[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31962]


[Federal Register: December 28, 1994]



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DEPARTMENT OF COMMERCE
International Trade Administration

[A-570-830]


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

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

EFFECTIVE DATE: December 28, 1994.

FOR FURTHER INFORMATION CONTACT:
David J. Goldberger or Louis Apple, 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-
4136 or (202) 482-1769, respectively.

Final Determination:

    We determine that courmarin 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 (LTFV), a provided in section 735 of the Tariff Act of 
1930, as amended (the Act). The estimated margins are shown in the 
``Continuation of Suspension of Liquidation'' section of this notice. 
The U.S. Department of Commerce (the Department) also determines that 
critical circumstances exist for all exporters except Jiangsu Native 
Produce Import & Export Corp. (Jiangsu Native).

Case History

    Since the preliminary determination on July 24, 1994 (Notice of 
Preliminary Determination of Sales at Less Than Fair Value: Courmarin 
from the People's Republic of China, 59 FR 3841, July 30, 1994), the 
following events have occurred.
    During August 1994, respondents submitted revised information on 
factors of production. From August 13 through 22, 1994, we verified the 
responses of the exporters Jiangsu Native and Tianjin Native Produce 
Import & Export Corp. (Tianjin Native); and the manufacturers Changzhou 
No. 2 Chemical Factory (Changzhou No. 2) and Tianjin Perfumery Factory 
(Tianjin Perfumery). Prior to scheduled verifications, counsel for 
Tianjin Chemicals Import & Export Corp. and Gaoyo City Perfumery 
Factory advised the Department that these clients would not agree to 
verification. On August 18, 1994, counsel withdrew its appearance for 
the two respondents.
    On August 11, 1994, we received a request from respondents to 
postpone the final determination in this investigation, pursuant to 19 
CFR 353.20. Accordingly, on August 31, 1994, we did so (59 FR 46618, 
September 9, 1994).
    Petitioner and respondents filed case briefs on October 19, 1994, 
and rebuttal briefs on October 24, 1994. A public hearing was held on 
October 26, 1994.

Scope of Investigation

    The product covered by this investigation is courmarin. Courmarin 
is an aroma chemical with the chemical formula C9H6O2 
that is also known by other names, including 2H-1-benzopyran-2-one, 
1,2-benzopyrone, cis-o-coumaric acid lactone, courmarinic anhydride, 2-
Oxo-1,2-benzopyran, 5,6-benzo-alpha-pyrone, ortho-hydroxyc innamic acid 
lactone, cis-ortho-courmaric acid anhydride, and tonka bean camphor.
    All forms and variations of courmarin are included within the scope 
of the investigation, such as courmarin in crystal, flake, or powder 
form, and ``crude'' or unrefined courmarin (i.e. prior to purification 
or crystallization). Excluded from the scope are ethylcourmarins 
(C11H10O2) and methylcoumarins (C10H8O2). 
Coumarin is classifiable under subheading 2932.21.0000 of the 
Harmonized Tariff Schedule of the United States (HTSUS). Although the 
HTSUS subheading is provided for convenience and customs purposes, our 
written description of the scope of this investigation is dispositive.

Period of Investigation

    The period of investigation (POI) is July 1 through December 31, 
1993.

