[Federal Register Volume 63, Number 221 (Tuesday, November 17, 1998)]
[Notices]
[Pages 63834-63842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30741]


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DEPARTMENT OF COMMERCE

[A-570-815]


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

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

ACTION: Notice of Final Results of the 1996-1997 Antidumping Duty 
Administrative Review of Sulfanilic Acid from the People's Republic of 
China.

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SUMMARY: On July 13, 1998, 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). The review covers the period August 1, 1996 through July 
31, 1997, and all PRC exporters of the subject merchandise.
    We gave all interested parties an opportunity to comment on our 
preliminary results. Based on our review of the comments received, the 
margins in the final results have changed from those presented in the 
preliminary results.

EFFECTIVE DATE: November 17, 1998.

FOR FURTHER INFORMATION CONTACT: LaVonne Jackson, Doug Campau or Nithya 
Nagarajan, Import Administration, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue NW, 
Washington, DC 20230; telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

[[Page 63835]]

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
current regulations at 19 CFR part 351 (1998).

Background

    On July 13, 1998, the Department of Commerce published in the 
Federal Register (63 FR 37528) 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 of August 1, 
1996 through July 31, 1997, and all 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 Industry Co. 
(``Zhenxing''); Mancheng Xinyu Chemical Factory, Shijiazhuang; Mancheng 
Xinyu Chemical Factory, Beijing; Hainan Garden Trading Company; Yude 
Chemical Industry Company (``Yude'') and Shunping Lile Chemical 
Factory. We have now completed the administrative review in accordance 
with section 751(a) of the Act.

Scope of 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, classifiable under the subheading 
2921.42.24 of the Harmonized Tariff Schedule (HTS), contains 96 percent 
minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent 
maximum alkali insoluble materials. Refined sulfanilic acid, also 
classifiable under the subheading 2921.42.24 of the HTS, contains 98 
percent minimum sulfanilic acid, 0.5 percent maximum aniline and 0.25 
percent maximum alkali insoluble materials.
    Sodium salt (sodium sulfanilate), classifiable under the HTS 
subheading 2921.42.79, 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.
    Although the HTS subheadings are provided for convenience and 
customs 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 determined in accordance with section 776(a) of the Act, 
that resort to facts otherwise available is appropriate in arriving at 
the country-wide 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. Because PRC exporters of this 
product did not respond to the Department's questionnaire, the 
Department finds that the ``PRC enterprise'' has failed to cooperate by 
not acting to the best of its ability to comply with a request for 
information.
    Where the Department must resort to 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, 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) of the Act 
provides that the Department will, 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 country-wide 
margin on the final best information available margin from the 
investigation, which was originally based on information from the 
petition. Notice of Final Determination of Sales at Less Than Fair 
Value, 57 FR 37524 (August 19, 1992). See also 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 wage rates which we 
have repeatedly found to be a probative source of data. With regard to 
the values contained in the petition, the Department was provided no 
useful information by the respondent or other interested parties, and 
we are aware of no other independent sources of information that would 
enable us to further corroborate the margin calculation in the 
petition. We note that the SAA at 870 specifically states that where 
``corroboration may not be practicable in a given circumstance,'' the 
Department may nevertheless apply an adverse inference. Based on these 
reasons, 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

[[Page 63836]]

