Federal Register, Volume 64 Issue 239 (Tuesday, December 14, 1999)

[Federal Register Volume 64, Number 239 (Tuesday, December 14, 1999)]
[Notices]
[Pages 69723-69730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32395]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-570-856]

Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Synthetic Indigo From
the People's Republic of China

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

EFFECTIVE DATE: December 14, 1999.

FOR FURTHER INFORMATION CONTACT: Dinah McDougall or David J.
Goldberger, Office 2, AD/CVD Enforcement Group I, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC
20230; telephone: (202) 482-3773 or (202) 482-4136, respectively.

The 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 of Commerce's (the
``Department's'') regulations are to 19 CFR part 351 (1998).

Preliminary Determination

We preliminarily determine that synthetic indigo from the People's
Republic of China (``PRC'') is being, or is likely to be, sold in the
United States at less than fair value (``LTFV''), as provided in
section 733 of the Act. The estimated margins of sales at LTFV are
shown in the ``Suspension of Liquidation'' section of this notice.

Case History

Since the initiation of this investigation (Notice of Initiation of

[[Page 69724]]

Antidumping Duty Investigation: Synthetic Indigo from the People's
Republic of China, 64 FR 40831, July 28, 1999) (Notice of Initiation)
the following events have occurred:
On August 16, 1999, the United States International Trade
Commission (``ITC'') notified the Department of its affirmative
preliminary injury determination in this case.
On August 20, 1999, the Department issued an antidumping
questionnaire to the China Chamber of Commerce for Metals, Minerals &
Chemicals (the ``Chamber'') and the Ministry of Foreign Trade and
Economic Cooperation (``MOFTEC'') with instructions to forward the
questionnaire to all producers/exporters of the subject merchandise for
their response by the specified deadline dates. We also sent courtesy
copies of the antidumping duty questionnaire to the following companies
identified as possible exporters/producers of the subject merchandise
during the period of investigation (``POI''):

Beijing Dyestuffs Plant
China National Chemical Construction Jiangsu Company
Chongqing Chuanran Chemicals General Plant
Chongqing Dyestuff Import & Export United Corp.
Chung Hing Chemicals
Hainan Huanhai Development Co., Ltd
Hebei Jinzhou Import & Export Corporation
Hebei Chemical Import & Export Co.
Hebei WuQiang Chemical General Factory
Jinhua Chemical Group
Jiahui Chemicals Works Theeast Tianjin
Jiangsu Taifeng Chemical Industry Co., Ltd.
Lianyungang Chemicals Medicines Products
Sinochem Hebei Import & Export Corp.
Sinochem Liaoning Import & Export Co.
Sinochem Ningbo Import & Export Corp.
Suzhou Foreign Trade Corp.
Syntron Industrial Co., Ltd.
Wonderful Chemical Industrial Ltd.
Wuhan Tianging Chemicals Import & Export Corp.
Yong Fong Trade & Development Corp.

During the period September through October 1999, the Department
received questionnaire responses from (1) Wonderful Chemical Industrial
Ltd. (``Wonderful''); (2) Taixing Taifeng Dyestuff Company Ltd.
(``Taixing Taifeng''); (3) Jiangsu Taifeng Chemical Industry Co., Ltd.
(``Jiangsu Taifeng''); (4) China National Chemical Construction Jiangsu
Company (``CNCCJC''); (5) China Jiangsu International Economic
Technical Cooperation Corp. (``CJIETCC''); (6) Shanghai Yongchen
International Trading Company Ltd. (``Shanghai Yongchen''); (7) Kwong
Fat Hong Group of Hong Kong (``Kwong Fat''); (8) Tianjin Jiahui
Dyestuffs & Chemical Plant (``Tianjin Jiahui''); (9) Tianjin Hongfa
Group Co. (``Tianjin Hongfa''); (10) Hebei Jinzhou Import & Export
Corporation (``Hebei Jinzhou''); (11) Hebei Huiqian (``Hebei
Huiqian''); (12) Beijing Dyestuffs Plant (``Beijing Dyestuffs''); (13)
Sinochem Hebei Import & Export Corp. (``Sinochem Hebei''); (14)
Chongqing Dyestuff Import & Export United Corp. (``Chongqing United'');
and (15) Wuhan Tianging Chemicals Import & Export Corp., Ltd.
(``Wuhan''). In addition, Jinhua Chemical Group Import & Export Corp.
contacted the Department and stated that it does not produce or export
the subject merchandise to the United States.
On October 5, 1999, pursuant to section 777A(c) of the Act, the
Department determined that, due to the large number of exporters/
producers of the subject merchandise, it would limit the number of
mandatory respondents in this investigation. See ``Respondent
Selection'' section below.
On October 13, 1999, the Department invited interested parties to
provide publicly available information (``PAI'') for valuing the
factors of production and for surrogate country selection.
On October 28, 1999, the petitioners alleged that critical
circumstances exist with respect to imports of synthetic indigo from
the PRC. Accordingly, pursuant to section 732(e) of the Act, on
November 2, 1999, the Department requested information regarding
monthly shipments of synthetic indigo to the United States during the
period January 1997 to October 1999, from the mandatory respondents
participating in this investigation. We received the requested
information on November 17, 1999. The critical circumstances analysis
for the preliminary determination is discussed below under ``Critical
Circumstances.''
On November 2, 1999, the respondents requested that the PRC be
treated as a market economy in this investigation. The respondents also
requested that the synthetic indigo industry be considered a market-
oriented industry (``MOI'') in a November 22, 1999, submission.
Treatment of both of these claims is discussed below under ``Nonmarket
Economy Country and Market-Oriented Industry Status.''