Separate Rates

    Both of the participating exporters, Jiangsu Native and Tianjin 
Native, have requested a separate, company-specific dumping margin. 
Their respective business licenses indicate that they are owned ``by 
all the people.'' In the Final Determination of Sales at Less Than Fair 
Value: Silicon Carbide from the People's Republic of China, 59 FR 
22585, (May 2, 1994) (Silicon Carbide), we found that the PRC central 
government had devolved control of state-owned enterprises, i.e., 
enterprises ``owned by all the people.'' As a result, we determined 
that companies owned ``by all the people'' were eligible for individual 
rates, if they met the criteria developed in the Final Determination of 
Sales at Less Than Fair Value: Sparklers from the People's Republic of 
China 56 FR 20588 (May 6, 1991) (Sparklers) and amplified in Silicon 
Carbide. Under this analysis, the Department assigns a separate rate 
only when an exporter can demonstrate the absence of both de jure and 
de facto governmental control over export activities.
De Jure Analysis\1\
    The PRC laws placed on the record of this case establish that the 
responsibility for managing companies owned by ``all the people,'' 
including the respondent companies, has been transferred from the 
government to the enterprise itself. These laws include: ``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). In particular, the 
1988 Law states that enterprises have the right to set their own prices 
(see Article 26). This principle was restated in the 1992 Regulations 
(see Article IX). The Export Provisions list those products subject to 
direct government control. Coumarin does not appear on the Export 
Provisions list and is not, therefore, subject to the constraints of 
those provisions. Consistent with Silicon Carbide, we determine that 
the existence of these laws demonstrates that Jiangsu Native and 
Tianjin Native, companies owned by ``all the people,'' are not subject 
to de jure control.
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    \1\Evidence supporting, though not requiring, a finding of de 
jure absence of central control includes: (1) An absence of 
restrictive stipulations associated with an individual exporter's 
business and export licenses; (2) any legislative enactments 
decentralizing control of companies; or (3) any other formal measure 
by the government decentralizing control of companies.
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    An additional PRC law concerning foreign exchange was obtained by 
the Department during this investigation. During verification, 
Changzhou No. 2 submitted a copy of the PRC's ``Provisional Regulations 
on Handling the Turnover to the State of Foreign Exchange Quotas,'' 
issued on January 1, 1991 (Foreign Exchange Regulations). As stated in 
these regulations, ``[i]n the case of general commodities, 20 percent 
of export exchange earnings shall be turned over gratis to the State.'' 
We find that these foreign exchange requirements have functioned as an 
implied export tax rather than a demonstration of state control over 
export activities. Therefore, the existence of these foreign exchange 
regulations is not a cause for a finding of de jure government control. 
(See Comment 1 for further discussion of this issue).
    In light of reports\2\ indicating that laws shifting control from 
the government to the enterprises themselves have not been implemented 
uniformly, our standard analysis of de facto control becomes critical 
in determining whether respondents are, in fact, subject to 
governmental control.
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    \2\See ``PRC Government Findings on Enterprise Autonomy,'' in 
Foreign Broadcast Information Service-China-93-133 (July 14, 1993) 
and 1992 Central Intelligence Agency 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.).
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De Facto Control Analysis\3\
    In the course of verification, we confirmed that export prices for 
both Jiangsu and Tianjin Native are not set, nor subject to approval, 
by any government authority. This point was supported by the companies' 
sales documentation and customer correspondence. We also confirmed, 
based on examination of documents related to sales negotiations, 
written agreements and other correspondence, that respondents have the 
authority to negotiate and sign contracts and other agreements 
independent of government intervention. We further found that, during 
the POI, although required to remit a portion of their foreign exchange 
earnings to the government, respondents retained proceeds from their 
export sales, net of the ``implied export tax,'' and made independent 
decisions regarding disposition of profits and financing of losses. The 
respondents' financial statements, accounting records, and bank 
statements supported this conclusion.
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    \3\The factors considered include: (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).
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    Based on our examination of company correspondence files during 
verification, we have determined that both Jiangsu Native and Tianjin 
Native had autonomy from the central government in making decisions 
regarding the selection of management. In the case of Tianjin Native, 
the general manager was elected by an employee assembly. We found no 
involvement by any government entity in Tianjin Native's selection of 
management.
    With respect to Jiangsu Native, we found that the general manager 
was appointed by the local administering authority, the Jiangsu Council 
on foreign Trade and Economic Cooperation (JCOFTEC). While this may 
indicate that Jiangsu Native is subject to the control of JCOFTEC, 
there is no evidence that any other exporter of the subject merchandise 
is currently under the control of JCOFTEC. Therefore, we have concluded 
that this does not preclude Jiangsu Native from receiving a separate 
rate.\4\ This determination is consistent with our recent decision in 
Final Determination of Sales at Less Than Fair Value: Paper Clips from 
the People's Republic of China, 59 JR 51168, (October 7, 1994) (Paper 
Clips).
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    \4\All non-responding exporters are presumed to be under the 
control of the central government. There is no basis on which to 
conclude that any non-responding exporter is controlled by JCOFTEC.
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    Based on the foregoing analysis, we have determined that Jiangsu 
Native and Tainjin Native are entitled to separate rates.

Nonmarket Economy

    The PRC has been treated as a nonmarket economy country (NME) in 
past antidumping investigations (see e.g., Final Determination of Sales 
at Less Than Fair Value: Saccharin from the People's Republic of China, 
59 FR 58818 (November 15,1994) (Saccharin). 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 continue to treat the PRC as an NME for purposes of this 
investigation.

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 economy countries that are (1) at a level of economic 
development comparable to that of the NME country, and (2) significant 
producers of comparable merchandise. The Department has determined that 
India is the country most comparable to the PRC in terms of overall 
economic development (see Memorandum from David Mueller, Director, 
Office of Policy, to Gary Taverman, Director of Division I of Office of 
Antidumping Investigations, dated March 10, 1994). In addition, there 
is evidence on the record that India is a significant producer of 
coumarin.

Fair Value Comparisons

    To determine whether sales of coumarin from the PRC to the United 
States by Jiangsu Native and Tianjin Native were made at less than fair 
value, we compared the United States price (USP) to the foreign market 
value (FMV), as specified in the ``United States Price'' and ``Foreign 
Market Value'' sections of this notice.

United States Price

    United States price was calculated on the basis of purchase price, 
as described in the preliminary determination, in accordance with 
section 772(b) of the Act. Pursuant to findings at verification, we 
adjusted foreign inland freight for Changzhou No. 2 based on verified 
distances between factory and port of exportation. No additional 
revisions were made to either exporter's USP.