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 comments from Yude, Zhenxing, PHT International, 
Inc. (``PHT'') (collectively Respondent), and from the Petitioner, 
Nation Ford Chemical Company.
    Comment 1: Petitioner contends that the Department should apply the 
country-wide rate of 85.20 percent as the facts available to calculate 
Respondent's dumping margin because Zhenxing and PHT failed to disclose 
what they called Respondent's ``affiliation'' with Baoding Import 
Export Company (``Baoding''), a PRC trading company, until the 
relationship was discovered by the Department during verification.
    Petitioner contends that Baoding and the Respondent are affiliated 
parties. According to the Petitioner, Zhenxing's U.S. sales of sodium 
sulfanilate during the period of review (POR) were made through 
Baoding. Petitioner argues that record evidence indicates that Baoding 
represented itself as the export agent of Zhenxing and that Respondents 
themselves characterized Baoding as a brokerage house to facilitate the 
export of sodium sulfanilate. Therefore, Petitioner reasons that 
Baoding, acting as Zhenxing's agent, is affiliated with Zhenxing. 
Petitioner argues that if Zhenxing and Baoding are affiliated, 
Baoding's failure to respond to the Departments original and subsequent 
questionnaires constitutes failure of Zhenxing to report all sales made 
by themselves and their affiliates.
    Petitioner states that Respondent addressed the issue of the PRC 
trading company only in post-verification submissions. Petitioner 
contends that the Department typically rejects such unsubstantiated, 
eleventh hour claims made by Respondent that have failed to disclose 
material information in their questionnaire responses. See Certain 
Welded Carbon Steel Pipes and Tubes from Thailand; Final Results of 
Antidumping Duty Administrative Review, 62 FR 53808, 53813 (Oct. 16, 
1997).
    Furthermore, Petitioner claims that fees paid by the Respondent to 
Baoding for its services are direct selling expenses which the 
Department was not able to verify. Consequently, a material part of the 
calculation of CEP has not been verified. Therefore, Petitioner 
contends that the Department must conclude that the Respondent did not 
act to the best of its ability to provide this information and that the 
Department cannot use the new information discovered at verification 
and provided in post-verification submissions to calculate the margin 
because it is not credible and cannot be verified.
    Respondent argues that Baoding was not the exporter of the subject 
merchandise, is not related to PHT and acted only as the brokerage 
house to facilitate the process of moving the goods from the factory to 
the port and through export customs in China, and that PHT simply 
purchased these services from Baoding. Respondent contends that 
Zhenxing only sells the subject merchandise to PHT, and neither sold 
nor intends to sell the subject merchandise directly to any 
unaffiliated U.S. buyers or to Baoding. Respondent argues that the 
criteria set forth in Engineered Process Gas Turbo-Compressor Systems 
from Japan, 62 FR 24394 (May 5, 1997), for determining affiliation are 
not applicable to this case. Respondent argues that the relationship 
between PHT and Baoding was not one of principal and agent within the 
context of a sales transaction. Respondent claims that this 
relationship was a simple contractual relationship and that Baoding was 
not an agent/reseller of sodium sulfanilate because Baoding did not act 
as a sales agent in negotiating the price or other terms of sale, 
interact with U.S. customers, maintain inventory of the subject 
merchandise, take title to the merchandise or bear risk of loss or 
process or otherwise add value to the merchandise. Therefore, Baoding 
was not required to respond to the Department's questionnaire with 
respect to those sales. Finally, Respondent states that its response to 
the Department's supplemental questionnaire with respect to Baoding was 
timely.
    Department's Position: We agree with Respondent. On May 1, 1998, 
after the conclusion of verification and prior to calculating our 
preliminary results of review, the Department issued a supplemental 
questionnaire requesting further clarification on the relationship 
between Zhenxing, PHT, and Baoding and the services provided by Baoding 
for sales of sodium sulfanilate. Respondent submitted their response on 
May 14, 1998, stating that Baoding was unaffiliated with either PHT or 
Zhenxing. Respondent stated that Zhenxing does not sell the subject 
merchandise to Baoding and that Baoding has no function regarding sales 
of the subject merchandise. According to the Respondent, Baoding's 
function is to facilitate the exportation of the merchandise. Baoding 
provides the documents necessary for the exportation and helps to 
arrange the delivery of goods to port. In addition, Baoding did not 
take title to the subject merchandise nor does Baoding assume the 
management, storage or shipment of the subject merchandise. In return 
for its brokerage and handling services, Baoding is paid a fee by PHT 
consistent with standard industry practice. Based on this information, 
the Department determined that Baoding was unaffiliated to either PHT 
or Zhenxing for purposes of the preliminary results of review and 
adjusted normal value to include the cost of brokerage and handling 
expenses incurred by Zhenxing and PHT to make sales via Baoding, valued 
in an appropriate market economy surrogate country. For purposes of 
these final results of review, the Department has not received any 
additional information to indicate that Baoding is affiliated with 
either PHT or Zhenxing, therefore, consistent with our findings in the 
preliminary results of review, we have adjusted for the additional 
brokerage and handling expenses incurred on sales via Baoding.
    Comment 2: Petitioner contends that the Department should apply the 
country-wide rate of 85.20 percent as the facts available to calculate 
Respondent's dumping margin because the Department was unable to verify 
a significant portion of the factors of production information 
submitted by the Respondent. Petitioner argues that discrepancies found 
at verification related to (1) coal usage, (2) electricity usage, and 
(3) labor hours understated the Respondent's factors of production and 
that new information used to recalculate Respondent's energy usage was 
untimely. Petitioner also argues that Respondent never corrected the 
usage data either in their supplemental questionnaire response or prior 
to the start of the factors of production verification.
    Petitioner further contends that the Department's preliminary 
results of review correcting said discrepancies is inappropriate 
because the discrepancies involve major factors of production, the 
record of the review contains no explanation of the reasons for the 
discrepancies and the discrepancies that were discovered all favored 
Respondent, indicating a pattern of under-reporting.
    Respondent argues that neither the Department's observation at 
verification of what it perceived to be unreconciled coal purchases in 
comparison to total coal usage, nor the difference between total 
predicted amount of electricity reported by Zhenxing and Zhenxing's 
final electricity consumption is

