to respondents because not all relevant entities in the 
PRC have participated in the investigation. Petitioner states that: (1) 
The silicon carbide industry in the PRC is characterized by significant 
provincial and/or local government ownership; (2) information on the 
record demonstrates a number of non-responding producers of silicon 
carbide in each province in which respondents and/or their suppliers 
are located; (3) respondents and the non-responding producers are owned 
by the governments of the provinces in which they are located; and (4) 
respondents have offered no reason why cooperation is not required of 
the non-responding producers. Petitioner further states that, while PRC 
law prohibits the central government from controlling prices for 
silicon carbide, there is no evidence that provincial governments 
cannot regulate prices between silicon carbide producers and exporters. 
Petitioner concludes that the respondents are thus ineligible for 
separate rates.
    IMI/E, QI/E, and SGW maintain that petitioner has confused the 
Department's market-oriented industry (MOI) policy with its separate 
rates policy. They state that PRC export companies do not need to prove 
that the product under investigation was produced in a market 
environment to be eligible for separate dumping margins. These 
respondents conclude that every PRC exporter and producer of silicon 
carbide does not need to participate in the case for participating 
exporters to qualify for separate rates.

DOC Position

    We disagree with petitioner. Pursuant to the discussion in the 
``Separate Rates'' section above, we have found that the three 
responding exporters ``owned by all the people'' are not controlled by 
the central, provincial, or municipal governments. (See discussion 
under ``Separate Rates'' section.) Further, the information on the 
record relating to provincial and local governments shows that their 
activities with regard to IMI/E, QI/E, and SGW are limited to such 
functions as taxation, business licensing, and the collection of export 
statistics. There is no evidence that these governments (1) can 
manipulate export prices or (2) interfere with other aspects of 
conducting business with the United States. Therefore, we determine 
that IMI/E, QI/E, and SGW are not subject to government control of 
their silicon carbide exports.
    Finally, petitioner's concerns regarding the ability of provincial 
governments to regulate prices between domestic producers and exporters 
are not relevant to those respondents' eligibility for separate rates. 
The Department's separate rates analysis focuses on governmental 
control over the respondents' export activities, not the regulation of 
prices charged by the respondents' suppliers.
    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, that 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. 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 conclusion, petitioner 
states that, based on the record for this investigation, respondents 
are ineligible for separate rates.
    IMI/E, QI/E, and SGW state that the Department should apply the 
Sparklers criteria and find them eligible for separate dumping margins. 
These respondents state that they have cooperated completely in this 
investigation and have provided information indicating a lack of 
ownership or control by the PRC central government. Moreover, these 
respondents emphasize that the appropriate test of ownership is control 
of property rather than simple legal title. IMI/E, QI/E, and SGW state 
that the record also provides evidence of a de facto absence of central 
control with respect to exporters.
    Hainan, Shaanix, and Xiamen state that they are not subject to de 
jure or de facto control by the central government. As evidence of de 
jure absence of control, Hainan, Shaanix and Xiamen cite the specific 
law and regulations provided in the MOFTEC verification report which 
indicate that: (1) the PRC central government cannot dictate the 
decision-making of enterprises; (2) enterprises have the right to enjoy 
the benefits from their business activities; and (3) enterprises are 
free to select their own management independently from the PRC central 
government. These respondents also maintain that evidence on the record 
demonstrates a de facto absence of control.
    DOC Position: The Department disagrees with petitioner regarding 
respondents IMI/E, QI/E, and SGW. As discussed at length in the 
``Separate Rates'' section above, IMI/E, QI/E, and SGW are eligible for 
separate rates.
    Respondents Hainan and Shaanxi have failed to establish their 
eligibility for separate rates because, at verification, these 
companies failed to produce bank records necessary to prove their 
retention of proceeds from export sales. Therefore, these respondents 
did not meet an important criterion for separate rates (see ``Separate 
Rates'' section above).
