[Federal Register Volume 61, Number 62 (Friday, March 29, 1996)]
[Notices]
[Pages 14057-14063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7634]



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DEPARTMENT OF COMMERCE
[A-570-842]


Notice of Final Determination of Sales at Less Than Fair Value; 
Polyvinyl Alcohol From the People's Republic of China

AGENCY: Import Administration, International Trade Administration, 
Commerce.

EFFECTIVE DATE: March 29, 1996.

FOR FURTHER INFORMATION CONTACT: Everett Kelly or David J. Goldberger, 
Office of Antidumping Investigations, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-4194 or (202) 482-4136, respectively.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act)

[[Page 14058]]
by the Uruguay Rounds Agreements Act (URAA).

Final Determination

    As explained in the memoranda from the Assistant Secretary for 
Import Administration dated November 22, 1995, and January 11, 1996, 
the Department of Commerce (the Department) has exercised its 
discretion to toll all deadlines for the duration of the partial 
shutdowns of the Federal Government from November 15 through November 
21, 1995, and December 16, 1995, through January 6, 1996. Thus, the 
deadline for the final determination in this investigation has been 
extended by 28 days, i.e., one day for each day (or partial day) the 
Department was closed. As such, the deadline for this final 
determination is no later than March 21, 1996.
    We determine that polyvinyl alcohol (PVA) from the People's 
Republic of China (PRC) is being sold in the United States at less than 
fair value (LTFV), as provided in section 735 of the Tariff Act of 
1930, as amended (the Act). The estimated margins are shown in the 
``Suspension of Liquidation'' section of this notice.

Case History

    Since the preliminary determination on October 2, 1995 (60 FR 
52647, October 10, 1995), the following events have occurred:
    On October 13 and 17, 1995, Guangxi GITIC Import and Export 
Corporation (Guangxi), Guangxi Vinylon Plant (Guangxi Vinylon) and 
Sinopec Sichuan Vinylon Works (Sichuan), respectively, requested a 
postponement of the final determination pursuant to 19 CFR 353.20. The 
Department has determined that such requests contain an implied request 
to extend the provisional measures period, during which liquidation is 
suspended, to six months (see Extension of Provisional Measures 
memorandum dated February 7, 1996). Accordingly, on October 19, 1995, 
the Department postponed the final determination until February 22, 
1996. (Postponement of Final Antidumping Duty Determinations: Polyvinyl 
Alcohol from Japan, Taiwan, and the People's Republic of China 60 FR 
54667, October 25, 1995).
    On November 3, 1995, Isolyser Co., Inc. (Isolyser), an importer of 
the subject merchandise, entered an appearance in this investigation, 
and submitted a request for clarification to the scope of this 
investigation, to exclude PVA fiber.
    On November 20, 1995, in response to concerns of Isolyser, 
petitioner clarified that the scope does not include polyvinyl alcohol 
fiber.
    In October and November, we verified the respondents' questionnaire 
responses. Additional publicly available published information (PAPI) 
on surrogate values was submitted by petitioner and respondents on 
January 19, 1996. Petitioner, respondents, and Isolyser submitted case 
briefs on January 30, 1996. Petitioner and respondents filed rebuttal 
briefs on February 6, 1996. A public hearing was held on February 14, 
1996.

Scope of Investigation

    The merchandise under investigation is polyvinyl alcohol. Polyvinyl 
alcohol is a dry, white to cream-colored, water-soluble synthetic 
polymer. Excluded from this investigation are polyvinyl alcohols 
covalently bonded with acetoacetylate, carboxylic acid, or sulfonic 
acid uniformly present on all polymer chains in a concentration equal 
to or greater than two mole percent, and polyvinyl alcohols covalently 
bonded with silane uniformly present on all polymer chains in a 
concentration equal to or greater than one-tenth of one mole percent. 
Polyvinyl alcohol in fiber form is not included in the scope of this 
investigation.
    The merchandise under investigation is currently classifiable under 
subheading 3905.30.00 of the Harmonized Tariff Schedule of the United 
States (HTSUS). Although the HTSUS subheading is provided for 
convenience and customs purposes, the written description of the 
merchandise under investigation is dispositive.

