[Federal Register Volume 64, Number 243 (Monday, December 20, 1999)]
[Notices]
[Pages 71104-71111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32916]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-570-852]


Notice of Final Determination of Sales at Less Than Fair Value: 
Creatine Monohydrate From the People's Republic of China

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

EFFECTIVE DATE: December 20, 1999.

FOR FURTHER INFORMATION CONTACT: Blanche Ziv, Rosa Jeong, or Ryan 
Langan, Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230; telephone: (202) 482-4207, (202) 482-3853, and 
(202) 482-1279, respectively.

Final Determination

    We determine that creatine monohydrate (``creatine'') 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''). The estimated 
margins of sales at LTFV are shown in the ``Continuation of Suspension 
of Liquidation'' section of this notice.

The Applicable Statute

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

Case History

    Since the preliminary determination (64 FR 41375, July 30, 1999), 
the following events have occurred:
    During September and October 1999, we conducted verification of the 
questionnaire responses of the respondents: Blue Science International 
Trading (Shanghai) Co., Ltd. (``Blue Science''); Nantong Medicines and 
Health Products Import and Export Co., Ltd. d/b/a Nantong Foreign Trade 
Corporation Medicine and Health Products Department (``Nantong''); 
Shanghai Desano International Trading Co., Ltd. (``Desano''); Shanghai 
Freemen International Trading Co., Ltd./Shanghai Greenmen International 
Trading Co., Ltd. (``Freemen''); Suzhou Sanjian Fine Chemical Co., Ltd. 
(``Sanjian''); and Tianjin Tiancheng Pharmaceutical Co., Ltd. 
(``Tiancheng''). We also verified information provided by the producers 
who supplied the respondents with the subject merchandise during the 
POI, including Jiangsu Shuang Qiang Chemical Co. and Wuxian 
Agricultural Chemical Factory (collectively ``SQ'') and several other 
producers whose identities have been treated as business proprietary 
information and cannot be publicly summarized. We issued reports on our 
findings of these verifications during October and November 1999.
    The petitioner, Pfanstiehl Laboratories, Inc., and the respondents 
filed case and rebuttal briefs on November 17, 1999, and November 23, 
1999, respectively. On November 29, 1999, the Department held a public 
hearing. On November 30, 1999, pursuant to the Department's request, 
the petitioner submitted supplemental information regarding the 
surrogate value of one input. On December 1, 1999, the respondents 
commented on the supplemental information.

Scope of the Investigation

    For purposes of this investigation, the product covered is creatine 
monohydrate, which is commonly referred to as ``creatine.'' The 
chemical name for creatine monohydrate is N-(aminoiminomethyl)-N-
methylgycine monohydrate. The Chemical Abstracts Service (``CAS'') 
registry number for this product is 6020-87-7. Creatine monohydrate in 
its pure form is a white, tasteless, odorless powder, that is a 
naturally occurring metabolite found in muscle tissue. Creatine 
monohydrate is provided for in subheading 2925.20.90 of the Harmonized 
Tariff Schedule of the United States (``HTSUS''). Although the HTSUS 
subheading and the CAS registry number are provided for convenience and 
customs purposes, the written description of the merchandise under 
investigation is dispositive.

Period of Investigation

    The period of this investigation (``POI'') is July 1 through 
December 31, 1998, which corresponds to each exporter's two most recent 
fiscal quarters prior to the filing of the petition.

Nonmarket Economy Country and Market Oriented Industry Status

    The Department has treated the PRC as a nonmarket economy (``NME'') 
country 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''). Under section 771(18)(C) of the Act, this 
NME designation remains in effect until it is revoked by the 
Department.
    The respondents in this investigation have not requested a 
revocation of the PRC's NME status and no further information has been 
provided that would lead to such a revocation. Therefore, we have 
continued to treat the PRC as an NME in this investigation.

Separate Rates

    All responding exporters have requested separate, company-specific 
antidumping duty rates. Blue Science has stated, and we verified, that 
it is a trading company which is wholly-owned by persons in Hong Kong. 
Therefore, in accordance with our past practice, we determine that this 
exporter qualifies for a separate rate. See, e.g., Notice of Final 
Determination of Sales