Postponement of Final Determination and Extension of Provisional
Measures

Pursuant to section 735(a)(2) of the Act, on December 1, 1999, the
mandatory PRC respondents requested that, in the event of an
affirmative preliminary determination in this investigation, the
Department postpone its final determination until not later than 135
days after the date of the publication of an affirmative preliminary
determination in the Federal Register. On December 6, 1999, these
parties amended their request to agree to extend the provisional
measures to not more than six months. In accordance with 19 CFR
351.210(b), because (1) our preliminary determination is affirmative,
(2) the requesting exporters account for a significant proportion of
exports of the subject merchandise, and (3) no compelling reasons for
denial exist, we are granting the respondents' request and are
postponing the final determination until no later than 135 days after
the publication of this notice in the Federal Register. Suspension of
liquidation will be extended accordingly.

Scope of Investigation

The products subject to this investigation are the deep blue
synthetic vat dye known as synthetic indigo and those of its
derivatives designated commercially as ``Vat Blue 1.'' Included are Vat
Blue 1 (synthetic indigo), Color Index No. 73000, and its derivatives,
pre-reduced indigo or indigo white (Color Index No. 73001) and
solubilized indigo (Color Index No. 73002). The subject merchandise may
be sold in any form (e.g., powder, granular, paste, liquid, or
solution) and in any strength. Synthetic indigo and its derivatives
subject to this investigation are currently classifiable under
subheadings 3204.15.10.00, 3204.15.40.00 or 3204.15.80.00 of the
Harmonized Tariff Schedule of the United States (``HTSUS''). Although
the HTSUS subheadings are provided for convenience and customs
purposes, the written description of the merchandise under
investigation is dispositive.

Period of Investigation

The POI comprises each exporter's two most recent fiscal quarters
prior to the filing of the petition, i.e., October 1, 1998 through
March 31, 1999.

Respondent Selection

The Department determined that the resources available to it for
this investigation limited its ability to analyze any more than the
responses of the two largest exporter/producers of

[[Page 69725]]

the subject merchandise in this investigation, their affiliates, and
their associated producers. Based on Section A questionnaire responses,
the Department selected the two largest exporter groups to be the
mandatory respondents in this proceeding: (a) Wonderful/Jiangsu Taifeng
and (b) Kwong Fat. (See Memorandum from the Team to Louis Apple dated
October 5, 1999). After further analysis of the questionnaire responses
and in consideration of section 772(a) of the Act, we preliminarily
determined that Tianjin Hongfa, rather than Kwong Fat, is the
appropriate respondent exporter and thus have used Tianjin Hongfa's
sales to Kwong Fat, rather than Kwong Fat's sales to unaffiliated
purchasers in the United States, in this preliminary determination (see
discussion below under ``Export Price''). Accordingly, Wonderful and
Tianjin Hongfa are the mandatory respondents analyzed in this
preliminary determination.

Nonmarket Economy Country and Market-Oriented Industry Status

The Department has treated the PRC as a NME in all past antidumping
investigations (see, e.g., Final Determination of Sales at Less Than
Fair Value: Certain Preserved Mushrooms from the People's Republic of
China, 63 FR 72255, December 31, 1998 (``Mushrooms''); Final
Determination of Sales at Less Than Fair Value: Furfuryl Alcohol from
the People's Republic of China, 60 FR 22545, May 8, 1995, (``Furfuryl
Alcohol''); and Final Determination of Sales at Less Than Fair Value:
Silicon Carbide from the People's Republic of China, 59 FR 22585, May
2, 1994, (``Silicon Carbide'')). A designation as an NME remains in
effect until it is revoked by the Department (see section 771(18)(C) of
the Act).
On November 2, 1999, the respondents made a claim that economic
changes in the PRC warrant revocation of the PRC's NME status. Because
the respondents' submission does not provide sufficient support for
their claim for market economy status and does not address a number of
important factors for determining market economy status (see Memorandum
from the Team to Lou Apple, dated December 6, 1999), we have
preliminarily determined to continue to treat the PRC as a NME.
In a November 22, 1999, submission, the respondents requested that
synthetic indigo be treated as a MOI, and accordingly, that the
Department should rely on the actual PRC prices or costs for
calculating normal value (``NV''). As a threshold matter, we note that
the respondents have not provided information for the record that
covers virtually all of the producers of the industry. While the
Department has received information from a number of exporters and
manufacturers of the subject merchandise, as stated above, we do not
have information from other exporters and producers. The Chamber states
in a September 10, 1999, submission that ``[w]e believe that the
quantity exported by the companies who have agreed to cooperate in this
investigation accounts for a substantial majority of the total quantity
exported from China during the POI.'' The Chamber refers to the
exporters ``who have agreed to be respondents'' as accounting for at
least 65 percent of exports and acknowledges that there are a number of
companies which have not supplied any data for this investigation.
Further, there is no information on the record which defines how large
the universe of synthetic indigo producers in the PRC is with any
specificity. Even in those cases where the number of investigated firms
is limited by the Department, a MOI allegation must cover all (or
virtually all) of the producers in the industry in question (see
Mushrooms at 72256, and Final Determination of Sales at Less Than Fair
Value: Freshwater Crawfish Tail Meat from the PRC, 62 FR 41347, 41353,
August 1, 1997). Thus, as it is clear that the respondents' claim does
not cover substantially all of the producers in the PRC synthetic
indigo industry, we are unable to consider the MOI claim further.

