[Federal Register Volume 62, Number 45 (Friday, March 7, 1997)]
[Notices]
[Pages 10530-10540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5711]


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DEPARTMENT OF COMMERCE
[A-570-825]


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

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

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

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SUMMARY: On September 3, 1996, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
review of the antidumping duty order on sebacic acid from the People's 
Republic of China (PRC). This review covers shipments of this 
merchandise to the United States during the period July 13, 1994 
through June 30, 1995. We gave interested parties an opportunity to 
comment on our preliminary results. Based upon our analysis of the 
comments received we have changed the results from those presented in 
the preliminary results of review.

EFFECTIVE DATE: March 7, 1997.

FOR FURTHER INFORMATION CONTACT: Elizabeth Patience or Jean Kemp, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone (202) 482-3793.

APPLICABLE STATUTE AND REGULATIONS: Unless otherwise indicated, all 
citations to the statute are references to the provisions effective 
January 1, 1995, the

[[Page 10531]]

effective date of the amendments made to the Tariff Act of 1930 (the 
Act) by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the current regulations, as amended by the interim regulations 
published in the Federal Register on May 11, 1995 (60 FR 25130).

SUPPLEMENTARY INFORMATION:

Background

    On September 3, 1996, the Department published in the Federal 
Register (61 FR 46440) the preliminary results of its administrative 
review of the antidumping duty order on sebacic acid from the PRC (59 
FR 35909, July 14, 1994). We gave interested parties an opportunity to 
comment on our preliminary results and, at the request of respondents 
and the petitioner, held a public hearing on November 5, 1996. We 
received written comments from Tianjin Chemicals Import and Export 
Corporation (Tianjin), Guangdong Chemicals Import and Export 
Corporation (Guangdong) and Sinochem International Chemicals Company, 
Ltd. (SICC) (collectively, respondents); and from the petitioner, Union 
Camp Corporation. On October 29, 1996, after case and rebuttal briefs 
were filed, respondents submitted ``newly discovered'' information 
regarding sebacic acid production in India. Due to the importance of 
this issue in this case, we accepted the submission over petitioner's 
argument that it was untimely. We subsequently gave both parties an 
opportunity to submit additional information regarding the production 
of sebacic acid in India. On November 13, 1996 and November 21, 1996, 
both parties submitted information and rebuttal comments regarding this 
issue. We have now completed the administrative review in accordance 
with section 751 of the Act.

Scope of the Review

    The products covered by this order are all grades of sebacic acid, 
a dicarboxylic acid with the formula (CH2)8(COOH)2, which include but 
are not limited to CP Grade (500ppm maximum ash, 25 maximum APHA 
color), Purified Grade (1000ppm maximum ash, 50 maximum APHA color), 
and Nylon Grade (500ppm maximum ash, 70 maximum ICV color). The 
principal difference between the grades is the quantity of ash and 
color. Sebacic acid contains a minimum of 85 percent dibasic acids of 
which the predominant species is the C10 dibasic acid. Sebacic acid is 
sold generally as a free-flowing powder/flake.
    Sebacic acid has numerous industrial uses, including the production 
of nylon \6/10\ (a polymer used for paintbrush and toothbrush bristles 
and paper machine felts), plasticizers, esters, automotive coolants, 
polyamides, polyester castings and films, inks and adhesives, 
lubricants, and polyurethane castings and coatings.
    Sebacic acid is currently classifiable under subheading 
2917.13.00.00 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheading is provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding remains dispositive.
    This review covers the period July 13, 1994, through June 30, 1995, 
and four exporters of Chinese sebacic acid.

Analysis of Comments Received

Comment 1

    Respondents assert that certain sales treated by the Department in 
its preliminary results as sales by Sinochem Jiangsu Import and Export 
Corporation (Jiangsu), another company subject to this antidumping duty 
order, should be considered SICC sales. According to respondents, SICC 
was acting as a sales agent for Jiangsu. In its capacity as sales 
agent, SICC negotiated the sale price with the U.S. importer, set the 
price of the sales, arranged the shipment of the merchandise to the 
U.S. importer, and purchased the cargo transportation insurance. In 
addition, the U.S. importer sent the purchase order to SICC rather than 
Jiangsu. Citing Sulfanilic Acid from the People's Republic of China: 
Final Results and Partial Recission of Antidumping Duty Administrative 
Review, 61 FR 53702 (October 15, 1996) (Sulfanilic Acid) and Final 
Determination of Sales at Not Less Than Fair Value; Canned Mushrooms 
from the People's Republic of China, 48 FR 45445 (October 5, 1983) 
(Canned Mushrooms), respondents argue that a margin should be 
calculated for these sales based on SICC's data as the exporter rather 
than assigning Jiangsu's 243 percent rate to these sales.
    In the alternative, respondents argue that, if the Department 
determines that these sales were Jiangsu sales, these sales should be 
removed from the calculation of SICC's rate.
    Respondents assert that in prior cases, such as Manganese Sulfate 
from China, 60 FR 52155 (October 5, 1995) (Manganese Sulfate), and 
Polyvinyl Alcohol from the People's Republic of China, 61 FR 14057 
(March 29, 1996) (Polyvinyl Alcohol from the PRC), where the Department 
has determined that certain sales were made by another exporter, it has 
dropped those sales from the U.S. sales base of the respondent 
exporter.
    Respondents contend that SICC has cooperated with the Department in 
each stage of this review and that SICC's dealings with Jiangsu are an 
accepted way of doing business in China. Respondents assert that SICC 
and U.S. importers are being punished because SICC fully disclosed its 
business dealings to the Department. Respondents argue that the 
Department is including these sales into SICC's dumping margin so as to 
curb circumvention by Chinese exporters. Respondents assert that 
Commerce's actions should reflect the remedial intention on the 
statute. According to respondents, the remedial purpose of the statute 
is not served by applying the country-wide rate to SICC's sales in this 
case and the Department has exceeded its authority by doing so.
    Petitioner supports the Department's treatment of the Jiangsu sales 
exported by SICC. Petitioner argues that respondents' reliance on 
Sulfanilic Acid to support its argument that SICC is the seller is 
misplaced. In that case, the Department decided that two producers were 
the proper respondents because the producers established the price with 
the U.S. importer, not the trading company through which the sales were 
made. The trading company's role was limited to processing paperwork. 
Petitioner argues that the same fact pattern does not exist in the 
present case. Petitioner notes that Jiangsu is not a producer of 
sebacic acid but is an export trading company that received its own 
dumping margin in the LTFV investigation.
    Petitioner also argues that respondents incorrectly rely on Canned 
Mushrooms. Petitioner contends that there is no discussion in that case 
on how to value sales that an exporter misrepresents as its own so that 
another exporter can avoid a larger dumping margin. Petitioner contends 
that Manganese Sulfate is not applicable because in that case it was 
clear from documents on the record that the trading company in question 
did not have any knowledge at the time the sale was made that the sale 
was destined for the United States. Petitioner also notes that a 
similar situation existed in Polyvinyl Alcohol from the PRC where the 
Department excluded certain sales of an exporter because, at the time 
the sales were made, the exporter did not know that the sales were 
destined for the United States.

