[Federal Register Volume 59, Number 115 (Thursday, June 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14624]
[[Page Unknown]]
[Federal Register: June 16, 1994]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-827]
Notice of Preliminary Determination of Sales at Less Than Fair
Value: Certain Cased Pencils From the People's Republic of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 16, 1994.
FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai or Kristin Heim,
Office of Countervailing Investigations, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue NW., Washington, DC 20230; telephone:
(202) 482-4087 or (202) 482-3798, respectively.
Preliminary Determination: We preliminarily determine that certain
cased pencils (pencils) from the People's Republic of China (PRC) are
being, or are likely to be, sold in the United States at less than fair
value (LTFV), 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 initiation of this investigation on November 29, 1993 (58
FR 64548, December 8, 1993), the following events have occurred.
On December 27, 1993, the U.S. International Trade Commission (ITC)
notified us of its preliminary determination that there is a reasonable
indication that an industry in the United States is materially injured
by reason of imports of pencils from the PRC that are alleged to be
sold at less than fair value.
On January 5, 1994, we sent a survey to the PRC's Ministry of
Foreign Trade and Economic Cooperation (MOFTEC) and certain companies
in the PRC requesting information on production and sales of pencils
exported to the United States. The names of the companies were found in
the petition and in data supplied by the Port Import-Export Reporting
Service (PIERS). We requested MOFTEC's assistance in forwarding the
survey to all exporters and producers of pencils and submitting
complete responses on their behalf. On January 14, the survey was sent
to the Asia Pencil Association.
On January 31, 1994, responses to the survey were received from the
China First Pencil Co., Ltd. (China First), an exporter and producer;
Shanghai Foreign Trade Corp. (SFTC), an exporter; Shanghai Lansheng
Corp. (Shanghai Lansheng), an exporter; Shanghai Machinery & Equipment
Import & Export Corp. (Shanghai Machinery), an exporter; and Shanghai
Three Star Stationery Industry Corp. (Three Star), a producer and
domestic reseller. Shanghai Machinery reported that while it had
exported pencils in the past, it did not make any sales to the United
States during the POI.
On February 9, 1994, four more companies responded to our survey:
Songnan Pencil Factory, a producer; Xinbang Joint Venture Factory, a
producer; Guangdong Provincial Stationery & Sporting Goods Import &
Export Corp. (Guangdong), an exporter; and Anhui Stationery Company
(Anhui), a producer.
On February 16, 17, and 23, 1994, all PRC producers and exporters
identified in the course of this proceeding, i.e., through the
petition, in PIERS data, in letters of appearance and as provided by
MOFTEC, for which we had addresses were sent full questionnaires.
During the month of March, in response to our questionnaire, we
received letters from a number of companies stating that they either
did not export cased pencils to the United States during the POI or
acted merely as freight forwarders.
On March 8, 1994, we postponed the preliminary determination in
this investigation (see 59 FR 10784, March 8, 1994).
SFTC requested on March 24, 1994, that it not be required to submit
sales and factors of production information for certain pencils it
exported to the United States during the POI. On April 4, 1994, SFTC
amended its request. Because the sales and factor of production
information covered a small percentage of SFTC's sales to the United
States, we granted SFTC's amended request (see Memorandum from E.
Graham to B. Stafford, April 7, 1994, on file in the Central Records
Unit in room B-099 of the Main Commerce Building).
On May 10, 11, and 25, 1994, petitioner submitted information
concerning the costs of certain raw materials which are used in the
production of pencils but that were not specifically addressed in the
petition. Petitioner also requested that the Department recalculate the
petition margins based on the information in its submission of May 25,
1994.
Between June 3, 1994, and this preliminary determination,
respondents submitted updated and additional information. Given the
late dates on which this information was provided, we found it
administratively infeasible to use this information (with the exception
of company-specific conversion factors) in our preliminary
determination.