Separate Rates

In proceedings involving NME countries, the Department begins with
a rebuttable presumption that all companies within the country are
subject to government control and thus should be assessed a single
antidumping duty deposit rate. In this case, each respondent has
requested a separate company-specific rate. Wonderful is a Hong Kong
trading company which is wholly-owned by a Hong Kong entity. Therefore,
we determined that no separate rate analysis is required for it.
Because Wonderful's affiliate Jiangsu Taifeng, which is jointly owned
by Wonderful and a PRC company, also made direct sales to the United
States during the POI, it is eligible for consideration of a separate
rate. Tianjin Hongfa states that it is ``owned by the people.'' As
stated in Silicon Carbide and Furfuryl Alcohol, ownership of the
company by ``all the people'' does not require the application of a
single rate. Accordingly, Tianjin Hongfa is also eligible for
consideration of a separate rate.
The Department's separate rate test to determine whether the
exporters are independent from government control is not concerned, in
general, with macroeconomic/border-type controls, e.g., export licenses
and quotas and minimum export prices, particularly if these controls
are imposed to prevent dumping. The test focuses, rather, on controls
over the investment, pricing, and output decision-making process at the
individual firm level. See Certain Cut-to-Length Carbon Steel Plate
from Ukraine: Final Determination of Sales at Less than Fair Value, 62
FR 61754, 61757, November 19, 1997; Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, from the People's Republic of China:
Final Results of Antidumping Duty Administrative Review, 62 FR 61276,
61279, November 17, 1997; and Honey from the People's Republic of
China: Preliminary Determination of Sales at Less than Fair Value, 60
FR 14725, 14726, March 20, 1995.
To establish whether a firm is sufficiently independent from
government control to be entitled to a separate rate, the Department
analyzes each exporting entity under a test arising out of the Final
Determination of Sales at Less Than Fair Value: Sparklers from the
People's Republic of China, 56 FR 20588 May 6, 1991 and amplified in
Silicon Carbide. Under the separate rates criteria, the Department
assigns separate rates in NME cases only if respondents can demonstrate
the absence of both de jure and de facto governmental control over
export activities.
1. Absence of De Jure Control
The respondents have placed on the record a number of documents to
demonstrate absence of de jure control, including the ``Foreign Trade
Law of the People's Republic of China'' and the ``Company Law of the
People's Republic of China.'' In prior cases, the Department has
analyzed such laws and found that they establish an absence of de jure
control (see, e.g., Notice of Final Determination of Sales at Less Than
Fair Value: Certain Partial-Extension Steel Drawer Slides with Rollers
from the People's Republic of China, 60 FR 54472, October 24, 1995; and
Furfuryl Alcohol). We have no new information in this proceeding which
would cause us to reconsider this determination.
According to the respondents, exports of synthetic indigo are not
subject to export quotas, nor does the subject merchandise appear on
any government list regarding export provisions or export licensing.
Therefore, we

[[Page 69726]]

preliminarily determine that, within the synthetic indigo industry,
there is an absence of de jure government control over export pricing
and marketing decisions of firms.
2. Absence of De Facto Control
As stated in previous cases, there is some evidence that certain
enactments of the PRC central government have not been implemented
uniformly among different sectors and/or jurisdictions in the PRC. (See
Silicon Carbide and Furfuryl Alcohol.) Therefore, the Department has
determined that an analysis of de facto control is critical in
determining whether respondents are, in fact, subject to a degree of
governmental control which would preclude the Department from assigning
separate rates.
The Department typically considers four factors in evaluating
whether each respondent is subject to de facto governmental control of
its export functions: (1) Whether the export prices are set by, or
subject to, the approval of a governmental authority; (2) whether the
respondent has authority to negotiate and sign contracts, and other
agreements; (3) whether the respondent has autonomy from the government
in making decisions regarding the selection of its management; and (4)
whether the respondent retains the proceeds of its export sales and
makes independent decisions regarding disposition of profits or
financing of losses (see Silicon Carbide and Furfuryl Alcohol).
Both Jiangsu Taifeng and Tianjin Hongfa asserted the following: (1)
They establish their own export prices; (2) they negotiate contracts
without guidance from any governmental entities or organizations; (3)
they make their own personnel decisions; and (4) they retain the
proceeds of their export sales, use profits according to their business
needs, and have the authority to sell their assets and to obtain loans.
Additionally, the questionnaire responses indicate that company-
specific pricing during the POI does not suggest coordination among
exporters. This information supports a preliminary finding that there
is an absence of de facto governmental control of the export functions
of these companies. Consequently, we preliminarily determine that both
Jiangsu Taifeng and Tianjin Hongfa have met the criteria for the
application of separate rates.