[[Page 10532]]

    Petitioner replies that because these two sales were blatant and 
admitted attempts to circumvent the antidumping duty order, the 
Department correctly valued these two sales with the country-wide 
dumping margin of 243.40 percent. Petitioner argues SICC received a 
commission from Jiangsu for acting as Jiangsu's sales agent.
    Petitioner contends that, unlike in Manganese Sulfate and Polyvinyl 
Alcohol from the PRC, in the instant case both SICC and Jiangsu knew 
that the two sales were destined for the United States. Petitioner 
argues in order to enforce the antidumping duty statute, the Department 
must assign the country-wide rate to the two Jiangsu sales. Petitioner 
contends that SICC clearly attempted to circumvent the antidumping duty 
laws by cooperating with Jiangsu by acting as a sales agent for two 
sales of sebacic acid to a U.S. importer. Consequently, petitioner 
maintains the Department was justified in using the country-wide 
antidumping rate for those two sales. See 19 U.S.C. Section 1677e(b).

Department Position

    We disagree with respondents. It was clear from statements made by 
SICC officials at verification that SICC considered these sales to be 
Jiangsu's sales. See SICC Verification Report at 6-7. Therefore, it is 
not appropriate to calculate a margin on these sales based on SICC's 
data as the exporter. However, because SICC reported these sales as 
their own in the questionnaire responses and played a significant role 
in the sale of this merchandise, including identifying itself as the 
exporter on U.S. Customs documentation and accepting and subsequently 
converting payment for Jiangsu, the Department has included these two 
sales in the calculation of SICC's margin.
    However, we disagree with petitioner's and respondents'' 
characterization of our treatment of these sales as punitive use of 
facts available to ``punish'' an uncooperative respondent. Our use of 
the rate of 243 percent was not punitive. Because these are Jiangsu 
sales, we applied the rate that Jiangsu would have received on the 
sales to the United States. That the rate is 243 percent is reflective 
only of Jiangsu's failure to respond to the Department's questionnaire 
and the Department's application of the country-wide rate to Jiangsu 
consistent with its normal practice. See Preliminary Results, 61 FR 
46442.
    In this review, SICC knowingly engaged in sales to the United 
States of another respondent's material, according to statements by 
SICC at verification, as an attempt to assist Jiangsu in avoiding 
posting of Jiangsu's higher antidumping duty cash deposits. Therefore, 
it is appropriate and consistent with the remedial nature of the 
statute, to apply the Jiangsu rate to these transactions in calculating 
SICC's rate. SICC's margin should reflect any dumping on sales in which 
it is the exporter of record. Respondents'' reliance on Asociacion 
Columbiana de Exportadores de Flores v. United States, 717 F.Supp. 834, 
837 (1989), C.J. Tower and Sons v. United States, 71 F.2d 438 (CCPA 
1934), and Helwig v. United States, 188 U.S. 605 (1903) is misplaced. 
The Department has assigned the Jiangsu rate to the Jiangsu sales 
reported by, and entered into the United States by SICC. The 
Department's determination to do so is a direct result of the actions 
taken by SICC and Jiangsu and should not be characterized as punitive.
    Respondents' reliance on Sulfanilic Acid is misguided. In that 
case, the Department rejected petitioner's argument that a trading 
company should be designated the respondent and not the producers of 
the subject merchandise. The trading company's role was limited to 
processing paperwork. In the instant case, SICC received a commission 
on the sales, accepted payment for the sales, converted this payment to 
Chinese currency, and claimed that it was the exporter of the 
merchandise to the U.S. Customs Service. SICC's role, therefore, was 
much more extensive than simply processing paperwork. SICC's role in 
making the sales, in combination with its agreement with Jiangsu to 
sell the merchandise to Jiangsu's U.S. customer at prices and terms set 
by Jiangsu, led to the Department's determination in this case to 
include the Jiangsu sales in SICC's margin calculation.
    Respondents' reference to Canned Mushrooms is similarly misplaced. 
In that case, petitioner was arguing that the Department should 
calculate purchase price using respondent's prices to PRC customers 
instead of prices to US customers. The Department disagreed and based 
purchase price on the prices which respondent sells the product to US 
customers. This decision is not relevant to the current discussion of 
sales by one exporter made through another in order to reduce payment 
of cash deposits and antidumping duties.
    Additionally, the facts of Manganese Sulfate and Polyvinyl Alcohol 
from the PRC are readily distinguishable from this case. In contrast to 
the companies in these cases, Jiangsu and SICC both knew the subject 
merchandise was being shipped to the United States. The agreement 
between SICC and Jiangsu identified the U.S. customer and outlined 
which party was responsible for export-related charges as well as which 
party was responsible for obtaining payment from the U.S. customer. See 
SICC Verification Report at 6.

Comment 2

    Petitioner argues that India should not be used as the surrogate 
country for valuing factors of production in this review because there 
is no production of sebacic acid or a comparable product in India. 
Petitioner contends that it would be inconsistent with the statute to 
use India as a surrogate because: (1) India is not a producer of 
sebacic acid; and (2) there is no evidence on the record to support 
that India is a producer of a comparable product. Petitioner argues 
that there is no evidence on the record to support the Department's 
conclusion that oxalic acid (1) is produced in India or (2) is 
comparable to sebacic acid. Petitioner states that while it is true 
that both oxalic and sebacic acid are dicarboxylic acids, oxalic acid 
has two carbon atoms and sebacic acid has ten carbon atoms, giving the 
two acids completely different properties and uses. Petitioner contends 
that the inputs for the two acids are very different. Additionally, 
petitioner argues that the commercial values of imported sebacic acid 
is nearly 20 times greater than the imported Indian value for oxalic 
acid.
    Petitioner suggests that the Department should value the factors of 
production based on either U.S. or Japanese values, the only two market 
economies in which sebacic acid is produced using the caustic fusion 
process. See Natural Bristle Paint Brushes and Brush Heads from China, 
50 FR 52812 (Dec. 26, 1985) (Natural Bristle Paint Brushes) (the 
Department used a U.S. import price as the foreign market value for 
certain paint brushes because there was no comparable product in the 
surrogate country).
    Respondents maintain that the Department has the option to choose 
as a surrogate a country that does not produce the same, or even 
comparable, merchandise if there is no country that meets both criteria 
in the statute (i.e., comparable level of economic development and 
producer of comparable merchandise). Otherwise, respondents contend, if 
Union Camp is correct, no country in the world meets the statutory 
criteria as a surrogate country.
    On October 29, 1996, respondents submitted a letter from an Indian 
chemical company offering to sell

[[Page 10533]]

sebacic acid. Respondents argue that this is evidence that sebacic acid 
is produced in India. However, respondents argue that even if sebacic 
acid is not produced in India, oxalic acid is produced in India. 
Respondents maintain that many of the inputs required to produce 
sebacic acid, including castor oil, also are produced in India and 
exported to China. Respondents contend that interchangeableness is not 
needed to make a product comparable. Respondents state that both oxalic 
and sebacic acids are used in the rubber manufacturing industry. 
Additionally, respondents quote the International Trade Commission, 
stating that sebacic acid has physical characteristics similar to those 
of other dicarbolic acids in the chemical series. See Sebacic Acid from 
the People's Republic of China, Inv. No. 731-TA-653 (Preliminary), 
USITC Pub. 2676 (1993) at I-4-4.
    Respondents argue that petitioner's reference to the 1985 Natural 
Bristle Paint Brushes case is inappropriate because it was decided 
before the nonmarket economy statute was amended in 1988 to provide for 
a factors of production approach. Respondents state that since 1988, 
the Commerce Department has never used the United States or Japan as a 
surrogate country in an antidumping case involving China because they 
are not at a comparable level of economic development.