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 two participating 
exporters. We calculated FMV based on factors of production as cited in 
the preliminary determination, making the following adjustments:
     For Tianjin Perfumery, we based the value for the 
salicylaldehyde input on a weighted-average of self-produced 
salicylaldehyde and purchased salicylaldehyde, according to the 
proportion of each used during the POI. Labor and energy factors were 
prorated between salicylaldehyde and coumarin production based on 
verification information. (See Comment 5 for further discussion).
     For Changzhou No. 2, we recalculated inland freight 
distances between factory and input supplier, based on verified 
distances; adjusted the number of direct labor hours upward, on 
verified time sheets and included a factor for unreported usage of 
plastic bags for packing, which was discovered at verification.
     We added input freight values to packing materials for 
both producers.
     We revised the factor calculations for both producers to 
remove water as a separate material input, as the Department is 
treating water as part of ``factory overhead'' (see Comment 9 for 
further discussion).
    To calculate FMV, the verified factor amounts for each company were 
multiplied by the appropriate surrogate values for the different input 
materials. In determining which surrogate value to use for valuing each 
factor of production, we selected, where it was available and was non-
aberrational, publicly available published information (``public 
information'') from India. If there were multiple such sources for a 
given factor, we selected the value that was (a) most current; (b) 
product specific; and (c) tax-exclusive. With regard to those few 
factors for which we did not have public information, or where such 
values were considered aberrational (as discussed below), we have 
relied on price quotes obtained in India and submitted by petitioner. 
As a result, we have used the same surrogate values used in the 
preliminary determination, with the following exceptions:
     For chlorine and hydrochloric acid, we have reassigned 
values based on price quotes submitted by petitioner, because we found 
that values derived from Indian import statistics are aberrational. 
(See Comment 6 for further discussion of this issue.)
     For inputs purchased from market-economy countries, we 
have assigned the market price to those inputs, if they were purchased 
by the manufacturers directly from foreign suppliers in convertible 
currency. Inputs purchased from market-economy countries by trading 
companies for use by their suppliers, have been assigned the surrogate 
value (see Comment 7 for further discussion of this issue).
    Finally, with respect to by-product offsets, we have revised our 
FMV calculations to offset the cost to manufacture coumarin by the 
amount of by-product recovered, which is consistent with Generally 
Accepted Accounting Principles (GAAP) and Department practice (see 
Final Determination of Sales at Less Than Fair Value: Sebacic Acid from 
the PRC, 59 FR 28053 (May 31, 1994)) (``Sebacic Acid''). In the 
preliminary determination, we accepted an offset to the cost of 
materials for by-product values. For Changzhou No. 2, we have 
disallowed the offset for sodium hypochlorite because the company could 
not demonstrate than an economic benefit accrued to the firm from the 
disposition of this by-product (see Comment 8 for further discussion).

Best Information Available (BIA)

    In this investigation, some PRC exporters failed to respond to our 
questionnaire or failed to participate in verification. We have 
determined that those exporters should receive rates based on BIA. In 
addition, because we presume all exporters to be centrally controlled, 
absent verified information to the contrary, in accordance with section 
776(c) of the Act, we have assigned a margin based on BIA to all 
exporters who have not demonstrated their independence from central 
control. This determination is consistent with our use of a BIA-based 
``All Others'' rate in other recent investigations (see e.g., Silicon 
Carbide).
    In determining what to use as BIA, the Department follows a two-
tiered methodology, whereby the Department normally assigns less 
adverse margins to those respondents that cooperated in an 
investigation and more adverse margins for those respondents that did 
not cooperate in an investigation. As 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 Plated 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, (b) the highest calculated rate of any 
respondent in the investigation, or (c) the margin from the preliminary 
determination for that firm.
    We consider all PRC exporters that did not respond, failed to 
participate in verification, or otherwise did not participate in the 
investigation, to be uncooperative and are assigning to them the 
highest margin based on information submitted in the petition, as 
recalculated by the Department. In recalculating the petition rate, we 
reassigned the value of salicylaldehyde based on the average unit value 
for the Indian import statistics category that includes 
salicylaldehyde. We did not adjust the petition margins for chlorine 
and hydrochloric acid values, because these are inputs used in 
salicylaldehyde production, and the petition's margin methodology was 
not based on the input values for salicylaldehyde. When applying BIA 
from the petition, Department practice is not to revise the information 
accepted at initiation, except where the petition includes erroneous or 
grossly aberrational data (see e.g., 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) (Pencils). In this instance, 
the surrogate value cited for salicylaldehyde, the principal raw 
material, was fair in excess of any other value for the material 
obtained in the course of this investigation. Therefore, we revised the 
petition calculation using the same value for salicylaldehyde that we 
are using in our company-specific FMV calculations. The recalculated 
petition rate applies to all exporters other than those responding 
exporters that are receiving separate rates.