Period of Investigation

    The period of investigation is October 1, 1994, through March 31, 
1995.

Separate Rates

    As stated in our preliminary determination, the PRC is a non-market 
economy (NME). Each of the responding PRC exporters, Sichuan and 
Guangxi, has requested a separate, company-specific rate. According to 
both respondents' business licenses, each is ``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, (May 2, 1994) (Silicon Carbide), and the Final Determination of 
Sales at Less than Fair Value: Furfuryl Alcohol from the People's 
Republic of China 60 FR 22545 (May 8, 1995) (Furfuryl Alcohol), 
ownership of a company by all the people does not, in itself, require 
the application of a single PRC-wide rate. Accordingly, both 
respondents are eligible for consideration for a separate rate.
    To establish whether a firm is sufficiently independent from 
government control 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 in nonmarket economy cases only if 
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 have placed on the administrative record a number 
of documents to demonstrate absence of de jure control, including laws, 
regulations and provisions enacted by the State Council of the central 
government of the PRC. Respondents have also submitted documents which 
establish that PVA is not included on the list of products that may be 
subject to central government export constraints (Export Provisions). 
The Department has reviewed these and other enactments in prior cases 
and has previously determined that these laws indicate that the 
responsibility for managing state-owned enterprises has been shifted 
from the government to the enterprise itself (See Silicon Carbide and 
Furfuryl Alcohol).
    However, as stated in previous cases, there is some evidence that 
the PRC central government enactments have not been implemented 
uniformly among different sectors and/or jurisdictions in the PRC (See 
Silicon Carbide and Furfuryl Alcohol). Therefore, the Department has 
determined that an analysis of de facto control is critical in 
determining whether respondents are, in fact, subject to a degree of 
governmental control which would preclude the Department from assigning 
separate rates.

2. Absence of De Facto Control

    The Department typically considers four factors in evaluating 
whether each respondent is subject to de facto governmental 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

[[Page 14059]]
disposition of profits or financing of losses (see Silicon Carbide and 
Furfuryl Alcohol).
    Each respondent has asserted the following: (1) it establishes its 
own export prices; (2) it negotiates contracts, without guidance from 
any governmental entities or organizations; (3) it makes its own 
personnel decisions; and (4) it retains the proceeds of its export 
sales, uses profits according to its business needs and has the 
authority to sell its assets and to obtain loans. In addition, 
respondents' questionnaire responses indicate that company-specific 
pricing during the POI does not suggest coordination among exporters. 
During verification proceedings, Department officials viewed such 
evidence as sales documents, company correspondence, and bank 
statements. This information supports a finding that there is a de 
facto absence of governmental control of export functions. 
Consequently, we have determined that Sichuan and Guangxi have met the 
criteria for the application of separate rates (see, also Comment 1 
under Interested Party Comments section below).

Fair Value Comparisons

    To determine whether sales of PVA from the PRC to the United States 
by Guangxi and Sichuan were made at less than fair value, we compared 
Export Price (EP) to the Normal Value (NV), as specified in the 
``Export Price'' and ``Normal Value'' sections of this notice.

Export Price

    For both Guangxi and Sichuan, we calculated EP in accordance with 
section 772(a) of the Act, because the subject merchandise was sold 
directly to the first unaffiliated purchaser in the United States prior 
to importation and because constructed export price under section 
772(b) is not otherwise warranted on the basis of the facts of this 
investigation.
    Petitioner has claimed that certain U.S. customers of the 
respondents are affiliated with respondents, pursuant to section 
771(33) of the Act, through common PRC government control. However, 
there is no information on the record that supports the claim that the 
U.S. customers are affiliated with the PRC government. Further, 
respondents have been deemed free of government control. Therefore, we 
find no basis to consider these customers as affiliated with 
respondents.
    We calculated EP based on packed, FOB PRC port or CIF U.S. port 
prices to unaffiliated purchasers in the United States, as appropriate, 
based on the same methodologies in the preliminary determination with 
the following exceptions:
    We excluded all U.S. sales by Sichuan and Guangxi that were 
reported as having been made through third country resellers, as we 
determined that, at the time of sale, respondents were unaware of the 
final destination of the subject merchandise (see Comment 6). For 
Guangxi, we valued ocean freight based on the actual price paid for 
this expense, as we determined at verification that Guangxi used market 
economy carriers and paid with market economy currencies. We also 
included in the final determination a sale by Guangxi that was excluded 
from our preliminary determination, because we verified that this sale 
was, in fact, made during the POI.

