[Federal Register Volume 61, Number 200 (Tuesday, October 15, 1996)]
[Notices]
[Pages 53711-53718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26368]


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DEPARTMENT OF COMMERCE
[A-570-815]


Sulfanilic Acid From the People's Republic of China; Final 
Results of Antidumping Duty Administrative Review

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

ACTION: Notice of final results of antidumping duty administrative 
review.

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SUMMARY: On May 20, 1996, the Department of Commerce (the Department) 
published the preliminary results of its administrative review of the 
antidumping duty order on sulfanilic acid from the People's Republic of 
China (PRC). This review covers the period August 1, 1993 through July 
31, 1994.

EFFECTIVE DATE: October 15, 1996.

FOR FURTHER INFORMATION CONTACT: Karin Price or Maureen Flannery, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington D.C. 20230; telephone (202) 482-4733.

Applicable Statute

    Unless otherwise indicated, all citations to the statute and to the 
Department's regulations are references to the provisions as they 
existed on December 31, 1994.

Background

    On May 20, 1996, the Department published in the Federal Register 
(61 FR 25196) the preliminary results of its administrative review of 
the antidumping duty order on sulfanilic acid from the PRC (57 FR 
37524, August 19, 1992). We conducted a hearing on July 24, 1996. We 
have now completed the administrative review in accordance with section 
751 of the Tariff Act of 1930 (the Act).

Scope of the Review

    Imports covered by this review are all grades of sulfanilic acid, 
which include technical (or crude) sulfanilic acid, refined (or 
purified) sulfanilic acid and sodium salt of sulfanilic acid.
    Sulfanilic acid is a synthetic organic chemical produced from the 
direct sulfonation of aniline with sulfuric acid. Sulfanilic acid is 
used as a raw material in the production of optical brighteners, food 
colors, specialty dyes, and concrete additives. The principal 
differences between the grades are the undesirable quantities of 
residual aniline and alkali insoluble materials present in the 
sulfanilic acid. All grades are available as dry, free flowing powders.

[[Page 53712]]

    Technical sulfanilic acid contains 96 percent minimum sulfanilic 
acid, 1.0 percent maximum aniline, and 1.0 percent maximum alkali 
insoluble materials. Refined sulfanilic acid contains 98 percent 
minimum sulfanilic acid, 0.5 percent maximum aniline and 0.25 percent 
maximum alkali insoluble materials.
    Sodium salt is a powder, granular or crystalline material which 
contains 75 percent minimum equivalent sulfanilic acid, 0.5 percent 
maximum aniline based on the equivalent sulfanilic acid content, and 
0.25 percent maximum alkali insoluble materials based on the equivalent 
sulfanilic acid content.
    This merchandise is classifiable under Harmonized Tariff Schedule 
(HTS) subheadings 2921.42.22 and 2921.42.90. Although the HTS 
subheadings are provided for convenience and customs purposes, our 
written description of the scope of this proceeding is dispositive.
    This review covers 10 manufacturers/exporters of sulfanilic acid 
from the PRC, and the period August 1, 1993 through July 31, 1994.

Analysis of Comments Received

    We invited interested parties to comment on the preliminary 
results. We received written comments from China National Chemical 
Construction Corporation (CNCCC), Hainan Garden Trading Company (Hainan 
Garden), PHT International, Inc. (PHT), a U.S. importer, Sinochem Hebei 
Import and Export Corporation (Sinochem Hebei), Yude Chemical Industry 
Co. (Yude), and Zhenxing Chemical Industry Co. (Zhenxing) 
(collectively, respondents); and from the petitioner, Nation Ford 
Chemical Company. At the request of the petitioner, a public hearing 
was held on July 24, 1996.

Comment 1

    Petitioner argues that CNCCC, Hainan Garden, Sinochem Hebei, Yude, 
and Zhenxing should be collapsed and given a single margin because of 
the relationships among these companies and the significant 
transactions they had with each other. As a result, petitioner contends 
there is a high probability of price manipulation and circumvention of 
the antidumping duty order if these five companies retain their 
separate cash deposit rates.
    According to petitioner, the Department ``collapses'' related firms 
where the type and degree of relationship is so significant that we 
find that there is a strong possibility of price manipulation, citing 
to Nihon Cement Co., Ltd. v. United States, 17 CIT 400 (1993) (Nihon). 
Petitioner notes that the Department considers five factors in 
evaluating whether respondents should be collapsed, and that these 
factors were used in the preliminary results of this review to 
determine whether to collapse Yude and Zhenxing. Petitioner states that 
the Department need not find that each of these factors is present in 
order to warrant collapsing. Rather, the relationships among the 
various entities are examined to determine whether collapsing is 
warranted to avoid price manipulation and circumvention of the order. 
It argues that, although these companies do not have interlocking 
boards of directors, they meet each of the other factors. Petitioner 
contends that these factors demonstrate that there exists a strong 
possibility of price manipulation, and that, by trading sulfanilic acid 
among themselves, these companies can avoid dumping duties. By 
collapsing the respondents and applying a single rate to them all, the 
Department can prevent this. Petitioner wants the Department to weight 
average the rates for each of the respondents, recalculated as argued 
by petitioner (see comments 2-9 below), to determine the single rate to 
apply to each company.
    Respondents reply that CNCCC, Hainan Garden, and Sinochem Hebei 
should not be collapsed with Yude and Zhenxing because they are 
independent entities and are not related to or affiliated with Yude, 
Zhenxing, or PHT. Respondents note that only related companies can be 
collapsed and given a single antidumping rate, citing Nihon, and that 
Yude and Zhenxing were collapsed by the Department because they had the 
same joint venture partner, PHT. Respondents point to the record of the 
review to show that, prior to the joint venture agreements, Yude and 
Zhenxing were privately owned and owned by ``All the People,'' 
respectively, and were not related to PHT. Further, CNCCC, Hainan 
Garden, and Sinochem Hebei are either owned by ``All the People'' or 
are privately owned, and are therefore not related to PHT. Respondents 
cite to the Notice of Final Determination of Sales at Less Than Fair 
Value: Silicon Carbide from the People's Republic of China (59 FR 
22585, May 2, 1994), in which the Department stated that ownership by 
``All the People'' means that no one person can own the company, as 
evidence that companies owned by ``All the People'' cannot be related 
to PHT. Respondents argue that the sales arrangements between these 
companies do not make them related parties with relationships 
significant enough to warrant collapsing them and treating them as a 
single entity, and that, contrary to petitioner's assertion, the 
relationships between these companies lack all of the five factors used 
to determine whether to collapse related parties.