Department Position

    In valuing factors of production, the Department used surrogate 
values from India. In accordance with section 773(c)(4) of the Act, the 
Department chose India as its surrogate because it was most comparable 
to the PRC in terms of overall economic development based on per capita 
gross national product (GNP), the national distribution of labor, and 
growth rate in per capita GNP, and because it was a significant 
producer of comparable merchandise (oxalic acid).
    The statute and the regulations instruct the Department to value 
factors of production in an appropriate surrogate country. The 
Department rarely departs from use of a surrogate value from a country 
comparable to the NME in terms of overall economic development. See 
Final Determination of Sales at Less Than Fair Value: Beryllium Metal 
and High Beryllium Alloys from the Republic of Kazakstan, 62 FR 2648 
(January 17, 1997). Surrogate values from countries at a similar level 
of development are considered to be the most appropriate and comparable 
for valuation of the factors in the similarly situated nonmarket 
economy country. While the Department may use values from the United 
States or other countries not at a comparable level of development for 
individual factors, its practice is to do so only if it cannot find 
those values in a comparable economy that produce comparable 
merchandise. Use of the United States, Japan or other country not on 
the list of recommended surrogate countries proposed by the 
Department's Office of Policy is the last and least suitable option 
specifically because surrogate values from countries not at a level of 
economic development comparable to that of the nonmarket economy are 
not considered representative of the nonmarket economy country's costs 
and prices. See Memorandum from David Mueller to Laurie Parkhill, 
Serbacic (sic) Acid from the People's Republic of China: Nonmarket 
Economy Status and Surrogate Country Selection, March 4, 1996.
    The fact that sebacic acid is produced in the United States or 
Japan does not make either an appropriate surrogate. A U.S. or Japanese 
value in this case is not representative of a PRC value because neither 
the U.S. nor Japan are at a level of economic development comparable to 
that of the PRC. Moreover, the Department has concluded that using 
values from India is appropriate because India is at a comparable level 
of development and is a significant producer of comparable 
merchandise--oxalic acid. Though sebacic acid and oxalic acid may have 
different end uses, both are dicarboxylic acids and both are used in 
the rubber manufacturing industry. See Petitioner's Brief at Exhibit 1, 
October 10, 1997. Many of the inputs used to produce sebacic acid are 
also used to produce oxalic acid (e.g., sodium hydroxide). See 
Petitioner's Brief at Exhibit 1, October 10, 1997. U.S. import 
statistics for the POR indicate that India is a significant producer of 
oxalic acid. See Memorandum to the File from Elizabeth Patience and N. 
Gerald Zapiain, Analysis Memorandum for the Final Results of the 1994/
1995 Review, February 24, 1997 (Final Analysis Memorandum). In 
addition, a cable from the U.S. embassy in Bombay, submitted during the 
LTFV investigation, identifies 15 Indian producers and nine exporters 
of oxalic acid, which also indicates that India is a significant 
producer of oxalic acid. See Final Analysis Memorandum.
    Petitioner's argument that we should value factors of production 
based on either U.S. or Japanese values because they are the only 
countries which use the caustic fusion process to produce sebacic acid 
is irrelevant. According to the ITC report from the LTFV investigation, 
Chinese producers do not use caustic oxidation to produce sebacic acid. 
See Sebacic Acid from the People's Republic of China, Inv. No. 731-TA-
653 (Preliminary), USITC Pub. 2676 (1993) at II-7. Therefore, we are 
not concerned with finding the identical production process in our 
chosen surrogate country.
    Finally, the documents submitted by interested parties on October 
29, 1996, November 13, 1996, and November 21, 1996, did not 
conclusively demonstrate that sebacic acid was produced in India during 
the period of review (POR). Therefore, these documents were not a basis 
for our decision to use India as the surrogate country for this review.

Comment 3

    Petitioner argues that the Department should value capryl alcohol 
consistent with the CIT's decision in Union Camp v. United States, Slip 
Op. 96-123 at 8, 10 (August 5, 1996). Specifically, petitioner argues 
that the Department should value capryl alcohol (octanol-2) based on an 
appropriate cost of crude octanol-2 rather than the Indian selling 
price for refined octanol-1.
    Petitioner argues neither of the two surrogate prices for capryl 
alcohol submitted by respondent is appropriate. Petitioner contends 
that the first value, Rs 76/kg, from Indian Chemical Weekly, must be a 
value for octanol-1, not octanol-2, because sebacic acid is not 
produced in India. Petitioner contends that because sebacic acid is not 
produced in India, octanol-2 must not be produced in India, since 
octanol-2 is a subsidiary product of sebacic acid production.
    Moreover, petitioner rejects respondents' second surrogate price 
for 98 percent pure capryl alcohol, $0.68/lb., from the Chemical 
Marketing Reporter, because it is the same as Union Camp's offering 
price for refined capryl alcohol. Petitioner contends that crude capryl 
alcohol, the subsidiary product of the sebacic acid process, must be 
further processed to achieve the 98 percent purity. The Chemical 
Marketing Reporter reported the market value of octanol-1 at $0.925/lb. 
during the POR. Petitioner argues that the U.S. value of octanol-1 
during the POR was 36 percent higher than the U.S. value of refined 
capryl alcohol and that the value difference between octanol-1 and 
crude capryl alcohol is even larger.
    Petitioner concludes that because octanol-1 is not comparable to 
octanol-2 either chemically or commercially, the Department should not 
use octanol-1 as a surrogate value for octanol-2. Petitioner contends 
that Union Camp and all three respondents treat octanol-

[[Page 10534]]