Scope of Investigation
The products covered by this investigation are certain cased
pencils of any shape or dimension which are writing and/or drawing
instruments that feature cores of graphite or other materials encased
in wood and/or man-made materials, whether or not decorated and whether
or not tipped (e.g., with erasers, etc.) in any fashion, and either
sharpened or unsharpened. The pencils subject to this investigation are
classified under subheading 9609.10.00 of the Harmonized Tariff
Schedule of the United States (``HTSUS'').
Specifically excluded from the scope of this investigation are
mechanical pencils, cosmetic pencils, pens, non-cased crayons (wax),
pastels, charcoals, or chalks.
Although the HTSUS subheading is provided for convenience and
customs purposes, our written description of the scope of this
investigation is dispositive.
Class or Kind of Merchandise
At the time of our initiation, we solicited comments from
interested parties on whether all cased pencils constitute one class or
kind of merchandise. Respondents have argued that raw pencils/pencil
blanks and semi-finished pencils constitute a separate class or kind of
merchandise apart from finished pencils. Based on the information
provided, we find that these products do not constitute a separate
class or kind of merchandise. (See memorandum from E. Graham to B.
Stafford, April 15, 1994.) In a submission dated June 2, 1994,
respondents argued that the merchandise subject to this investigation
comprises four separate classes or kinds of merchandise. While this
argument was made too late to be considered for our preliminary
determination, we will address this in our final determination.
The Asia Pencil Association argued that specialty pencils (e.g.,
carpenter and art pencils) should constitute a separate class or kind
of merchandise. However, the information submitted in support of their
claim was insufficient to allow us to make a determination that
specialty pencils are a separate class or kind of merchandise.
Period of Investigation
The POI is June 1, 1993, through November 30, 1993.
Separate Rates
China First, Guangdong, SFTC, and Shanghai Lansheng have each
requested a separate rate. Guangdong's and SFTC's business licenses
each 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 (59 FR 22585, 22586 (May 2,
1994)) (``Silicon Carbide'') ``ownership of a company by all the people
does not require the application of a single rate.'' Accordingly,
Guangdong and SFTC are eligible for consideration for separate rates.
Shanghai Lansheng has reported that, for the majority of the POI,
it was owned ``by all the people'' and that it was later reorganized as
a shareholding company. It has indicated that its shares are traded on
the Shanghai stock exchange. In the Preliminary Determination of Sales
at Less Than Fair Value and Postponement of Final Determination:
Certain Paper Clips from the People's Republic of China (``Paper
Clips'') (59 FR 25885, 25887, May 18, 1994) the Department stated that
``a `municipal government' owns 70 percent of [Shanghai Lansheng's]
shares.'' There is no evidence on the record that this municipality
controls other exporters of cased pencils that made sales to the United
States during the POI. We will, however, evaluate this issue carefully
during verification.
Since ownership by all the people (the situation applicable to
Shanghai Lansheng during the majority of the POI) ``does not require
the application of a single rate'' and there was no central government
ownership during the later part of the POI, Shanghai Lansheng is
eligible for consideration for a separate rate.
China First has reported that it is a shareholding company and has
provided a list of its shareholders. According to China First, the
shareholders elect the board of directors which, in turn, appoints the
general manager. Its questionnaire response states that there are three
types of shares: A shares held by Chinese legal persons, B shares held
by non-Chinese legal persons and Enterprise shares. We do not have on
the record any information addressing the similarities or differences
in rights accruing to the various types of shares.
Based on our examination of the information provided regarding the
shareholder identities and the ownership structure of China First, we
have determined that we do not have enough information on the record to
grant it a separate rate at this time. Due to the proprietary nature of
the information, we are not able to discuss the ownership structure of
China First in further detail in this notice; however, there is a
proprietary decision memorandum regarding this issue on the record (see
Decision Memorandum of June 8, 1994). We are assigning China First the
PRC country-wide rate for purposes of this preliminary determination.