Department's Position

    We collapse related parties when the type and degree of 
relationship is so significant that we find that there is a strong 
possibility of price manipulation (see Nihon). For purposes of 
determining United States price (USP) and foreign market value (FMV), 
the statute defines a ``related party'' in terms of agency, stock 
ownership, control, or ``any interest'' in the business in question. 
See section 771(13) of the Act. We have taken the position in a number 
of cases and in our questionnaire that ``any interest'' means at least 
a five percent ownership interest between the parties, arguing that 
five percent ownership is an appropriate indicator of the possibility 
of price manipulation (see, e.g., Final Determinations of Sales at Less 
Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, Certain 
Cold-Rolled Carbon Steel Flat Products, and Certain Corrosion-Resistant 
Carbon Steel Flat Products from Japan (58 FR 37154, July 9, 1993).
    In this review, we considered whether Yude and Zhenxing should be 
collapsed because each formed a joint venture with PHT; PHT has an 
ownership interest in each joint venture. However, the information on 
the record of this review shows that CNCCC, Hainan Garden, and Sinochem 
Hebei are not related to Yude, Zhenxing, or PHT; CNCCC and Sinochem 
Hebei are owned by ``All the People,'' and Hainan Garden is privately 
owned. Therefore, we have not collapsed CNCCC, Hainan Garden, and 
Sinochem Hebei with Yude, Zhenxing, and PHT. As we did in the 
preliminary results of review, we have calculated separate antidumping 
margins for CNCCC, Hainan Garden, and Sinochem Hebei; we have also 
calculated a separate margin for Yude and Zhenxing, which were 
collapsed due to their relationship with PHT.

Comment 2

    Petitioner argues that CNCCC and Hainan Garden had such serious 
deficiencies in their questionnaire responses that the Department must 
base the final results for them on best information available (BIA). 
With respect to CNCCC, petitioner contends that the Department cannot 
rely on certain of CNCCC's records because of problems found at 
verification. Second, petitioner states that the Department was unable 
to trace 1993 sales to the

[[Page 53713]]

source records because CNCCC did not keep a ``contract book'' for 1993 
as it had for 1994. Petitioner further contends that CNCCC did not 
cooperate with the Department by refusing to provide copies of loan 
documents and books that the Department had requested at verification.
    With respect to Hainan Garden, petitioner notes two discrepancies 
at verification. First, Hainan Garden failed to record sales in a 
timely manner, causing Hainan Garden to be in violation of Generally 
Accepted Accounting Principles (GAAP) under both U.S. and PRC practice 
and preventing the Department from tracing Hainan Garden's reported 
sales to its financial statement. Second, petitioner complains that 
Hainan Garden failed to maintain a separate accounts receivable ledger, 
which also violates U.S. and PRC GAAP.
    As a result of the above, petitioner argues that CNCCC and Hainan 
Garden impeded the Department's verifications, and that the Department 
is therefore required to rely on BIA, citing to 19 U.S.C. Sec. 1677e(c) 
and section 353.37(a)(1) of the Department's regulations. Petitioner 
also cites as support Uddeholm Corp. v. United States, 676 F. Supp. 
1234, 1236 (Ct. Int'l Trade 1987); NSK Ltd. v. United States, 910 F. 
Supp., 663, 670 (Ct. Int'l Trade 1995); N.A.R., S.p.A. v. United 
States, 741 F. Supp. 936, 941 (Ct. Int'l Trade 1990); and Allied Signal 
Corp. v. United States, 996 F.2d 1991 (Fed. Cir. 1994). Petitioner 
contends that CNCCC and Hainan Garden should receive as BIA the PRC-
wide rate of 85.20 percent.
    Respondents reply that CNCCC and Hainan Garden are both entitled to 
a separate antidumping margin, and that the Department was able to 
verify these companies with only minor discrepancies. They contend 
that, at CNCCC's verification, the Department traced CNCCC's 1993 and 
1994 reported sales to the export sales ledgers, tied the export sales 
ledgers to CNCCC's financial statements, and found that all sales of 
sulfanilic acid made to the United States during the period of review 
had been reported. Next, they state that CNCCC never refused to give 
the Department access to requested information and, in almost every 
instance, allowed the Department to take copies of the documents. 
Lastly, they note that, in CNCCC's records, CNCCC is listed as the 
vendor for sales made prior to the establishment of the joint ventures 
between PHT and Yude and Zhenxing, and that Yude and Zhenxing are 
listed as the vendors for sales made subsequent to the establishment of 
the joint ventures.
    With respect to Hainan Garden, respondents state that the PRC GAAP 
to which petitioner cites is a June 1, 1994 regulation, which was 
therefore not applicable for most of the period of review. Second, they 
note that Hainan Garden made it clear at verification that they had not 
issued an invoice for the reported sales to PHT because they had not 
been paid by Hainan Nationalities, the company it used to export the 
merchandise from the PRC, for certain other sales. Respondents also 
note that, despite the Department's inability to tie the sales payments 
to the financial statements, the Department was able to verify 
completeness by examining the shipping journal. Respondents lastly 
argue that, although Hainan Garden does not keep an ``accounts 
receivable'' ledger, it showed the Department its ``subsidiary 
ledger,'' which keeps track of payments to the factory and payments 
from Hainan Nationalities.
    Respondents conclude that CNCCC and Hainan Garden fully cooperated 
with the Department, and that the Department was able to verify their 
questionnaire responses. Accordingly, they contend that the Department 
should use their questionnaire responses to calculate a margin for 
these companies.