Critical Circumstances

    In our preliminary determination, we found that critical 
circumstances exist with respect to imports of coumarin from Tianjin 
Native and ``all other'' exporters in the PRC. We also found that 
critical circumstances did not exist with respect to imports of 
coumarin from Jiangsu Native.
    Pursuant to section 733(e)(1) of the Act and 19 CFR 353.16, we 
based that preliminary determination on a finding of (1) an imputed 
knowledge of dumping to the importers because the estimated dumping 
margins were in excess of 25 percent, and (2) massive imports of 
coumarin over a relatively short period, based on an analysis of 
respondents' shipment data. We used BIA as the basis for our 
determination of critical circumstances for non-respondent exporters.
    Because information submitted for the preliminary determination has 
been verified, and no additional information was submitted since that 
determination, the Department affirms the analysis as explained in its 
preliminary finding. Accordingly, we determine that critical 
circumstances exist with respect to imports of coumarin from Tianjin 
Native and firms covered by the ``All Others'' rate. Regarding imports 
of coumarin from Jiangsu Native, we determine that critical 
circumstances do not exist, as we did at the preliminary determination.

Verification

    As provided in section 776(b) of the Act, we verified the 
information submitted by respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records, and original 
source documents provided by respondents.

Interested Party Comments

    Comment 1: Separate Rates Eligibility--The petitioner argues that 
the Department should find that Jiangsu Native and Tianjin Native are 
subject to de jure and de facto control by the central government in 
the PRC. The respondents argue that ``the totality of the information 
on the record'' demonstrates that the respondent companies are not 
subject to de jure and de facto state control.

De Jure Analysis Comments

    The petitioner argues that the laws submitted by the respondents in 
this investigation ``evince significant governmental control over these 
companies.'' As an example, the petitioner cites to Chapter VI, Article 
55, of the 1988 Law, which states that ``[t]he government, or the 
government department in charge, shall * * * uniformly issue mandatory 
plans to enterprises * * * examine and approve plans submitted by 
enterprises * * * appoint or remove from office or reward or penalize 
factory directors.'' The petitioner also cites to the Foreign Exchange 
Regulations, as evidence that enterprises in the PRC are subject to 
significant foreign currency surrender requirements and other 
restrictions on access to foreign currency earnings. Specifically, the 
petitioner cites to Article 1, Section 3 of the Foreign Exchange 
Regulations which states that ``[i]n the case of general commodities, 
20% of export exchange earnings shall be turned over gratis to the 
State.'' Finally, the petitioner cites to a 1994 World Bank report, 
China Foreign Trade Reform (World Bank Report), which describes a 
foreign trade contract system in the PRC which has ``the effect of 
holding local authorities and FTCs (foreign trade companies) to what 
are in effect mandatory export targets.''
    The respondents argue that the Department has reviewed the 1988 Law 
in previous PRC investigations, and has consistently rejected that 
document as a basis for a finding of de jure control. The respondents 
further argue that mandatory plans and foreign trade contracts are 
reserved for controlled industries or products in the PRC, as listed in 
the Export Provisions list--and that coumarin is not one of the 
controlled products. The respondents also argue that the Department has 
recognized the limited scope of mandatory plans in the PRC, and cite to 
a verification report in Silicon Carbide which reported that ``[a]fter 
1988, the central government was not in the internal workings of 
companies. In particular, there were no mandatory plans, with the 
exception of critical elements of the national economy,'' * * * such as 
``grain, cotton, and coal.'' (See, Silicon Carbide, Verification Report 
of Meeting at Ministry of Foreign Trade and Economic Cooperation 
(MOFTEC), February 15, 1994). With respect to the Foreign Exchange 
Regulations, the respondents argue that these regulations reflect the 
``complex foreign exchange system'' relating to Chinese currency and 
foreign exchange credits in the PRC, but that the regulations ``do not 
require that the respondents give a portion of their sales revenues to 
the government.''

