[Federal Register Volume 62, Number 179 (Tuesday, September 16, 1997)] [Notices] [Pages 48597-48601] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 97-24564] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [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 the 1995-1996 antidumping administrative review of Sulfanilic Acid from the People's Republic of China. ----------------------------------------------------------------------- SUMMARY: On May 12, 1997, 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, 1995 through July 31, 1996, and all PRC exporters of the subject merchandise. We gave all interested parties an opportunity to comment on our preliminary results. After we reviewed the comments received, the margins in the final results did not change from those presented in the preliminary results. EFFECTIVE DATE: September 16, 1997. FOR FURTHER INFORMATION CONTACT: Kristen Smith or Kristen Stevens, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington D.C. 20230; telephone (202) 482-3793. SUPPLEMENTARY INFORMATION: Applicable Statute Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department's regulations are to 19 CFR part 353 (April 1997). Background On May 12, 1997, the Department published in the Federal Register (62 FR 25917) the preliminary results of its administrative review of the antidumping duty order on sulfanilic acid from the PRC (57 FR 37524, August 19, 1992). This review covers exports of subject merchandise to the United States for the period August 1, 1995 through July 31, 1996, and all PRC exporters of sulfanilic acid, including, but not limited to, the following thirteen firms: China National Chemical Import and Export Corporation, Hebei Branch (Sinochem Hebei); China National Chemical Construction Corporation, Beijing Branch; China National Chemical Construction Corporation, Qingdao Branch; Sinochem Qingdao; Sinochem Shandong; Baoding No. 3 Chemical Factory; Jinxing Chemical Factory; Zhenxing Chemical Factory; Mancheng Zinyu Chemical Factory, Shijiazhuang; Mancheng Xinyu Chemical Factory, Bejing; Hainan Garden Trading Company; Yude Chemical Company and Shunping Lile. We have now completed the administrative review in accordance with section 751 of 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. 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 [[Page 48598]] purposes, our written description of the scope of this proceeding is dispositive. Use of Facts Otherwise Available Only two firms, Yude and Zhenxing, responded to the Department's questionnaire and demonstrated that they are entitled to a separate rate. All firms that have not demonstrated that they qualify for a separate rate are deemed to be part of a single enterprise under the common control of the government (the ``PRC enterprise''). Therefore, all such entities receive a single margin, the ``PRC rate.'' We preliminarily determine, in accordance with section 776(a) of the Act, that resort to the facts otherwise available is appropriate for the PRC rate because companies deemed to be part of the PRC enterprise for which a review was requested have not responded to the Department's antidumping questionnaire. Where the Department must resort to the facts otherwise available because a respondent fails to cooperate by not acting to the best of its ability to comply with a request for information, section 776(b) of the Act authorizes the Department to use an inference adverse to the interests of that respondent in choosing from the facts available. Section 776(b) also authorizes the Department to use as adverse facts available information derived from the petition, the final determination of the less than fair value investigation or a previous administrative review, or other information placed on the record. The Statement of Administrative Action (SAA) accompanying the URAA clarifies that information from the petition and prior segments of the proceeding is ``secondary information.'' See H.Doc. 3216, 103rd Cong. 2d Sess. 870 (1996). If the Department relies on secondary information as facts available, section 776(c) provides that the Department shall, to the extent practicable, corroborate such information using independent sources reasonably at its disposal. The SAA further provides that ``corroborate'' means simply that the Department will satisfy itself that the secondary information to be used has probative value. However, where corroboration is not practicable, the Department may use uncorroborated information. In the present case the Department has based the margin on information in the petition. See Notice of Final Determination of Sales at Less Than Fair Value: Circular Welded Non-Alloy Steel Pipe from South Africa, 61 FR 24272 (May 14, 1996). In accordance with section 776(c) of the Act, we corroborated the data contained in the petition, as adjusted for initiation purposes, to the extent possible. The petition data on major material inputs are consistent with Indian import statistics, and also with price quotations obtained by the U.S. Embassies in Pakistan and India. Both of these corroborating sources were placed on the record during the investigation and have been added to the record of this review. In addition, we note that the petition used World Bank labor rates which we have repeatedly found to be a probative source of data. Based on our ability to corroborate other elements of the petition calculation, we preliminarily find that the information contained