    Respondent Xiamen has also failed to establish its eligibility for 
a separate rate. As noted in the ``Separate Rates'' section above, 
Xiamen has stated that certain other PRC exporters of silicon carbide 
(i.e., CAEC and its other affiliates) are related parties within the 
meaning of section 771(13) of the Act. However, Xiamen has failed to 
provide information regarding the eligibility for separate rates of 
CAEC, et al. Without such information, the Department cannot consider 
assigning a separate rate to Xiamen/CAEC. (See also the Concurrence 
Memorandum of April 22, 1994.)
    Comment 3: Hainan, Shaanxi, and Xiamen argue that two of the 
members of the petitioning coalition, Treibacher and Saint-Gobin, 
should be excluded as interested parties in this investigation because 
these companies do not sell U.S.-manufactured silicon carbide. These 
respondents assert that Treibacher and Saint-Gobain sell silicon 
carbide produced in Canadian furnaces that is merely ground and 
screened in the United States. Respondents ask the Department to notify 
the U.S. International Trade Commission (ITC) that these two companies 
should not be considered as part of the domestic silicon carbide 
industry because of (1) their insignificant U.S. capital investment 
regarding silicon carbide, (2) their negligible U.S. employment, and 
(3) their negligible real value-added to the product in the United 
States.
    Hainan, Shaanxi, and Xiamen assert that, once the Department has 
excluded Treibacher and Saint-Gobain from participating as interested 
parties in this proceeding, the Department must scrutinize Exolon-ESK, 
the sole remaining petitioner with standing as a U.S. producer of 
silicon carbide. These respondents point out that Exolon was indicted 
in February 1994 for alleged improper commercial activities. These 
charges, Hainan, Shaanxi, and Xiamen argue, are ``directly relevant to 
the credibility of the certifications on which the Department based the 
initiation of this investigation and to the legitimacy of Exolon's 
request for import relief.'' These respondents conclude that since (1) 
the Department must reject Exolon's submissions as an unreliable basis 
for the initiation of this investigation, and (2) Treibacher and Saint-
Gobain are not interested parties and are thus barred from status as 
petitioners, there are no remaining petitioners with standing to 
continue this investigation. Therefore, these respondents maintain that 
the Department should rescind its investigation of silicon carbide from 
the PRC,
    Petitioner argues that based on long-standing practices, the 
Department analyzes petitioner's standing only in the event of a 
challenge from other U.S. producers. Petitioner rebuts respondents' 
argument by maintaining that the indictment of the petitioner is not 
relevant to this investigation, that Exolon, the indicted party, is 
innocent of the charges, and that Treibacher and Saint-Gobain are 
interested parties to this investigation.
    DOC Position: We agree, in part, with petitioner. Exolon's 
indictment is irrelevant to our analysis and its status as a U.S. 
producer of subject merchandise is unchallenged. Further, the ITC 
preliminarily determined that Treibacher and Saint-Gobain are engaged 
in U.S. ``production'' of subject merchandise and thus qualify as 
members of the domestic industry (see Silicon Carbide From the People's 
Republic of China, Inv. No. 731-TA-651 (Preliminary) (Pub. 2668, August 
1993), at 12-13). We have reviewed the ITC's analysis, which addresses 
the same arguments raised by respondents in this proceeding, and we 
concur with the ITC. Therefore, we determine that Treibacher and Saint-
Gobain are engaged in ``production'' of silicon carbide in the United 
States. Thus, these companies qualify as interested parties to this 
proceeding. Given these facts, there is no basis for rescinding the 
initiation of this investigation.
    Comment 4: Hainan, Shaanxi, and Xiamen argue that, if the 
Department decides not to rescind the initiation of this investigation, 
the Department should consider crude silicon carbide and refined 
silicon carbide to be separate classes or kinds of merchandise.
    Petitioner asserts that these respondents have offered no evidence 
on the record to support an alternative class or kind analysis.