[[Page 71105]]

at Less Than Fair Value: Disposable Pocket Lighters From the People's 
Republic of China, 60 FR 22359, 22360 (May 5, 1995). The other 
responding exporters have stated, and we verified, that they are 
privately owned companies with no element of government ownership or 
control.
    The Department's separate rate test is not concerned, in general, 
with macroeconomic/ border-type controls, e.g., export licenses, 
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 (Nov. 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 (Nov. 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) (``Sparklers''), 
as modified by Final Determination of Sales at Less Than Fair Value: 
Silicon Carbide from the People's Republic of China, 59 FR 22585 (May 
2, 1994). Under the separate rates criteria, the Department assigns 
separate rates in NME cases only if the 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 government control, including the 
``Foreign Trade Law of the People's Republic of China'' and the 
``Company Law of the People's Republic of China.''
    The Department has analyzed these laws in prior cases and found 
that they establish an absence of de jure control. See, e.g., 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); see also Notice of Final 
Results of New Shipper Review: Freshwater Crawfish Tail Meat from the 
People's Republic of China, 64 FR 27961 (May 24, 1999). We have no new 
information in this proceeding which would cause us to reconsider this 
determination. Accordingly, we determine that, within the creatine 
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, 
e.g., Sparklers. 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.
    As discussed in the preliminary determination, the responding 
exporters claim to have the autonomy to set prices at whatever level 
they wish through independent price negotiations with their foreign 
customers without government interference. During verification, our 
examination of correspondence and sales documentation revealed no 
evidence that any of the responding exporters' export prices are set, 
or are subject to approval by, any governmental authority. Based on our 
review of written agreements and contracts, it appears that these 
exporters have the authority to negotiate and sign contracts and other 
agreements independent of any government authority. Moreover, we have 
determined that the responding exporters have autonomy from the central 
government in making decisions regarding the appointment of management. 
Finally, based on our examination of financial records and purchase 
invoices, we have concluded that the responding exporters retained 
proceeds from their export sales and made independent decisions 
regarding disposition of profits and financing of losses.
    This information supports a finding that there is an absence of de 
facto governmental control of the export functions of Desano, Freemen, 
Nantong, Sanjian and Tiancheng. Consequently, we determine that the 
responding exporters in this investigation should be assigned 
individual dumping margins.

PRC-Wide Rate

    As stated in the preliminary determination, information on the 
record of this investigation indicates that there may be producers and 
exporters of the subject merchandise in the PRC in addition to the 
companies participating in this investigation. Also, U.S. import 
statistics indicate that the total quantity of U.S. imports of creatine 
from the PRC is greater than the total quantity of creatine exported to 
the United States as reported by all PRC creatine exporters that 
submitted responses in this investigation. Given this discrepancy, it 
appears that not all PRC exporters of creatine responded to our 
questionnaire. Accordingly, we are applying a single antidumping 
deposit rate--the PRC-wide rate--to all exporters in the PRC, other 
than those specifically identified below under the ``Continuation of 
Suspension of Liquidation'' section of this notice. We apply this 
single rate 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., Final Determination of 
Sales at Less Than Fair Value: Bicycles from the People's Republic of 
China, 61 FR 19026 (April 30, 1996) (``Bicycles'').

Use of Facts Available

    As explained in the preliminary determination, the PRC-wide 
antidumping rate is based on adverse facts available, in accordance 
with Section 776 of the Act. 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 or the 
Commission under this title, (B) fails to provide such information by 
the deadlines for 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 and the 
Commission shall, subject to section 782(d), use the facts otherwise 
available in reaching the applicable determination under this title.'' 
Use of facts available is warranted in this case because the exporters 
other than those under investigation have failed to respond to the 
Department's questionnaire.
    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 in any form to the Department's 
questionnaire failed to act to the best of

[[Page 71106]]

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. Thus, the 
Department has determined that, in selecting from among the facts 
otherwise available, an adverse inference is warranted.
    As adverse facts available, we are assigning the highest margin in 
the petition, 153.70 percent, which is higher than any 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. 
103-316 (1994) (``SAA''), states that ``corroborate'' means to 
determine that the information used has probative value. See SAA at 
870. As discussed in the preliminary determination, we determine that 
the calculations set forth in the petition have probative value. See 
also Comment 2.
    In addition to the PRC-wide rate, we have also used partial facts 
available in calculating the dumping margins for two responding 
exporters. As discussed below in comment 2, certain producers which 
supplied the subject merchandise Blue Science and Freemen did not 
provide complete factors of production information. We find that 
neither Blue Science, Freemen, nor the suppliers in question have 
cooperated to the best of their abilities in providing complete factors 
of production information.
    Accordingly, as adverse facts available, we have applied a margin 
of 153.70 percent, the highest margin from the petition, to those sales 
for which factor information was not provided (see Comment 2).

Fair Value Comparisons

    To determine whether sales of the subject merchandise by Blue 
Science, Desano, Freemen, Nantong, Sanjian and Tiancheng to the United 
States were made at LTFV, we compared the export price (``EP'') to the 
normal value (``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 weighted-average NVs.

Export Price

    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 appropriate. We calculated EP based on packed c.i.f. 
or c&f prices to the first unaffiliated purchaser in the United States. 
Where appropriate, we made deductions from the starting price (gross 
unit price) for billing adjustments, inland freight from the plant/
warehouse to port of exit, brokerage and handling in the PRC, marine 
insurance and ocean freight. Because certain domestic brokerage and 
handling, marine insurance, and inland freight were provided by NME 
companies, we valued those charges using surrogate rates from India 
(see ``Normal Value'' section for further discussion). In addition, we 
made corrections for certain clerical errors found at verification (see 
calculation memoranda for individual respondents).