To establish whether a firm is sufficiently independent to be
entitled to a separate rate, the Department analyzes each exporting
entity under a test arising out of 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'') and amplified in Silicon
Carbide. Under the separate rates criteria, the Department assigns
separate rates only where respondents can demonstrate the absence of
both de jure and de facto governmental control over export activities.
1. Absence of De Jure Control
Three PRC laws that have been placed on the record in this
proceeding indicate that the responsibility for managing 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 control from the
government 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 list those products subject to direct
government control. Pencils do not appear on the Export Provisions list
and are not, therefore, subject to the export constraints.
The existence of these laws indicates Guangdong, SFTC and Shanghai
Lansheng are not de jure subject to central government 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, the Department has
determined that an analysis of de facto control is critical to
determining whether respondents are, in fact, subject to governmental
control.
2. Absence of De Facto Control
The Department typically considers four factors in evaluating
whether each respondent is subject to de facto government control of
its export functions: (1) Whether the export prices are set by or
subject to the approval of a 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 disposition of profits or
financing of losses (see Silicon Carbide).
Guangdong, SFTC and Shanghai Lansheng have each asserted that (1)
it establishes its own export prices; (2) it negotiates contracts
without guidance from any governmental entities or organizations; (3)
its management operates with a high degree of autonomy and there is no
information on the record that suggests central government control over
selection of management; and (4) it retains the proceeds of its export
sales, and has the authority to sell its assets and to obtain loans. In
addition, company-specific pricing during the POI does not suggest any
coordination among exporters (i.e., the prices for comparable products
appear to differ among companies). This information supports a
preliminary finding that there is a de facto absence of governmental
control of export functions.
Consequently, Guangdong, SFTC and Shanghai Lansheng have
preliminarily met the criteria for the application of separate rates.
We will examine this issue in detail at verification and determine
whether the questionnaire responses are supported by verifiable
documentation.
There is an additional issue relating to governmental control that
we will consider further for purposes of our final determination.
Guangdong and SFTC have indicated that the appointments of their
general managers are subject to approval by the local Commission on
Foreign Trade and Economic Cooperation (COFTEC) office. While the
significance of this is unclear, the evidence cited above indicates
that the COFTEC offices do not control the key functions of the
enterprises. However, we will examine at verification the precise
nature of the authority that the COFTEC offices exercise over the
enterprises.
Nonmarket Economy
The PRC has been treated as a nonmarket economy (NME) in past
antidumping investigations. (See, e.g., Final Determination of Sales at
Less than Fair Value: Sebacic Acid from the People's Republic of China
(54 FR 28053 (May 31, 1994)). No information has been provided in this
proceeding that would lead us to overturn our former determinations.
Therefore, in accordance with 771(18)(c) of the Act, we have treated
the PRC as an NME for purposes of this investigation.
Where the Department is investigating imports from an NME, section
772(c)(1) of the Act directs us to base FMV on the NME producers'
factors of production, valued in a comparable market economy that is a
significant producer of the merchandise. Section 773(c)(2) of the Act
alternatively provides that where available information is inadequate
for using the factors of production methodology, FMV may be based on
the export prices for comparable merchandise from market economy
countries at a comparable level of economic development.
In this investigation, the respondents have urged the Department to
make use of the alternative methodology provided in section 773(c)(2)
of the Act. In particular, they have argued that the primary input into
PRC pencils, lindenwood, cannot be valued elsewhere. Petitioner has
also questioned the Department's ability to value certain inputs using
publicly available published information (PAPI) from India, as Indian
input statistics cover broader product categories. Petitioner does not
request that the Department use the alternative methodology for FMV.
Instead, it suggests that U.S. producers' costs be used to value these
inputs.
For purposes of the preliminary determination, we have relied on
the methodology provided by section 773(c)(1) of the Act to determine
FMV. The sources of individual factor prices are discussed under the
FMV section, below. However, as a result of the comments made by
petitioner and respondents on the relevance of factor prices in India,
we will be seeking additional data on factor values and on export
prices that could also be used under the alternative methodology
provided in section 773(c)(2) of the Act for possible use in our final
determination.