Normal Value

    As in our preliminary determination, we are relying on India as the 
surrogate country in accordance with section 773(c)(4) of the Act. 
Accordingly, we have continued to calculate normal value (NV) using 
Indian prices for the PRC producers' factors of production. We have 
obtained and relied on published, publicly-available information 
wherever possible.
    In accordance with section 773(c) of the Act, we calculated NV 
based on factors of production reported by Sichuan, and by Guangxi 
Vinylon, which produced the PVA for Guangxi. To calculate NV, the 
reported unit factor quantities were multiplied by Indian values. 
Except as noted below, we applied surrogate values to the factors of 
production in the same manner as in our preliminary determination. For 
a complete discussion of surrogate values, see Valuation Memorandum, 
dated March 21, 1996. We then added amounts for overhead, general 
expenses (including interest) and profit, based on the experience of 
two Indian PVA producers (see also Comment 3), and packing expenses.
    For both Sichuan and Guangxi, we have corrected the affected 
factors of consumption to reflect verification results. For Sichuan, 
these revisions include changes to PVA production stage based on actual 
PVA production levels, rather than the standards of the industry, (see 
Comment 8), and changes to the acetic acid consumption factors to net 
out regained acetic acid. For Guangxi, we revised calcium carbide 
factors to reflect actual rather than standard consumption (see Comment 
7).

All-Others Rate

    The Department requested the PRC Ministry of Foreign Trade and 
Economic Corporation (MOFTEC) to identify all exporters of subject 
merchandise. MOFTEC identified two PRC companies as the only known PRC 
exporters of PVA to the United States during the POI. Both of these 
identified exporters have responded in this investigation, and both 
were found to meet the criteria for application of separate rates. We 
compared the respondents' sales data with U.S. import statistics for 
time periods including the POI, and found no indication of unreported 
sales, with the possible exception of re-sales made by a third country 
reseller. This reseller was not investigated as a respondent in this 
proceeding because it was not identified as a potential respondent 
until after the preliminary determination. All known PRC exporters 
responded to our questionnaires and qualified for separate rates. We 
have no evidence that there are any other PRC exporters that may be 
subject to common government control. Therefore, we have not calculated 
a PRC-Wide rate in this investigation. We have calculated an all-others 
rate in accordance with section 735 (c)(5) of the Act.

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 Rate for Sichuan Vinylon

    Petitioner states that Sichuan did not demonstrate the absence of 
de jure or de facto governmental control and thus should not be granted 
a separate rate. Petitioner claims the Department found evidence at 
verification to indicate a relationship between Sichuan and China 
National Petrochemical Corporation (Sinopec), which petitioner 
identifies as a state-owned petroleum company. According to the 
petitioner, as Sichuan is a subsidiary of Sinopec, the Department's 
analysis of de jure and de facto governmental control should have been 
at the Sinopec level. Further, petitioner contends that Sichuan's 
questionnaire response should be considered incomplete and incorrect, 
since it did not disclose its business relationship with Sinopec. 
Therefore, petitioner asserts that the Department should rely on the 
facts available for calculating a margin for Sichuan, Sinopec and all 
other PRC entities except Guangxi.

[[Page 14060]]

    Sichuan argues that, at the outset of this investigation, it fully 
disclosed its past relationship with Sinopec. Sichuan argues that, 
under recent PRC law, Sichuan is an independent legal person with its 
own management and is not related to any level of government or to 
Sinopec. Additionally, Sichuan states that, in past cases, the 
Department recognized the 1988 laws and the 1992 regulations as 
sufficient evidence of the absence of de jure government control. 
Further, Sichuan asserts that verification revealed no evidence of 
affiliation with Sinopec or de facto governmental control. 
Additionally, Sichuan contends that the name Sinopec is attached to 
Sichuan Vinylon Works only as a trademark used for international 
business recognition, a practice used by other PRC companies, and not 
as an indication of a continued business relationship.