Normal Value

1. Surrogate Country

    Section 773(c)(4) of the Act requires the Department to value an 
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, Office of Policy, 
to Susan Kuhbach, Senior Director, AD/CVD Enforcement, Office 1, March 
26, 1999). Moreover, we have determined that both India and Indonesia 
are significant producers of comparable merchandise. As discussed in 
the preliminary determination, although we have no information to 
indicate that India and Indonesia produce creatine, they do produce 
other products within the same customs heading and other fine chemicals 
with nutritional characteristics.
    For purposes of our final determination, we have continued to rely 
on India as our primary surrogate country for this investigation. 
Because India is frequently used as a surrogate in cases involving the 
PRC, its use in this proceeding enhances predictability, one of the 
Department's goals in administering the NME provisions (see preamble to 
proposed 19 CFR Sec. 351.408, 61 FR 7308, 7344 (February 27, 1996)). 
Also, India produces and exports more merchandise than Indonesia under 
United National Standard International Trade Classification Revised 
number 514.82, ``carboxyamide-function compounds (including saccharin 
and its salts) and imine-function compounds,'' the heading which 
includes creatine. Thus, we have relied primarily on Indian values to 
calculate NV. When Indian values were not available or determined to be 
aberrational, we used Indonesian values.

2. Factors of Production

    In accordance with section 773(c) of the Act, we calculated NV 
based on factors of production reported by the companies in the PRC 
which produced creatine for the responding exporters during the POI.
    To calculate NV, the verified per-unit factor quantities were 
multiplied by publicly available surrogate values. We then added 
amounts for labor, overhead, selling, general and administrative 
expenses (including interest) (``SG&A''), profit, and packing expenses 
incidental to placing the merchandise in packed condition and ready for 
shipment to the United States.
    We calculated NV based on the same methodology used in the 
preliminary determination. In addition, we made corrections for certain 
clerical errors found at verification (see calculation memoranda for 
individual respondents).

3. Surrogate Values

    In selecting the surrogate values, we considered the quality, 
specificity, and contemporaneity of the data. As appropriate, we 
adjusted input prices to make them delivered prices. Where a producer 
did not report the distance between the material supplier and the 
factory, as facts available, we used either the distance to the nearest 
seaport (if an import value was used as the surrogate value for the 
factor) or the farthest distance reported for a supplier. Where 
distances were reported, we added to Indian and Indonesian c.i.f. 
surrogate values a surrogate freight cost using the shorter of the 
reported distances from either the closest PRC port to the PRC factory, 
or from the domestic supplier to the factory. This adjustment is in 
accordance with the Court of Appeals for the Federal Circuit's decision 
in Sigma Corp. v. United States, 117 F.3d 1401 (Fed. Cir. 1997).
    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.
    (1) Material Inputs: Many of the inputs in the production and 
packing of

[[Page 71107]]

creatine are considered business proprietary data by the respondents. 
Thus, we are unable to discuss individual inputs in this notice. In 
general, the chemical inputs were valued using data reported in the 
following sources: Monthly Statistics of the Foreign Trade of India, 
the Indian publication Indian Chemical Weekly (``ICW'') and Monthly 
Statistics of the Foreign Trade of Indonesia. For a complete analysis 
of surrogate values, see ``Factors of Production Valuation'' memoranda 
dated July 22, 1999 and December 13, 1999.
    (2) Labor: We valued labor using the method described in 19 CFR 
Sec. 351.408(c)(3).
    (3) Electricity: To value electricity, we used the 1995 electricity 
rates reported in the publication Energy Prices and Taxes, 4th quarter 
1998. We based the value of coal on prices reported in Energy Prices 
and Taxes, 2nd quarter 1998.
    (4) Overhead, SG&A and Profit: We based factory overhead, SG&A, and 
profit on the financial statements of Sanderson Industries, Ltd. 
(``Sanderson''), an Indian chemical producer (see comments 1 and 4).
    (5) Inland Freight: To value truck freight rates, we used price 
quotes obtained by the Department from Indian truck freight companies 
in November 1999. For inland water transportation, we valued boat and 
barge transportation using the surrogate values provided in an August 
1993 cable from the US Embassy Bombay. With regard to rail freight, we 
based our calculation on price quotes obtained by the Department from 
an Indian rail freight company in November 1999.
    (6) Packing Materials: For packing materials we used import values 
from the Monthly Foreign Trade Statistics of India; Volume II Imports.
    (7) Brokerage and Handling: To value foreign brokerage and 
handling, we relied on public information reported in the case record 
for a new shipper review of stainless wire rod from India. See Certain 
Stainless Steel Wire Rod From India; Preliminary Results of Antidumping 
Duty Administrative and New Shipper Reviews, 63 FR 48184 (Sept. 9, 
1998).
    (8) Marine Insurance: For marine insurance, we used public 
information collected for Tapered Roller Bearing and Parts Thereof, 
Finished and Unfinished, from the PRC; Final Results of 1996-1997 
Antidumping Administrative Review, 63 FR 63842, 63847 (Nov. 17, 1998) 
(``TRBs-10''), which was obtained through queries made directly to an 
international marine insurance provider.
    (9) Ocean Freight: For ocean freight, we relied on public 
information used in TRBs-10, which was obtained through queries made 
directly to an international freight provider.

