[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]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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