Department's Position

    We disagree with petitioner. At verifications, CNCCC and Hainan 
Garden fully cooperated with our requests for information, and, with 
the exception of some minor discrepancies, we were able to verify the 
information provided in CNCCC's and Hainan Garden's questionnaire 
responses. Therefore, we have used their questionnaire responses to 
determine their antidumping duty rates.
    With regard to CNCCC, we do not find that the problems found at 
verification with some of CNCCC's records are such that the documents 
cannot be relied upon. Further, we were able to conduct our 
completeness test using CNCCC's export sales ledgers for 1993 and for 
1994, and we found that all sales of sulfanilic acid to the United 
States during the period of review had been reported (see pages 5-6 of 
the May 30, 1996 CNCCC verification report). The ``contract book'' to 
which petitioner refers is a workbook kept by the sales person in 
charge of sulfanilic acid for her personal use. The sales person did 
not maintain such a workbook for sales made in 1993. We reviewed the 
1994 contract book as an additional check to ensure that all sales had 
been reported. That the sulfanilic acid sales person did not maintain 
such a book for 1993 sales does not mean that we were not able to 
verify that sales made in 1993 had been properly reported; as mentioned 
above, we were able to verify completeness using the export sales 
ledgers. Lastly, although CNCCC did not allow us to take copies of 
certain documents, we were allowed to review those documents, and the 
results of our review have been reported in the verification report. We 
do not believe that this hindered our verification such that use of BIA 
is warranted.
    Whether Hainan Garden maintains its records in a manner conforming 
to the PRC or the U.S. GAAP is not an issue which warrants the use of 
BIA for that company. Rather, at verification, we examined the 
company's records to determine whether the information reported to us 
in the questionnaire responses is complete and accurate. At Hainan 
Garden's verification, we found that we could not tie the sales made to 
PHT to the financial statement because the sales had not yet been 
recorded in the company's records, and we found that Hainan Garden had 
not received payment for two of these sales. Hainan Garden provided the 
following explanation, which is described in the September 14, 1995 
Hainan Garden verification report. Hainan Garden used another company, 
Hainan Nationalities, to export the merchandise. Sometimes Hainan 
Garden received payment from Hainan Nationalities and it paid the 
factories, and sometimes Hainan Nationalities paid the factories and 
remitted to Hainan Garden its revenues. Hainan Garden stated that, for 
the sales to PHT, Hainan Nationalities had not paid Hainan Garden 
because of a payment problem on sales of other products, but that 
Hainan Nationalities had paid the factories. Because of the amount 
outstanding, Hainan Garden had not sent to Hainan Nationalities an 
invoice and had not recorded the sales on its financial statements.
    At verification, we reviewed Hainan Garden's shipping journal, 
sales journal, and subsidiary ledger showing payments to the factories 
and payments from Hainan Nationalities. From the documentation we 
reviewed, we were able to verify that all sales of sulfanilic acid to 
the United States during the period of review had been reported. With 
regard to the subsidiary ledger, we are satisfied that Hainan Garden 
maintains a record of the amounts which it is owed. As we are satisfied 
that Hainan Garden, with some minor discrepancies, reported to us its 
sales information accurately and completely, we have not used BIA to 
calculate its margin.