 2 as a by-product. However, because the Department used an overvalued 
publicly available, published value in its preliminary results, the 
Department determined octanol-2 to be of such a significant value in 
relation to sebacic acid that it categorized it as a co-product rather 
than a by-product. Petitioner contends that using octanol-1 values 
distorts the by-product/co-product analysis and results in artificially 
lower margins for the respondents. Petitioner offers its own by-product 
credit value for crude capryl alcohol, $0.15/lb., as the best available 
surrogate price for the subsidiary product. However, petitioner states 
that if the Department chooses to use the $0.68/lb price, it should 
make adjustments for input costs incurred in converting crude capryl 
alcohol to refined capryl alcohol. Petitioner supplies such a 
calculation where the resulting value is $0.1544/lb.
    Respondents argue that the Department should reject petitioner's 
submission of surrogate value information in its case brief as it is 
untimely and petitioner had opportunities prior to the publication of 
the preliminary results to submit this information. Respondents 
maintain that the surrogate value of $0.15/lb. is unverified and that 
there is no support on the record of this review that these internal 
costs represent actual market prices in the United States. Respondents 
argue the Department should use the Indian publicly available, 
published value of Rs 76/kg value they submitted for the period of 
review rather than the surrogate value of Rs 56/kg that was used in the 
less-than-fair-value investigation.
    Respondents contend that comparing the $0.68/lb. octanol-2 price 
from the Chemical Marketing Reporter, to the internal Union Camp price 
of $0.15/lb. supports respondents' argument that Union Camp's internal 
costs do not reflect the market price of these chemicals. Respondents 
maintain that Union Camp's internal cost should not be used as it is 
not from an appropriate surrogate country and the value is not a 
published or public figure. Respondents contend that use of unverified, 
internal costs does not provide respondents with greater certainty and 
predictability in the administration of the antidumping law. 
Respondents maintain that use of such internal costs give the Chinese 
respondents no opportunity to determine their dumping margins.
    Additionally, respondents contest petitioner's assertion that the 
CIT held that octanol-1 and octanol-2 are not comparable products. 
Respondents maintain that the Court held that there was not substantial 
evidence on the record of the LTFV investigation to support the 
Department's determination in the LTFV investigation that the two 
products are comparable.
    Respondents argue that the term octanol does not necessarily mean 
octanol-2. Respondents maintain that octanol is a generic term, which 
includes all isomers having eight carbon atoms and one alcohol 
functional group. Thus, respondents contend, the term ``octanol'' in 
the Indian Chemical Weekly does not necessarily refer only to octanol-
1, but could also include octanol-2. Respondents maintain that there is 
no evidence on the record of this review, and Union Camp has made no 
effort to find evidence, that octanol-2 is not sold in India.
    Respondents argue that petitioner made no effort to provide 
publicly available, published values during the course of this review. 
Therefore, respondents maintain that the Department should not reward 
petitioner for its decision not to submit surrogate value information 
by using petitioner's late-submitted internal value for octanol-2. 
Respondents contend that, pursuant to 19 CFR 353.37, the Department is 
justified in using the Indian surrogate value for octanol in the Indian 
Chemical Weekly as the best information available.
    Moreover, respondents argue that the Department should not use 
petitioner's proposed calculation for adjusting the Chemical Marketing 
Reporter octanol-2 value for additional costs. Respondents maintain 
that the Chinese factorie' factors of production already include the 
labor and energy used to produce the subsidiary products. According to 
Zhong He's March 8, 1996 submission to the Department, Zhong He is 
unable to separate these factors from those used to produce sebacic 
acid. Additionally, the verification report indicates that the Workshop 
No. 2 (where sebacic acid is produced) production report includes all 
the consumption of raw materials, and records the production of sebacic 
acid and each of the three subsidiary products.
    Respondents provide additional statements by Mr. Hoegl of Ivanhoe 
Industries to state that petitioner's conversion of capryl alcohol to 
refined capryl alcohol should possibly be higher than $0.15/lb. Mr. 
Hoegl states that the co-product of the distillation process, methyl 
hexyl ketone, has a market value of approximately $2.50/lb. Therefore, 
Mr. Hoegl argues, the value of the crude capryl alcohol stream is much 
greater than $0.15/lb. and ``may even be higher than the published 
$0.68/lb. price for refined capryl alcohol.''

Department Position

    In valuing factors of production, the Department's practice is to 
rely, to the extent possible on publicly available information. The 
Department prefers to use publicly available information because: (1) 
It alleviates difficulties in obtaining, and concerns about the quality 
of, cable data from embassies and consulates (previously often used as 
sources for surrogate values); (2) it allows interested parties an 
opportunity to actively submit and comment on surrogate value data; (3) 
the establishment of a clear surrogate values hierarchy, with a 
preference for surrogate values from a single country based on publicly 
available information, increases the certainty and predictability of 
the outcome of the Department's factor valuations; (4) the 
methodological framework helps to focus comments made by petitioner and 
respondent in the case and rebuttal briefs and reduces miscellaneous 
submissions throughout the course of proceedings regarding the 
appropriateness of various surrogate values; and (5) it alleviates the 
administrative burden on U.S. embassies and consulates caused by 
requests for large amounts of data. See Final Determination of Sales at 
Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings from 
the People's Republic of China, 57 FR 21058, 21062 (May 18, 1992). In 
determining which surrogate value to use for valuing each factor of 
production, therefore, the Department selects, where possible, publicly 
available information which is: (1) An average non-export value; (2) 
representative of a range of prices within the period of review if 
submitted by an interested party, or most contemporaneous with the POR; 
(3) product-specific; and (4) tax-exclusive.
    In this review, the Department was unable to locate an Indian value 
for octanol-2. In addition, the Department specifically asked 
interested parties to submit any publicly available, published values 
for octanol-2. Neither the petitioner, Union Camp, nor the respondents 
were able to locate an Indian value, specifically for octanol-2. As a 
result, the Department used an Indian price for octanol-1 as a 
surrogate value for octanol-2 as the best available information after 
the Department concluded that, for purposes of factor valuation, 
octanol-1 was comparable to octanol-2. We find that octanol-1 and 
capryl alcohol (octanol-2) share very similar molecular formulae though 
they are not identical products. Since product-specific price 
information is not

[[Page 10535]]