    DOC Position: We agree with petitioner. Hainan, Shaanxi, and Xiamen 
have provided no substantial analytical or factual basis for their 
claim that crude silocon carbide and refined silicon carbide should be 
considered as separate classes or kinds of merchandise.
    Comment 5: IMI/E, QI/E, and SGW argue that the Department should 
continue to use the Pakistani rates for electricity because the Indian 
rates for industrial use from the petitioner's December 30, 1993, 
submission were artificially high.
    Petitioner asserts that the Department should follow its preference 
for using surrogate values from one country when possible. In this 
case, the Department has surrogate values from India for all factors of 
production, including electricity. Petitioner further asserts that the 
Pakistani rate used as the surrogate value for electricity in the 
preliminary determination was flawed because it did not completely 
capture electricity costs for industrial users.
    DOC Position: We agree with petitioner. In its preliminary 
determination, the Department relied upon published, publicly-available 
information (PPI) regarding Pakistani electricity rates for industrial 
use during the POI. We did so because the PPI available at that time 
for India either was out of date or was not necessarily specific to 
industrial use. Since that time, publicly available electricity rates 
for India have become available and these rates more accurately capture 
total costs for Indian industrial users.
    With regard to the concern raised by IMI/E, QI/E, and SGW regarding 
artificially high electricity rates in India, the document which these 
respondents cites as evidence of their contention simply fails to 
support their position; viz., that document states that ``[t]o 
encourage industrial development, many states also offer low rates to 
large industries.'' Therefore, the Department has selected the 
publicly-available industrial rates for India to value electricity 
consumption for the calculations for this determination (see 
Calculation Memorandum).
    Comment 6: Petitioner states that there is a history of dumping in 
the United States and Europe of silicon carbide from the PRC. Moreover, 
petitioner states that the import data show there have been massive 
imports of silicon carbide from PRC over a relatively short period of 
time. Since preliminarily estimated dumping margins in this case exceed 
25 percent, petitioner maintains that the importers knew or should have 
known that the product was being sold at less than fair value. 
Petitioner maintains that the Department should find critical 
circumstances in this case.
    QI/E, IMI/E, and SGW state that since their exports were not 
massive after the petition was filed, the Department should not find 
critical circumstances.
    Hainan, Shaanxi, and Xiamen state that the EC findings which 
petitioner cites as evidence of a history of dumping do not, in fact, 
demonstrate such a history. These respondents maintain that, because 
the PRC exporters offered the EC ``satisfactory undertakings'' (i.e., 
agreed to eliminate injurious dumping), there is no ``history of 
dumping'' in the EC.
    DOC Position: As described in the ``Critical Circumstances'' 
section above, we have analyzed the information on the record regarding 
critical circumstances and have found that critical circumstances do 
not exist for the three respondents (IMI/E, QI/E, and SGW) that are 
eligible for separate rates. For non-respondent exporters during the 
POI, we have used BIA to determine the existence of critical 
circumstances. Since Hainan, Shaanxi, and Xiamen are ineligible for 
rates separate from those non-respondent exporters, we must extend to 
them the same BIA-based determination of critical circumstances.
    Comment 7: Petitioner maintains that the silicon carbide industry 
is not a market-oriented industry due to: (1) State ownership of some 
producers; (2) government control of production levels and prices for a 
significant portion of the industry; and (3) government control of 
prices and production of significant inputs.
    IMI/E, QI/E, and SGW contend that, since prices for energy inputs 
in the United States are also set by governments, the PRC respondents' 
market rates submission should not have been rejected on the basis that 
coal rates are set by the Government of the PRC. IMI/E, QI/E, and SGW 
further contend that no U.S. industry could ever be considered an MOI 
under these criteria. The Department's criteria according to IMI/E, QI/
E, and SGW, are therefore, inherently unreasonable.
    According to Hainan, Shaanxi, and Xiamen, the Department's MOI 
analysis is inaccurate. They maintain that the Department's MOI test is 
a charade since, once the Department determines that a country is a 
non-market economy, it is a foregone conclusion that respondents will 
be unable to prove that an MOI exists.