De Facto Control Comments

    The petitioner argues that an examination of the factors considered 
by the Department in assessing evidence of de facto control, leads to a 
finding of government control of export functions. According to the 
petitioner, respondent companies: (1) Do not freely establish export 
prices nor have unrestricted autonomy to negotiate and sign contracts, 
because of the restrictions and controls imposed by the foreign trade 
contract system as outlined in the World Bank Report; (2) do not have 
autonomy regarding selection of management, because the general manager 
of Jiangsu Native was appointed by the JCOFTEC; and (3) do not retain 
all proceeds of their export sales because of significant restrictions 
on access to foreign currency earnings, and, in the case of Tianjin 
Native, the respondent's proceeds from export sales are deposited into 
an account labeled ``China Native,'' the national trading company known 
as China Native Produce Import & Export Corporation.
    The respondents argue that the evidence on the administrative 
record in this investigation, ``overwhelmingly'' supports a finding of 
a de facto lack of state control. The respondents assert that (1) the 
Department examined the exporter's purchase orders, invoices, and 
correspondence files, and these documents demonstrated that the 
exporters freely negotiate prices with customers; (2) JCOFTEC's 
``recommendation'' of a general manager was done according to law; and 
(3) China Native does not have any access or control over Jiangsu 
Native's bank account, and respondents were able to retain earnings in 
the amount invoiced to customers at the Renminbe converted rate. In 
addition, the respondents argue that the Department examined 
respondents' correspondence and financial files at verification and 
found no evidence of mandatory business plans.
    DOC Position: Regarding mandatory plans, we agree with the 
respondents that the provision in the 1988 Law for mandatory export 
plans applies to controlled industries or products, as identified in 
the Export Provisions list. Coumarin is not identified in the list. The 
business plans obtained from respondent companies at verification, 
which were prepared by the respondents and submitted to the local 
administering authorities, consisted of export targets based on company 
growth from previous years. We find that these business plans do not 
demonstrate mandatory government planning or government interference in 
the respondents' export activities.
    With respect to the foreign trade contract system described in the 
World Bank Report, we find respondents' statement that such contracts, 
which fix export quantities for specific products, only apply to 
controlled industries as identified in the Export Provisions list, to 
be consistent with the evidence of record. We find that there is no 
evidence on the record indicating that a government entity controlled 
Jiangsu Native's or Tianjin Native's report activities during the POI 
through a foreign trade contract. To the contrary, we verified that the 
companies negotiated and signed contracts and other agreements without 
interference from any government entity. Although business plans are 
part of the foreign trade contracting system as discussed above, we do 
not find these plans demonstrate government interference in the 
respondents' exporting activities.
    Regarding the foreign currency requirements cited by petitioner, we 
agree with the World Bank Report which refers to the PRC's foreign 
exchange system as a ``very substantial tax burden on Chinese 
exports,'' and an ``implied export tax.'' Absent the foreign currency 
requirements, an exporter would have realized a greater portion of the 
income associated with its export sales. This income reduction is 
comparable to a tax payment. We found that during the POI, Jiangsu 
Native retained proceeds from its export sales, net of the ``implied 
export tax,'' and made independent decisions regarding the disposition 
of profits.
    As stated in the ``Separate Rates'' section of this notice, we have 
determined that both Jiangsu Native and Tianjin Native had autonomy 
from the central government in making decisions regarding the selection 
of management. With respect to Jiangsu Native, although JCOFTEC may 
exercise some control through the appointment of the general manager, 
there is no evidence that any other exporter of the subject merchandise 
is currently under the control of JCOFTEC. Therefore, Jiangsu Native 
remains eligible for a separate rate.
    Comment 2: Separate Rates for Suppliers--The respondents argue that 
manufacturing respondents should be assigned the same rate as their 
respective exporters, and not the ``all others'' rate. The respondents 
urge the Department to issue instructions to Customs that clarify that 
the calculated rates apply to the particular manufacturers. In support 
of this argument, the respondents cite Departmental practice outlined 
in Final Determination of Sales at Less Than Fair Value: Sulfur Dyes, 
Including Sulfur Vat Dyes, from the People's Republic of China (58 FR 
7543, February 8, 1993) (Sulfur Dyes), where the Department listed LTFV 
margins for specific exporters paired with the PRC factory which 
supplied that exporter. The respondents argue further that because the 
manufactures in this investigation were ``cooperative,'' it would be 
``contrary to the statute and judicial precedent to assign a BIA margin 
to these companies.''
    Also relying on Sulfur Dyes, the petitioner agrees with the 
respondents to the extent that it is appropriate for the Department to 
assign the margin calculated for a given exporter to that exporter and 
its supplying factory. However, the petitioner argues that the 
Department should not assign the responding manufacturer separate rates 
because: (1) the companies have not responded to the Department's 
separate rates questionnaire and, therefore, have not demonstrated that 
they are entitled to any rate other than the ``all others'' rate; and 
(2) separate rates should only apply to the producer/exporter pair on 
whom that rate was based. The petitioner cites to Paper Clips where the 
Department found that companies that had claimed that they had no 
shipments during the POI could not receive any rate other than the 
country-wide BIA rate because those companies had not replied to the 