DOC Position

    We have calculated a separate margin rate for Sichuan. All evidence 
on the record supports Sichuan's assertion that there is no current 
relationship between Sichuan and Sinopec. Accordingly, examination of 
whether Sinopec was subject to government control was not necessary in 
considering whether to give Sichuan a separate rate. At verification, 
we reviewed a wide variety of sales documents including contracts, 
invoices, records of payments, and correspondence and found that 
Sichuan acted independently from Sinopec and any other entities in its 
day to day business activities. We found that Sichuan officials made 
all decisions regarding sales pricing and contracting, appointment of 
management personnel, and disposition of profits, and that these 
decisions were neither reviewed nor approved by Sinopec or any other 
entity. Accordingly, we determine that Sichuan has satisfactorily met 
the Department's criteria for showing an absence of de jure and de 
facto governmental control.

Comment 2: Separate Like Product for Certain PVA Grades

    Isolyser, an importer of the subject merchandise, asserts that PVA 
hydrolyzed at a level of 98% should be considered a separate domestic 
like product. Thus, Isolyser contends that the Department should 
calculate a separate antidumping margin for PVA with a hydrolysis level 
of at least 98% in order for the International Trade Commission (ITC) 
to analyze the magnitude of the domestic margin on the domestic 
producers for each specific like product.

DOC Position

    There is no evidence on the record to show that PVA hydrolyzed at a 
98% level has physical characteristics and uses different from the 
subject merchandise for separate consideration as a domestic like 
product pursuant to section 771(10) of the Act. Therefore, we are 
rejecting Isolyser's request.

Comment 3: Application of Factory Overhead

    Petitioner claims that the Department understated NV for both 
Sichuan and Guangxi in the preliminary determination by applying 
factory overhead only at the final stage of production, rather than to 
the upstream stages of the vertically integrated production processes. 
Petitioner argues that both respondents incur overhead costs throughout 
the production process, rather than simply at the final stage, because 
both are involved in processing and producing many of the inputs used 
in PVA production. Petitioner contends that the Indian PVA 
manufacturers are not as vertically integrated as the PRC respondents 
and thus the factory overhead percentage derived from the Indian 
companies' financial statements does not fully capture the factory 
overhead incurred by the PRC producers. In order to fully account for 
the overhead incurred, petitioners claim that an appropriate surrogate 
factory overhead percentage must be applied to both respondents at each 
upstream stage of production.
    Sichuan and Guangxi argue that if factory overhead were applied to 
each stage of production, the Department would engage in ``double 
counting.'' Each respondent states that its production processes are 
continuous and although overhead costs are incurred throughout, by 
applying the overhead percentage to the factors of production at the 
final stage, the Department captures the total overhead cost for the 
entire production process.

DOC Position

    We disagree with the petitioner. Our analysis of the information on 
the record, including the financial statements of the Indian PVA 
producers, does not support the assumptions made by petitioner 
regarding the level of vertical integration of the Indian surrogate PVA 
producers. There is no evidence on the record to indicate that the 
Indian producers are any less vertically integrated than the PRC PVA 
producers.
    To support its claim, petitioner states that the Indian producers 
must purchase such inputs as acetylene gas, oxygen, nitrogen, and 
treated water, while the PRC producers manufacture or process these 
materials themselves. However, the Indian financial statements state 
only that the Indian producers consume such inputs, but contain no 
information as to whether or not such consumption is derived from 
internal manufacture or outside manufacture. Further analysis of these 
documents indicates that the Indian producers have considerable 
investment in PVA production facilities. Such investment may, in fact, 
represent vertical integration at the same level or close to that of 
the PRC producers.
    There is no basis to assume that applying factory overhead 
percentage once, at the final stage of production of the PRC producers, 
undervalues factory overhead. By applying the factory overhead to the 
final stage of production we have captured all appropriate factory 
overhead expenses incurred in the manufacture of PVA. Therefore, we 
have continued our preliminary determination methodology for 
calculating overhead expenses.