    DOC Position: We agree with petitioner. And MOI does not exist 
because coal, a significant material input used to produce silicon 
carbide, is not purchased at market-determined prices. On November 16, 
1993, petitioner submitted for the record of this investigation a World 
Bank Discussion Paper entitled ``The Sectoral Foundations of China's 
Development.'' This paper demonstrates that much of the coal supply of 
the PRC is subject to central regulation of both price and allocation. 
Coal not subject to central regulation is often subject to regulation 
by provincial price boards. The PRC's coal market is also distorted by 
substantial ``in plan'' production. Given the many distortions of the 
coal market evident from information on the record, we cannot consider 
the price of coal in the PRC to be market-determined. (For further 
discussion, see the preliminary determination in this investigation (58 
FR 64549, December 8, 1993).
    Comment 8: Petitioner maintains that IMI/E has not demonstrated its 
independence from other entities listed on its organizational chart or 
that these other entities did not export silicon carbide to the United 
States during the POI. Further, petitioner maintains that the 
Department's failure to find evidence of investments between IMI/E and 
these other entities does not indicate a lack of business 
relationships. Petitioner concludes that IMI/E's potential relationship 
with these other entities renders it ineligible for a separate rate.
    IMI/E states that its maintenance of business relationships with 
other companies should not disqualify it from receiving a separate 
rate.
    DOC Position: The Department disagrees with petitioner. first, at 
verification the Department examined the completeness of IMI/E's sales 
reporting. That examination encompassed IMI/E's records and substantial 
other documentation. There was no indication at verification that any 
part of IMI/E had failed to report POI sales to the United States.
    IMI/E for its part has stated that other entities shown on its 
organizational chart are ``not related to IMI/E''. Rather, they contend 
that those ``independent and unrelated organizations appear on IMI/E's 
organization chart to give the impression that IMI/E is a large company 
that is prepared to do business with huge customers requiring enormous 
volumes of products.'' IMI/E's explanation is consistent with the 
Department's examinations at verification.
    Finally, although petitioner concedes that IMI/E's investment 
accounts demonstrated no investments between IMI/E and the entities in 
question, petitioner maintains that IMI/E is ineligible for a separate 
rate because of potential business relationships with these entities. 
However, petitioner has not indicated any reasonable basis upon which 
the Department can determine that such potential relationships offer 
entities an opportunity to manipulate IMI/E's export pricing.
    Comment 9: Petitioner states that SGW is ineligible for a separate 
rate because other silicon carbide exporters in the same province have 
failed to respond to the Department's questionnaire. Further, 
petitioner maintains that information on the record links SGW to other 
exporters. Petitioner concludes that since exporters of silicon carbide 
related to SGW are not cooperating in this investigation, the 
Department cannot issue a separate rate for SGW.
    SGW states that it is unrelated to any other exporters of silicon 
carbide. In particular, SGW maintains that it demonstrated during 
verification its independence from its provincial government and, thus, 
from other exporters in the same province.
    DOC Position: We agree with SGW that it has established its 
eligibility for a separate rate. As noted in our ``Separate Rates'' 
section above, our analysis shows that SGW is not subject to central-
government control of its silicon carbide exports. Further, other than 
the now disproven contention of relationships based on the common 
``provincial ownership'' of exporters, the only other basis for 
petitioner's assertion of a relationship among exporters is the use by 
SGW of ledger paper bearing the name of another exporter. SGW has 
satisfactorily explained this situation at verification (see 
Concurrence Memorandum and Verification Report). There is no other 
indication of a relationship between SGW and other exporters of silicon 
carbide and, therefore, SGW's eligibility for a separate rate is 
unaffected.
    Comment 10: Petitioner states that the Department was unable to 
verify the factors of production reported by IMI/E, QI/E, and SGW and, 
therefore, must base FMV on BIA for the final determination.
