[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.
---------------------------------------------------------------------------

    \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