Margins for Exporters Whose Responses Were Not Analyzed

For the responding companies that provided all the questionnaire
responses requested of them and otherwise fully cooperated with the
Department's investigation, but nonetheless, were not fully analyzed by
the Department due to limited resources (see ``Respondent Selection''
section above), we assigned the weighted-average of the rates of the
fully-analyzed companies as a non-adverse facts available rate.
Companies receiving this rate are identified by name in the
``Suspension of Liquidation'' section of this notice.
The parties who responded but were not analyzed have applied for
separate rates, and provided information for the Department to consider
for this purpose. Although the Department is unable, due to
administrative constraints, to consider the requests for separate rates
status, and to calculate a separate rate for each of these named
parties who are exporters, there has been no failure on the part of
these exporters to provide requested information. Because it would not
be appropriate for the Department to assign to these cooperative
exporters a margin based on adverse facts available, the Department has
assigned these exporters a rate based on a weighted-average of the
rates of the two analyzed exporters.

PRC-Wide Rate

U.S. import statistics indicate that the total quantity and value
of U.S. imports of synthetic indigo from the PRC is greater than the
total quantity and value of synthetic indigo reported by all PRC
exporters that submitted responses in this investigation. In addition,
as noted above, the Chamber stated in a September 10, 1999, letter that
not all exporters have responded to the Department's questionnaire.
Accordingly, we applied a single antidumping deposit rate--the PRC-wide
rate--to all exporters in the PRC, other than those specifically
identified below under ``Suspension of Liquidation,'' based on our
presumption that the export activities of the companies that failed to
respond to the Department's questionnaire are controlled by the PRC
government (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, April 30, 1996 (``Bicycles from the PRC'')).
As explained below, this PRC-wide antidumping rate is based on
adverse facts available. Section 776(a)(2) of the Act provides that
``if an interested party or any other person--(A) Withholds information
that has been requested by the administering authority; (B) fails to
provide such information by the deadlines for the submission of the
information or in the form and manner requested, subject to subsections
(c)(1) and (e) of section 782; (C) significantly impedes a proceeding
under this title; or (D) provides such information but the information
cannot be verified as provided in section 782(i), the administering
authority * * * shall, subject to section 782(d), use the facts
otherwise available in reaching the applicable determination under this
title.''
Section 776(b) of the Act provides that adverse inferences may be
used when a party has failed to cooperate by not acting to the best of
its ability to comply with a request for information. The exporters
that decided not to respond to the Department's questionnaire failed to
act to the best of their ability in this investigation. Further, absent
a response, we must presume government control of these and all other
PRC companies for which we cannot make a separate rates determination.
Therefore, the Department has determined that, in selecting from among
the facts otherwise available, an adverse inference is warranted.
As adverse facts available, we assigned the highest margin based on
information in the petition, because the margins derived from the
petition are higher than either of the calculated margins.
Section 776(c) of the Act provides that where the Department
selects from among the facts otherwise available and relies on
``secondary information,'' such as the petition, the Department shall,
to the extent practicable, corroborate that information from
independent sources reasonably at the Department's disposal. The
Statement of Administrative Action accompanying the URAA, H.R. Doc. No.
316, 103d Cong., 2d Sess. (1994) (hereinafter, the ``SAA''), states
that ``corroborate'' means to determine that the information used has
probative value. See SAA at 870.
The petitioners' methodology for calculating the export price
(``EP'') and NV is discussed in the Notice of Initiation. To
corroborate the petitioners' EP calculations, we compared the prices in
the petition to the prices submitted by respondents for the same indigo
product. To corroborate the petitioners' NV calculations, we compared
the petitioners' factor consumption data to the data reported by the
respondents, and the surrogate values for these factors in the petition
to the values selected for the preliminary determination.
As discussed in the Memorandum from the Team to the File entitled
Corroboration of Data Contained in the Petition for Assigning an
Adverse Facts Available Rate, dated December 6, 1999,

[[Page 69727]]

we found that the U.S. price and factors of production information in
the petition to be reasonable and of probative value. As a number of
the surrogate values selected for the preliminary determination
differed from those used in the petition, notably the ratio for
selling, general and administrative (``SG&A'') expenses, we compared
the petition margin calculations to the calculations based on the
selected surrogate values wherever possible and found they were
reasonably close. Therefore, we preliminarily determine that the
petition information continues to have probative value. Accordingly, we
find that the highest margin from the petition, 129.60 percent, is
corroborated within the meaning of section 776(c) of the Act.