[[Page 53714]]

Comment 3

    Petitioner argues that use of Indian import prices as the surrogate 
value for aniline is inappropriate. Petitioner contends that the 
domestic market prices of aniline reported in Chemical Business and 
Chemical Weekly should be used as surrogate values because they 
accurately reflect the prices paid for aniline by Indian manufacturers 
of sulfanilic acid. It notes that the import value of aniline used for 
the preliminary results of review is approximately 30 percent of the 
prices reported in Chemical Business and Chemical Weekly.
    Petitioner states that, in selecting surrogate values for a 
factors-of-production analysis, the Department attempts to calculate 
values for raw materials in a manner which closely approximates the 
actual costs of the raw materials paid by manufacturers in the 
surrogate country market. As support, petitioner cites to 19 U.S.C. 
Sec. 1677b(c), the Final Determination of Sales at Less Than Fair 
Value: Coumarin from the People's Republic of China (59 FR 66895, 
December 28, 1994) (Coumarin), and the Notice of Final Determination of 
Sales at Less Than Fair Value: Saccharin from the People's Republic of 
China (59 FR 58818, November 15, 1994) (Saccharin).
    Petitioner contends that the data it submitted from Chemical 
Business and Chemical Weekly provide the most accurate source of 
surrogate values for aniline, and stresses that they are consistent 
with information provided by the U.S. Embassy in India for the less-
than-fair-value (LTFV) investigation of this case (see Final 
Determination of Sales at Less Than Fair Value: Sulfanilic Acid from 
the People's Republic of China (57 FR 29705, July 6, 1992) (Sulfanilic 
Acid)). It states that the fact that the import value of aniline is so 
much lower than the prices reported in Chemical Business and Chemical 
Weekly is evidence that the prices in those publications are more 
reliable. Petitioner notes that these publications have been used as 
sources of surrogate values in other cases, including the Notice of 
Final Determination of Sales at Less Than Fair Value: Sebacic Acid from 
the People's Republic of China (59 FR 28053, May 31, 1994) (Sebacic 
Acid) and the Notice of Final Determination of Sales at Less Than Fair 
Value: Bicycles from the People's Republic of China (61 FR 19026, April 
30, 1996) (Bicycles), and were also used to determine surrogate values 
for sulfuric acid and activated carbon in the preliminary results of 
this review. According to petitioner, it makes no sense for the 
Department to use Chemical Business and Chemical Weekly for two 
surrogate values in this review, but to reject them for valuing 
aniline.
    Petitioner further argues that there is nothing on the record to 
suggest that the PRC producers only use aniline imported into the PRC, 
or that Indian manufacturers of sulfanilic acid only use imported 
aniline. It cites to a letter from the president of R-M Industries (now 
called Nation Ford Chemical Company) stating that none of the Indian 
importers of aniline are sulfanilic acid producers. Without substantial 
evidence pointing to import values as the source for the surrogate 
values, petitioner believes that the Department should not rely on the 
low import values.
    Moreover, petitioner contends that the Indian import statistics 
used by the Department for the preliminary results reflect the value of 
the aniline at the foreign port of export, and, therefore, the cost to 
produce aniline in the country of exportation, not India. As a result, 
the import statistics do not reflect costs incurred by Indian 
sulfanilic acid manufacturers and should be rejected.
    Petitioner also claims that reliance on Indian import statistics 
assumes that Indian sulfanilic acid producers can purchase aniline in 
bulk quantities at low per-unit prices, noting that chemicals such as 
aniline are imported in large quantities by Indian importers. By 
contrast, Indian sulfanilic acid producers are small operations without 
the need or ability to purchase, store, or use large volumes of 
aniline, and would pay a higher per-unit cost than do Indian importers 
of such chemicals. Petitioner argues that the reported Indian domestic 
prices of aniline in Chemical Business and Chemical Weekly reflect the 
development of the Indian industry, which is similar to that of the 
Chinese industry and consists of smaller facilities without modern, 
efficient methods of production.
    Petitioner contends that respondents' argument in comments 
submitted before the preliminary results that the Department should 
disregard the domestic prices of aniline, a petroleum-based product, in 
Chemical Business and Chemical Weekly because India is not a petroleum 
producing country, resulting in artificially high domestic aniline 
prices, is unfounded. Petitioner states that respondents have not 
offered support for this claim, and notes that leading aniline 
exporters, such as Japan or the Netherlands, do not produce large 
amounts of petroleum. Accordingly, petitioner contends that petroleum 
production does not determine the price of aniline.
    Petitioner further contends that the import prices should not be 
used because the import statistics contain significant unexplained 
aberrations. For example, petitioner notes that the U.S. export 
statistics show that the United States exported to India over four 
times the amount of aniline than is indicated by the Indian import 
statistics.
    Lastly, petitioner argues that the Department has considered 
whether Indian import statistics merit consideration as surrogate 
values in other cases. Petitioner cites specifically to Coumarin, in 
which the Department found that Indian import statistics for chlorine 
were aberrational because they varied sharply from ``numerous examples 
of alternative price sources,'' and therefore did not use the import 
values for chlorine. Instead, the Department used non-publicly 
available price quotes supplied by the petitioner. Petitioner contends 
that the situation in this case is no different, because a number of 
sources of information on the record of this review indicate that the 
value of aniline is at least three times greater than the import value 
used by the Department in the preliminary results of review.
    Respondents contend that the Department should continue to use 
import prices for valuing aniline, as was done in the LTFV 
investigation of this case (see Sulfanilic Acid). They state that the 
Department's primary objective in a review is to calculate antidumping 
margins as accurately as possible for the PRC producers/exporters, 
citing the Final Determinations of Sales at Less Than Fair Value: 
Oscillating Fans and Ceiling Fans from the People's Republic of China 
(56 FR 55271, October 25, 1991) (Fans). To do so, the Department must 
determine the actual cost of aniline for an Indian manufacturer that 
produces sulfanilic acid for export. They state that the evidence on 
the record of this review shows that Indian sulfanilic acid producers 
use imported aniline to produce sulfanilic acid for export, and that 
there is no evidence to show that they use domestic aniline to produce 
sulfanilic acid for export. They further state that the evidence shows 
that exported sulfanilic acid would not be competitive if they used 
domestic aniline.
    Respondents note that they have submitted to the record a letter 
from an Indian sulfanilic acid producer stating that it uses imported 
aniline to produce sulfanilic acid for export, a letter from an Indian 
sulfanilic acid exporter describing in detail how an Indian producer 
uses imported aniline for export without paying import duties, and a 
letter from a sulfanilic acid end