in the petition has probative value. Accordingly, we have relied upon the information contained in the petition. We have assigned to all exporters other than Yude and Zhenxing a margin of 85.20 percent, the margin in the petition, as adjusted by the Department for initiation purposes. Analysis of Comments Received We invited interested parties to comment on the preliminary results. We received written comments from Yude Chemical Industry Co. (Yude), Zhenxing Chemical Industry Co. (Zhenxing), PHT International, Inc. (PHT), and from the petitioner, Nation Ford Chemical Company. Comment 1: Petitioner claims that the use of Indian import prices for aniline as the surrogate value for aniline used by the PRC respondents in this case is inappropriate because the plain language of the statute does not permit the Department to use imported aniline prices when the NME respondents use domestically-sourced aniline. Petitioner contends that the Department incorrectly based the surrogate value for aniline on Indian sulfanilic acid production processes, instead of reported PRC production processes. Petitioner contends that the Department must first identify the NME factors of production and then, using those same factors, obtain surrogate values from a market economy country at a similar level of economic development. Petitioner contends that because respondents use domestically-sourced aniline to manufacture sulfanilic acid, the Department must value aniline using prices for aniline domestically produced in India. Petitioner also contends that the Department has recently stated a clear preference for using domestic market prices in the surrogate country to value factors of production when such prices are available. As support for this position, Petitioner cites Brake Drums and Brake Rotors from the PRC, 62 FR 9163; Persulfates from the PRC, 61 FR 68,232, 68,235; Sebacic Acid from the PRC, 59 FR 565, 568; and Tehnoimportexport v. United States, 16 CIT 13, 783 F. Supp. 1401 (1992). Petitioner also argues that the profitability of surrogate country producers in export markets is irrelevant to the Department's valuation of the factors of production utilized by the NME enterprises under investigation. Thus, they urge the Department to disregard respondents' argument that Indian producers could not make a profit on export sales if they used Indian-produced aniline. Furthermore, Petitioner contends that the values for imported aniline used in the preliminary results cannot be used because, they claim, these values are based on subsidized prices. According to petitioners, the Department has determined that the Indian Advanced License program is a countervailable subsidy under U.S. law. Sulfanilic Acid From India, 57 FR 35,785 (Aug. 11, 1992); Sulfanilic Acid From India, 58 FR 12,026 (Mar. 2, 1993). Under this program the normal 85% duty on imported aniline is not collected if sulfanilic acid produced with imported aniline is subsequently exported. Petitioner contends that Indian sulfanilic acid producers receive a government subsidy to the extent that they pay duty-free prices for imported aniline. Petitioner states that the Department is precluded from using imported aniline prices due to the reasons stated above. Therefore, Petitioner contends that the Department should use as surrogate values the domestic market prices for aniline published in the Indian publications Chemical Business and Chemical Weekly. Petitioner states that these are ``contemporaneous, product-specific, tax-exclusive, and non-export prices.'' Petitioner maintains that these publications are reliable sources as evidenced by the Department's use of these sources in several antidumping investigations and reviews involving PRC products, including the Department's valuation of activated carbon in the preliminary results of this case. Respondent argues that the Department correctly valued aniline using Indian import statistics because Indian sulfanilic acid producers used imported aniline to produce sulfanilic acid for export. Respondents refer to the 1993-94 and 1994-95 administrative reviews of this case in which the Department previously used Indian import statistics in valuing aniline. Respondents also cite the decision of [[Page 48599]] the Court of Appeals for the Federal Circuit (CAFC) in Lasko Metal Products, Inc. v. United States, 43 F.3d 1442, 1446 (1994), in which the CAFC stated that in the underlying case the best available information on what the supplies used by the Chinese manufacturers would cost in a market economy country was the price charged for those supplies on the international market. Respondent argues that the value of the aniline used by the Indian producer to make sulfanilic acid for export is the import price for aniline, which reflects the cost of aniline on the international market. Department Position: We agree with respondent that the Indian import values provide a better approximation than Indian domestic prices of what the inputs used by the Chinese manufacturers would cost were the PRC a market economy country. Evidence on the record of this review indicates that a two-tier pricing system for aniline exists in India as a result of the combination of an 85% tariff on imports of aniline and the effects of the advanced license program, which waives that tariff when imported aniline is used in the production of sulfanilic acid for export. Thus, Commerce had two main options in selecting a surrogate value