Fair Value Comparisons

To determine whether sales of the subject merchandise by Wonderful/
Jiangsu Taifeng and Tianjin Hongfa to the United States were made at
LTFV, we compared the EP to the NV, as described in the ``Export
Price'' and ``Normal Value'' sections of this notice, below. In
accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI-
wide, weighted-average EPs to the POI-wide, weighted-average NV.

Export Price

Under section 772(a) of the Act, EP is to be based on the ``price
at which the merchandise is first sold (or agreed to be sold) before
the date of importation by the producer or exporter of the subject
merchandise outside of the United States to an unaffiliated purchaser
in the United States or to an unaffiliated purchaser for exportation to
the United States. * * *'' That is, the Department must examine the
first sale between unaffiliated parties where the seller knows that the
merchandise is destined for the United States.

Wonderful/Jiangsu Taifeng

The Hong Kong-based exporter Wonderful purchases the subject
merchandise from its PRC-based affiliated producers, Jiangsu Taifeng
and Taixing Taifeng, via PRC trading companies.¹ Because the
producers are affiliated with Wonderful, we based EP on Wonderful's
sales to the unaffiliated U.S. customer in accordance with section
772(a) of the Act (see also Preliminary Determination of Sales at Less
Than Fair Value : Certain Preserved Mushrooms from the People's
Republic of China, 63 FR 41794, 41796, August 5, 1998). Wonderful also
reported that a small percentage of all sales of synthetic indigo to
the United States during the POI were made directly by its affiliated
producer, Jiangsu Taifeng. Because of the close affiliation between
Wonderful and Jiangsu Taifeng, we have calculated a single rate for
these companies based on product-specific, weighted-average EPs.
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\1\ Wonderful reported the following entities as the
intermediate trading companies it used: CNCCJC, Shanghai Yongchen,
CJIETCC, and China National Chemical Supply & Sales Corp.
---------------------------------------------------------------------------

We used EP methodology in accordance with section 772(a) of the
Act, because the subject merchandise was sold directly to unaffiliated
customers in the United States prior to importation and CEP methodology
was not otherwise indicated. We calculated EP based on packed CIF
prices to the first unaffiliated purchaser in the United States. Where
appropriate, we made deductions from the starting price (gross unit
price), for inland freight from the plant/warehouse to port of exit,
brokerage and handling in the PRC, and ocean freight and insurance,
where appropriate, in accordance with section 772(c) of the Act.
Because domestic brokerage and handling and inland freight were
provided by NME companies, we based those charges on surrogate rates
from India, as discussed in the Preliminary Determination Valuation
Memorandum from the Team to the File dated December 6, 1999
(``Valuation Memorandum''). As Wonderful and Jiangsu Taifeng reported
using market economy suppliers for ocean freight and insurance, we
valued these expenses using the actual reported costs.

Tianjin Hongfa

For purposes of the preliminary determination, we have based EP on
sales by Tianjin Hongfa, a trading company in the PRC, to Kwong Fat, an
unaffiliated Hong Kong-based exporter. To determine the appropriate
transaction to analyze for purposes of EP, we examined whether Tianjin
Hongfa sold the subject merchandise to Kwong Fat with the knowledge
that the merchandise was destined for export to the United States.
Based on our examination of the questionnaire responses, we
preliminarily determined that Tianjin Hongfa has knowledge that
merchandise is for export to the United States at the time of sale,
since it is involved in arranging for the direct shipment of the
merchandise to the port of destination in the United States, and is
responsible for preparing sales and shipment documents issued on or
about the date of sale which clearly indicate that the United States is
the destination for the merchandise being exported. Furthermore,
Tianjin Hongfa reports that it only sells synthetic indigo to Kwong
Fat, with the knowledge that Kwong Fat only ships synthetic indigo to
the United States. Thus, for purposes of the preliminary determination,
we have based EP on Tianjin Hongfa's sales to Kwong Fat.
We used EP methodology in accordance with section 772(a) of the Act
because the subject merchandise was sold directly to an unaffiliated
purchaser for exportation to the United States prior to importation, as
discussed above, and CEP methodology was not otherwise indicated. We
calculated EP based on packed FOB prices and made deductions from the
starting price (gross unit price) for inland freight from the plant/
warehouse to port of exit, and brokerage and handling in the PRC.
Because domestic brokerage and handling and inland freight were
provided by NME companies, we based those charges on surrogate rates
from India, as discussed in the Valuation Memorandum.