[[Page 63837]]

significant. Further, Respondent argues that these verification 
findings did not create a pattern of under-reporting factors of 
production.
    Department's Position: The Department agrees with Respondent 
regarding the use of verified information for coal usage, electricity, 
and labor factors of production. It is the Department's practice to 
allow respondents to correct for minor errors during the course of 
verification. In the instant case, while conducting the verification, 
Department officials noted certain errors in Zhenxing's factors of 
production response. Department officials then proceeded to verify and 
ensure that they obtained the most accurate factors of products which 
tied to the company's actual books and records. At the conclusion of 
verification, the Department determined that the errors found were 
minor in nature and did not require a revised response to be submitted. 
Therefore, in order to ensure that the most accurate factors of 
production were used to calculate NV in the preliminary results of 
review, the Department utilized the verified factors of production for 
coal usage, electricity, and labor. In regard to the Petitioner's 
argument that these discrepancies indicated a pattern of under-
reporting, the Department has determined that the errors noted during 
verification were insignificant and did not constitute a pattern or 
under-reporting on behalf of the Respondent. Contrary to Petitioner's 
allegation, not every discrepancy involved favored Respondent. For 
purposes of the final results, the Department has therefore continued 
to use the verified information for these factors of production.
    Comment 3: Petitioner claims that the use of Indian import prices 
for aniline as the surrogate value for aniline used by the PRC 
Respondent in this case is inappropriate because, it claims, 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 argues that the Department incorrectly based the 
surrogate value for aniline on Indian sulfanilic acid production 
processes, instead of reported PRC production processes. Petitioner 
states that the Department must first identify the NME factors of 
production and then, using those same factors, obtain surrogate values 
from a market economy at a similar level of economic development. 
Petitioner contends that because Respondent uses domestically-sourced 
aniline to manufacture sulfanilic acid, the Department must value 
aniline using prices for aniline domestically produced in India. 
Petitioner argues that the Department has recently stated a clear 
preference for using domestic market prices in the surrogate country to 
value factors of production. As support for this position, Petitioner 
cites Pure Magnesium from the People's Republic of China: Final Results 
of Antidumping Duty New Shipper Administrative Review, 63 FR 3085, 3087 
(Jan. 21 1998) (``Magnesium''); Final Determination of Sales at Less 
Than Fair Value: Certain Cut-to-length Carbon Steel Plate from the 
People's Republic of China, 62 FR 61964, 61966 (Nov 20, 1997) (``Carbon 
Steel Plate''); and Notice of Final Determination of Sales at Less Than 
Fair Value: Brake Drums and Brake Rotors from the People's Republic of 
China, 62 FR 9163 (Feb. 28, 1997) (``Brake Drums''). 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 under investigation.
    Petitioner contends that the values for imported aniline used in 
the preliminary results cannot be used because these values are based 
on subsidized prices and are not an accurate reflection of the price of 
aniline. Petitioner cites Brake Drums and Tehnoimportexport v. United 
States, 783 F. Supp. 1401 (CIT 1992) (``Tehnoimportexport''). According 
to the Petitioner, the Department has determined that the Indian 
Advanced License program is a countervailable subsidy under U.S. law. 
Preliminary Affirmative Countervailing Duty Determination: Sulfanilic 
Acid From India, 57 FR 35785 (Aug. 11, 1992); Countervailing Duty 
Order: Sulfanilic Acid From India, 58 FR 12026 (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 
prices for imported aniline due to the reasons stated above. Petitioner 
argues that the statute requires the Department to use, instead, 
published domestic price information reported in Chemical Business and 
Chemical Weekly to value aniline in this review. 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. See, e.g., Notice of Final 
Determination of Sales at Less Than Fair Value: Bicycles From the 
People's Republic of China, 61 FR 19026, 19030 (Apr. 30, 1996) 
(``Bicycles''). Petitioner also argues that the Department used 
Chemical Weekly data as the surrogate value for another input, sulfuric 
acid, in the preliminary results of this case. Petitioner states that 
the domestic prices are contemporaneous, product specific, tax 
exclusive and publicly available and are therefore a reliable basis for 
use as a surrogate value.
    Respondent argues that the Department correctly valued aniline 
using Indian import statistics because Indian sulfanilic producers used 
imported aniline to produce sulfanilic acid for export. Respondent 
refers to the initial investigation and the 1993-94 and 1994-95 
administrative reviews of this case, in which the Department previously 
used Indian import statistics for valuing aniline. Respondent cites 
Nation Ford Chemical Co. v. United States, 985 F. Supp. 133 (CIT 1997) 
and Nation Ford Chemical Co. v. United States, 985 F. Supp. 138 (CIT 
1997), in which the Court of International Trade (CIT) affirmed the 
Department's determinations in the 1993-94 and 1994-95 reviews, 
respectively, to use Indian import values as a surrogate for PRC 
aniline costs. Respondent also contends that the CIT determined that 
Petitioner's argument that the Department must use the Indian domestic 
price for aniline because Chinese producers use domestic aniline was 
erroneous because there was no basis in the statute for arguing that 
the factors of production must be ascertained in a single fashion. 
Nation Ford Chemical Co., 985 F. Supp. at 136 (citing Lasko Metal 
Prod., Inc. v. United States, 43 F.3d 1442, 1446 (Fed. Cir. 1994) 
(``Lasko'') and 19 U.S.C. 1677b(c)(3)). In addition, Respondent 
contends that the CIT further stated that it was reasonable for the 
Department to conclude that Indian domestic prices were not adequately 
representative of the situation in the PRC. Respondent contends that 
the Court also notes that although a surrogate value must be 
representative of the situation in the non-market economy (NME), that 
does not mean that the Department must duplicate the exact production 
experience at the expense of choosing a surrogate value that most 
accurately represents what would be the fair market value of aniline in 
a market-economy PRC.
    Respondent contends that the CIT has determined that the Indian 
subsidy program would have no impact on the price of imported aniline, 
and therefore