Critical Circumstances

    In the preliminary determination, we found that critical 
circumstances, within the meaning of section 733(e)(1) of the Act, 
exist for Desano, Freemen and all other PRC exporters except Blue 
Science, Nantong, Sanjian and Tiancheng. Our decision was based on the 
analysis of shipment data submitted by the respondents and available 
import statistics, as well as evidence of importer knowledge of dumping 
and the likelihood of resultant material injury. As discussed in the 
preliminary determination, the Department normally considers margins of 
25 percent or more and a preliminary International Trade Commission 
(``ITC'') determination of material injury sufficient to impute 
knowledge of dumping and the likelihood of resultant material injury.
    In the final determination, Desano's calculated dumping margin is 
less than 25 percent. Therefore, because there is no longer sufficient 
evidence to impute knowledge of dumping, we have reversed our 
preliminary finding of critical circumstances for Desano. With regard 
to other exporters, no new information has been provided to warrant a 
reconsideration of our finding. Therefore, we have determined that 
critical circumstances exist for Freemen and all other PRC exporters 
except Blue Science, Desano, Nantong, Sanjian and Tiancheng.

Verification

    As provided in section 782(i) of the Act, we verified the 
information submitted by respondents for use in our final 
determination. We used standard verification procedures including 
examination of relevant accounting and production records, and original 
source documents provided by respondents.

Interested Party Comments

Comment 1: Surrogate Value for Overhead, SG&A and Profit

    Blue Science, Freemen, Nantong, SQ and Sanjian argue that the 
Department should reject the data used in the preliminary determination 
to calculate factory overhead, SG&A, and profit. The respondents argue 
that these data from the Reserve Bank of India Bulletin (``RBI'') are 
stale and unreliable because they relate to 1992-1993 and include data 
drawn from an aggregation of over 600 companies from dissimilar 
industries. The respondents claim that the Department has rejected the 
use of RBI data in past cases for these same reasons (see, e.g., 
Tapered Roller Bearing and Parts Thereof, Finished and Unfinished, from 
the PRC; Final Results of Antidumping Administrative Review, 62 FR 
6189, 6206 (Feb. 11, 1997) and Pure Magnesium from the PRC, 63 FR 3085 
(Jan. 21, 1998) (``Magnesium'')).
    Instead, the respondents urge the Department to use the financial 
statement of an Indian producer of bulk drugs, Kopran Limited 
(``Kopran''), to derive overhead, SG&A, and profit. While Kopran does 
not produce creatine, the respondents assert that it is in the same 
general industry category as creatine and, thus, Kopran's experience is 
more comparable to the experience of PRC creatine producers.
    In the alternative, the respondents argue that the Department 
should use the data from Sanderson, an Indian producer of sulfuric acid 
and other chemicals. Sanderson's ratios were used in Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Persulfates from the PRC, 61 FR 
68232 (Dec. 27, 1996) (``Persulfates (Preliminary)'') (Sanderson's data 
were not used for the final determination). In that case, according to 
the respondents, the Department selected Sanderson's industry-specific 
data over the broad-based RBI data.
    The petitioner contends that the Department should continue to use 
the RBI ratios used in the preliminary determination. The petitioner 
argues that the financial data of both Kopran and Sanderson are 
inappropriate because neither company produces creatine. Moreover, use 
of this data would be contrary to the Department's practice of using 
publicly available statistical averages rather than relying on company-
specific data. See TRBs-10. Where the Department has relied on the 
financial data from a single producer or the average of a small group 
of surrogate producers, the petitioner contends that the producers 
involved have been producers of the like merchandise (see, e.g., 
Mushrooms; Certain Cut-to-Length Carbon Steel Plate from the PRC, 60 FR 
61964 (Nov. 20, 1997); Freshwater Crawfish Tail Meat from the PRC, 62 
FR 41347 (Aug. 1, 1997)).
    Concerning Persulfates (Preliminary), the petitioner contends that 
the Department used company-specific information in that case only 
after extensive information was placed on the record concerning the 
specific production processes of the Indian chemical producers. In the 
present case, according to the petitioner, no such evidence exists with 
respect to the

[[Page 71108]]

production processes. The petitioner adds that the respondents' 
``cherry-picking'' one particular Indian company is inherently 
unreliable.