Normal Value

A. Surrogate Country
Section 773(c)(4) of the Act requires the Department to value the
NME producer's factors of production, to the extent possible, in one or
more market economy countries that: (1) Are at a level of economic
development comparable to that of the NME, and (2) are significant
producers of comparable merchandise. The Department has determined that
India, Pakistan, Sri Lanka, Egypt, Indonesia, and the Philippines are
countries comparable to the PRC in terms of overall economic
development (see Memorandum from Jeff May, Director of Office of
Policy, to Louis Apple, Director of Office 2, AD/CVD Enforcement Group
I, dated October 8, 1999). According to the available information on
the record, we have determined that India meets the statutory
requirements for an appropriate surrogate country for the PRC.
Accordingly, we have calculated NV using Indian values for the PRC
producers' factors of production except, as noted below, in certain
instances where an input was sourced from a market economy and paid for
in a market economy currency. We have obtained and relied upon PAI
wherever possible.
B. Factors of Production
In accordance with section 773(c) of the Act, we calculated NV
based on the factors of production reported by the companies in the PRC
which produced

[[Page 69728]]

synthetic indigo for the exporters which sold synthetic indigo to the
United States during the POI. To calculate NV, the reported unit factor
quantities were multiplied by publicly available Indian values, where
possible. For comparison to sales made by Wonderful and its affiliate
Jiangsu Taifeng, we calculated a weighted-average NV based on the
factors of production reported by Jiangsu Taifeng and Taixing Taifeng,
as the record evidence indicates that these companies produced the same
merchandise during the POI.
Wonderful claimed that its producers' consumption of aniline was
sourced from a market economy and paid for in market economy currency,
and thus the actual price paid should be used in our calculation of NV,
in accordance with 19 CFR 351.408(a)(1). However, the support
documentation submitted by Wonderful shows that the aniline was
imported by an intermediate trading company in the PRC, not by
Wonderful's affiliated PRC producers. Further, there is no indication
on the support documentation that the material was actually produced in
a market economy, or that the material was ever actually transported to
the producers and used by them. Accordingly, there is an insufficient
basis upon which to rely on this alleged market economy purchase to
value these indigo producers' consumption of aniline and, therefore, we
have relied on the surrogate value, as discussed below.
Wonderful also claimed that it purchased the dispersing agent SK2
for its producers from a market economy through the supplier's
affiliate in Hong Kong. However, the support documentation included in
Wonderful's questionnaire response provides no indication that the
material was actually produced in, or even shipped from, a market
economy. Thus, there is an insufficient basis upon which to rely on
this alleged market economy purchase to value the indigo producers'
consumption of this dispersing agent. We have no other information to
value this material. As this material is reportedly consumed in very
small quantities, we have not valued this material for purposes of this
preliminary determination.
The selection of the surrogate values applied for purposes of this
determination was based on the quality, specificity, and
contemporaneity of the data. As appropriate, we adjusted input prices
to make them delivered prices. For those values not contemporaneous
with the POI and quoted in a foreign currency, we adjusted for
inflation using wholesale price indices published in the International
Monetary Fund's International Financial Statistics. For a complete
analysis of surrogate values, see the Valuation Memorandum.
We valued raw materials used in the producers' production of the
subject merchandise based on data from one of the following sources:
Average Indian domestic unit price, as quoted in the
Indian publication Chemical Weekly from November 1998 through March
1999. We adjusted the average price to exclude the Indian excise tax,
based on information provided by the petitioners.
The weighted-average unit import value derived from
various editions of Monthly Statistics of the Foreign Trade of India
(``Monthly Statistics'').
The weighted-average unit price for Indian exports, on an
FOB basis, as published in Chemical Weekly during the period October
1997 through September 1998.
The average of price quotes submitted as public documents
by the petitioners and the respondents, adjusted to exclude Indian
excise taxes, where appropriate.
For certain materials reportedly consumed in small to very small
quantities, such as dispersing agents, wetting agents, and lubricants,
we were unable to identify appropriate surrogate values. Therefore, we
have not included these factors in our preliminary determination NV
calculation.
In past antidumping proceedings, the Department has relied on the
import data from Monthly Statistics to value aniline, rather than the
domestic price from Chemical Weekly, because of distortions and
aberrations in the Indian domestic price (see, e.g., Final Results of
Antidumping Administrative Review: Sulfanilic Acid from the People's
Republic of China, 63 FR 63834, November 17, 1998). However, the
petitioners have placed information on the record of this investigation
to indicate that the distortions in domestic prices are disappearing,
as the Indian import tariff on aniline has been reduced to the same
level as that of other chemicals, and the pricing of domestic aniline
is now comparable to that of imported aniline (see the petitioners'
submission of November 5, 1999, at pages 7-8 and Exhibit 6A). While the
Department continued to rely on the import value in the Preliminary
Results of Antidumping Administrative Review: Sulfanilic Acid from the
People's Republic of China, 64 FR 48788, September 8, 1999, based on
the information on the record of the instant proceeding, it appears
that any distortions remaining in the Indian domestic prices are not
any greater than those which may exist in the import prices. Of the
values under consideration, the domestic, excise-tax-exclusive value
for the POI is preferable to the average unit import value from an
earlier period. Therefore, for purposes of this preliminary
determination, we have relied on the average Indian domestic prices
(exclusive of excise taxes) for the aniline surrogate value.
Tianjin Hongfa's PRC producer, Tianjin Jiahui, reported that it
resold iron slurry and mixed alkali by-products from its synthetic
indigo production. However, we did not make an offset deduction to the
surrogate cost of production because we were unable to identify
appropriate surrogate values for these materials. We note further that
Tianjin Jiahui considers these materials to have very low values.
We valued labor based on a regression-based wage rate, in
accordance with 19 CFR 351.408(c)(3).
To value electricity and furnace oil, we used an average rate
derived from the 1998-1999 annual reports of three Indian companies. We
based the value of steam coal on data from the Monthly Statistics. For
diesel fuel, we used average prices reported in the December 1997 issue
of Economic Times of India. Where a producer reported the consumption
of purchased steam, we valued the steam based on an average rate found
in the 1997-1998 annual report of an Indian company.
To value water, we relied on the publicly available tariff rates
reported in the October 1997 publication Second Water Utilities Data
Book: Asian and Pacific Region. We valued water separately, rather than
as part of factory overhead, in accordance with a number of other PRC
proceedings, because the information used to derive factory overhead
appeared to exclude water consumption expenses (see Valuation
Memorandum).
We based our calculation of factory overhead, SG&A expenses, and
profit on data contained in the 1998-1999 Annual Report of Daurala
Organics Ltd., an Indian producer of phenylglycine, a chemical
intermediate produced during the manufacture of synthetic indigo. As
discussed in the Valuation Memorandum, we used this information as no
data was available from a synthetic indigo producer in any of the
surrogate countries.
To value truck freight rates, we used POI rates published in the
Economic Times of India. As we were unable to identify a surrogate
value for inland water transportation, we valued boat and barge
transportation using the surrogate value for truck freight. With regard
to rail freight, we based our