[[Page 63838]]

rejected the identical subsidy argument Petitioners are making in this 
review. Respondent relies upon the CAFC's statement in Lasko 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, similarly, the best 
available information on the value of aniline used by the Indian 
producers to make sulfanilic acid for export is the import price for 
aniline, which reflects the cost of aniline on the international 
market.
    Respondent also cites Tehnoimportexport, in which the CIT 
acknowledged that the Department has frequently used import statistics 
in NME country cases. Respondent argues further that the Department 
uses import statistics for at least one factor in almost every dumping 
case against China, even though the Chinese producers source the 
product from a domestic manufacturer in China. See Notice of Final 
Determination of Sales at Less Than Fair Value: Sebacic Acid from the 
People's Republic of China, 59 FR 28053 (May 31, 1994); Bicycles, and 
Brake Drums.
    Respondent contends that the issue is which surrogate value from 
India best represents what the cost of aniline would be in China to the 
Chinese producer if the price were set by market forces. Respondent 
argues that the CIT states in Tehnoimportexport, 783 F. Supp. at 1406, 
that when the Department is faced with the decision between two 
reasonable alternatives and one alternative is favored over the other, 
the Department has the discretion to choose. Respondent also relies 
upon Union Camp v. United States, 941 F. Supp. 108, 116 (CIT 1996), 
remand aff'd, 963 F. Supp. 1212 (CIT 1997), and Magnesium Corp. of 
America v. United States, 938 F. Supp. 870 (CIT 1996) for the 
proposition that the Department has such discretion. Finally, 
Respondent argues that the Department's antidumping regulations 
published on May 19, 1997, state that aberrational surrogate input 
values should be disregarded. Respondent further argues that the 
Department has determined that the domestic price for aniline was 
aberrational because it did not reflect a market price for aniline but, 
instead, a price which has been inflated by India's protection of its 
national aniline industry.
    Department's Position: We agree with Respondent that the Indian 
import values for aniline provide a better approximation than Indian 
domestic prices of what the aniline 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 Licence 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 the Indian producers of sulfanilic acid for the domestic 
market and the duty-free, Indian import price for aniline paid by 
Indian producers of sulfanilic acid for the export market. As the CIT 
has recognized with respect to prior reviews, the Department reasonably 
used the average Indian import price because the Indian price for 
domestically-produced aniline is artificially inflated due to a 
protective tariff that bears no relationship to the situation governing 
the aniline respondents source domestically in the PRC. Furthermore, 
because the costs constructed using the surrogate methodology are the 
costs for Chinese production for the export market, the costs incurred 
by Indian producers manufacturing sulfanilic acid for the export market 
are a better surrogate than are the costs incurred by Indian producers 
in manufacturing sulfanilic acid for their domestic market.
    Petitioner cites Magnesium, Carbon Steel Plate and Brake Drums for 
the proposition that domestic prices are preferred unconditionally to 
import prices for factor valuation purposes. However, the three cases 
cited above refer to ``tax-exclusive domestic prices,'' and together 
with the Department's position above on the tariff problem, suggest 
that domestic prices are preferred only if both domestic and import 
prices are available on a tax-and duty-exclusive basis, all else being 
equal. When this is not the case, the Department must decide on a case-
by-case basis which price is more appropriate for factor valuation 
purposes. In this case, because of the tariff problem discussed above, 
as well as uncertainty about the indirect taxes, if any, that the 
domestic price reflects, the Department has determined that the import 
price is more appropriate.
    Petitioner's claim that the ``factor of production'' to be valued 
is ``domestic aniline,'' such that the statute requires the value of 
this factor to 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 the Department must base its valuation on ``domestic'' (Indian-
produced) aniline simply 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 the Department compelled to use Indian domestic values 
simply because some domestic market exists. The CIT has long recognized 
that the Department 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 and the Nation Ford cases cited 
above. In this case, as in prior reviews of this order, 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 Respondent's 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 for sulfanilic acid.
    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