[[Page 53715]]

user stating that Indian sulfanilic acid producers could not use 
domestic aniline to produce sulfanilic acid for export because their 
prices would not be competitive. They contend that since there is no 
publicly available published information regarding the source of 
aniline for Indian sulfanilic acid producers, the Department must rely 
on this next best information to show that imported aniline is used by 
Indian sulfanilic acid producers. They further note that there is 
nothing on the record showing that Indian manufacturers use 
domestically-produced aniline to produce sulfanilic acid for export.
    According to respondents, the domestic Indian aniline market is 
inefficient and protected by high tariffs. Therefore, respondents 
argue, Indian-produced aniline is very expensive, and the Indian 
government allows aniline to be imported duty free for production of 
sulfanilic acid for export. Respondents contend that petitioner fails 
to take into account that Indian sulfanilic acid producers use 
different aniline inputs for producing sulfanilic acid for the domestic 
and export markets. Respondents state that, while the prices reported 
in Chemical Business and Chemical Weekly may reflect the cost of 
domestically-produced aniline, they do not reflect the cost of imported 
aniline used to produce sulfanilic acid for export and should therefore 
be rejected in favor of import prices. They argue that use of import 
prices does not mean that the surrogate country is Japan or some other 
country, because the import prices are actual market prices paid by 
Indian, not Japanese, sulfanilic acid producers.
    They further claim that the Indian import prices are not 
aberrational, are close to the world market price, and have remained 
steady during the period of review; this leads to a more accurate 
calculation of the export price for sulfanilic acid. Lastly, 
respondents note that the Department is not required to choose one 
source of surrogate information to value all factors in the face of 
evidence that it will lead to inaccurate results.

Department's Position

    We disagree with petitioner. The evidence placed on the record of 
this review by the respondents indicates that Indian sulfanilic acid 
producers use imported aniline in their production process when they 
produce sulfanilic acid for export. Therefore, these values best 
approximate the cost incurred by the sulfanilic acid exporters in 
India, and we have continued to use import prices reported in the 
Monthly Statistics of the Foreign Trade of India, Volume II--Imports 
(Indian Import Statistics) to value aniline for the final results of 
review, as in the LTFV investigation of this case (see our response to 
Comment 1 in Sulfanilic Acid).
    With regard to petitioner's argument that the import statistics 
reflect the value at the port of export, we note that the introductory 
comments to the Indian Import Statistics state that the values are 
reported on a CIF (cost, insurance, freight) basis (see our response to 
Comment 4). Therefore, we disagree with petitioner that the import 
values are inappropriate because they reflect only the cost to produce 
in the country of exportation.
    Contrary to petitioner's argument that it does not make sense to 
reject Chemical Business and Chemical Weekly for aniline but to use 
them for other factors, we believe that we can use different sources 
for valuing different factors when we find that the surrogate values 
are appropriate. Therefore, it is not inappropriate to use the Indian 
Import Statistics to value aniline and to use Chemical Business and 
Chemical Weekly to value other factors.

Comment 4

    Petitioner argues that, if the Department continues to use import 
prices as the surrogate value for aniline, the import prices should be 
adjusted to account for ocean freight from the port of export to India, 
Indian port terminal and brokerage charges, the Indian importers' mark-
up, and the Indian import duty, in order to approximate costs incurred 
by Indian sulfanilic acid producers. Petitioner contends that the 
aniline import values relied upon by the Department in the preliminary 
results are FOB values at the foreign port of export, and, therefore, 
do not include such costs. Petitioner states that the ultimate 
purchaser of the aniline, the Indian sulfanilic acid producer, would 
clearly be charged these expenses, and that an upward adjustment is 
necessary to reflect the total cost of the aniline. Petitioner contends 
that a comparison of the customs import values used for the preliminary 
results and CIF import prices reported in Chemical Weekly show that the 
CIF values are considerably higher, and that the use of the customs 
values, which are FOB foreign port of export, confers a substantial 
unfair benefit upon respondents. Petitioner suggests that an upward 
adjustment of eight percent, the statutory minimum profit, be used to 
make the adjustment for the importer's markup.
    With regard to import duties, petitioner states that aniline 
imported into India during the period of review was subject to an ad 
valorem duty of 85 percent which was not added to the surrogate value 
for aniline in the preliminary results of this review. According to 
petitioner, the letter from the sulfanilic acid exporter provided by 
the respondents, which states that import duties on aniline are not 
collected when the sulfanilic acid is exported, does not demonstrate 
that this 85 percent duty should not be included in the surrogate 
value. Petitioner notes that the Department has previously concluded 
that the import duty exemption for aniline was a countervailable 
subsidy under the U.S. law, citing the Preliminary Affirmative 
Countervailing Duty Determination: Sulfanilic Acid from India (57 FR 
35784, August 11, 1992) (Sulfanilic Acid CVD Determination), and argues 
that the alleged forgiveness of import duties, a countervailable 
subsidy, does not warrant the disregarding of the import duty in the 
factors-of-production analysis.
    Respondents reply that the Department should not make any 
adjustments to the import value of aniline. They state that, in 
previous cases, such as Sebacic Acid, Saccharin, and the Notice of 
Final Determination of Sales at Less Than Fair Value; Polyvinyl Alcohol 
from the People's Republic of China (61 FR 14057, March 29, 1996) 
(Polyvinyl Alcohol), the Department has eliminated from the surrogate 
values excise taxes, freight, and all other charges associated with the 
surrogate values because the Department already adds amounts for 
freight charges and other markups. Respondents note that, in this 
review, the Department has added to the surrogate value for aniline 
freight costs for transporting the aniline from the supplier in the PRC 
to the sulfanilic acid factory and PRC brokerage and handling costs. 
Therefore, respondents contend, the petitioner is arguing that the 
Department double count such expenses.
    Respondents also state that they have submitted evidence to the 
record of this review showing that, pursuant to the Indian government's 
duty drawback program, Indian importers of aniline import the chemical 
duty free and export the sulfanilic acid without the payment of the 
import duty. Therefore, the import duty would not be included in the 
cost of the aniline to the sulfanilic acid producer. They further state 
that the Department determined in the Sulfanilic Acid CVD Determination 
that the duty drawback for aniline was a countervailable subsidy based 
on BIA, using information provided by petitioner which misled the 
Department into believing that aniline is removed