available from our recommended surrogate countries, we must rely on the 
price of the closest product we could obtain to value capryl alcohol. 
Additionally, we agree with respondents that it is not clear from the 
Indian Chemical Weekly whether their listed price for ``octanol'' 
refers to octanol-1, octanol-2, or a combination of the two products.
    Union Camp's statements that octanol-1 is derived from a process 
entirely unrelated to the sebacic acid process and that octanol-1 is a 
high-priced petrochemical are not necessarily dispositive on the issue 
of the comparability of octanol-1 and octanol-2 for purposes of factor 
valuation. In a nonmarket economy case, the Department may need to 
value anywhere from 10 to hundreds of factors of production; in this 
case we needed to value approximately 25. If we were required to find 
an exact match for each factor, the administrative burden would be 
enormous and, in many instances, the task would be impossible. 
Therefore, although we strive to locate exact surrogate matches in our 
preferred surrogate country, we often are unable to do so. In those 
instances, the Department's practice is to use the most comparable 
surrogate match that meets our publicly available information criteria 
in an appropriate surrogate country.
    There is no basis in the statute or legislative history to suggest 
that the Department is required to research or consider the production 
process or use for each factor so as to locate a surrogate match with 
an identical or even similar production process or use. In valuing 
factors of production, the Department is attempting to assign a market-
economy value, i.e., a price or a cost, to some non-market economy 
factor, e.g., 50 kilograms of chemical ``x'', 12 nuts and bolts, 3 
plastic bags, 7 hours of labor. The Department does not delve into 
intricacies of the production and use of every potential surrogate 
precisely because production and use are not necessarily relevant to 
valuation of factors of production. The Department foremost is 
concerned about assigning an appropriate surrogate value to a specific 
factor of production. As a result, the Department will consider 
rejecting a potential surrogate where it has evidence that a possible 
surrogate value does not reasonably reflect the ``value'' of the 
factor. For example, if the Department had evidence that a surrogate 
price was significantly higher than other potential surrogate prices 
for a particular factor, the Department might find that it was not 
reasonable to use that particular price as a surrogate value.
    Similarly, the Department is not required to consider 
interchangeableness in determining whether to use a particular 
surrogate to value a factor of production. The CIT's opinion in Union 
Camp suggests that because octanol-1 and octanol-2 are not 
``interchangeable'' they are not comparable for factor valuation 
purposes. If interchangeableness were a prerequisite, however, the 
Department would have extreme difficulty in valuing factors of 
production. The Department would be required to locate precise matches 
between surrogates and factors --an impracticable if not virtually 
impossible task given the amount of data the Department would have to 
collect and analyze for each factor. The very nature of chemicals, in 
particular, is such that a small difference in grade or a change in 
molecular structure would preclude ever finding two different chemicals 
comparable for purposes of factor valuation. In this case, for example, 
the Department recognizes that octanol-1 and octanol-2 are two 
different products, and, hence not interchangeable. 
Interchangeableness, however, is not the test for comparability for 
factor valuation.
    As stated in Comment 2 above, the statutue and the regulations 
instruct the Department to value factors of production in an 
appropriate surrogate country. In addition to the United States and 
Japan not being appropriate surrogate countries in this case, there is 
no evidence on the record that octanol-2 is sold in either country. The 
only U.S. value on the record for octanol-2 is the internal accounting 
cost Union Camp assigns to octanol-2. The Department normally would not 
consider using such a value because it is not a value from an 
appropriate surrogate country and the value is not a public or 
published figure. As explained above, the Department's practice is to 
use public, published figures because, among other reasons, it 
increases the certainty and predictability of the outcome of the 
Department's factor valuations in NME cases and it affords all 
interested parties an opportunity to submit and comment on surrogate 
value data. Use of an unpublished, internal cost from a country not on 
the list of recommended surrogates is contrary to the Department's 
established practice. See Magnesium Corp. versus United States, 938 F. 
Supp. 885 (CIT 1996) (``It is Commerce's standard practice to disregard 
petitioners' costs because they are not `an appropriate benchmark by 
which to test the accuracy of surrogate country values.' '') Our 
preference is for values from the selected surrogate country. 
Additionally, there is no conclusive evidence on the record of this 
review that respondents' octanol-1 value is not a reasonable substitute 
for octanol-2 in our calculations, given the limited public and 
published data from India available to the Department. Therefore, we 
are using the Rs 76/kg value from the Indian Chemical Weekly as a 
surrogate value for capryl alcohol as the best information available to 
the Department.

Comment 4

    The verification report for Zhong He includes the statement that 
``Zhong He began producing sebacic acid for outside parties in January 
1995.'' Petitioner interprets this to mean that SICC's six reported 
sales occurring prior to January 1995 could not have been manufactured 
by Zhong He. Petitioner argues that because SICC apparently misreported 
the manufacturer of its sebacic acid for six sales during the POR, the 
Department should assign the country-wide rate of 243.40 percent to 
these six sales as best information available.
    Respondents argue that the sentence quoted in petitioner's brief 
refers to Zhong He's toll production of sebacic acid using Indian 
castor oil which had been purchased and imported by certain parties. 
This toll production began in January 1995. Respondents maintain that 
prior to and after January 1995, Zhong He produced sebacic acid from 
castor oil which it had purchased from Chinese castor oil producers. 
Respondents contend that during verification the Department traced 1994 
sales of sebacic acid from Zhong He to SICC. Respondents maintain that 
there is no indication on the record of this review that SICC did not 
use Zhong He as a supplier for these sales to the United States.

Department Position

    We agree with respondents. The statement in the verification report 
refers to Zhong He's tolling operation in which it accepted castor oil 
from outside parties in exchange for sebacic acid. It is this operation 
that did not begin until January 1995. We verified that Zhong He had 
produced and sold sebacic acid to SICC throughout the administrative 
review period. See Memorandum to the File from Elizabeth Patience and 
Rebecca Trainor: Verification of the Response of Tianjin Zhong He 
Chemical Plant With Regard to the Factors of Production of Sebacic 
Acid, August 26, 1996.

[[Page 10536]]

Comment 5

    Respondents contend that the surrogate values used in our 
calculations of their antidumping duty margins should be valued on a 
tax-exclusive basis. Respondents state that our source for values for 
caustic soda, cresol, sulfuric acid, sodium chloride and zinc oxide, 
Chemical Weekly, indicated that these values were tax-inclusive. 
Respondents point to number of recent cases involving the PRC in which 
we excluded taxes from the surrogate values used in our calculations. 
See, e.g., Sulfanilic Acid From the People's Republic of China; Final 
Results and Partial Rescission of Antidumping Duty Administrative 
Review, 61 FR 53702 (October 15, 1996).
    Petitioner argues that if the Department excludes Indian taxes from 
the valuation of the factors of production, it should include any 
Chinese taxes applied to such factors of production in China. 
Petitioner maintains that PRC taxes that are not rebated upon export do 
affect PRC sales to the United States.

Department Position

    We agree with respondents that the surrogate values used to value 
the raw materials and by-products should be exclusive of taxes. See, 
e.g., Sulfanilic Acid. The issues of Chemical Weekly used to determine 
the surrogate values of all by-products and raw materials in the 
preliminary results of this review, state that the prices reported for 
these inputs are inclusive of Excise and Maharshtra taxes. Accordingly, 
we have adjusted the surrogate values of all raw materials and by-
products to exclude taxes for the final results of review. To adjust 
the prices to exclude taxes, we have used the Central Excise Tariff of 
India, 1994-95, and the Bombay Sales Tax Act of 1959. These documents 
show that the tax rates are 20 percent and 4 percent, respectively. See 
Memorandum to the File from Karin Price, Analysis for the final results 
of the 1994/1995 administrative review of sulfanilic acid from the 
People's Republic of China--Yude Chemical Industry Company and Zhenxing 
Chemical Industry Company, October 7, 1996 and Final Analysis 
Memorandum.
    We disagree with petitioner that PRC taxes should replace Indian 
taxes in our calculations. The normal value being calculated (by 
applying Indian surrogate values to the PRC factors) is a surrogate for 
material costs in the PRC for comparison to U.S. sales of Chinese 
merchandise. Therefore, Indian value-added taxes, which do not affect 
PRC sales to the United States, should be removed from such surrogate 
costs. Alternatively, PRC taxes should not be used because they are not 
based on market economy considerations. They are also not relevant to 
the value of material inputs in India. In constructing a market-based 
cost for merchandise exported to the United States, we must recognize 
that virtually all countries of the world employ indirect tax rebate 
schemes to prevent double-taxation from placing their exports at an 
unfair competitive disadvantage in world markets.