[[Page 69729]]

calculation on information from the Indian Railway Conference
Association.
In accordance with the decision in Sigma Corp. v. United States,
117 F.3d 1401 (CAFC 1997), when using an import surrogate value, we
have added to CIF surrogate values from India a surrogate freight cost
using the shorter of the reported distances from either the closest PRC
port to the factory, or from the domestic supplier to the factory.
For the reported packing materials, we used import values from the
Monthly Statistics.

Critical Circumstances

On October 28, 1999, the petitioners alleged that there is a
reasonable basis to believe or suspect that critical circumstances
exist with respect to imports of synthetic indigo from the PRC. In
accordance with 19 CFR 351.206(c)(2)(i), since this allegation was
filed at least 20 days before the deadline for the Department's
preliminary determination, we must issue our preliminary critical
circumstances determination no later than the preliminary determination
of sales at LTFV.
Section 733(e)(1) of the Act provides that if a petitioner alleges
critical circumstances, the Department will determine whether there is
a reasonable basis to believe or suspect that:

(A)(i) there is a history of dumping and material injury by
reason of dumped imports in the United States or elsewhere of the
subject merchandise, or
(ii) the person by whom, or for whose account, the merchandise
was imported knew or should have known that the exporter was selling
the subject merchandise at less than its fair value and that there
was likely to be material injury by reason of such sales, and
(B) there have been massive imports of the subject merchandise
over a relatively short period.