[[Page 53716]]

from the sulfanilic acid during the production process.
    Respondents further argue that the Department should not add to the 
surrogate value for aniline an amount for the importer's markup. First, 
respondents state that the petitioner has not submitted any evidence as 
to what the importer's markup would be for aniline. Further, since the 
surrogate value should be as close as possible to the price at the 
factory gate and the import value of aniline represents the closest 
approximation of the actual aniline cost to the Indian manufacturer, it 
should not include any upward adjustments after importation which would 
artificially inflate the aniline cost.

Department's Position

    We agree with petitioner that, in order for the surrogate values to 
reflect the true costs to India for the raw materials, the surrogate 
values should include freight to India. However, the introductory notes 
to the Indian Import Statistics, used to determine the surrogate value 
for aniline, state that the values are reported on a CIF basis. Thus, 
the reported import values include the costs of transporting the 
merchandise to India, and an adjustment for ocean freight from the port 
of export to India and for Indian port terminal and brokerage charges 
is not necessary. This does not double count freight charges, as argued 
by respondents. We add freight costs to the cost of manufacturing to 
account for costs for transporting the raw materials from the suppliers 
of the raw materials to the factory producing the subject merchandise, 
not freight to the surrogate country.
    We also disagree that we should add an importer's markup to the 
surrogate value. There is no evidence on the record of the review 
indicating who imports the aniline, the sulfanilic acid producer or an 
importer who sells the aniline to the sulfanilic acid producer. 
Accordingly, there is no basis for determining that an importer's 
markup would be included in the price to the Indian sulfanilic acid 
producer and for adjusting the surrogate value for such a markup.
    With respect to petitioner's argument that we should include an 
amount for import duties in the surrogate value for aniline, we note 
that respondents have placed on the record evidence showing that the 
import duty is not paid when the sulfanilic acid is exported. 
Therefore, we disagree with petitioner, and have not made an adjustment 
for import duties.

Comment 5

    Petitioner argues that the Department should include a factor for 
water in its factors-of-production calculation. It contends that water 
is a significant input in the production of sulfanilic acid, and, 
therefore, should not be included in factory overhead. According to 
petitioner, the fact that the PRC producers may not incur any charges 
for water is not relevant to what the proper valuation should be in a 
factors-of-production analysis, arguing that surrogate values are used 
in non-market-economy (NME) country cases because the valuation of 
inputs is unreliable in the NME country. Therefore, since water is used 
in the production of sulfanilic acid, it should be valued in India 
without regard to the value that may be assigned that factor in the 
PRC.
    Respondents reply that, in past cases, the Department has 
determined that water was part of factory overhead because it was 
already included in Indian overhead numbers. As support, they cite to 
Polyvinyl Alcohol, Sebacic Acid, Saccharin, and Sulfanilic Acid. They 
state that petitioner has provided no reason in this case to overturn 
this established precedent.

Department's Position

    We disagree with petitioner. As was stated in Yude's and Zhenxing's 
questionnaire responses, and verified, Yude and Zhenxing have their own 
wells from which they pump water for use in the production process; the 
water is then recirculated. As we have stated in Saccharin, the Notice 
of Final Determination of Sales at Less Than Fair Value; Disposable 
Pocket Lighters from the People's Republic of China (60 FR 22359, May 
5, 1995), and Coumarin, it is normal practice to include such costs in 
factory overhead. Moreover, the data provided in the Reserve Bank of 
India Bulletin, used to determine the surrogate value for factory 
overhead, did not indicate to the contrary. Therefore, we have included 
water in factory overhead and have not valued it separately.