Department's separate rates questionnaire.
    DOC Position: As noted by the petitioner, Department practice is to 
examine sales by exporters. We have determined that exporters and 
producers should not be ``paired'' in our instructions to Customs. 
Although exporters and producers were paired in Sulfur Dyes, recent 
Department practice has been to assign rates only to exporters, and in 
the case of multiple suppliers, margins have been based on weight-
averaged FMVs (see, e.g., Final Determination of Sales at Less Than 
Fair Value: Certain Cut-to-length Carbon Steel Plate from Poland (58 FR 
27205, July 9, 1993), Pencils,\5\ and Preliminary Determination of 
Sales at Less Than Fair Value: Magnesium from the People's Republic of 
China, 59 FR 55420, November 7, 1994). In this investigation, the 
manufacturing respondents did not export coumarin to the United States. 
Our separate rates determinations apply only to the exporters of the 
subject merchandise who have responded to the Department's 
questionnaire and were verified on this issue. Therefore, we are not 
assigning rates to the suppliers.
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    \5\In Pencils, the Department calculated a zero rate for one 
exporter based upon the factors of production provided by the 
suppliers of the exporter. The Department determined that the zero 
rate applied only to the exporter's sales of merchandise produced by 
those suppliers, and that, if the exporter sold merchandise produced 
by other suppliers, that merchandise would be subject to the ``All 
Others'' rate. However, in the same case, the Department gave 
another exporter that had multiple suppliers, and did not have a 
zero rate, a single margin based on the weighted-average FMV of all 
suppliers.
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    Comment 3: Exporters' SG&A and Profit--The petitioner argues that 
the Department must include SG&A expenses and profit of the exporters, 
as well as the suppliers, to arrive at the FMV of the subject 
merchandise. The resulting FMV would be based on the SG&A and profits 
associated with sales of coumarin to the United States during the POI. 
The petitioner cites Department practice in Final Determination of 
Sales at Less Than Fair Value: Fresh and Chilled Atlantic Salmon from 
Norway (56 FR 7665, February 25, 1991) (Norwegian Salmon), which stated 
that the Department ``combined the SG&A of the farmer and the exporter 
for the statutory ten percent test.'' The petitioner argues that 
because responding exporters did not report SG&A expenses, the 
Department should rely on the manufacturers' SG&A, as well as profit, 
rates and apply them to the exporters' costs.
    The respondents argue that the Department followed its normal 
practice in the preliminary determination, in that the surrogate value 
for SG&A includes all selling expenses necessary to sell chemical 
products in the home market (see e.g., Paper Clips, Preliminary 
Determination of Sales at Less Than Fair Value: Silicomanganese from 
the People's Republic of China (59 FR 31199, June 17, 1994), Sebacic 
Acid, and Silicon Carbide). The respondents further assert that the 
petitioner has incorrectly interpreted Norwegian Salmon because in that 
case, the Department included the SG&A expenses of the exporters 
because the farmers had no selling expenses, and the case involved the 
use of third country sales as FMV. The respondents claim that the 
petitioner's suggested calculation for SG&A and profit would deviate 
from the Department's normal practice, and would result in double-
counting.
    DOC Position: We find the petitioner's reliance on Norwegian Salmon 
to be misplaced because of the differences in fact patterns in the 
investigations, as cited by the respondents. Therefore, consistent with 
Department practice in NME cases, as cited by the respondents, we find 
that SG&A and profit of the exporters should not be included in the 
calculation of FMV. The statute and regulations provide for valuation 
of factors used in the production of (emphasis added) the subject 
merchandise. As stipulated in Sec. 353.52(c) of the Department's 
regulations, FMV is calculated ``using constructed value based on 
factors of production incurred in the home market country in producing 
(emphasis added) the subject merchandise.'' Therefore, we have only 
used the SG&A and profit of the manufacturers.
    Comment 4: Captively-produced Inputs--The petitioner argues that 
the Department should value only inputs used in the coumarin production 
process, and, therefore, should not base the FMV of coumarin on the 
value of the factors of production of the captively-produced 
intermediate product, salicylaldehyde. The petitioner argues that 
coumarin is the merchandise under investigation, and not 
salicylaldehyde. According to the petitioner, valuation of only the 
subject merchandise, is consistent with section 773 of the Act. The 
petitioner further argues that, since the Department did not value the 
factors of production for captively-produced phenol, the Department 
must be consistent and not value factors for any captively-produced 
input.
    The respondents argue that section 773 of the Act requires that FMV 
be based on ``the value of the factors of production utilized in 
producing'' coumarin. In this case, the respondents contend that there 
are two production stages utilized in producing coumarin: (1) 
Salicylaldehyde production, and (2) finishing production of coumarin. 
Therefore, they argue that both stages should be valued. Further, the 
respondents cite the antidumping investigation concerning refined 
antimony trioxide as establishing Departmental practice of valuing 
significant input materials in all stages of the production process, 
including intermediate stages (see Final Determination of Sales at Less 
Than Fair Value: Refined Antimony Trioxide from the People's Republic 
of China, 57 FR 6801, February 28, 1992) (Refined Antimony).
    DOC Position: We agree with the respondents that under section 773 
of the Act it is appropriate to value all of the factors of production, 
including intermediate inputs captively-produced by the responding 
producer. Further, this methodology is consistent with Department 
practice in NME cases (see e.g., Refined Antimony, and the Calculation 
Memorandum for the Final Determination of Sales at Less Than Fair 
Value: Sulfanilic Acid from the People's Republic of China, 57 FR 