[[Page 63839]]

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 the import value of 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 the Department 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. Therefore, for the purposes of these final results, 
the Department has continued to use Indian import prices as the 
surrogate value for aniline.
    Finally, there is no merit to Petitioner's inference that prices 
published in certain Indian periodicals can only be rejected as 
surrogate values for Chinese prices if the periodicals are found to be 
unreliable sources of data. The problem with this data is not its 
reliability as to Indian prices, but the inappropriateness in this case 
of Indian domestic price data for aniline as a surrogate value for 
aniline sourced in China by the Chinese respondent.
    Comment 4: Petitioner argues, alternatively, that the Department 
should adjust the import statistics to include import duties and an 
importers' mark-up in order to reflect what they call the true cost of 
imported aniline. 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 the U.S. price 
under 19 U.S.C. 1677a(d)(1)(B) if the Respondent could show that the 
importer took advantage of the duty drawback program. Petitioner argues 
that there is no evidence that any of the Indian producers of 
sulfanilic acid took advantage of the Advanced License program. 
Petitioner contends that the burden is on the Respondent to show Indian 
sulfanilic acid producers either did not pay customs duties or received 
refunds of customs duties payable on imports of aniline upon the 
exportation of finished sulfanilic acid. Petitioner also argues that 
the fact that the Indian Advanced License program has been found to be 
a countervailable subsidy under U.S. law provides another reason why 
the Department should add the import duties to the import values used 
as the surrogate value of aniline. Petitioner also argues that based on 
the absence of evidence on record that Indian sulfanilic acid producers 
purchased imported aniline directly and not through importers the 
Department should conclude that importer/middlemen import aniline and 
re-sell to sulfanilic acid producers with a mark-up added. Petitioner 
contends that the appropriate rate for the importers' mark-up is 28.44 
percent of the CIF value. This rate is based upon information placed on 
record by the Petitioner establishing profit rates for Indian import 
trading companies. Petitioner contends that the Department should add 
28.44 percent of the CIF value to the surrogate cost of aniline.
    Respondent contends that, in the two Nation Ford cases cited above, 
the CIT determined that the Department was justified in not adding 
import duties and an importer mark-up to import prices because there 
was evidence on the record that Indian producers did not pay import 
duties on the aniline used to produce sulfanilic acid for export and 
there was no evidence on the records of an importer's markup. 
Respondent argues that the Court stated that the Department's refusal 
to add import duties or markups on imported aniline given the absence 
of proof that Indian producers paid import duties or markups on 
imported aniline was supported by the record.
    Department's Position: We agree with Respondent that we should not 
add to the Indian import values an amount corresponding to the 85% tax 
levied by the Indian government on imported 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 and Parts 
Thereof, Finished and Unfinished, From the People's Republic of China; 
Final Results of Antidumping Duty Administrative Review and Revocation 
in Part of Antidumping Duty Order, 62 FR 6173, 6177 (February 11, 1997) 
(Comment 3); Certain Helical Spring 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.
    Respondent has 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. Respondent has 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 the Department 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 Respondent in this review is not seeking a duty drawback 
adjustment to a United States price for sulfanilic acid exports from 
India (the country granting the duty drawback), and is not privy to the 
confidential documents of the Indian sulfanilic acid companies 
involved. What we are attempting to determine in this case 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 Chinese 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.
    The record also provides no support for Petitioner's contention 
that we must add to the constructed valuation of the cost of the 
Chinese aniline an amount corresponding to an importer's markup.