Comment 6

    Petitioner argues that the Department erroneously based Sinochem 
Hebei's ocean freight on surrogate costs. It notes that when an input 
is sourced from a market economy country and is paid for in a 
convertible currency, the Department's policy is to use actual costs, 
not surrogate costs.
    Respondents reply that the verification report for Sinochem Hebei 
states that ocean freight was always provided by NME carriers. 
Therefore, they contend that ocean freight should be valued using 
surrogate values, even if the expense was paid for in U.S. dollars.

Department's Position

    We agree with petitioner that when an input is provided by a market 
economy country in a convertible currency, we value the input using the 
actual cost. However, we found at verification that ocean freight for 
Sinochem Hebei's sales was always provided by NME carriers (see page 5 
of the May 30, 1996 Sinochem Hebei verification report), even though it 
was sometimes paid in U.S. currency and sometimes paid in renminbi. 
Accordingly, we have valued ocean freight for all of Sinochem Hebei's 
purchase price (PP) and exporter's sales price (ESP) sales using 
surrogate values.

Comment 7

    Petitioner contends that the Department should make an adjustment 
to Sinochem Hebei's ESP and PP sales for commissions and warehousing 
expenses paid by Alchemy International (Alchemy), Sinochem Hebei's U.S. 
subsidiary, and an adjustment to Yude's/Zhenxing's ESP sales for 
commissions paid by PHT, citing sections 353.41(e) and 353.56(a)(2) of 
the Department's regulations. Petitioner notes that, in their 
questionnaire responses, Sinochem Hebei and Yude/Zhenxing stated that 
they did not pay these expenses on their sales to the United States, 
but that the Department discovered these expenses for the first time at 
verifications. According to petitioner, since the respondents did not 
report these expenses in their responses, the Department should use BIA 
to adjust for them. It also argues that the Department should made an 
adjustment to the USP for Sinochem Hebei for credit expenses incurred 
on U.S. sales, citing Bicycles, 61 FR at 19028-29.
    Petitioner further argues that the Department must deduct indirect 
selling expenses incurred by Alchemy in the calculation of ESP for 
Sinochem Hebei. According to petitioner, these expenses should be 
deducted even though this is an NME proceeding, because the Department 
found in Bicycles that the statute requiring that indirect selling 
expenses be deducted ``provides no exception for cases involving non-
market-economy countries.'' It contends that this analysis governs this 
proceeding even though the decision in Bicycles was made under the Act 
as amended in 1994, rather than the prior version of the statute 
governing this review.
    Respondents reply that, at the verification of Alchemy, the 
Department

[[Page 53717]]

found no evidence that commissions were paid on sales of sulfanilic 
acid and was able to verify the specific ESP sales for which 
warehousing expenses were paid. Further, they state that the credit 
expenses referred to in the Alchemy verification report were not 
related to sales of sulfanilic acid. They also reply that, at the 
verification of PHT, the Department verified the sales for which 
commissions were paid and, if it makes an adjustment for commissions, 
should make the adjustment only for those sales.
    With regard to the deduction of indirect selling expenses from ESP, 
respondents reply that it has been the Department's long-standing 
practice not to deduct indirect selling expenses and profit in NME 
cases because of the difficulty in isolating these expenses in the 
surrogate values. As support, they cite Fans, Coumarin, Notice of Final 
Determination of Sales at less Than Fair Value: Pure Magnesium from 
Ukraine (60 FR 16432, March 30, 1995), and Saccharin. According to 
respondents, the Department needs to make a fair comparison between USP 
and FMV, citing The Budd Co. v. United States, 746 F. Supp. 1093, 1098 
(Ct. Int'l Trade 1990) and Smith Corona Group v. United States, 713 
F.2d 1568 (Fed. Cir. 1983), and should stand by this long-standing 
decision that such adjustments would lead to inaccurate results. They 
further argue that to implement this policy retroactively as a result 
of Bicycles would be unfair. Respondents also contend that the U.S. 
Congress' failure to amend the antidumping law to overrule the 
longstanding policy not to deduct indirect selling expenses shows it 
was aware of this practice and approved it.
    Lastly, respondents point out that any required adjustments 
resulting from the Uruguay Round Agreements Act (URAA) are not 
applicable to this review as it was requested before implementation of 
the URAA.

Department's Position

    With regard to whether direct and indirect selling expenses should 
be deducted from ESP in the calculation of our margins, we have 
reexamined our position. In Bicycles, we stated that we had reevaluated 
our practice in this area and concluded that selling expenses should be 
deducted in the calculation of constructed export price (CEP) under 
section 772(c)(2)(d) of the statute effective January 1, 1995, the 
effective date of the amendments made to the Act by the URAA (see 
Bicycles, 61 FR at 19031 (Comment 1)). Although the provisions which 
became effective January 1, 1995 are not applicable to this review, as 
it was requested prior to January 1, 1995, the language of section 
772(e) of the provisions as they existed on December 31, 1994 and 
applicable to this review clearly state that ESP shall be reduced by 
the amount of commissions for selling in the United States the 
particular merchandise under consideration and expenses generally 
incurred by or for the account of the exporter in the United States. 
This language requires the same deductions to ESP as does the language 
requiring deductions to CEP under the provisions effective January 1, 
1995. We have therefore changed our practice in this respect from that 
described in the cases cited to by respondents. Pursuant to our current 
practice as described in Bicycles, we have deducted from ESP for 
Sinochem Hebei and for Yude/Zhenxing direct selling expenses, including 
credit, warehousing expenses, and commissions, as applicable and 
verified, and indirect selling expenses incurred in the United States.

