[Federal Register Volume 59, Number 238 (Tuesday, December 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30581]


[[Page Unknown]]

[Federal Register: December 13, 1994]


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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-834]

 

Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Disposable Pocket Lighters From the People's Republic of China

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

EFFECTIVE DATE: December 13, 1994.

FOR FURTHER INFORMATION CONTACT: Julie Anne Osgood or Todd Hansen, 
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) 482-0167 or 482-1276, respectively.

Preliminary Determination

    We preliminarily determine that disposable pocket lighters 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, as provided in section 
733 of the Tariff Act of 1930 (the ``Act''), as amended. The estimated 
margins of sales at less than fair value are shown in the ``Suspension 
of Liquidation'' section of this notice.

Case History

    Since the initiation of this investigation on May 31, 1994 (59 FR 
29412, June 7, 1994), the following events have occurred:
    On June 23, 1994, the United States International Trade Commission 
(``ITC'') issued an affirmative preliminary injury determination (see 
ITC Investigation No. 303-TA-25).
    On June 13, 1994, we sent a letter to the China Chamber of Commerce 
for Machinery and Electronic Products Import and Export (``CCCME'') 
requesting names and addresses of PRC producers and exporters of 
disposable pocket lighters (``lighters'') sold in the United States. On 
June 22, 1994, we received a list of producers and exporters of 
lighters from the CCCME. A questionnaire was presented on July 1, 1994, 
to the CCCME and to the Ministry of Foreign Trade and Economic 
Cooperation (``MOFTEC'') for distribution to PRC producers and 
exporters of lighters.
    On September 20, 1994, we postponed the preliminary determination 
until December 5, 1994 (59 FR 48284).
    On September 9, 1994, responses to the Department's questionnaire 
were received from the following exporters of lighters: China National 
Overseas Trading Corporation (Ningbo) (``COTCO''), Guangdong Light 
Industrial Products Import and Export (``GLIP''), Gao Yao (Hong Kong) 
Hua Fa Industrial Company, Ltd. (``Gao Yao''), PolyCity Industrial, 
Ltd. (``PolyCity''), and Cli-Claque Company Limited (``Cli-Claque''). 
On October 12 and 18, 1994, we sent supplemental/deficiency 
questionnaires to the respondents. Responses to the supplemental 
questionnaires were received on November 14, 1994. On November 23, 
1994, petitioner alleged critical circumstances.

Scope of the Investigation

    The products covered by this investigation are disposable pocket 
lighters, whether or not refillable, whose fuel is butane, isobutane, 
propane, or other liquified hydrocarbon, or a mixture containing any of 
these, whose vapor pressure at 75 degrees fahrenheit (24 degrees 
celsius) exceeds a gage pressure of 15 pounds per square inch. Non-
refillable pocket lighters are imported under subheading 9613.10.0000 
of the Harmonized Tariff Schedule of the United States (``HTSUS''). 
Refillable, disposable pocket lighters would be imported under 
subheading 9613.20.0000. Although the HTSUS subheadings are provided 
for convenience and Customs purposes, our written description of the 
scope of this proceeding is dispositive.
    Windproof refillable lighters, as described in a memorandum to 
Barbara R. Stafford, dated December 5, 1994, are excluded from the 
scope of this investigation.

Period of Investigation

    The period of investigation (``POI'') is December 1, 1993 through 
May 31, 1994.

Nonmarket Economy Country Status

    The Department has treated the PRC as a nonmarket economy country 
(``NME'') in all past antidumping investigations (see, e.g., Notice of 
Final Determination of Sales at Less than Fair Value: Saccharin from 
the PRC (59 FR 58818, November 15, 1994). No information has been 
provided in this proceeding that would lead us to overturn our former 
determinations. Therefore, in accordance with section 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 
773(c)(1) of the Act directs us to base foreign market value (``FMV'') 
on the NME producers' factors of production, valued in a market economy 
that is at a level of economic development comparable to that of the 
NME under investigation and that is a significant producer of 
comparable 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.
    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 in the FMV 
section below.