Comment 4: Surrogate Value Source for Factory Overhead, General 
Expenses and Profit

    Petitioner contends that the Department should continue to rely on 
the Annual Report of VAM Organic Chemicals Ltd. (VAM Organic), an 
Indian producer of VAM and PVA, as the sole source to calculate factory 
overhead, general expenses, and profit. Petitioner argues that VAM 
Organic produces mostly VAM and PVA, and its experience is the most 
comparable among available sources to that of the PRC producers. 
Petitioner argues further that the VAM Organic report is more 
representative of the PRC industry experience than the financial 
statement of a second Indian producer, Polychem Limited (Polychem), 
because PVA related production is a relatively smaller part of 
Polychem's business. If, however, the Department were to consider using 
both VAM Organic and Polychem data, petitioner contends that the data 
should be weight-averaged based on the production of VAM and PVA at 
each company.
    Sichuan contends that the surrogate value used for factory 
overhead, general expenses and profit should be based on the experience 
of India's chemical industry as a whole, using aggregate data compiled 
by the Reserve Bank of India (RBI), as applied in past Department cases 
(see, e.g., Saccharin). Sichuan contends that this data is more 
representative than the data from VAM Organic, which Sichuan claims is 
aberrational. Sichuan's next preferred methodology is to base these 
surrogate

[[Page 14061]]
values on Polychem's experience as Polychem's total PVA sales and VAM 
sales are greater than the total sales of VAM Organic's PVA and VAM 
sales, and thus Polychem's experience is more representative of the 
Indian experience. Finally, Sichuan contends that if the Department 
chooses to use both VAM Organic and Polychem data, the data should be 
weight-averaged based on each company's total sales volume of PVA.

DOC Position

    For valuing such factors as factory overhead, general and 
administrative expenses and profit, the Department seeks to base 
surrogate values on industry experience closest to the product under 
investigation. In this case, we have information from two producers of 
the subject merchandise. Thus, there is no need to rely on the 
experience of the chemical industry as a whole. Between the two Indian 
producers, we found no significant difference in the quality and 
representativeness of the data contained in the financial statements. 
Thus we find both Polychem and VAM Organic to be equally representative 
of the PVA industry in India. Because there is nothing in this case to 
indicate that one factor (i.e. sales volume or production volume) is 
more important than the other in valuing factory overhead, general and 
administrative expenses and profit, we determine that weight-averaging 
the data from both companies on the basis of either factor is 
inappropriate. Accordingly, we have weighted the data equally between 
each company and calculated factory overhead, general and 
administrative expenses and profit percentages using a simple average 
of the percentages derived from each producer, and applied these 
percentages to the factors of production.

Comment 5: Classification of Certain Labor and Overhead Expenses

    Petitioner states that the Department should follow the methodology 
outlined in Final Determination of Sales at Less than Fair Value: 
Manganese Metal from the People's Republic of China (60 FR 56045, 
November 6, 1995) (Manganese Metal), where the Department determined 
that the surrogate value for labor did not include contributions to the 
provident fund and employee welfare expenses and thus these 
contributions and expenses were added to the factory overhead 
calculation. Petitioner also contends that the data used to derive the 
value for overhead should be re-allocated to properly include research 
and development expenses.
    Sichuan and Guangxi argue that the Department's past practice has 
been to include provident fund and employee welfare expenses as 
components of total labor cost (see, e.g. Saccharin) and not as part of 
overhead expenses. Sichuan states that the example in Manganese Metal 
was an aberration and should not be a precedent for this investigation. 
Sichuan asserts that the International Labor Organization (ILO) data, 
used by the Department in the preliminary determination, is fully 
loaded to include employee benefits such as provident fund 
contributions and employee welfare expenses. In addition, Sichuan 
argues that there is insufficient evidence to support petitioner's re-
allocation of research and development in the factory overhead 
calculation. Sichuan maintains that if VAM Organic data is used, no 
adjustment for research and development is warranted.