Department's Position

    It is the Department's preference, where information is available, 
to derive the overhead, SG&A and profit values from producers of 
merchandise that is identical or comparable to the subject merchandise. 
See section 351.408(c)(4) of the Department's regulations. Because the 
RBI data cover a wide range of industries, and because we now 
information relating to a producer of a narrower category of products 
which includes comparable merchandise, we have determined that it would 
be inappropriate to rely on the RBI data used in the preliminary 
determination.
    After reviewing publicly available information submitted for the 
record and available to the Department in this investigation, we have 
determined that Sanderson's financial data provide the best basis for 
valuing overhead, SG&A and profit. The products produced by Sanderson 
appear to be manufactured using bulk chemical processes, similar to the 
processes used by the PRC creatine producers. In contrast, Kopran 
produces high-grade pharmaceutical products. Given this, we have 
concluded that Sanderson better reflects the overhead, SG&A and profit 
levels that would be incurred by the producers of creatine.
    We disagree with the petitioner's arguments against the use of 
company-specific data to calculate overhead, SG&A and profit. First, 
the Department does not require that these ratios be calculated using 
data from producers of a like product. As noted above, section 
351.408(c)(4) of the Department's regulations establishes that, for 
purposes of valuing manufacturing overhead, general expenses, and 
profit, the Department normally will use ``non-proprietary information 
gathered from producers of identical or comparable merchandise in the 
surrogate country'' (emphasis added). Second, the petitioner's 
assertion that the Department's practice is to use publicly available 
statistical averages rather than relying on company-specific data is 
misplaced. While it is correct that we prefer average values for 
valuing inputs such as raw materials, we prefer producer- or industry-
specific data for overhead, SG&A and profit. This is explained in the 
preamble to the Department's regulations:

    When compared to a publicly available price that reflects 
numerous transactions between many buyers and sellers, a single 
input price reported by a surrogate producer may be less 
representative of the cost of that input in the surrogate country. 
For these reasons, we have continued the general schema . . . of 
relying on publicly available data (which will not normally be 
producer-specific) for material inputs, while relying on producer- 
or industry-specific data for manufacturing overhead, general 
expenses, and profit.

62 FR 27296, 27366 (May 19, 1997). We note that in TRBs-10, cited by 
the petitioner, the value at issue was labor (prior to the Department's 
adoption of the present regression-based methodology), rather than 
overhead, SG&A and profit. Finally, regarding the petitioner's concern 
that the respondents may have submitted data favorable to them, we note 
that the petitioner also had the opportunity to submit data relating 
more specifically to creatine than the RBI data. In any case, since we 
have not used the Kopran data, the petitioner's point is moot.

Comment 2: Use of Partial Facts Available for Freemen and Blue Science

    Freemen and Blue Science argue that the Department's use of adverse 
facts available for certain sales was overly punitive given that 
Freemen and Blue Science have cooperated fully in the investigation and 
that the sales in question account for a small percentage of their 
total U.S. sales. Freemen and Blue Science assert that section 
351.308(a) of the Department's regulations requires that to warrant an 
adverse inference, the Department must find that the interested party 
has impeded the investigation. Moreover, Freemen and Blue Science 
contend that pursuant to section 351.308(e), the Department should 
consider the factors information submitted by other suppliers of the 
two exporters because the information meets all conditions of section 
782(e) of the Act. The respondents assert that in cases such as Allied-
Signal Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir. 1994) 
and Olympic Adhesives, Inc. v. United States, 899 F.2d 1565 (Fed. Cir. 
1990), the courts have consistently held that a company cannot be 
penalized for failing to provide information that it does not have.
    The respondents also argue that the petitioner's petition data, on 
which the adverse facts available rate was based, cannot be 
corroborated because the petition data uses the price of a more 
expensive grade of one chemical input rather than the price of the less 
expensive industrial grade that is used by all respondents.
    The petitioner contends that the Department should continue to 
apply adverse facts available to the sales for which Freemen and Blue 
Science have not provided complete and accurate production data. Citing 
TRBs-10 (at 61846), the petitioner argues that the suppliers, who are 
interested parties, have failed to provide factors of production data 
and, thus, have not acted to the best of their ability. According to 
the petitioner, both Allied-Signal and Olympic Adhesives are 
distinguishable because the cases involved a genuine lack of ability on 
the part of interested parties to respond. In the instant case, the 
petitioner contends that there is no evidence on the record 
demonstrating that the non-responsive suppliers of Blue Science and 
Freemen were genuinely unable to respond.