Surrogate Country
As discussed above, section 773(c)(4) of the Act requires the
Department to value the NME producers' 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 nonmarket
economy country, and that are significant producers of comparable
merchandise. The Department has determined that India and Pakistan are
the countries most comparable to the PRC in terms of overall economic
development. (See memorandum from the Office of Policy to the file,
dated March 18, 1994.) In addition, there is evidence on the record
that pencils are produced in India.
Although India is the preferred surrogate country for purposes of
valuing the factors of production used in producing the subject
merchandise, we have resorted to Pakistan and Indonesia for certain
surrogate values where Indian values were either unavailable or
significantly outdated. We have obtained and relied upon PAPI wherever
possible.
Fair Value Comparisons
To determine whether sales of pencils from the PRC to the United
States by Guangdong and Shanghai Lansheng 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.
Because all of SFTC's responses were not received in time for
consideration in this preliminary determination and, therefore, we had
only partial information for calculating FMV, we have based SFTC's
margin on the best information available (BIA). (See ``Best Information
Available'' section 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 directly by the
Chinese exporters to unrelated parties in the United States prior to
importation into the United States.
For those exporters that responded to the Department's
questionnaire and were found to be eligible for a separate rate, we
calculated purchase price based on packed, FOB foreign-port prices to
unrelated purchasers in the United States. We made deductions for
containerization, loading, port handling expenses and foreign inland
freight valued in a surrogate country.
Foreign Market Value
We calculated FMV based on factors of production reported by the
factories which produced the subject merchandise for the three
exporters. The factors used to produce pencils include materials,
labor, and energy. We made adjustments to materials costs for the
resale of scrap materials, where applicable.
In determining which surrogate value to use for valuing each factor
of production, we selected, where possible, the PAPI 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 used surrogate transportation rates to value inland freight
between the source of the production factor and the pencil factories,
and between factories, where appropriate. In those cases where a
respondent failed to provide any information on transportation
distances and modes, we applied, as best information available, the
most expensive distance/modes combination (i.e., the longest truck
rates) that was available from the surrogate information we had
selected. For two modes of transportation (man-drawn carts, inland
water transport), we were unable to obtain PAPI or cable information in
time for this preliminary determination. To value these two modes of
transportation, we assumed that these forms competed effectively with
an alternate form of transportation over similar distances and used the
applicable rates for the alternate form.
To value the raw materials and packing materials, we used PAPI. Our
sources included: Indian Import Statistics for 1989, 1991 and 1992; and
Indonesian Import Statistics for 1989.
To value wood slats, we used the Asian market price for jelutong
wood in the sawn form during the POI as reported in the Market News
Service Report for Tropical Timber and Timber Products dated November
1993. To value wood logs, we used Indian import statistics for a group
of woods in rough form which included jelutong wood. The record in this
proceeding shows that jelutong wood is used in pencil production and is
similar to lindenwood, the input used by the PRC producers. For
ferrules we used Indian import statistics for a basket aluminum
category and for paint we used the import statistics category
identified by respondents.
To value electricity, we used PAPI from the Asian Development Bank.
To value coal and natural gas, we used Indian Import Statistics for
1992 and the Monthly Statistics of Mineral Production, Indian Bureau of
Mines dated November 1992, respectively. 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 because
we could not locate a value for water in any Indian or Pakistani
publication.
For all material and energy prices 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
published in International Financial Statistics (IFS) by the
International Monetary Fund.
To value labor amounts, we used the International Labor Office's
1993 Yearbook of Labor Statistics. To determine the number of hours in
an Indian workday, we used the Country Reports: Human Rights Practices
for 1990. 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.