DOC Position

    We agree with Sichuan. As in the cases cited by Sichuan, we 
consider the ILO statistics to be fully loaded with respect to all 
labor expenses, incorporating such costs as contributions to the 
provident fund and employee welfare expenses. In contrast, the labor 
value used in Manganese Metal was from a different source, and did not 
include these expenses. We also agree there is insufficient evidence to 
support petitioner's assumptions for basing re-allocation of research 
and development expenses.

Comment 6: Sales to Non-PRC Trading Company

    Petitioner contends that at the time of sale, Sichuan and Guangxi 
were unaware of the final destination for sales made to a third country 
trading company. Petitioner states these sales should be excluded from 
the calculation of the PRC producer's export price and assigned an 
antidumping rate separate from that of the respondents.
    While Sichuan states the exclusion of these sales would have 
minimal effect on the final margin calculations, Sichuan states it knew 
at the time of sale that the sales to the trading company were destined 
to the United States. Sichuan contends that it had numerous sales 
documents that would have supported its claim that it knew at the time 
of sale the final destination of the sales made to trading companies. 
Guangxi agrees that it did not know the final destination of the sales 
made through the trading companies.

DOC Position

    We reviewed numerous sales documents at the verification of Sichuan 
and in no instance did we find that at the time of sale, Sichuan knew 
or had any reason to believe the destination of the subject merchandise 
was the United States. There is no further information on the record 
that supports Sichuan's claim that, at the time of sale, it knew the 
destination of the subject merchandise. Although each respondent may 
have had some indication of the destination prior to the time of 
shipment, all of the sales documents reviewed at each company showed no 
information identifying the United States as the ultimate destination 
of the subject merchandise. We have therefore excluded the trading 
company sales from each company's margin calculation.

Comment 7: Guangxi Vinylon Reporting of Calcium Carbide Factor

    Petitioner argues the Department should revise Guangxi's reported 
calcium carbide factors based on information discovered at 
verification, which revealed that Guangxi Vinylon had reported this 
factor based on an industrial standard, rather than the actual 
consumption of calcium carbide for PVA production.
    Guangxi argues that it reported its calcium carbide factor 
consumption consistent with the legally required PRC industry standard 
for production of PVA and its production accounting system.

DOC Position

    We agree with the petitioner. We have revised the calcium carbide 
consumption factors to reflect actual consumption, based on information 
discovered at verification. Actual consumption in a production process 
is more accurate than a standard figure.

Comment 8: Sichuan Reporting of PVA Production

    Petitioner claims that the Department should reject as new 
information verification findings that Sichuan's reported concentration 
percentage of PVA used to calculate consumption factors of inputs used 
at the PVA production stage was inaccurate. Additionally, petitioner 
argues that Sichuan has not demonstrated that such an adjustment is 
appropriate.
    Sichuan argues it provided numerous submissions and complete 
accurate and timely responses to the Department. Further, Sichuan 
states the Department was able to verify, within the time specified, 
the completeness of this factual information. Therefore, Sichuan argues 
that the Department should use

[[Page 14062]]
the verified evidence on record to calculate an antidumping margin for 
Sichuan.

DOC Position

    The information discovered at verification, regarding the 
concentration percentages of PVA production, represents a relatively 
minor correction of data already provided by Sichuan, rather than new 
information not previously provided. Moreover, we find that using the 
actual concentration percentages of PVA production will yield more 
accurate results. Therefore, we have revised affected input factors 
based on the actual PVA production data.

Comment 9: Surrogate Value for Electricity

    Petitioner argues that the Department should use data on 
electricity prices issued by the Centre for Monitoring the Indian 
Economy (CMIE), from March 1, 1995, for the electricity surrogate 
value. In applying the rates, petitioner suggests the surrogate value 
should be calculated as the weighted-average of rates from the Indian 
states where the Indian chemical industry is located.
    Sichuan and Guangxi argue that the electricity prices submitted by 
the petitioner are effective beginning with the last month of the POI, 
while all of their PVA production during the POI occurred earlier. 
Therefore, they claim that the petitioners proposed value is 
inappropriate for use as a surrogate value because it reflects prices 
in effect subsequent to their PVA production. Sichuan suggests that the 
Department use either data on an electricity rate for India issued by 
the International Energy Agency (IEA), or the CMIE value from June 1994 
used in the preliminary determination. Sichuan contends that the IEA 
figure, when adjusted to the POI, is an appropriate measure of the cost 
of electricity.