Comment 8

    Petitioner argues that the Department failed to exclude sales made 
by Sinochem Hebei to a related party in its analysis. According to 
petitioner, Sinochem Hebei did not clarify the relationship between 
these parties in its supplemental questionnaire response, as requested 
by the Department, and did not reveal that it sold to this party until 
verification.
    Respondents reply that there is no information on the record of 
this review to indicate that Sinochem Hebei is related to Sinochem 
U.S.A. They cite to the verification report for Sinochem Hebei, which 
states that the Department reviewed the related party ledger for 
Sinochem Hebei and did not find any companies other than those listed 
in the organization chart.

Department's Position

    We disagree with petitioner. At the verification of Sinochem Hebei, 
we inquired about Sinochem Hebei's relationship to Sinochem U.S.A., and 
were told that Sinochem Hebei is independent of Sinochem U.S.A., that 
Sinochem U.S.A. is part of Sinochem China, and that Sinochem Hebei made 
sales to Sinochem U.S.A. We reviewed Sinochem Hebei's organization 
chart and related party ledger, and found no indication that Sinochem 
Hebei is related to Sinochem U.S.A. See page 2 of the May 30, 1996 
Sinochem Hebei verification report. Therefore, sales made to Sinochem 
U.S.A. have not been treated as related party sales in our analysis.

Comment 9

    Petitioner argues that the Department must rely on BIA to calculate 
freight expenses incurred by PHT because, at verification, the 
Department discovered that PHT's freight records were inconsistent and 
undocumented; therefore, the freight records cannot be relied upon. 
According to petitioner, PHT's accountants stated that there were no 
documents to support an adjustment they had made to PHT's freight 
expenses in preparing PHT's financial statements and the reason for the 
adjustment was explained unsatisfactorily.
    Respondents reply that, with regard to freight costs, the 
Department examined at verification the original freight documents for 
specific sales and verified the fact that ocean freight and marine 
insurance was provided by PRC companies. Therefore, the fact that the 
Department could not tie all freight costs to the financial statements 
is irrelevant because actual costs will not be used in the calculation.

Department's Position

    We disagree with petitioner. Although we were not able to trace the 
freight account in the general ledger to the financial statements at 
verification, we are satisfied that, except for minor discrepancies, 
Yude and Zhenxing reported their sales information accurately and 
completely. At PHT's verification, we reviewed the actual freight 
documents for each ESP sale made by PHT during the period of review. 
Accordingly, we were able to use the actual freight amounts charged to 
PHT to determine the per unit amount of U.S. inland freight deducted 
from ESP. We also found that ocean freight and marine insurance was 
always provided by NME companies, and, therefore, we used surrogate 
values to value both expenses.

Clerical Errors

    Respondents contend that the Department made two clerical errors in 
its preliminary results. First, they argue that, in calculating the 
cost of packing materials, the Department used the wrong weights for 
the bags used to pack the sulfanilic acid. Second, they state that the 
Department inaccurately determined the freight cost for transporting 
the raw materials between the supplier factories and the sulfanilic 
acid factories. We have reviewed the calculations, and agree that these 
errors were made. They have been corrected for the final results.

[[Page 53718]]

Final Results of Review

    As a result of our review of the comments received, we have 
determined that the following margins exist:

------------------------------------------------------------------------
                                                                Margin  
          Manufacturer/exporter              Time period      (percent) 
------------------------------------------------------------------------
China National Chemical Construction                                    
 Corporation............................     8/1/93-7/31/94        60.68
Hainan Garden Trading Company...........     8/1/93-7/31/94        67.05
Sinochem Hebei Import & Export                                          
 Corporation............................     8/1/93-7/31/94         7.70
Yude Chemical Industry Company*.........     8/1/93-7/31/94         0.00
Zhenxing Chemical Industry Company*.....     8/1/93-7/31/94         0.00
PRC Rate................................     8/1/93-7/31/94       85.20 
------------------------------------------------------------------------
* Yude and Zhenxing have been collapsed for the purposes of this        
  administrative review. However, we have listed them separately on this
  chart for Customs purposes.                                           

    The Department will instruct the Customs Service to assess 
antidumping duties on all appropriate entries. The Department will 
issue appraisement instructions directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of these final results for all shipments of sulfanilic 
acid from the PRC entered, or withdrawn from warehouse, for consumption 
on or after the publication date, as provided for by section 751(a)(1) 
of the Act: (1) the cash deposit rates for reviewed companies named 
above which have separate rates will be the rates for those firms 
listed above; (2) for the companies which were not found to have a 
separate rate, Baoding No. 3 Chemical Factory, China National Chemical 
Construction Corporation, Qingdao Branch, Jinxing Chemical Factory, 
Sinochem Qingdao, and Sinochem Shandong, as well as for all other PRC 
exporters, the cash deposit rate will be the highest margin ever in the 
LTFV investigation or in this or prior administrative reviews, the PRC-
wide rate; and (3) the cash deposit rate for non-PRC exporters of 
subject merchandise from the PRC will be the rate applicable to the PRC 
supplier of that exporter. These deposit requirements shall remain in 
effect until publication of the final results of the next 
administrative review.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CR 353.34(d)(1). Timely written notification 
of the return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: October 7, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-26368 Filed 10-11-96; 8:45 am]
BILLING CODE 3510-DS-P