To value factory overhead, we calculated percentages based on
elements of industry group income statements from The Reserve Bank of
India Bulletin (RBI), December 1992. We based our overhead percentage
calculations on the RBI data, adjusted to reflect an energy-exclusive
overhead percentage. For selling, general and administrative (SG&A)
expenses, we calculated percentages based on the RBI data. We used the
calculated SG&A percentages because they were greater than the ten
percent statutory minimum. We also used the calculated profit
percentage because it was greater than the statutory minimum of eight
percent of materials, labor, factory overhead, and SG&A expenses.
We made no adjustments for selling expenses. We added surrogate
freight costs for the delivery of packing materials to the factories
producing pencils.
Best Information Available
Because information has not been presented to the Department to
prove otherwise, any PRC companies not participating in this
investigation are not entitled to separate dumping margins. Potential
exporters identified by the Ministry of Foreign Trade and Economic
Cooperation (MOFTEC) have failed to respond to our questionnaire. In
the absence of responses from these and other PRC exporters during the
POI, we are basing the PRC country-wide rate on BIA. As discussed
above, we are also applying BIA to SFTC.
In determining what to use as BIA, the Department follows a two-
tiered methodology, whereby the Department normally assigns lower
margins to those respondents that cooperated in an investigation and
more adverse margins for those respondents which did not cooperate in
an investigation. As outlined in the Preliminary Determination of Sales
at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products
From Argentina (``Argentina Steel''), 58 FR 7066, 7069, 7070 (February
4, 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. Here, since some PRC exporters failed to respond to
our questionnaire, we are assigning to them the highest margin in the
petition, as recalculated by the Department for the initiation and for
this determination using petitioner's updated information submitted May
1994. This rate applies to all exporters other than those responding
exporters which have shown their independence from central government
control.
Since SFTC has been cooperative in this proceeding, and since we
have preliminarily determined it is eligible for a separate rate, we
are assigning a margin based on the highest calculated rate for any
respondent in the investigation (see Argentina Steel).
Verification
As provided in section 776(b) of the Act, we will verify all
information determined to be acceptable for use in making our final
determination.
Suspension of Liquidation
In accordance with section 733(d)(1) of the Act, we are directing
the Customs Service to suspend liquidation of all entries of pencils
from the PRC that are entered, or withdrawn from warehouse, for
consumption on or after the date of publication of this notice 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 suspension of liquidation
instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
average
Manufacturer/producer/exporter margin
percentage
------------------------------------------------------------------------
Guangdong.................................................. 58.34
SFTC....................................................... 100.98
Shanghai Lansheng.......................................... 100.98
PRC country-wide rate*..................................... 107.63
------------------------------------------------------------------------
*Including China first.
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine before the later of 120 days after the date of
this preliminary determination or 45 days after our final determination
whether these imports are materially injuring, or threaten material
injury to, the U.S. industry.
Public Comment
In accordance with 19 CFR 353.38, case briefs or other written
comments in at least ten copies must be submitted to the Assistant
Secretary for Import Administration no later than August 8, 1994, and
rebuttal briefs, no later than August 12, 1994. In accordance with 19
CFR 353.38(b), we will hold a public hearing, if requested, to afford
interested parties an opportunity to comment on arguments raised in
case or rebuttal briefs. Tentatively, the hearing will be held at 10
a.m. on August 15, 1994, at the U.S. Department of Commerce, Room 3708,
14th Street and Constitution Avenue NW., Washington, DC 20230. Parties
should confirm by telephone the time, date, and place of the hearing 48
hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
B-099, within ten days of the publication of this notice. Requests
should contain: (1) The party's name, address, and telephone number;
(2) the number of participants; and (3) a list of the issues to be
discussed. In accordance with 19 CFR 353.38(b), oral presentations will
be limited to issues raised in the briefs. If this investigation
proceeds normally, we will make our final determination by August 22,
1994.
This determination is published pursuant to section 733(f) of the
Act and 19 CFR 353.15(a)(4).
Dated: June 8, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-14624 Filed 6-15-94; 8:45 am]
BILLING CODE 3510-DS-P