DOC Position

    We agree in part with the petitioner that the March 1995 CMIE data 
is the most contemporaneous value relative to the POI and is the 
appropriate source for deriving the electricity surrogate value. 
Petitioners and respondents are both incorrect in stating that these 
rates are ``effective'' on March 1, 1995. Rather, the source shows that 
these were the rates ``as of'' March 1, 1995, and thus represent Indian 
price levels contemporaneous with the POI. However, we disagree with 
the petitioner's weighted average methodology. There is insufficient 
basis to assume that the electricity rates from the Indian states 
selected by petitioner are more appropriate for surrogate value than 
electricity rates in other states. Other factors beside chemical 
production levels, such as methods of generation and transmission as 
well as overall demand, are determinants of price. Since there is not 
sufficient information on the record to weigh the appropriateness of 
using one Indian state's electricity rates over those in another, we 
have based the surrogate value on the simple average of all Indian 
state rates found in the 1995 CMIE source.

Comment 10: Surrogate Value for Natural Gas

    Petitioner contends that the Department should use the data on 
natural gas costs derived from 1994-1995 Gujarat Narmada Valley 
Fertilizer Co. Ltd (Gujarat) Annual Report as a surrogate for valuing 
natural gas because this value reflects the actual POI cost to an 
Indian chemical producer of this input.
    Sichuan maintains that the value submitted by petitioner is not 
sufficiently representative of Indian prices as it is taken from a 
single Indian company's experience. Sichuan supports the use of an 
India-wide price rate obtained for 1994-1995 from Hydrocarbon 
Perspective: 2010, as used in the preliminary determination.

DOC Position

    We agree with Sichuan and have used a rate obtained from 
Hydrocarbon Perspective: 2010 as the surrogate value for natural gas. 
In determining the most appropriate surrogate value to apply to an 
input factor, the Department considers such elements as the specificity 
of the value as compared to the factor used, the contemporaneity of the 
value with respect to the POI, and the representativeness of the value 
for the industry in the surrogate country. In this instance, both 
values are equally specific with respect to the natural gas input, and 
equally contemporaneous with respect to the POI. For this factor, we 
consider the Hydrocarbon Perspective: 2010 value to be more 
representative than a value from an annual report of a single company.

Comment 11: Surrogate Value for Coal

    Petitioner states that the Department should use a surrogate value 
for steam coal derived from the annual report of Sukhjit Starch & 
Chemical Ltd (Sukhjit), an Indian chemical manufacturer. Petitioner 
contends that this value is specifically for steam coal, an input used 
by the respondents, and the value is contemporaneous with the POI.
    Sichuan contends that the Department should derive a surrogate 
value for steam coal using average numbers for the Indian chemical 
industry as a whole rather than use a price quote from specific 
companies whose primary production is not PVA.

DOC Position

    We valued steam coal inputs using an average price derived from the 
Sukhjit annual report and the 1994-95 annual report for Gujarat report, 
identified in Comment 10, which also is on the record. Both of these 
sources are equally contemporaneous with the POI and are publicly 
available. Although the fertilizer company's annual report does not 
specifically classify the coal consumed as ``steam coal'', it is clear 
from its inclusion in a table relating to power and fuel consumption 
that the coal consumed is for generating steam, and thus can be 
considered steam coal. Therefore both values are equally specific with 
regard to the input. As we have no basis to determine that one of these 
sources is superior to the other, we have weighted them equally in 
calculating a surrogate value.
    We agree with Sichuan that where surrogate values cannot be based 
on the experiences of Indian producers of subject merchandise, a 
surrogate value based on a broader sample of Indian experience would be 
preferable, where all other relevant factors are equal. However, we 
consider the contemporaneity to the POI of the two annual reports to be 
more important for valuing this factor. While Sukjhit and Gujarat are 
not producers of PVA, we do not consider that fact to be relevant for 
considering surrogate values of commodity inputs such as coal, where 
the prices from PAPI typically represent the overall price level for 
that input in the surrogate country. Further, in comparing the average 
of the two companies to other, non-contemporaneous values on the 
record, we find that our average is reasonably comparable with respect 
to the other inflation-adjusted coal values, including those derived 
from the annual reports of the Indian PVA producers.