Separate Rates

    All five respondents have requested separate antidumping duty 
rates. In cases involving non-market economies, the Department's policy 
is to assign a separate rate only when an exporter can demonstrate the 
absence of both de jure and de facto governmental control over export 
activities. In determining whether companies should receive separate 
rates, we focus our attention on the exporter rather than the 
manufacturer, as our concern is manipulation of export prices, and we 
examine PRC government control of the exporter. In this case, two of 
the five respondents are Hong Kong exporters that are involved in joint 
ventures in the PRC that manufacture lighters. Since PolyCity and Cli-
Claque are located outside the PRC, the PRC government does not have 
jurisdiction over them. Moreover, the PRC government does not have any 
ownership interest in these exporters and, therefore, it cannot 
exercise control through ownership of these companies. Further, we have 
no evidence on the record indicating that the PRC government exerts 
control over these exporters. (See, business proprietary memorandum to 
the file dated December 5, 1994.) On this basis, we preliminarily 
determine that there is no need to apply our separate rates analysis 
and that PolyCity and Cli-Claque are entitled to individual rates.
    In contrast to PolyCity and Cli-Claque, Gao Yao is a 50/50 joint 
venture between a Chinese company and Hong Kong company. The joint 
venture owns both the production and export facilities used to 
manufacture and export the lighters it sells to the United States. 
Given the direct PRC ownership in Gao Yao's export facilities, we have 
preliminarily determined that it is appropriate to apply our separate 
rates analysis to this company.
    COTCO's and GLIP's business licenses indicate that they are owned 
``by all the people.'' As stated in the Final Determination of Sales at 
Less than Fair Value: Silicon Carbide from the PRC (59 FR 22585, May 2, 
1994) (``Silicon Carbide''), ``ownership of a company by all the people 
does not require the application of a single rate.'' Accordingly, these 
companies are eligible for consideration for a separate rate under our 
criteria.
    To establish whether a firm is 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 PRC (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

    The respondents submitted a number of documents to demonstrate 
absence of de jure control, including two PRC laws indicating that the 
responsibility for managing enterprises owned by ``all 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''); 
and the ``Regulations for Transformation of Operational Mechanism of 
State-Owned Industrial Enterprises,'' approved on August 23, 1992 
(``1992 Regulations''). Respondents' submission also included 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 ``all the 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 contains 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 employees 
without government approval (Article XVII).
    The Export Provisions indicate those products subject to direct 
government control. Lighters do not appear on the Export Provisions 
list and are not, therefore, subject to export constraints.
    Consistent with Silicon Carbide, we determine that the existence of 
these laws demonstrates that COTCO, GLIP, and Gao Yao are not subject 
to de jure central government control with respect to export sales and 
pricing decisions. 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 a de facto analysis is critical to 
determine whether COTCO, Gao Yao and GLIP are subject to governmental 
control over export sales and pricing decisions.