    IMI/E, QI/E, and SGW request that the Department accept the correct 
and verified consumption factors and use these inputs in the final 
determination.
    DOC Position: The Department agrees with respondents. While the 
Department's verification uncovered several inaccuracies in these 
respondents' reported data, the inaccuracies do not undermine the 
fundamental soundness of their questionnaire responses because the 
inaccuracies were not significant and there was no pattern of under-
reporting of the factors of production. Given these findings, the 
Department has used the verified factors of production in its 
calculations for the final determination.
    Comment 11: Petitioner states that, should the Department use the 
factors of production for IME/E, QI/E, and SGW, it must adjust these 
factors for findings at verification. Specifically, petitioner 
maintains that the Department should do the following: (1) For IMI/E, 
adjust sand consumption and electricity consumption, account for 
previously unreported input materials, reallocate labor hours, and 
correct transportation distances for certain raw materials; (2) QI/E, 
adjust QI/E's rail freight distance from factory to port, coal 
transportation distance and use BIA for sand transportation distance, 
electricity consumption, and labor; and (3) for SGW adjust distances 
for shipping sand and coal, reverse the number of skilled and unskilled 
workers used in the calculations for the preliminary determination 
ignore unverified information regarding labor rates, and use BIA for 
rail freight distance from factory to port as well as SGW's reported 
truck freight distances.
    These respondents assert that the Department should use these 
respondents' verified factors of production, taking clerical errors at 
verification into account, where appropriate.
    DOC Position: As stated in the Department's position to the 
previous comment, we have used the verified amounts for each of these 
respondents' factors of production. Any inaccuracies found at 
verification do not undermine the fundamental soundness of the 
respondent's questionnaire responses. The inaccuracies were not 
significant and there was no pattern of under-reporting of the factors 
of production. Given these findings, the Department has used the 
verified factors of production in its calculations for the final 
determination because the verified factors of production yield the most 
accurate measure of the respondents' margins of dumping. (For an in-
depth discussion of verification findings, see our Concurrence 
Memorandum).
    Comment 12: Petitioner states that, should the Department consider 
a separate rate for IMI/E, the Department should adjust IMI/E's U.S. 
price to eliminate a claimed bonus payment for product purity in excess 
of requirements.
    IMI/E requests that the Department use its verified sales prices in 
the final determination.
    DOC Position: The Department agrees with respondent. The Department 
verified the proof of payment for the sales in question. That proof of 
payment demonstrated that actual final sales price for the reported 
sales, including bonus payments. We have used the verified final sales 
prices in the calculations for this determination.
    Comment 13: Petitioner states that, should the Department consider 
a separate rate for QI/E, the Department must adjust QI/E's U.S. price 
based on documentation reviewed at verification. Specifically, 
petitioner maintains that the Department must exclude a certain price 
adjustment because the Department was unable to verify the silicon 
carbide content of one sale.
    DOC Position: We disagree with petitioner. The Department verified 
the proof of payment for the sale in question. That proof of payment 
demonstrated the actual final sales price for the reported sale. Since 
the Department's calculations are based on actual sales prices, proof 
of the silicon carbide content of the merchandise sold is unnecessary. 
We have used the verified final sales price in the calculations for 
this determination.
    Comment 14: Petitioner states that the Department discovered at 
verification that QI/E had failed to report certain U.S. sales. In 
addition, petitioner maintains that changes in the terms of the sales, 
which Qinghai claims place the dates of sale after the POI, were 
immaterial. Petitioner concludes that the sales in question are POI 
sales, and that QI/E's failure to report those sales requires that the 
Department base its final determination for QI/E on BIA.
    QI/E maintains that the changes in question were material changes 
in quantity. QI/E states that the date of sale for these sales was 
after the POI. QI/E concludes that these sales were properly excluded 
from QI/E's questionnaire responses.