Comment 6

    Respondents argue that the Department understated the cost of 
manufacturing and overstated factory overhead and SG&A percentages. 
Respondents note that, in determining surrogate values for overhead, 
SG&A expenses, and profit, the Department used data contained in the 
April 1995 Reserve Bank of India Bulletin. In making its calculation, 
respondents argue that the Department arbitrarily and without 
explanation allocated 50 percent of the expenses in three categories, 
``provident fund,'' ``salaries, wages and bonuses,'' and ``employees, 
welfare expenses,'' to SG&A expenses and 50 percent to the cost of 
manufacture. As a result, the cost of manufacturing is understated and 
the overhead rate, SG&A rate, and profit rate are overstated. They 
contend that 100 percent of these three categories should be applied to 
the cost of manufacture, consistent with Polyvinyl Alcohol from the PRC 
and Sulfanilic Acid.

Department Position

    We agree with respondents that 100 percent of these labor 
categories should be included in the cost of manufacturing. In the 
absence of any information to the contrary, it makes sense that most of 
these expenses are costs of manufacturing rather than to SG&A expenses. 
In addition, we note that in Polyvinyl Alcohol from the PRC, although 
we did not use information from the Reserve Bank of India Bulletin as 
surrogate values for overhead, SG&A expenses and profit, we compared 
expenses from this source to values from financial statements from 
Indian producers and, as a result, in each instance, we allocated 100 
percent of these labor-cost categories to the cost of manufacturing. We 
have also reexamined our classification of other categories in the 
Reserve Bank of India Bulletin, and have determined that several 
categories were misclassified in the preliminary results of review. 
This has been corrected for the final results. See Final Analysis 
Memorandum.

Comment 7

    Petitioner argues that the Department should not have valued 
overhead as a percentage of cost of manufacture. Instead, petitioner 
contends that overhead should have been calculated as a percentage of 
raw materials, labor, power and fuel, the three surrogate value 
categories used in the factors of production. See Valuation Memorandum: 
Final Antidumping Duty Determination: Polyvinyl Alcohol from the PRC at 
2 and Attachment 5 (March 22, 1996).
    Petitioner contends that ``Stores and Spares Consumed'' is more 
properly categorized as an overhead expense rather than a cost of 
manufacture as they are indirect materials and should be treated as a 
part of factory overhead. See Memorandum from Manganese Metal Team to 
Barbara R. Stafford re: Antidumping Investigation of Manganese Metal 
from the PRC: Major Final Determination Issues, October 16, 1995 at 7. 
Petitioner contends that the new overhead ratio should be 20.18 
percent.
    Moreover, petitioner contends that the Department improperly 
omitted ``Other expenses'' and ``Other provisions'' from its 
calculation of SG&A. Petitioner maintains that these expenses are 
integral to, and should be included in the calculation of SG&A 
expenses. See Valuation Memorandum: Preliminary Antidumping Duty 
Determination: Polyvinyl Alcohol from the PRC at 7 and Attachment 9 
(October 2, 1995). Petitioner argues that if the Department excludes 
these expenses then it must adjust the profit calculation upward by the 
same amount. Petitioner states that profit in the Reserve Bank of India 
Bulletin equals revenue minus costs (including other expenses and other 
provisions). Therefore, petitioner concludes, all costs associated with 
the reported profit must be included as overhead or SG&A, or the profit 
must be increased by the value of any costs that are excluded.

Department Position

    We agree with petitioner that the category for stores and spares 
consumed should be classified as an overhead expense. Additionally, we 
have included the categories ``Other Expenses'' and ``Other 
Provisions'' as SG&A expenses, consistent with Sulfanilic Acid. We have 
made adjustments to our calculations for these categories in our final 
results. However, we disagree with petitioner's argument that overhead 
should be valued as a percentage of raw materials, labor, power and 
fuel. Instead, we calculated

[[Page 10537]]

overhead, less power and fuel, as a percentage of cost of manufacture, 
consistent with Sulfanilic Acid.

Comment 8

    Respondents contend that the Department did not properly adjust for 
Hengshui Chemical factory's use of both purchased and self-produced 
castor oil in the production of sebacic acid. Respondents maintain that 
the Department double-counted amounts for raw material and energy 
inputs consumed by Hengshui in the production of castor oil. 
Respondents propose two methods to account for the castor oil produced 
by Hengshui. One method is to not add amounts for the inputs consumed 
in castor oil production. Alternatively, respondents recommend a 
methodology which they argue more accurately reflects Hengshui's 
operations and Department practice. See Polyvinyl Alcohol from the PRC.
    Moreover, respondents argue that the Department used the incorrect 
value for castor seed in Hengshui's constructed value calculation. The 
Department used a value of Rs 9.36/kg for castor seed. Respondents 
contend the value should be Rs 9.23/kg.
    Petitioner contends that the Department incorrectly deducted the 
value of castor seed cake as a by-product credit from the foreign 
market value calculation of sebacic acid because Hengshui produces some 
of its own castor oil. Petitioner contends that this is an incorrect 
adjustment because castor seed cake is a by-product of the castor oil 
process, not the sebacic acid process. Petitioner maintains that the 
by-product adjustment should be an adjustment to the price of castor 
oil and not to the value of sebacic acid.

Department Position

    We agree with respondents and petitioner and have revised our 
calculations to accurately reflect Hengshui's production of castor oil 
consistent with Polyvinyl Alcohol from the PRC. See Final Analysis 
Memorandum. Additionally, we have used the Rs 9.23/kg value for castor 
seeds for our final results calculations.

Comment 9

    Respondents argue that the Department failed to deduct amounts for 
the by-products glycerine and castor seed cake in our calculations of 
constructed value. Respondents maintain that analysis memorandum and 
notice of preliminary results, we indicated that we would be deducting 
these values but in the calculation worksheets attached to the analysis 
memorandum, no deduction was made. See Preliminary Results, 61 FR 46440 
and Memorandum from Case Analyst to the File: Analysis Memorandum; 
August 27, 1996.

Department Position

    We agree with respondents and deducted these amounts in our 
calculations for the final results of review.

Comment 10

    Respondents maintain that the Department was incorrect in 
individually valuing a separate value for water. They contend that the 
Indian overhead number used in our calculations already includes a 
value for water. See, e.g., Polyvinyl Alcohol from the PRC.
    Petitioner argues that the Department correctly treated water as an 
input in the sebacic acid process rather than an overhead expense. 
Petitioner maintains that respondents' reported water consumption 
factors indicate that water is a significant factor in the production 
of sebacic acid that varies directly with output. Petitioner contends 
that the cost of water for each company is greater than the costs for 
certain other factors of production so water should likewise be 
separately valued. Petitioner argues, using examples from Indian 
chemical companies' annual reports, that Indian chemical companies 
typically account for water as a direct cost in the same manner as 
power and fuel. According to petitioner, this treatment of water as a 
direct expense contradicts the Department's past practice of presuming 
that it is ``normal'' practice to include water as an overhead item and 
the Department's past statement that there was nothing in the Reserve 
Bank of India Bulletin financial statement to indicate that water is 
not included in overhead. See, e.g., Final Determination of Sales at 
Less Than Fair Value: Disposable Pocket Lighters from the People's 
Republic of China, 60 FR 22359, 22367-68 (May 5, 1995).
    The Department was unable to locate a contemporaneous value for 
water in India or Pakistan so chose to adjust the Pakistani value used 
in the LTFV investigation. Petitioner offers the value for water from 
the Water Utilities Data Book, Asian and Pacific Region, Asian 
Development Bank (November 1993). Petitioner maintains that the 
Department should use an average of the Indian water values reported, 
adjusted for inflation, as a more appropriate surrogate value than the 
value for Pakistani water.