2. Absence of De Facto Control

    The Department typically considers four factors in evaluating 
whether a respondent is subject to de facto government control of its 
export functions: (1) Whether the export prices are set by, or subject 
to the approval of, a 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).
    In response to our questionnaire, COTCO, GLIP, and Gao Yao have 
each asserted that they:
     Are able to borrow at market rates from commercial banks;
     Maintain their own bank accounts, including foreign 
exchange earnings;
     Are not restricted in their access to their bank accounts;
     Operate at a profit;
     Make independent business decisions, including what to 
export;
     Set their own prices independently and that the prices are 
not subject to review by trading companies or government authorities;
     Base their relationships with suppliers and customers on 
arm's length negotiations without governmental interference;
     Are not subject to foreign exchange targets set by either 
the central or provincial governments;
     Have the ability to sell, transfer, or acquire assets; 
Exporter-Specific Information:
    The following is a summary of additional information provided by 
the exporters:
    Gao Yao has stated that:
     It is a Sino-Hong Kong 50-50 joint venture;
     It has no legal relationship with either the local, 
regional and/or national government;
     It maintains a bank account in Hong Kong where all monies 
received from Gao Yao's foreign sales are deposited and that the 
allocation of foreign currency is not subject to governmental review or 
approval;
     Chinese joint venture and other laws confirm Gao Yao's 
independence (Gao Yao submitted an exhibit consisting of laws 
pertaining to Sino-Foreign joint ventures in its response);
     Management is selected by the board of directors, without 
any governmental interference;
     Profits are divided evenly between the joint venture 
partners according to the shares invested;
     The managing director of Gao Yao is a Hong Kong resident; 
and
     All contracts are negotiated and signed by the officials 
of Gao Yao's Hong Kong sales office.
    GLIP has stated that:
     Management is selected by its board of directors;
     Current ownership of the company is by ``all the people.'' 
The company received authorization to privatize on March 5, 1993, and 
``is in the process of totally privatizing;'' and
     It is independently managed and operated (a statement to 
this effect from CCCME was included in the response as an exhibit).
    COTCO has stated that:
     It is a limited liability company, owned by COTCO Beijing, 
which, in turn, is an ``all the people'' company;
     It is independently managed and operated (a statement to 
this effect from CCCME was included in the response as an exhibit);
     Its manager is hired following a public notice of vacancy, 
screening, and hiring negotiations; the manager then selects the 
company's management committee; the decisions regarding the selection 
and promotion of management are not subject to any entity's review or 
approval.
    The information submitted on behalf of each of the three companies 
supports a preliminary finding that there is a de facto absence of 
governmental control of export functions of each of the three 
companies.
    Consequently, COTCO, Gao Yao and GLIP 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.

Surrogate Country

    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 economies that (1) are at a level of economic development 
comparable to that of the NME country and (2) are significant producers 
of comparable merchandise. The Department has determined that Indonesia 
is the most suitable surrogate for purposes of this investigation. 
Based on available statistical information, Indonesia is at a level of 
economic development comparable to that of the PRC, and Indonesian 
export statistics indicate that the country is a significant producer 
of lighters. Based on available information, Indonesia is the only 
surrogate country, of those identified by our Office of Policy, that 
meet both of these criteria. (See, memorandum to the file from Todd 
Hansen to Carole Showers, dated December 5, 1994, Surrogate Country 
Selection and memorandum from David Mueller, Director, Office of Policy 
to Susan Kuhbach, Director, Office of Countervailing Investigations, 
dated September 8, 1994, Lighters from the People's Republic of China, 
Non-Market Economy Status and Surrogate Country Selection.)

Fair Value Comparisons

    To determine whether sales of lighters from the PRC by COTCO, Gao 
Yao, GLIP, PolyCity and Cli-Claque were made at less than fair value, 
we compared the United States price (``USP'') to FMV, as specified in 
the ``United States Price'' and ``Foreign Market Value'' sections of 
the notice.

United States Price

    For all respondents, we based USP on purchase price, in accordance 
with section 772(b) of the Act, because lighters were sold directly to 
unrelated parties in the United States prior to importation into the 
United States, and because exporter's sales price (``ESP'') methodology 
was not indicated by other circumstances.
    We calculated purchase price based on packed, FOB foreign-port 
prices to unrelated purchasers in the United States, and packed, CIF 
prices, where appropriate. We made deductions for foreign inland 
freight, containerization, loading, port handling expenses, and marine 
insurance, as indicated. Generally, costs for these items were valued 
in the surrogate country. However, where inland freight was purchased 
from market economy suppliers and paid for in a market economy 
currency, we used the cost actually incurred by the exporter.