[[Page 63840]]

The Chinese producers of sulfanilic acid source their aniline directly, 
not through a middleman. Furthermore, the record contains no indication 
that Indian producers of sulfanilic acid for exportation pay an 
importer's markup. Indeed, the only arrangement reflected in the record 
involves a tolling arrangement rather than purchase of aniline from an 
importer. In the Nation Ford cases, the CIT rejected a similar claim by 
petitioner. Because the record of this review involves similar facts, 
we again determine that it is not appropriate to increase the cost of 
aniline by the cost of a hypothetical importer's markup.
    Comment 5: Respondent, relying upon the Department's verification 
findings in this review, contends that the Department used incorrect 
factors of production (FOP) for aniline and sulfuric acid when 
calculating the material costs for producing crude sulfanilic acid. 
Respondent states that the factors verification report accurately 
reported the consumption of raw materials and production of crude 
sulfanilic acid, but that these values were not carried over into the 
computer programs.
    Petitioner argues that, in the preliminary results, the Department 
used the aniline and sulfuric acid usage amounts Respondent originally 
reported in its questionnaire response and that the Department, acting 
on its own initiative, corrected the denominator of the calculations to 
use the appropriate yield data. However, Respondent did not correct the 
numerators of the calculations in its supplemental questionnaire 
response or prior to the start of the production verification. 
Petitioner contends that Respondent brought these alleged errors to the 
Department's attention for the first time in its case brief.
    Petitioner argues that pursuant to NTN Bearing Corp. v. United 
States, 74 F.3d 1204 (Fed. Cir. 1995), the Department's policy is to 
correct a respondent's alleged clerical errors that are brought to the 
Department's attention for the first time in the respondent's case 
brief only if all applicable criteria are met. Petitioner refers to the 
Department's decisions Tapered Roller Bearings and Parts Thereof, 
Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four 
Inches or Less In Outside Diameter, and Components Thereof, From Japan; 
Final Results of Antidumping Duty Administrative Reviews and 
Termination in Part, 63 FR 20585, 20611 (Apr. 27, 1998), citing Certain 
Fresh-Cut Flowers From Columbia; Final Results of Antidumping Duty 
Administrative Reviews, 61 FR 42833 (Aug. 19, 1996). Petitioner argues 
that the alleged errors fail to meet at least three of the criteria 
outlined in the Department's policy: Respondent has not established 
that the alleged error is a clerical error and not an error in 
judgement or a substantive error, the Respondent did not avail itself 
of the earliest possible time to correct the alleged error, and the 
alleged clerical errors entail a substantial revision of the 
Respondent's response. Petitioner concludes that these alleged errors 
entail a substantial revision of the Respondent's data and may not be 
corrected under the Department's policy.
    Department's Position: We agree with Respondent and have corrected 
the FOP data for aniline and sulfuric acid used to calculate material 
costs for producing crude sulfanilic acid. When it issued the 
preliminary results of this review, the Department intended to correct 
both the FOP and the yield to reflect verified totals. However, when 
making this correction, we inadvertently did not substitute the 
original FOP for the verified FOP. Respondent noted this error based on 
the preliminary analysis memo dated July 6, 1998. In accordance with 
Sec. 351.224(a) of the Department's regulations, the Department 
disclosed the calculation of material costs for producing crude 
sulfanilic acid in the preliminary analysis memo. In response, the 
Respondent brought the errors to the Department's attention.
    Comment 6: Petitioner contends that, in the preliminary results, 
the Department failed to calculate and deduct from the CEP starting 
price the inventory carrying costs incurred by PHT during the time 
between the exportation of the subject merchandise from the PRC and the 
delivery to the first unaffiliated customer in the United States. 
Petitioner argues that the costs of carrying inventory during the time 
of exportation from the PRC and delivery to the first unaffiliated 
customer in the United States were not related to Zhenxing's sales to 
PHT. Therefore, those expenses must be calculated and deducted from the 
CEP starting price pursuant to 19 CFR 351.402(b) because they relate to 
the sale to the first unaffiliated customer in the United States.
    Respondent cites Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, Germany, Italy, Japan, 
Romania, Singapore, Sweden, and the United Kingdom; Final Results of 
Antidumping Duty Administrative Reviews, 63 FR 33320, 33344 (June 18, 
1998), in which the Department stated that its regulations clearly 
direct that any expense that is related solely to the sale to an 
affiliated importer in the United States should not be deducted from 
the starting price. Respondent argues that, similarly, the inventory 
carrying costs in this case should not be deducted from the starting 
price.
    Department's Position: The Department agrees with Petitioner in 
part. Pursuant to 19 CFR 351.402, the Department, in calculating the 
CEP, deducts from the starting price those expenses associated with 
economic activity in the United States. Inventory carrying costs 
between Zhenxing and PHT are not associated with economic activities in 
the United States because, they are not associated with PHT's sales to 
unaffiliated U.S. parties. Therefore, the Department has not deducted 
the inventory carrying costs between Zhenxing and PHT from the starting 
price in calculating CEP. However, Petitioner is correct in arguing 
that the Department should adjust the U.S. price for inventory carrying 
costs incurred by PHT prior to its sale and delivery to unaffiliated 
U.S. customers. The Department has corrected the final CEP calculation 
for these inventory carrying costs. (See Final Analysis Memo dated 
November 10, 1998.)
    Comment 7: Petitioner contends that the Department failed to 
calculate an assessment rate applicable to PHT. Petitioner states that 
this failure is contrary to the Department's regulations, which state 
the assessment rate for each importer of the subject merchandise under 
review will normally be calculated by dividing the dumping margin found 
for the subject merchandise examined by the entered value of such 
merchandise for normal customs purposes. 19 CFR 351.212(b)(1).
    Department's Position: We agree with the Petitioner. The Department 
has calculated an importer specific assessment rate for PHT and has 
included a reference to this calculation in the final results of this 
review.
    Comment 8: Petitioner contends that the Department's preliminary 
calculation of electricity usage by Zhenxing contained critical errors. 
Petitioner states that the number of kilowatt hours of electricity 
reported in Zhenxing's records did not reconcile to the actual 
electricity bills and, as a result, the Department used, as facts 
otherwise available, the number of kilowatt hours reported on the 
electricity bills. Petitioner adds that because the August 1996 bill 
was missing the Department stated that it would use ``the highest 
monthly amount recorded on the available electricity