29705, July 6, 1992). Regarding Changzhou No. 2's captively-produced 
phenol, we will not value its factors of production because phenol 
accounts for an insignificant percentage of materials, based on 
quantity and value, required to produce coumarin.
    Comment 5: Purchased Salicylaldehyde--The petitioner argues that, 
since Tianjin Perfumery purchased significant quantities of its 
salicylaldehyde from outside suppliers, the Department should calculate 
the value of this input based on a weighted-average of the self-
produced and purchased salicylaldehyde. The petitioner contends that 
the purchased portion of salicylaldehyde, and not the inputs into its 
production, should be valued in a surrogate country, including 
additional cost for inland freight. As such, this methodology would be 
consistent with Department practice, cited in Final Results of 
Antidumping Duty Administrative Review: Silicon Metal from Brazil, 59 
FR 42806 (August 19, 1994), which holds that ``it is inappropriate to 
specifically identify inputs obtained at a lower cost to a particular 
product or production run.''
    The respondents argue that, because the factory was able to satisfy 
its salicylaldehyde input needs for coumarin sold to the U.S. during 
the POI with its self-produced amounts, there is no need to ignore the 
factory's production factors for valuing all of the salicylaldehyde 
factor. Thus, it is not necessary to resort to surrogate values because 
the factory was able to cover its input needs.
    DOC Position: We agree with the petitioner that the salicylaldehyde 
value for Tianjin Perfumery should be based on a weighted-average of 
Tianjin Native's own factors and the purchased salicylaldehyde, because 
the company both self-produced and purchased the salicylaldehyde during 
the POI. While this situation does not occur often, where it does 
(e.g., Preliminary Determination of Sales at Less Than Fair Value: 
Furfuryl Alcohol from the People's Republic of China, signed on 
December 9, 1994), we use the weighted-average. This methodology 
recognizes the additional economic cost to a producer when it 
substitutes outside purchases for an input it normally produces. The 
weighted-average cost is thus more representative of the company's cost 
of production during the POI than to assume that it produced all of the 
input material.
    Comment 6. Chlorine--The respondents contend that the surrogate 
value for chlorine applied at the preliminary determination is 
aberrational and unrealistic. The respondents compare the value derived 
from Indian import statistics, which was used for the preliminary 
determination, to numerous examples of alternative price sources, 
including Indian price quotes submitted by the petitioner. According to 
their analysis, the Indian import value is several times higher than 
these other values. While acknowledging the Department's preference for 
public information such as the Indian import statistics, the 
respondents cite Silicon Carbide where the Department has tested the 
reasonableness of its surrogate values and rejected those it found to 
be aberrational. For the final determination, the respondents argue 
that the Department should value chlorine using the petitioner's Indian 
price quote, or values based on either Indonesian import statistics or 
U.S. export statistics.
    The petitioner responds that the Department properly followed its 
practice of utilizing public information for valuing chlorine in India 
based on import statistics rather than the unpublished price quote, and 
should continue to do so for the final determination.
    DOC Position: We agree with the respondents that, although the 
Indian import value is preferable according to our methodology, this 
value is aberrational. We note that, in addition to Silicon Carbide, 
the Department specifically rejected surrogate values for chlorine and 
hydrochloric acid in Saccharin (materials common to saccharin and 
coumarin production) derived from Indian import statistics because 
these values were aberrational when compared against data derived from 
export statistics from five countries (Canada, Germany, Japan, South 
Korea, and the United States) that exported the materials to India. The 
only other Indian values for chlorine and hydrochloric acid properly 
submitted for the record in this investigation are the petitioner' 
price quotes. Therefore, we value both chlorine and hydrochloric acid 
using these Indian price quotes.
    Comment 7: Inputs from Market-Economy Countries--The petitioner 
argues that raw material inputs that manufacturers purchased from PRC 
trading companies in PRC currency should be valued in a surrogate 
country, even though the inputs were purchased by the trading companies 
from market economy sources in convertible currency. The petitioner 
points out that the convertible currency prices were paid by the 
trading companies and not the manufacturers, and that prices paid by 
the manufacturer to the trader were in nonconvertible currency. 
Therefore, the petitioner contends that these factors should be 
assigned surrogate values.
    The respondents contend that the Department should use the actual 
import prices for these inputs, as it did in the preliminary 
determination. As the respondents explain, these purchases were made by 
the trading companies on behalf of the producers because of the trading 
companies' access to foreign currency. The producers reimbursed the 
trading companies for the imported goods in RMB. The respondents add 
that there is no support for the petitioner's position in Departmental 
practice. They cite Paper Clips where market prices for imported goods 
were used to value certain inputs that were obtained by PRC 
manufacturers through their suppliers.
    DOC Position: We agree with the petitioner. Department practice 
allows for the valuation of inputs in NME cases based on market prices 
paid by the manufacturer for goods obtained from a market economy 
source because these prices reflect commercial reality (see e.g., 
Saccharin and Final Determination of Sales at Less Than Fair Value: 
Oscillating Fans and Ceiling Fans from the PRC (56 FR 55271, October 
25, 1991) (Fans). In this case, some of the transactions are conducted 
by the trading companies and not the manufacturers. Thus, the 
manufacturer obtained the input from a PRC source (the trading company) 