for aniline: the Indian domestic price paid by Indian producers of sulfanilic acid for the Indian domestic market and the duty-free, Indian import price for aniline paid by Indian producers of sulfanilic acid for the export market. As in prior reviews, Commerce has chosen to use the average Indian import price because it is the value of the aniline used to produce sulfanilic acid for the export market (and the costs constructed using the surrogate methodology are the costs for Chinese production for the export market). Petitioner's claim that the ``factor of production'' to be valued is ``domestic aniline,'' such that the statute requires that the value of this factor be assigned based on aniline produced domestically in India, has no support in law or fact. There is no indication on the record that the aniline used by the Chinese producers, which their public response indicates is locally sourced rather than imported, is physically or chemically different from the aniline that is produced in India or imported into India, or that the sulfanilic acid ``production process'' is different in either China or India depending upon whether imported or domestically-sourced aniline is used. There is no reason why Commerce must base its valuation on ``domestic'' (Indian-produced) aniline because the PRC factories use ``domestic'' (PRC-produced) aniline. Aniline is a generic, fungible input, not altered by whether it is imported or sourced in the same country in which it is used. The factor to be valued in this case is not ``domestic aniline'' but simply ``aniline.'' Nor is Commerce compelled to use domestic values simply because some domestic market values exist. The Court of International Trade has long recognized that Commerce has often used import statistics (to value both inputs imported into NME countries and imports sourced locally in NME countries) and that import prices into the surrogate country are an acceptable reflection of the value of that input in the surrogate country. See, e.g., Tehnoimportexport v. United States (1992), 783 F. Supp. 1401, 1405. In this case, the prices for domestically produced aniline on the record of this review are not suitable for use as surrogates for the PRC cost of aniline because these prices are artificially high due to India's 85% import tax. With respect to the question of whether Indian producers could profitably produce sulfanilic acid for export using Indian-sourced aniline, we note that we have not based our choice of surrogate value for aniline on respondents' suggestion that this would not be possible. No such finding is necessary. The aniline purchase choices of Indian manufacturers of sulfanilic acid (as reflected in the record) are relevant primarily as an indication that the price of aniline when used for production of sulfanilic acid for sale in India is unusually high, and thus, inappropriate for purposes of valuation of PRC export production costs. Finally, petitioner's argument that the aniline import values are ``subsidized prices'' which therefore cannot be used as surrogate values misses the mark. Assuming, for the purposes of argument, that the Indian Advanced License program identified in 1992 as constituting a subsidy to Indian-produced sulfanilic acid would still be found to be countervailable, this program would constitute a subsidy to Indian- produced sulfanilic acid, not to aniline imported into India from other countries. Thus, Commerce would avoid using, as a surrogate value, the export value of Indian-produced sulfanilic acid, but not of imported aniline. The Indian Import Statistics used by the Department to value aniline are pre-tariff prices, which are unaffected by whether or not subsequently added duties charged to the importer are waived on a given shipment. The sort of subsidy Commerce is concerned with when it uses import prices is a producer-country subsidy that would artificially lower the import price. India has no interest in subsidizing aniline produced in other countries and imported into India. Because any subsidy which may be associated with the importation of aniline under the Advanced License Program for purposes of producing sulfanilic acid for export is a subsidy not to aniline but to sulfanilic acid, it does not provide a reason for rejecting aniline import values for purposes of serving as surrogates for the cost of aniline (not sulfanilic acid) to PRC producers. Comment 2: Petitioner argues that if the Department uses Indian import statistics to value aniline in the final results, the Department should adjust the import values upward to reflect Indian import duties. Petitioner contends that the Indian Advance License program is similar to duty drawback. In the case of duty drawback the customs duty refunded to the importer would be added to U.S. Price under 19 U.S. C. 1677a(d)(1)(B) if the respondent can show that the importer took advantage of the duty drawback program. Petitioner argues that there is no evidence in this review that any of the Indian producers of sulfanilic acid took advantage of the Advance License program. Petitioners contend that the burden is on the Respondents to show that Indian sulfanilic acid producers either did not pay the import duties or received refunds of import duties payable on imports of aniline upon the exportation of finished sulfanilic acid. Petitioner also argues that because the Indian Advanced License program has been found to be a countervailable subsidy under