Comment 12: Sichuan Indirect Labor Factors

    Petitioner claims that Sichuan significantly underreported its 
indirect labor cost by reporting indirect labor only for the final 
stage of the production process. Petitioner contends that the 
Department must apply a value for indirect labor to all upstream 
production stages, as in Manganese Metal.

[[Page 14063]]

    Sichuan contends that it reported, and the Department verified, all 
of its indirect labor factors and no further adjustment is warranted.

DOC Position

    We agree with Sichuan. We verified Sichuan's indirect labor 
reporting and found no basis to add additional factors for this input. 
Petitioner's reliance on the Manganese Metal case is misplaced. In 
Manganese Metal, the respondent did not report any separate factors for 
indirect labor, and the factory overhead value did not include indirect 
labor factors. Thus, an adjustment was warranted. In this case, both 
Sichuan and Guangxi reported all indirect labor factors and no further 
accounting for this input is needed.

Comment 13: Valuation of Guangxi Vinylon's Water Consumption

    Petitioner argues that Guangxi Vinylon's water factor should be 
considered as a direct manufacturing cost. Petitioner states that 
Guangxi's water factor is distinguishable from the Department's 
treatment of water in past cases. Petitioner argues that, in past 
cases, water was considered an overhead item, since there was no 
information in the Reserve Bank of India Bulletin data to indicate 
otherwise. In this case, petitioner contends that water is a direct 
manufacturing cost of producing PVA. Further, Petitioner argues that 
the Indian producers of PVA treat water as a component of power and 
fuel, thus identifying water as a direct manufacturing cost. Therefore, 
water should be calculated separately from factory overhead.
    Guangxi Vinylon states that the Department's treatment of water as 
a factory overhead item is consistent with past practice (see, e.g. 
Saccharin) and should continue in this investigation.

DOC Position

    We agree with Guangxi Vinylon. There is no information on the 
record that supports petitioners claim that water must be treated as a 
direct manufacturing cost. Consistent with our practice in such cases 
as Saccharin, which involved a chemical product and relied on a similar 
type of factory overhead data, we have considered Guangxi's Vinylon's 
water consumption factor to be part of factory overhead.

Continuation of Suspension of Liquidation

    For Sichuan, we calculated a zero margin. Consistent the 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 Sichuan but manufactured 
by other producers will not receive the zero margin. Instead, such 
entries will be subject to the ``All-Others'' rate.
    In accordance with section 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 polyvinyl alcohol (except those entries that 
represent U.S. sales by Sichuan of PVA that Sichuan has manufactured) 
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 normal 
value exceeds the export price as shown below. These suspension of 
liquidation instructions will remain in effect until April 7, 1996.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
               Manufacturer/Producer/Exporter                   margin  
                                                              percentage
------------------------------------------------------------------------
Guangxi GITIC Import and Export Corp........................      116.75
Sichuan Vinylon Works.......................................        0.00
All-Others Rate.............................................      116.75
------------------------------------------------------------------------

The All-Others rate applies to all entries of subject merchandise 
except for entries from Guangxi and entries of merchandise manufactured 
by Sichuan.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will, within 45 days, determine whether these imports are 
materially injuring, or threaten material injury to, the U.S. industry. 
If the ITC determines that material injury, or threat of material 
injury does not exist, the proceeding will be terminated and all 
securities posted will be refunded or canceled. 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 for consumption on or 
after the effective date of the suspension of liquidation.
    This determination is published pursuant to section 735(d) of the 
Act.

    Dated: March 21, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-7634 Filed 3-28-96; 8:45 am]
BILLING CODE 3510-DS-P