    DOC Position: We agree with QI/E. The change in question was a 
change in the quantity sold under the contract. Petitioner maintains 
that the implementation of the change through a quantity variation is 
an ``immaterial'' change. However, verification exhibits indicate that 
the customer's intent (and the final result) was a change in the 
quantity term of the shipment. That change went beyond the allowable 
quantity variation of the original contract. Thus, the quantity of the 
contract, a material term, was not established until after the POI. 
Therefore, the date of sale was after the POI.
    Comment 15: Petitioner states that SGW understated its U.S. sales 
during the POI, and that the Department must use BIA for SGW's 
unreported sale.
    SGW requests that the Department include the verified, but 
unreported sale, in its final determination because SGW did not benefit 
from this oversight.
    DOC Position: The Department agrees with SGW. The omission in 
question appeared to be inadvertent and had the effect of raising, 
rather than lowering, SGW's calculated margin. In addition, we have no 
reason to believe that this omission is indicative of a larger pattern 
of inaccurate reporting by SGW. Further, this omission does not 
approach the magnitude of the omissions, errors, and inadequacies which 
we discovered during the verifications of Hainan, Shaanxi, and Xiamen, 
requiring us to use BIA for those respondents. Therefore, we have used 
the actual, verified information for SGW's unreported sale in our 
calculations for this determination because its inclusion yields the 
most accurate estimate of SGW's margin of dumping. (See also the 
Concurrence Memorandum.)
    Comment 16: IMI/E, QI/E, and SGW state that the Department should 
not include coal and water in overhead, in order to avoid double-
counting these items.
    DOC Position: We agree with respondents that we should not double 
count these costs. Therefore, we have not included water as a separate 
factor of production because we believe that water costs are captured 
in the ``other manufacturing expenses'' category of the Department's 
surrogate overhead expense (see the Calculation Memorandum attached to 
the Concurrence Memorandum). However, we have continued to account for 
coal as a separate factor of production because we have excluded 
``power and fuel'' from the surrogate overhead expense.

Continuation of Suspension of Liquidation

    In accordance with sections 733(d)(1) and 735(c)(4) (A) and (B) of 
the Act, we are directing the Customs Service to continue to suspend 
liquidation of entries of silicon carbide from the PRC from three of 
the respondents in this investigation--IMI/E, QI/E, and SGW--that are 
entered, or withdrawn from warehouse, for consumption on or after 
December 8, 1993, which is the date of publication of the preliminary 
determination in the Federal Register. For imports of silicon carbide 
from all other exporters from the PRC, we are directing the Customs 
Service to suspend liquidation on or after September 9 1993, which is 
90 days prior to the date of publication of the preliminary 
determination in the Federal Register. The Customs Service shall 
require a cash deposit or posting of a bond equal to the estimated 
amount by which the FMV exceeds the USP as shown below. These 
suspensions of liquidation instructions will remain in effect until 
further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
                          Exporter                              margin  
                                                              percentage
------------------------------------------------------------------------
7th Grinding Wheel Factory Import and Export Corporation...        99.52
The Import and Export Trading Corporation of Inner Mongolia             
 Autonomous Region.........................................        27.41
The Qinghai Metals and Minerals Import and Export                       
 Corporation...............................................         7.50
All Others*................................................       406.00
------------------------------------------------------------------------
*Including respondents Hainan, Shaanxi, and Xiamen.                     

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. The ITC will now determine, within 45 days, 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry. If the ITC determines that material 
injury, or threat of material injury does not exist, the proceeding 
will be terminated and all securities posted will be refunded or 
cancelled. If the ITC determines that such injury does exist, the 
Department will issue an antidumping duty order directing Customs 
officials to assess antidumping duties on all imports of the subject 
merchandise entered, or withdrawn from warehouse, for consumption on or 
after the effective date of the suspension of liquidation.
    This determination is published pursuant to section 735(d) of the 
Act and 19 CFR 353.20(a)(4).

    Dated: April 22, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-10455 Filed 4-29-94; 8:45 am]
BILLING CODE 3510-DS-P