Department Position


    We agree with respondents. Consistent with Department practice, we 
have presumed that the overhead value from the Reserve Bank of India 
Bulletin includes an expense for water. Therefore, consistent with 
Sulfanilic Acid and Polyvinyl Alcohol from the PRC we have not valued 
water as a separate production input.

Comment 11

    Respondents note that the Department only verified one of three 
respondents in this review, Zhong He Chemical Factory. Accordingly, 
respondents contend that it was inappropriate for the Department, in 
our preliminary results, to use the weights of bags at Zhong He in our 
calculations of all three companies in place of the values originally 
reported to the Department. Respondents contend that the Department 
should not assign the packing bag weights, revised from information 
gained at verification of Zhong He, to the other factories. Respondent 
argues that there is no evidence that the packing bag weights that they 
submitted for Tianjin and Guangdong were incorrect.
    Petitioner contends that the Department correctly used the verified 
weights of Zhong He's plastic bags as the weight for Handan's and 
Hengshui's plastic bags. Petitioner points out that the Department 
found at verification that Zhong He had under-reported the weight of 
its plastic bags. Petitioner also points to the fact that Handan 
reported the same weight as Zhong He and that Hengshui reported even 
lighter weights for plastic bags. Petitioner argues that the 
Department, using the facts available, correctly replaced the weights 
of the plastic bags reported by Handan and Hengshui with the verified 
weights.

Department Position

    We agree with respondents. Each responding company submitted 
differing weights for its packing bags, indicating that each company 
uses different bags for packing. Therefore, for our final results, we 
have used the revised Zhong He packing bag weights for Zhong He only. 
For Handan and Hengshui, we have used packing bag weights reported on 
March 22, 1996.

Comment 12

    Respondents maintain that the value we used from Chemical Weekly 
for caustic soda is based on a 100 percent purity value. Respondents 
contend that the three responding factories all use caustic soda of 
considerably less than 100 percent purity. Therefore, respondents 
maintain that to properly value the caustic soda used by the three

[[Page 10538]]

factories, the Department should multiply the Chemical Weekly price 
(exclusive of tax) by the purity percentage for each factory. See 
Polyvinyl Alcohol from the PRC.

Department Position

    We agree with respondents and have adjusted for caustic soda purity 
levels.

Comment 13

    Petitioner states that the Department incorrectly used a value for 
Indian oxalic acid, instead of sebacic acid, in our by-product/co-
product analysis. Additionally, petitioner argues that the Department 
erroneously misplaced the decimal point in calculating the actual value 
of oxalic acid. Petitioner concludes that correcting this error shows 
that oxalic acid should not serve as a surrogate for sebacic acid 
because of the relative value of oxalic acid compared to the values for 
the three subsidiary products. Petitioner also protests the use of an 
oxalic acid value based on imports from the PRC to India. Petitioner 
argues that it is inconsistent with Department practice to use a value 
from an NME as a surrogate value. Due to these concerns, petitioner 
contends that the Department should use the import value of sebacic 
acid from Japan into India rather than the Indian oxalic acid value 
from the PRC.
    Respondents contend that the Department should not use the Japanese 
sebacic acid value, as suggested by petitioner. Respondents cite the 
Chemical Marketing Reporter and a fax from Ivanhoe Industries, a U.S. 
importer of subject merchandise, to argue that the Japanese value does 
not reflect the actual price of normal sebacic acid in India. According 
to the Chemical Marketing Reporter, the U.S. price for sebacic acid is 
between $2.04 to $2.05 per pound. However, using the Indian import 
price for sebacic acid from Japan indicates that the price is almost 
$5.00/lb. for the Japanese imports into India. According to John Hoegl 
of Ivanhoe Industries, the sebacic acid from Japan is a special 
repurified grade, which is higher in quality than either Chinese or 
Union Camp products, and is sold at premium prices to specific end 
users.

Department Position

    We agree with petitioner in part. It is inconsistent with 
Department practice to use a surrogate value from a non-market economy 
country (e.g., PRC). Additionally, we agree with respondents that the 
Indian import value from Japan overstates the value of the product. 
Therefore, we selected the Indian import value for sebacic acid from 
the United States as our surrogate value for sebacic acid to determine 
whether the subsidiary products are by-products or co-products.

Comment 14

    Petitioner contends that if Zhong He used benzene sulfuric acid in 
its production of sebacic acid, as the Department found at 
verification, the Department must include a value for benzene sulfuric 
acid in its factors of production calculation.

Department Position

    We agree with petitioner. However, as neither petitioner nor Zhong 
He provided a publicly available value for benzene sulfuric acid, we 
have used an average value for benzene from Indian Chemical Weekly, 
contemporaneous with the POR.

Comment 15

    The Department derived the value of caustic soda from the Indian 
Chemical Weekly. Petitioner states that the selected values indicate a 
price of Rs 9.50/kg for the weeks between October 25, 1994 and February 
1, 1995. Petitioner also states that no other prices are given for 1995 
until April 12, 1995, when the price for caustic soda (lye) is reported 
as Rs 21.50/kg. Petitioner argues that the Department failed to factor 
this increase in the caustic soda price. Petitioner maintains that the 
Department should average the two values and use the price of Rs 15.5/
kg in its calculations.
    Respondents argue that the Chemical Weekly price of Rs 9.5 was from 
five months (October, November, and December 1994; January and February 
1995), whereas the price of Rs 21.5 was only documented for one month, 
April 1995. Therefore, respondents contend that an average accounting 
for the months each value was reported should be used, i.e., Rs 11.50/
kg. Respondents argue that this price should then be converted to a 
tax-exclusive basis and multiplied by the purity percentage applicable 
to each factory.

Department Position

    We examined all copies of the Indian Chemical Weekly for the POR 
available to the Department. We found 27 values for caustic soda (lye) 
between October 19, 1994 and June 28, 1995. A simple average of these 
values is Rs 14.59/kg. We have used this value in our calculations.

Comment 16

    The Department based the price of zinc oxide upon the published 
market prices reported in Chemical Weekly. See, Final Analysis 
Memorandum. Respondents provided market price information for zinc 
oxide on March 28, 1995. Petitioner argues that the price for zinc 
oxide reported on four other dates in Chemical Weekly are significantly 
higher than the Rs 48/kg figure submitted by respondents. Petitioner 
maintains that the Department should use the higher price of Rs 75/kg 
as the surrogate price for zinc oxide as it represents a wider range 
over the POR rather than one price for one date during the POR.