We are not aware of any antidumping order in any country on
synthetic indigo from the PRC. Therefore, we examined whether there was
importer knowledge. The Department normally considers margins of 25
percent or more for EP sales, or 15 percent or more for CEP sales, and
a preliminary ITC determination of material injury sufficient to impute
knowledge of dumping and the likelihood of resultant material injury.
In this investigation, because the dumping margins for both mandatory
respondents, the non-mandatory PRC exporters, and all other producers/
exporters are greater than 25 percent, we have imputed knowledge of
dumping to importers of subject merchandise from all producers/
exporters. As to the knowledge of injury from such dumped imports, if,
as in this case, the ITC finds a reasonable indication of present
material injury to the relevant U.S. industry, the Department will
determine that a reasonable basis exists to impute importer knowledge
that there would be material injury by reason of dumped imports during
the critical circumstances period--the 90-day period beginning with the
initiation of the investigation. See 19 CFR 351.206(i).
Accordingly, we find that the importers either knew, or should have
known, that the imports of synthetic indigo were being sold at LTFV and
that there was likely to be material injury be reason of such sales.
Because we have preliminarily found that the first statutory
criterion is met, we must consider the second statutory criterion:
whether imports of the merchandise have been massive over a relatively
short period. According to 19 CFR 351.206(h), we consider the following
to determine whether imports have been massive over a relatively short
period of time: (1) Volume and value of the imports; (2) seasonal
trends (if applicable); and (3) the share of domestic consumption
accounted for by the imports.
When examining volume and value data, the Department typically
compares the export volume for equal periods immediately preceding and
following the filing of the petition. Under 19 CFR 351.206(h), unless
the imports in the comparison period have increased by at least 15
percent over the imports during the base period, we will not consider
the imports to have been ``massive.'' The Department examines shipment
information submitted by the respondent or import statistics when
respondent-specific shipment information is not available.
To determine whether or not imports of subject merchandise have
been massive over a relatively short period, we compared the mandatory
respondent's export volume for the four months subsequent to the filing
of the petition (July-October 1999) to that during the four months
prior to the filing of the petition (March-June 1999). These periods
were selected based on the Department's practice of using the longest
period for which information is available from the month that the
petition was submitted through the effective date of the preliminary
determination. For the non-mandatory PRC exporters and all PRC
exporters subject to the PRC rate, we performed this analysis using
import statistics through September 1999 (the latest month for which
such data was available), and then subtracted the figures of the
mandatory respondents. Although synthetic indigo is classifiable under
several HTSUS subheadings, we based our analysis on the one HTSUS
category which includes the majority of synthetic indigo and its
derivatives subject to this investigation. For further discussion of
the data examined, see the Memorandum from The Team to The File dated
December 6, 1999.
Based on our analysis, we preliminarily find that the increase in
imports was significantly greater than 15 percent with respect to the
named respondents, the non-mandatory PRC exporters, and all other
producers/exporters.
With regard to seasonal trends, we reviewed the record and found no
information indicating that seasonal trends apply in this case. With
regard to the share of domestic consumption accounted for by imports,
pursuant to 19 CFR 351.206(h)(iii), we considered the information
submitted by petitioners on November 24, 1999.
Based on the foregoing analysis, we preliminarily determine that
there is a reasonable basis to believe or suspect that critical
circumstances exist with respect to synthetic indigo from the mandatory
respondents in this investigation as well as the non-mandatory
respondents and all other producers/exporters.
We will make a final determination concerning critical
circumstances when we make our final determination of sales at LTFV in
this investigation.

Verification

As provided in section 782(i) of the Act, we will verify all
information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the
Customs Service to suspend liquidation of all imports of subject
merchandise that are entered, or withdrawn from warehouse, for
consumption on or after 90 days prior to the date of publication of
this notice in the Federal Register. We will instruct the Customs
Service to require a cash deposit or the posting of a bond equal to the
weighted-average amount by which the NV exceeds the EP, as indicated in
the chart below. These suspension of liquidation instructions will
remain in effect until further notice.

[[Page 69730]]

----------------------------------------------------------------------------------------------------------------
Weighted-
Exporter average margin Critical circumstances
percentage
----------------------------------------------------------------------------------------------------------------
Wonderful Chemical Industrial Ltd./Jiangsu Taifeng Chemical 78.35 Yes
Industry Co., Ltd.
Tianjin Hongfa Group Co.................................... 126.65 Yes
China National Chemical Construction Jiangsu Company....... 97.58 Yes
China Jiangsu International Economic Technical Cooperation 97.58 Yes
Corp.
Shanghai Yongchen International Trading Company Ltd........ 97.58 Yes
Hebei Jinzhou Import & Export Corporation.................. 97.58 Yes
Sinochem Hebei Import & Export Corp........................ 97.58 Yes
Chongqing Dyestuff Import & Export United Corp............. 97.58 Yes
Wuhan Tianging Chemicals Import & Export Corp., Ltd........ 97.58 Yes
PRC-wide Rate.............................................. 129.60 Yes
----------------------------------------------------------------------------------------------------------------

The PRC-wide rate applies to all entries of subject merchandise
except for entries from exporters that are identified individually
above.

ITC Notification

In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine before the later of 120 days after the date of
this preliminary determination or 45 days after our final determination
whether these imports are materially injuring, or threaten material
injury to, the U.S. industry.

Public Comment

Case briefs or other written comments in at least ten copies must
be submitted to the Assistant Secretary for Import Administration no
later than March 23, 2000, and rebuttal briefs, no later than March 28,
2000. A list of authorities used and an executive summary of issues
should accompany any briefs submitted to the Department. Such summary
should be limited to five pages total, including footnotes. In
accordance with section 774 of the Act, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
arguments raised in case or rebuttal briefs. Tentatively, the hearing
will be held on March 30, 2000, at the U.S. Department of Commerce,
14th Street and Constitution Avenue, NW, Washington, DC 20230. Parties
should confirm by telephone the time, date, and place of the hearing 48
hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, within 30 days of the publication of this notice. Requests should
contain: (1) The party's name, address, and telephone number; (2) the
number of participants; and (3) a list of the issues to be discussed.
Oral presentations will be limited to issues raised in the briefs. If
this investigation proceeds normally, we will make our final
determination no later than 135 days after the publication of this
notice in the Federal Register.
This determination is issued and published in accordance with
sections 733(d) and 777(i)(1) of the Act.

Dated: December 7, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-32395 Filed 12-13-99; 8:45 am]
BILLING CODE 3510-DS-P