[[Page 63841]]

bills.'' Petitioner contends that the Department used an incorrect 
number of hours (the number for March 1997) as the facts available for 
the missing August 1996 number of hours. Additionally, Petitioner 
states the Department did not use the correct number of hours reported 
on the July1997 bill in its calculation. Petitioner concludes that the 
Department should require Respondent to submit all of the actual 
electricity bills for the record and actual amounts should be used to 
calculate energy usage.
    Respondent argues that the Department's calculation of electricity 
usage is accurate and that the Department was correct in selecting the 
March 1997 figure as a surrogate value for August 1996, because the 
March figure is truly the highest monthly amount recorded on the 
available electric bills.
    Department's Position: We agree with the Respondent in part. 
Consistent with the preliminary results of this case, as facts 
available we have used the number of kilowatt hours reported on 
Respondent's actual electric bills in determining the quantities of 
electricity used. Additionally, as facts available, we used the highest 
monthly kilowatt usage recorded on a verified electric bill (i.e., that 
for March 1997) as the electricity consumption factor for August 1996, 
for which the electricity bill could not be located.
    We agree with Petitioner that the Department made an error in the 
process of transferring to the energy usage portion of its computer 
program the verified number of kilowatt hours billed for July 1997. The 
Department has corrected this error in calculating the final results.
    Comment 9: Respondent contends that, with respect to the credit 
expenses incurred on U.S. sales, the Department should have calculated 
a daily interest rate using a 365 day year rather than a 360 day year. 
Respondent cites the Department's Antidumping Manual, which states that 
the imputed credit costs are calculated using 365 days unless a firm 
uses 360 days as a credit base rather than 365 days, in which case 360 
days would be used in the calculation. Respondent argues that the 
Department did not state in the preliminary results that the Respondent 
uses 360 days as a credit base.
    Petitioner contends that Respondent's argument that the Department 
must use 365 days in the U.S. credit expense calculation because it did 
not state in the disclosure arguments that Respondent uses 360 days as 
a credit base is incorrect. Petitioner argues that the burden to 
establish the appropriate credit base was on the Respondent and that 
Respondent has no standing to contest the Department's use of 360 days 
instead of 365 days in the credit expense calculation.
    Department's Position: We agree with the Respondent. The 
Department's normal practice is to calculate credit costs by dividing 
the number of days between shipment and payment by 365, then 
multiplying by the interest rate and unit price. Only if the record 
shows that a firm uses 360 days as the credit base do we divide the 
number of days by 360. In this case there is no indication that either 
Zhenxing or PHT used a 360 day credit base. Therefore, the Department 
has corrected its final calculation of imputed credit costs utilizing 
365 days rather than 360 days.