Department Position

    We agree with petitioner in part and have revised our surrogate 
value for zinc oxide. We have used an average of all reported values 
for zinc oxide in the POR for our final results.

Comment 17

    Petitioner contends that the value for coal used by the Department 
in its calculations is not contemporaneous with the POR. Petitioner 
contends the Department should use the steam coal value of Rs 1461.87/
mt from the Polyvinyl Alcohol from the PRC investigation because it is 
contemporaneous to the POR and publicly available information.
    Respondents argue that the alternative proposed by petitioner 
should be rejected because it is less representative than the Gazette 
of India data, used in the preliminary results. Respondents argue that 
the Polyvinyl Alcohol from the PRC value was based on the average value 
from only two Indian companies. Respondents argue alternatively, the 
Gazette of India data, based on all but five Indian states, is much 
more representative than the Polyvinyl Alcohol from the PRC data 
because the former is basically an average for the entire country while 
the latter is from just two companies (selected by petitioner) which 
may be located in high cost areas. Respondents also argue that the 
Polyvinyl Alcohol from the PRC values should be rejected because the 
tax and freight status of these prices is unknown, thereby prohibiting 
the Department from making appropriate adjustments to these coal 
values.

Department Position

    We agree with respondents. Consistent with Sulfanilic Acid, we used 
the Gazette of India data in our final results calculations. As we did 
in our preliminary results, we are adjusting the June 16, 1994 coal 
value to account for inflation.

[[Page 10539]]

Comment 18

    In the Analysis Memorandum the Department stated that it used an 
electricity value from the July 1995 Current Energy Scene in India. 
However, in the Memo to the File, the Department included different 
electricity values from ``State-wise Electricity Rates for Different 
Categories of Consumers'' from India's Energy Sector, Centre for 
Monitoring Indian Economy (July 1995). This publication includes three 
values for electricity, one each for small, medium and large 
industries. Petitioner contends that the Department should use the 
value for medium industries, Rs 1.92/kwh, rather than the Rs 0.732/kwh 
used in the preliminary results of review. Petitioner maintains that 
the medium industry rate is applicable because all respondents reported 
using more than 14,600/kwh/month (medium industries) but less than 
2,190,000/kwh/month (large industries).

Department Position

    We agree with petitioner and have used the electricity value for 
medium industries in our calculations for the final results.

Comment 19

    Petitioner maintains that, for Hengshui, the Department used an 
incorrect freight rate for plastic bags. Petitioner contends that the 
Department used a freight rate of Rs 250 rather than the correct rate 
of Rs 750 listed in the freight calculation charts.

Department Position

    We agree with petitioner and have used the rate of Rs 750 in our 
calculations for the final results.

Comment 20

    In its preliminary results, the Department used ocean freight 
information provided by respondents from common rates tariff filed by 
Nippon Yusen Kaisha with the Federal Maritime Commission for rates from 
China to New York. Petitioner contends that this rate does not include 
appropriate delivery destination and fuel adjustment factor charges. 
Therefore, petitioner argues that the Department should use the rate 
from the LTFV investigation because it does include these charges and 
more accurately reflects ocean freight charges.
    Respondents contend that the Department should exclude the delivery 
destination charge of $485.00 except for shipments to inland 
destinations. Respondents suggest that the Department check directly 
with the Federal Maritime Commission or a freight company to determine 
the freight rates for this product.

Department Position

    We contacted the Federal Maritime Commission to request additional 
information about the ocean freight charge respondents submitted for 
this review. In addition to the $1705 charge respondents reported, our 
research indicates that a $485 delivery destination charge and a $62 
fuel adjustment factor should be included as ocean freight expenses as 
they are assessed on all shipments. We chose to use the sum of these 
charges ($2252) in our final results, rather than the rate used in the 
LTFV investigation as the new figure is contemporaneous with the POR.

Comment 21

    Petitioner contends that the Department failed to adjust the 
foreign brokerage and handling expense for inflation.

Department Position

    We agree with petitioner and have adjusted foreign brokerage and 
handling for inflation in our calculations of the final results.

Comment 22

    Petitioner maintains that if the Department insists on categorizing 
capryl alcohol as a co-product rather than a by-product, the Department 
should allocate capryl alcohol based on its value relative to sebacic 
acid rather than its quantity relative to sebacic acid. Petitioner 
contends that allocations based on quantity can lead to significant 
distortions. Petitioner argues that sebacic acid and capryl alcohol 
have significantly different revenue-producing powers. Therefore, 
citing the Final Determination of Sales at Less Than Fair Value: 
Polyvinyl Alcohol from Taiwan, 61 FR 14064, 14071 (March 29, 1996) 
(Polyvinyl Alcohol from Taiwan), petitioner contends that the co-
product allocation should be based on value rather than volume.

Department Position

    Consistent with Polyvinyl Alcohol from Taiwan we based our 
determination of co-products and by-products on their value relative to 
sebacic acid rather than their volume. Although that case was a market 
economy case, in both that case and the present case, sebacic acid has 
a significantly higher per-unit value than any of the subsidiary 
products. Therefore, production costs should be allocated to the co-
products based upon their relative sales values. As in Polyvinyl 
Alcohol from Taiwan, we found that basing the allocation of costs 
solely on production volume ignores the vastly different revenue-
producing powers of joint products (i.e., sebacic acid and the co-
products). See Final Analysis Memorandum.

Final Results of Review

    As a result of our review of the comments received, we have changed 
the results from those presented in our preliminary results of review. 
Therefore, we determine that the following margins exist as a result of 
our review:

------------------------------------------------------------------------
                                                                Margin  
       Manufacturer/exporter              Time period         (percent) 
------------------------------------------------------------------------
Tianjin Chemicals I/E Corp........          7/13/94-6/30/95         0   
Guangdong Chemicals I/E Corp......          7/13/94-6/30/95        13.54
Sinochem International Chemicals                                        
 Corp.............................          7/13/94-6/30/95        70.54
PRC Rate..........................          7/13/94-6/30/95       243.40
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between U.S. price and normal value may vary from the 
percentages stated above. The Department will issue appraisement 
instructions directly to the Customs Service.
    Furthermore, the following cash deposit requirements will be 
effective upon publication of these final results for all shipments of 
sebacic 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) For Tianjin, Guangdong, and SICC, 
which have separate rates, the cash deposit rates will be the company-
specific rates stated above; (2) for the company which

[[Page 10540]]

did not respond to our questionnaire (Jiangsu), and for all other PRC 
exporters, the cash deposit rate will be the PRC rate stated above; (3) 
for non-PRC exporters of subject merchandise from the PRC, the cash 
deposit rate will be the rate applicable to the PRC supplier of that 
exporter.
    These deposit rates shall remain in effect until publication of the 
final results of the next administrative review.

Notification of Interested Parties

    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 orders (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 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 the 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 section 353.22 
of the Department's regulations.

    Dated: February 28, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-5711 Filed 3-6-97; 8:45 am]
BILLING CODE 3510-DS-P