Department's Position

    We have continued to apply adverse facts available for those 
Freemen and Blue Science sales for which these exporters did not supply 
factors of production data. As noted above, in accordance with section 
776(b) of the Act, an adverse inference is appropriate where a party 
``has failed to cooperate by not acting to the best of its ability to 
comply with a request for information.'' As further explained below, 
both Freemen and Blue Science and certain of their suppliers failed act 
to the best of their abilities in providing factors of production 
information from those certain suppliers.
    As respondents are aware, our practice is to require convincing 
evidence from exporters claiming that their suppliers cannot supply 
requested factors of production information. See Tapered Roller 
Bearings and Parts Thereof, Finished and Unfinished, From the People's 
Republic of China; Final Results of 1997-1998 Antidumping Duty 
Administrative Review and Final Results of New Shipper Review, 64 FR 
61837, 61846 (November 15, 1999) (``TRBs-11s'') (``In this case, we 
determine that Premier has not acted to the best of its ability. 
Premier was unable to provide letters from all of its suppliers 
responding to Premier's request for information.''). While Freemen and 
Blue Science argue that they did attempt to secure the requested 
factors information from their suppliers, their explanations are not 
persuasive. Specifically, Freemen claims that it made repeated demands 
for this information on one supplier, and that this supplier responded 
that it would not participate in the investigation. However, Freemen 
provided no documentation confirming its efforts, or the supplier's 
refusals. Similarly, Blue Science claims that its supplier only 
produced the subject merchandise on a trial basis. This is not an 
adequate

[[Page 71109]]

explanation, as the mere cessation of production of a particular 
product does not mean that relevant records are no longer available. We 
also emphasize that neither Freemen nor Blue Science provided any 
additional information regarding their efforts to obtain the requested 
information upon our application of adverse facts available for these 
sales in the preliminary determination.
    As we explained in TRBs-11, suppliers to respondent exporters are 
interested parties, and their failure to provide factors information 
prevents the Department from calculating accurate dumping margins. 
Moreover, we must ensure that an exporter does not benefit by 
selectively providing factors of production information from low-cost 
producers. In cases such as this, we are precluded from measuring the 
costs of those suppliers who refused to cooperate, and cannot assume 
that their costs resemble those of other suppliers who did cooperate. 
For this reason, too, an adverse inference in warranted.
    In the case of Freemen, even if it is true that the supplier in 
question refused to provide the necessary information, it is not 
acceptable for a producer to withhold such information. As there is no 
acceptable explanation on the record for the supplier's failure to 
provide factors of production information, an adverse inference in 
applying facts available is warranted due to the supplier's failure to 
act to the best of its ability. Similarly, there is no acceptable 
explanation on the record for the failure of Blue Science's supplier to 
provide the necessary factors of production information, and therefore, 
an adverse inference is warranted.
    Freemen and Blue Science's argument concerning section 782(e) of 
the Act is misplaced. Section 782(e) directs the Department to use 
information submitted by a respondent, where possible, with respect to 
that respondent. In this case, we have used the factors of production 
information that was submitted to the extent that is applicable. 
Section 782(e) of the Act does not, however, direct the Department to 
apply one company's information to another company. Section 782(e) does 
not require us to substitute the suppliers' information we have on the 
record for those suppliers that failed to provide factors of production 
information.
    Finally, we disagree with respondents' contentions that the 
petition data upon which the adverse facts available rate is based 
cannot be corroborated due to the fact that the petitioner uses a more 
expensive grade of one input than do respondents. Because there are a 
variety of production processes for creatine, it would be inappropriate 
to isolate the value of a single input in determining whether a 
petition rate is valid for facts available purposes. Furthermore, the 
constructed NV used in the petition is generally within close range of 
NVs calculated in this investigation, suggesting that the petition data 
do indeed have probative value.

Comment 3: Sales by Desano and Sanjian

    Desano argues that certain sales of creatine supplied by Sanjian 
and exported by Desano should be considered Sanjian's sales and 
excluded from Desano's U.S. sales data. Desano asserts that the 
invoices from Sanjian to Desano indicate that Sanjian knew the 
merchandise was destined for the United States at the time it made the 
sale to Desano. Additionally, Desano argues out that the sales, which 
were denominated in U.S. dollars, are the first market-based sales in 
the chain of distribution for export to the United States. In support 
of its argument, Desano cites Polyvinyl Alcohol from the PRC, 61 FR 
14057 (March 29, 1996) and Fresh Garlic from the PRC, 62 FR 23758 (May 
1, 1997) (``Garlic''), where the Department based the exclusion or 
inclusion of the sale on whether the sale constituted the first market-
based sale and whether the supplier had knowledge of the U.S. 
destination.
    Sanjian contends that it properly reported all of its U.S. sales 
and the sales in question are Desano's sales. Sanjian asserts that its 
sales were reported based on the contract date as the date of sale 
because the contract date better reflects the date on which the 
material terms of its sales were established. According to Sanjian, 
there was no change in price, quantity or the terms of payment between 
the contract and the subsequent invoice. Sanjian argues that at the 
time of the sale to Desano (i.e., the contract date), Sanjian did not 
know the merchandise was ultimately destined for the United States and 
was only asked to identify the port of destination on the invoice to 
Desano.