U.S. law, the Department should add the import duties to the import values used as the surrogate value of aniline for this reason. Respondents contend that the Department should follow its precedent in the prior administrative reviews of this case and not add the 85% import duty to the value of aniline taken from the Indian Import Statistics. Respondents argue that the only way that Indian sulfanilic acid factories can produce sulfanilic acid for export is to import aniline duty free under India's import duty exemption scheme. Respondents argue that the Department does not need to verify that every Indian producer and exporter uses the Advance License program and should base its determine on the evidence on the record of this investigation. Department's Position: We agree with respondents that we should not add to the Indian import values an amount corresponding to the 85% tax levied by the Indian government on imported [[Page 48600]] aniline which is not subsequently used in the manufacture of another product for export. Because these Indian import duties do not represent costs that a PRC producer would pay if the PRC were a market economy, it is the Department's practice to refrain from including any such duties in an NME surrogate price. See, e.g., Tapered Roller Bearings from the PRC, 62 FR 6173, 6177 (February 11, 1997)(Comment 3); Lockwashers from the PRC, 58 FR 48833, 48843 (September 20, 1993) (Comments 12 and 13). In this case, there are also two additional reasons for not adding on the amount of the import tax. The 85% tax at issue is not only unique to India; it is also abnormally high for an import tax, and is, furthermore, not even paid by producers of sulfanilic acid for the export market. Respondents have placed on the record of this review published Indian government materials describing the operation of the Advance License system and its use to avoid payment of duties on aniline used to produce sulfanilic acid for export from India. Respondents have also placed on the record, inter alia, a letter from an Indian sulfanilic acid exporter explaining in detail how it imports aniline duty free, works with an Indian sulfanilic acid producer to produce sulfanilic acid from the imported aniline, and then exports the sulfanilic acid without paying duty on the imported aniline, and a letter from an Indian sulfanilic acid producer stating that it uses imported aniline to produce sulfanilic acid. Thus, petitioner's claim that there is no evidence on the record of this review that Indian producers of sulfanilic acid used the Advance License program and thus avoided payment of the 85% duty is without basis. Also without basis is petitioner's claim that Commerce must add the 85% import tax to the import values absent the same type of evidence required to support a duty drawback adjustment to U.S. price. The PRC respondents in this review are not seeking a duty drawback adjustment to a United States price for sulfanilic acid exports from India (the country granting the duty drawback), and are not privy to the confidential documents of the Indian sulfanilic acid companies involved. What we are attempting to determine here is a surrogate value for Chinese aniline. The question of whether particular Indian exporters of sulfanilic acid imported sufficient aniline to qualify for duty drawback might be relevant if we were determining the U.S. price of Indian sulfanilic acid. However, it is simply immaterial to the question of the value of aniline. Finally, petitioner has no basis for insisting that the 85% duty be added onto the aniline import value because of an alleged subsidy to the price of imported aniline. As explained above, any subsidy that may exist is a subsidy to Indian-produced sulfanilic acid, not to aniline produced elsewhere and imported into India. Comment 3: Respondents contend that Indian export prices for activated carbon should be used instead of Indian import statistics because the import prices do not reflect the prices of the liquid phase activated carbon used by the Indian and Chinese sulfanilic acid producers. Respondents state that activated carbon can be classified as gas phase or liquid phase. Respondents argue that gas phase activated carbon is generally higher in price and is used in small quantities, while liquid phase activated carbon is a less expensive industrial grade which is used in larger quantities. Respondents also state that liquid phase activated carbon is generally sold in powder form. Respondents argue that prices for imported activated carbon are aberrational and do not reflect the prices for liquid phase activated carbon, the type used by the Chinese respondents. Respondents cite as precedent the Department's approach in the less than fair value investigation of Polyvinyl Alcohol from the PRC, (``Polyvinyl Alcohol''), in which the Department used Indian export, rather than import, values as a surrogate for Chinese activated carbon. Respondents submit that due to the great price disparity between the import and export prices, it is highly unlikely that Indian sulfanilic acid producers would use imported activated carbon to produce sulfanilic acid for export. Respondents argue that in using import values in its preliminary determination, the Department did not take into consideration the quality of the activated carbon used by the Chinese respondents or the quality of the activated carbon imported into India. Respondents argue that the record