Foreign Market Value

    In accordance with section 773(c) of the Act, we calculated FMV 
based on factors of production reported by the factories in the PRC 
which produced the subject merchandise for the five responding 
exporters. The factors used to produce lighters include materials, 
labor and energy. To calculate FMV, the reported factor quantities were 
multiplied by the appropriate surrogate values from Indonesia for those 
inputs purchased domestically from PRC suppliers. Where inputs were 
imported from market economy countries and paid for in a market economy 
currency, we used the actual costs incurred by the producers to value 
those factors (see, e.g., Final Determination of Sales at Less Than 
Fair Value: Oscillating Ceiling Fans From the People's Republic of 
China, 56 FR 55271, October 25, 1991). Where a respondent failed to 
provide certain factor information in a usable form, we have used 
publicly available information from the petition and other respondents 
as best information available in valuing these factors.
    Cli-Claque has argued that since it purchases certain input parts 
produced in the PRC from a Hong Kong reseller, the Department should 
accept these prices as market-determined and use them when calculating 
FMV. We disagree with this argument and have not used the prices for 
these inputs in calculating FMV. For purposes of valuing factors of 
production, it is the Department's practice not to use prices from one 
PRC producer to an unrelated PRC producer because those prices are 
distorted. In the present case, the two Hong Kong companies negotiated 
prices for inputs produced in the PRC on behalf of their related 
production facilities located in the PRC. Therefore, we have determined 
that these input prices should not be used to value the factors of 
production in this case. We have only used prices for imported inputs 
which were produced in market-based economies to value those factors.
    In determining which surrogate value to use for each factor of 
production which was not sourced from a market-economy country, we 
selected, where possible, from publicly available, published 
information (``PAPI'') 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.
    With the exception of butane, we used the Indonesian import price 
taken from the Indonesian Foreign Trade Statistical Bulletin--Imports, 
November 1993. For butane, however, the amount imported into Indonesia 
was negligible compared to the amount exported from that country. 
Therefore, for those PRC producers that did not import butane from 
market economy sources, we relied on Indonesian export statistics, as 
reported in the Indonesian Foreign Trade Statistical Bulletin--Exports, 
November 1993.
    We used Indonesian transportation rates taken from a September 18, 
1991, U.S. State Department cable from the U.S. Embassy in Indonesia to 
value inland freight between the source of the production factor and 
the disposable lighter factories.
    To value electricity, we used public information from the Electric 
Utilities Data Book for the Asian and Pacific Region (January 1993) 
published by the Asian Development Bank. To value labor amounts, we 
used labor rates published by the Bureau of International Labor 
Affairs, U.S. Department of Labor, in Foreign Labor Trends-Indonesia.
    We adjusted the factor values, when necessary, to the POI using 
wholesale price indices (``WPIs'') published by the International 
Monetary Fund (``IMF'').
    To value factory overhead, we calculated percentages based on a 
December 2, 1994 U.S. State Department cable from the U.S. Embassy in 
Jakarta giving elements of industry group income statements.
    For general expense percentages, we used the statutory minimum of 
10 percent of materials, labor, and overhead costs calculated for each 
factory. For profit we used the statutory minimum of eight percent of 
materials, labor, factory overhead, and general expenses. We did not 
have Indonesian values for either general expenses or profit.
    We added packing based on Indonesian values obtained from the 
Indonesian Foreign Trade Statistical Bulletin--Imports, November 1993.
    Cli-Claque argues that since it makes all of its sales/exports from 
Hong Kong, has all of its management, administrative and selling 
operations in Hong Kong, and is wholly-owned and operated as a market-
economy producer, we should treat Cli-Claque as a market-economy 
producer and base FMV on Hong Kong home market prices. Failing this, 
Cli-Claque maintains that since the PRC production facility does not 
know Cli-Claque's customers or the ultimate destination of the 
merchandise and since the products enter the commerce of Hong Kong, we 
should, at a minimum, consider Cli-Claque as a third country reseller 
and consider Hong Kong a viable home market on which to base FMV.
    We disagree with Cli-Claque on both accounts. First, its related 
production facility is located in a non-market economy country and, 
therefore, the FMV of the subject merchandise must be determined using 
the factors of production methodology. Second, given the relationship 
between Cli-Claque and the PRC production facility, we do not consider 
that there is a ``purchase'' from the PRC production facility by Cli-
Claque within the meaning of section 773(f) of the Act. Therefore, Cli-
Claque is not considered a ``reseller'' within the meaning of that 
provision.