Department's Position

    We agree with Sanjian that the sales in question should be 
considered Desano's U.S. sales. First, we disagree with Desano that the 
transaction between Sanjian and Desano is the first market-based 
transaction. Both Sanjian and Desano are companies located in the PRC, 
in terms of physical location, place of incorporation and the place of 
business. As discussed in Garlic, our knowledge test ``is restricted 
with regard to NME cases, since we will not base export price on 
internal transactions between two companies located in the NME 
country.'' 62 FR at 23759. Whether Sanjian knew the merchandise was 
destined for the United States is irrelevant in this instance, as the 
appropriate starting point for the application of the knowledge test is 
the first transaction with a market-based entity (i.e., Desano's 
transaction with the U.S. customer). Accordingly, we have continued to 
treat these sales as Desano's sales.

Comment 4: Factory Overhead and SG&A Labor

    The petitioner asserts that the Department failed to include 
factory overhead and SG&A labor in its calculations.
    The respondents disagree. According to the respondents, they 
included all relevant labor hours in their initial questionnaire 
responses. This is evidenced by the fact that at verification, the 
Department asked that indirect labor be broken down into indirect 
factory labor, overhead and SG&A labor. To adopt petitioner's position 
would effectively double-count the labor costs for overhead and SG&A, 
in respondents' view.

Department's Position

    Based upon our verification, we have concluded that factory 
overhead and SG&A labor hours were not included in the total labor 
figures. For Tiencheng, although overhead and SG&A labor hours were 
included in the indirect labor amount used for the preliminary 
determination, this labor has since been reclassified and removed. 
Therefore, for our final determination, we have included overhead and 
SG&A labor in the overhead and SG&A ratios calculated from Sanderson's 
financial statement. Since only surrogate overhead and SG&A labor hours 
are included in normal value, there is no double-counting.

Comment 5: Indonesian Import Values

    The respondents contend that the Department improperly adjusted 
Indonesian values. Because Indonesian import values were reported in 
U.S. dollars, they are not subject to Indonesian inflation and no 
adjustment is necessary.
    The petitioner asserts that the Department has consistently 
adjusted source data for inflation in numerous NME cases using the 
wholesale price index (``WPI'') of the country from which the source 
data is obtained. The petitioner claims that the Indonesian WPI is the 
best information available to

[[Page 71110]]

make this adjustment. Furthermore, the petitioner argues that the 
stability of the U.S. dollars is irrelevant because the dollar is also 
subject to inflationary forces.

Department's Position

    We agree with the respondents that the Indonesian import statistics 
were improperly adjusted for inflation in the preliminary determination 
because we used the Indonesian WPI to make the adjustment. For the 
final determination, we have adjusted the data (which predates the POI 
by two-and-a-half years) using the U.S. WPI. This is consistent with 
our practice in several cases (see, e.g., TRBs-10).

Comment 6: Material Input ``A'

    The respondents contend that the Department should not use the ICW 
data to value material input A. First, they argue that the prices 
listed in ICW for material input A are aberrational when compared to a 
price quote obtained by the respondents. Second, the ICW data may, in 
fact, be for a different grade of material input than that used by the 
respondents. Third, the respondents claim that the ICW data are 
``highly suspect'' because they are based on sales by a company with an 
interest in the outcome of this investigation. The respondents 
conclude, therefore, that the only public data available to value this 
input is unusable. For this reason, the respondents ask the Department 
to construct a surrogate value for material input A by valuing the 
various inputs used by one respondent in producing material input A.
    The petitioner contends that the price quote obtained by the 
respondents does not prove the ICW data to be aberrational and may even 
support the ICW price. The petitioner notes that the price quote 
obtained by respondents is for a 12 percent solution and that the ICW 
price is for a 50 percent solution. According to the petitioner, when 
adjustments for differences in concentration are made, the resulting 
U.S. dollar per kilogram values do not differ enough to prove ICW data 
aberrational. The petitioner also contends that the respondents' 
accusation that the ICW data is highly suspect is entirely implausible. 
Finally, the petitioner asserts that the ICW data are based on sales 
executed by unrelated companies and reflect arms-length pricing.