Clerical Errors

    Petitioner contends that the Department's preliminary calculation 
of the materials cost of crude sulfanilic acid contained a clerical 
error which understates the constructed value of the subject 
merchandise. Respondent agrees with the Petitioner that the Department 
should correct the clerical error in the calculation of crude 
sulfanilic acid. We agree and have corrected the calculation of the 
materials cost of crude sulfanilic acid.
    Respondent argues that the Department erred when it used a 
conversion factor of 2.2 pounds per kilogram rather than the factor of 
2.204623 provided in The New International Webster's Comprehensive 
Dictionary of the English Language for converting values expressed in 
dollars per kilogram to dollars per pound in the calculation of net 
U.S. prices and dumping margins for PHT's sales. Petitioner states in 
its rebuttal brief that it does not object to the Department's use of a 
more precise factor. The Department has revised its preliminary 
calculations to reflect the conversion value of 2.204623 pounds per 
kilogram.
    Respondent argues that the Department compounded the preceding 
error when it attempted to convert values expressed in dollars per 
kilogram to dollars per pound by multiplying dollars by the incorrect 
factor rather than dividing the dollars per kilogram by the correct 
factor. Petitioner does not object to the correction of this error. The 
Department has corrected the final values to reflect the correct 
conversion formula.

Final Results of Review

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

------------------------------------------------------------------------
                                                                 Margin 
      Manufacturer/producer/exporter           Time period     (percent)
------------------------------------------------------------------------
Yude Chemical Industry, Co./Zhenxing                                    
 Chemical Industry, Co....................     8/1/96-7/31/97       .29 
PRC Rate\1\...............................     8/1/96-7/31/97     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.                                                             
* Exporters Yude and Zhenxing have been collapsed for the purposes of   
  this administrative review. See Sulfanilic Acid from the People's     
  Republic of China: Preliminary Results of Antidumping Administrative  
  Review, 63 FR 37528 (July 13, 1998).                                  


    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. 
Because the number of transactions involved in the review and other 
simplification methods prevent entry-by-entry assessments, we have 
calculated exporter/importer-specific assessment rates by dividing the 
total dumping margins for the reviewed sales by the total entered value 
of those reviewed sales for each importer. We will direct Customs to 
assess the resulting percentage margins against the entered Customs 
values for the subject merchandise on each of that importer's entries 
under the relevant order during the review period. While the Department 
is aware that the entered value of the reviewed sales is not 
necessarily equal to the entered value of entries during the POR 
(particularly for CEP sales), the use of the entered value of sales as 
the basis of the assessment rate permits the Department to collect a 
reasonable approximation of the antidumping duties which would have 
been determined if the Department had reviewed those sales.
    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) No cash deposit will be required for Yude and Zhenxing 
as the rate above is de minimis (i.e., less than .5 percent); (2) the 
cash deposit rate for all other PRC exporters (i.e., the PRC rate) will 
be 85.20%; and (3) the cash deposit rate for non-PRC exporters of 
subject merchandise from the PRC will be the

[[Page 63842]]

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 351.402(f) 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 CFR 351.305. 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 351.211.

    Dated: November 10, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-30741 Filed 11-16-98; 8:45 am]
BILLING CODE 3510-DS-P