Best Information Available

    Potential exporters identified by MOFTEC 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 
best information available (BIA). When a company refuses to provide 
information requested in the form required, or otherwise significantly 
impedes the Department's investigation, it is appropriate for the 
Department to assign to the company the higher of (a) the highest 
margin alleged in the petition, or (b) the highest calculated rate of 
any respondent in the investigation (see 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) 
(``Belgium Steel''). Since some PRC exporters failed to respond to our 
questionnaire, we are assigning to all other PRC exporters the highest 
margin in the May 27, 1994, amendment to the petition.

Critical Circumstances

    On November 23, 1994, petitioner alleged that ``critical 
circumstances'' exist with respect to imports of disposable pocket 
lighters from the PRC. We did not receive the allegation in time to 
make a critical circumstance determination in this preliminary 
determination. However, we will make a preliminary determination with 
respect to critical circumstances no later than December 23, 1994, 
pursuant to 19 CFR 353.16(b)(2)(ii).

Verification

    As provided in section 776(b) of the Act, we will verify 
information used in making our final determination.

Suspension of Liquidation

    For Gao Yao, we calculated a zero margin. Consistent with Notice of 
Final Determination of Sales at Less Than Fair Value: Certain Cased 
Pencils from the People's Republic of China (59 FR 55625, November 8, 
1994), merchandise that is sold by Gao Yao but manufactured by other 
producers will not receive the zero margin. Instead, such entries will 
be subject to the ``All Others'' margin.
    In accordance with section 733(d)(1) of the Act, we are directing 
the Customs Service to suspend liquidation of all entries of disposable 
pocket lighters from the PRC, as defined in the ``Scope of the 
Investigation'' section of this notice, 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 dumping 
margins, as shown below. This suspension of liquidation will remain in 
effect until further notice. The weighted-average dumping margins are 
as follows:

------------------------------------------------------------------------
                                                                Margin  
               Manufacture/producer/exporter                  (Percent) 
------------------------------------------------------------------------
China National Overseas Trading Corp.......................        37.48
Cli-Claque Company Ltd.....................................         7.03
Gao Yao (HK) Hua Fa Industrial Co., Ltd....................      \1\0.10
Guangdong Light Industrial Products Import and Export Corp.        35.08
PolyCity Industrial, Ltd...................................        63.09
All others.................................................       197.85
------------------------------------------------------------------------
\1\De minimus.                                                          

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 whether these imports are materially injuring, 
or threaten material injury to, the U.S. industry within 75 days after 
our final determination.

Public Comment

    Interested parties who wish to request a hearing 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, case briefs or other written 
comments in at least ten copies must be submitted to the Assistant 
Secretary no later than January 20, 1995, and rebuttal briefs no later 
than January 27, 1995. A hearing, if requested, will be held on Friday, 
February 3, 1995, at 10:00 am at the U.S. Department of Commerce in 
Room 1412. Parties should confirm by telephone the time, date, and 
place of the hearing 48 hours prior to the scheduled time. In 
accordance with 19 CFR 353.38(b), oral presentations will be limited to 
issues raised in the briefs.
    We will make our final determination not later than 75 days after 
of this preliminary determination.
    This determination is published pursuant to section 733(f) of the 
Act and 19 CFR 353.15(a)(4).

    Dated; December 5, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-30581 Filed 12-12-94; 8:45 am]
BILLING CODE 3510-DS-P