Department's Position

    We agree with the petitioner that the price quote obtained by the 
respondents does not prove ICW data to be aberrational. When 
appropriate adjustments are made to account for the differences in 
solution concentrations between the prices listed in ICW and in the 
price quote, the U.S. dollar per kilogram values for material input A 
are close. Moreover, additional ICW price quotes (provided to the 
Department by the petitioner upon the Department's request at the 
November 29, 1999 public hearing) refute the respondents' allegations 
concerning the legitimacy of the ICW data used in the preliminary 
determination. Thus, we have no reason to believe that the ICW data do 
not reflect sales made at arm's-length.
    We note that, in a change from our preliminary determination, we 
have adjusted the ICW price to reflect the different solution 
concentrations used by the PRC respondents. With this adjustment, and 
because we have determined that the ICW prices are neither aberrational 
nor suspect, we do not believe that it is necessary to pursue the 
alternative methodology suggested by the respondents for valuing this 
input.

Comment 7: Under-Reported Labor at Tiancheng

    The petitioner asserts that Tiancheng under-reported indirect labor 
due to a mathematical error in its June 2, 1999, questionnaire 
response. The petitioner further contends that Tiancheng did not report 
labor hours for one month during the POI and failed to report certain 
labor that was classified incorrectly as not being related to the 
production of the subject merchandise. The petitioner urges the 
Department to include any unreported labor in Tiancheng's labor 
calculations.

Department's Position

    We agree with the petitioner that Tiancheng miscalculated indirect 
labor in its factors of production response and that labor data for one 
month of the POI were not reported. However, the two errors mentioned 
above were corrected during verification.
    Concerning petitioner's claim that certain labor was not reported 
because it was improperly classified as not being related to production 
of the subject merchandise, we note that the verification exhibit upon 
which the petitioner has based its argument does not correspond to the 
factory in question.

Comment 8: Valuation of Inland Shipping Rates

    The respondents argue that the surrogate value used by the 
Department for inland boat rates was incorrect because the rate used by 
the Department reflects the cost of shipping on large vessels while the 
respondents used small barges.

Department's Position

    The only information on the record with respect to inland boat 
rates is the value used in the preliminary determination. No parties 
have submitted any alternative values. Therefore, in the absence of 
information, we have continued to value inland shipping rates in the 
same manner as that in the preliminary determination.

Other Comments

    The respondents have raised several additional arguments concerning 
the calculation of inputs that are being treated as business 
proprietary information. The petitioner did not comment on these 
issues. We have agreed with the respondents' arguments and have made 
applicable changes to our calculations for the final determination. 
Because the proprietary nature of these inputs precludes any meaningful 
discussion of these comments, we have included the detailed discussion 
in the respective calculation memoranda for each company, rather than 
in this notice.

Continuation of Suspension of Liquidation

    We are directing the Customs Service to continue to suspend 
liquidation of all imports of subject merchandise from the PRC, except 
for subject merchandise exported by Nantong and produced by its 
proprietary producer and merchandise produced and exported by Tianjin 
(which have zero weighted-average margins), that are entered, or 
withdrawn from warehouse, for consumption on or after July 30, 1999, 
the date of publication of the preliminary determination in the Federal 
Register. In addition, for Freemen, as well as for companies subject to 
the PRC-wide rate, we are directing Customs to continue suspending 
liquidation of any unliquidated entries of subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after May 1, 1999, 
the date 90 days prior to the date of publication of the preliminary 
determination in the Federal Register, in accordance with our critical 
circumstances finding. Furthermore, we will instruct the Customs 
Service to refund all bonds and cash deposits posted on subject 
merchandise exported by Desano that was entered or withdrawn from 
warehouse for consumption prior to July 30, 1999.

[[Page 71111]]

    The Customs Service shall continue 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.

----------------------------------------------------------------------------------------------------------------
                                                                                    Weighted-
                             Exporter/manufacturer                               average margin      Critical
                                                                                    percentage    circumstances
----------------------------------------------------------------------------------------------------------------
Blue Science International Trading (Shanghai) Co., Ltd.........................       58.10                  No
Nantong Medicines and Health Products Import and Export Co., Ltd...............        0.00                  No
Shanghai Desano International Trading Co., Ltd.................................       24.84                  No
Shanghai Freemen International Trading Co., Ltd and Shanghai Greenmen                 44.43                 Yes
 International Trading Co., Ltd................................................
Suzhou Sanjian Fine Chemical Co., Ltd..........................................       50.32                  No
Tianjin Tiancheng Pharmaceutical Co., Ltd......................................        0.00                  No
PRC-wide Rate..................................................................      153.70                 Yes
----------------------------------------------------------------------------------------------------------------

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

ITC Notification

    We have notified the ITC of our determination. As our final 
determination is affirmative, the ITC will, within 45 days, determine 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry. If the ITC determines that material 
injury, or threat of material injury does not exist, the proceeding 
will be terminated and all securities posted will be refunded or 
canceled. If the ITC determines that such injury does exist, the 
Department will issue an antidumping duty order.
    This determination is issued and published in accordance with 
sections 735(d) and 777(i)(1) of the Act.

    Dated: December 13, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-32916 Filed 12-17-99; 8:45 am]
BILLING CODE 3510-DS-P