and paid for the input in PRC currency. This is not the type of 
situation encountered in Saccharin or Fans where we have accepted the 
actual prices paid. (We note that the respondents' cite to Paper Clips 
is incorrect; we did not use the import prices in the situation cited.) 
Accordingly, for those market economy-source inputs that were 
exclusively obtained by PRC trading companies and resold to the 
manufacturers, we have applied the appropriate surrogate value.
    Comment 8: By-Products--The petitioner argues that all subsidiary 
products generated in the production of coumarin should be classified 
as by-products, rather than co-products, due to the insignificance of 
by-product sales values when compared to the subject merchandise. 
Nonetheless, the petitioner goes on to argue that no by-product offsets 
should be made to FMV in this investigation because: (1) Hydrochloric 
acid, alcohol, and sodium hypochlorite are by-products of 
salicylaldehyde production and no coumarin production; (2) insufficient 
information was provided by the respondents on product held in 
inventory; therefore, the Department should assume that the 
manufacturers did not sell coumarin by-products, and GAAP allows for 
by-product adjustments only for product sold; (3) there is insufficient 
information on the record to substantiate that the coumarin production 
facilities at Changzhou No. 2 benefit from the sodium hypochlorite that 
was given away by the manufacturer; and (4) the respondents failed to 
provide the Department with sufficient information regarding the grade, 
quality, purity, and after-separation costs of the by-products.
    The respondents agree that all subsidiary products recovered during 
the production of coumarin should be classified as by-products. 
However, regarding valuation of the by-products, the respondents argue 
that the petitioner's suggestions are erroneous because: (1) GAAP allow 
for by-product offsets on the basis of production quantities, as well 
as sales quantities; (2) there is ample information on the record to 
demonstrate that the factories sell recovered by-products, except for 
product held in inventory; (3) Changzhou No. 2 does not retain sodium 
hypochlorite for its own use, but disposes of it in a manner that 
yields an economic benefit to the company; and (4) the respondents 
reported all necessary physical parameters of the by-products, 
including concentration levels, and the record indicates that no after-
separation costs are incurred by the factories in the sale of the by-
products.
    DOC Position: In this investigation, we find that alcohol, acetic 
acid and hydrochloric acid, are produced as a result of the production 
of coumarin, and that these products have low sales values compared 
with the sales value of coumarin. Therefore, we find these products to 
be by-products, and that the cost to manufacture coumarin should be 
offset by the value of by-product recovered, except for sodium 
hypochlorite, adjusted for concentration levels. Such treatment is 
consistent with GAAP and previous Department practice (see e.g., 
Sebacic Acid). We agree with the respondents that GAAP allows for by-
product offsets on the basis of production quantities. We have also 
verified the respondent's reported sales of by-products, including 
concentration levels, and that thee are no after-separation costs 
associated with the by-products. We determined that no offset should be 
made for the sodium hypochlorite recovered and disbursed by Changzhou 
No. 2, because the company could neither demonstrate that any economic 
benefit accrued to the firm, nor that the benefit was linked to 
coumarin production.
    Comment 9: Water--The respondents argue that the Department erred 
in its preliminary determination, in calculating a cost for water, 
separate from factory overhead. The respondents cite to Department 
practice that includes water costs in factory overhead, i.e., Paper 
Clips and Silicon Carbide.
    The petitioner argues that the Indian survey data from the metals 
and chemicals market sector used to calculate factory overhead 
contained water costs associated with administrative functions. The 
petitioner further argues that there is no evidence in the record 
indicating that water used for production purposes is included in the 
factory overhead category of ``other manufacturing expense.''
    DOD Position: The facts in this case are very similar to those in 
Saccharin with respect to water consumption. In Saccharin we found that 
it is normal practice to include water in factory overhead, and that it 
is reasonable to presume that water is included in the Indian surrogate 
value overhead percentage. Accordingly, we have revised FMV 
calculations for both producers and not valued water as a separate 
input.

Continuation of Suspension of Liquidation

    In accordance with sections 733(d)(1) and 735(c)(4)(B) of the Act, 
we are directing the Customs Service to continue to suspend liquidation 
of all entries of coumarin 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-                               
    Manufacturer/producer/       average                                
           exporter              margin        Critical circumstances   
                               percentage                               
------------------------------------------------------------------------
Jiangsu Native Produce I/E         15.04   Negative.                    
 Corp.                                                                  
Tianjin Native Produce I/E         50.35   Affirmative.                 
 Corp.                                                                  
All Others...................     160.80   Affirmative.                 
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
International Trade Commission (ITC) of our determination. As our final 
determination is affirmative, the ITC will determine whether these 
imports are causing material injury, or threat of material injury, to 
the industry in the United States, within 45 days. 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.

Notification to Interested Parties

    This notice serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to section 735(d) of the 
Act and 19 CFR 353.20(a)(4).

    Dated: December 19, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-31962 Filed 12-27-94; 8:45 am]
BILLING CODE 3510-DS-M