of this case contains public price quotes from an Indian activated carbon producer and an Indian chemical export company which support the use of the submitted published export price. Additionally, respondents argue that the quantities associated with the sales of imported activated carbon used in the preliminary determination demonstrate that the imports are for the gas phase activated carbon, not the industrial liquid phase activated carbon. The quantity of the shipments cited in the Department's Surrogate Value Memorandum of May 5th, 1997 for this review of sulfanilic acid from the PRC, shows that the valuation of activated carbon was based on shipments varying in total weight from 2 to 7.8 metric tons per shipment and were primarily imported by laboratories. In contrast, the record of this review shows that during the POR the respondent companies used 90 to 100 metric tons of activated carbon as compared to the total of 26.9 metric tons used for valuation purposes. Respondents contend that this small quantity associated with the import sales supports their argument that these imports are of the more expensive gas phase type of activated carbon. Additionally, respondents contend that the quantities required by respondents would surely merit quantity discounts, not reflected by the subject prices. Petitioners did not comment on respondents' arguments with respect to activated carbon. Department Position: We agree with Respondents that the import prices do not appear to correspond to the type of activated carbon used by Chinese manufacturers. The record of this review contains two sources of publicly available published price data on activated carbon. The published import prices contain information more contemporaneous to the period of review than the submitted published export price. However, neither of these sources state which types of activated carbon are contained in these sales. The Department consulted with a chemical products specialist at the International Trade Commission who confirmed that there is a distinction between liquid and gas phase activated carbon, and that liquid phase activated carbon is generally sold in powdered form. (See Memorandum to the File dated August 21, 1997 from Case Analyst.) The great disparity between the import and export prices suggests that these price quotes may be for different grades of activated carbon. Respondents have additionally provided public price quotes which are specific to the type and grade of activated carbon reported in the Chinese sulfanilic acid producers' factors of production response. These price quotes, which are contemporaneous to the POR, are comparable to the published export price indexed to the POR. The Department has previously found that Indian export prices for activated carbon are more reliable than import prices in the Polyvinyl Alcohol investigation. This issue was not mentioned in the Federal Register notice of the final determination, but the [[Page 48601]] Department's Polyvinyl Alcohol preliminary determination concurrence memorandum states that ``in the case of activated carbon, we compared the export and import statistics values to other available data and found that the import statistics values varied substantially greater from the other comparison values, as shown in the Attachment 1 chart. By comparison the export value varied by a lesser extent.'' See Polyvinyl Alcohol attachments to the Final Analysis Memorandum for Sulfanilic Acid from the PRC, September 9, 1997. Because the public price quotes submitted by respondents on the record of this sulfanilic acid review are contemporaneous to the POR, are supported by publicly available published information (i.e., the export price), and are specific to the type and grade of activated carbon used by the Chinese producers, we have used the average of these prices as the surrogate value for this factor. Clerical Errors Respondents contend that the Department made one clerical error in its preliminary results. They state that, in calculating the surrogate value for activated carbon, the Department used incorrect wholesale price indices (WPI's) when it adjusted the sales prices for April 4, May 2, and May 16, 1995, for inflation. For the final results of review, we used price quotes contemporaneous to the time period. Therefore, the surrogate value for this factor will not be indexed for inflation using the WPI. 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) ------------------------------------------------------------------------ Yude Chemical Industry Company.......... 8/1/95-7/31/96 0.00 Zhenxing Chemical Industry Company...... 8/1/95-7/31/96 0.00 PRC Rate \1\............................ 8/1/95-7/31/96 85.20 ------------------------------------------------------------------------ \1\ This rate will be applied to all firms other than Yude and Zhenxing, including all firms which did not respond to our questionnaire requests. * Yude and Zhenxing have been collapsed for the purposes of this administrative review. See Preliminary Results of Antidumping Administrative Review of Sulfanilic Acid from the PRC (62 FR 25917) May 12, 1997. 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)(2)(c) 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 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: September 9, 1997. Jeffrey P. Bialos, Acting Assistant Secretary for Import Administration. [FR Doc. 97-24564 Filed 9-15-97; 8:45 am] BILLING CODE 3510-DS-P