[Federal Register Volume 68, Number 46 (Monday, March 10, 2003)]
[Notices]
[Pages 11371-11374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5632]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-856]


Synthetic Indigo from the People's Republic of China: Preliminary 
Results of Antidumping Duty Administrative Review

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

ACTION: Notice of preliminary results of antidumping duty 
administrative review.

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SUMMARY: In response to a timely request from a manufacturer/exporter, 
the Department of Commerce is conducting an administrative review of 
the antidumping duty order on synthetic indigo from the People's 
Republic of China with respect to Liyang Skyblue Chemical Co., Ltd. The 
period of review is June 1, 2001, through May 31, 2002. As a result of 
this review, the Department of Commerce has preliminarily determined 
that sales have been made below normal value by the above-referenced 
company for the covered period. Interested parties are invited to 
comment on these preliminary results. If these preliminary results are 
adopted in our final results of administrative review, we will instruct 
the Customs Service to assess antidumping duties on all appropriate 
entries.

EFFECTIVE DATE: March 10, 2003.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Margarita 
Panayi, 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) 482-4136 or (202) 482-0049, respectively.

SUPPLEMENTARY INFORMATION: 

Background

    On June 19, 2000, the Department of Commerce (the Department) 
published in the Federal Register (65 FR 37961) an antidumping duty 
order on synthetic indigo from the People's Republic of China (PRC), 
which was amended on June 23, 2000 (65 FR 39128). On June 26, 2002, 
Liyang Skyblue Chemical Co., Ltd. (Liyang), a PRC manufacturer/exporter 
of the subject merchandise, requested, in accordance with 19 CFR 
351.213, that we conduct an administrative review of Liyang's exports. 
On July 24, 2002, the Department published a notice of initiation of an 
administrative review of the antidumping duty order on synthetic indigo 
from the PRC with respect to Liyang (67 FR 48435). In July 2002, we 
issued the antidumping questionnaire to Liyang, and we received its 
responses in August and September 2002. We issued a supplemental 
questionnaire to Liyang in October 2002 and received its response in 
November 2002.
    On July 25, 2002, the Department informed the parties of an 
opportunity to submit publicly available information (PAI) for 
consideration as surrogate values in these preliminary results. The 
petitioner, Buffalo Color Corporation, provided such data in November 
2002.

Scope of Order

    The products subject to this order 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 order 
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 the order is dispositive.

Period of Review

    The period of review (POR) is June 1, 2001 through May 31, 2002.

Separate Rates Determination

    In previous antidumping duty proceedings, the Department has 
treated the PRC as a non-market economy (NME) country. We have no 
evidence

[[Page 11372]]

suggesting that this determination should be changed. Accordingly, the 
Department has determined that NME treatment is appropriate in this 
review. See section 771(18)(c)(i) of the Act. In proceedings involving 
NME countries, the Department begins with a rebuttable presumption that 
all companies within the country are subject to government control and, 
therefore, should be assigned a single antidumping duty deposit rate 
(i.e., a PRC-wide rate).
    To establish whether a company operating in an NME is sufficiently 
independent to be entitled to a separate rate, the Department analyzes 
each exporting entity under the test established in 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 
amplified by the 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). Under this test, companies operating in an 
NME are entitled to separate, company-specific margins when they can 
demonstrate an absence of government control, both in law (de jure) and 
in fact (de facto), with respect to export activities (Sparklers, 56 FR 
20589). In this review, the sole respondent is a Hong Kong/PRC joint-
venture company and, thus, a separate rates analysis is necessary to 
determine whether its export activities are independent from government 
control.

1. Absence of De Jure Control

    Evidence supporting, though not requiring, a finding of de jure 
absence of government control over export activities includes: (1) An 
absence of restrictive stipulations associated with the individual 
exporter's business and export licenses; (2) any legislative enactments 
decentralizing control of companies; and (3) any other formal measures 
by the government decentralizing control of companies (id.).
    The respondent has placed on the record a number of documents to 
demonstrate absence of de jure control, including the ``General 
Principles of the Civil Law of the People's Republic of China'' and the 
``PRC's Enterprise Legal Person Registration Administrative 
Regulations.''
    As in prior cases, we have analyzed these laws and have found them 
to establish sufficiently an absence of de jure control of 
collectively-owned enterprises, joint ventures between PRC and foreign 
companies, and/or limited liability companies. See, e.g., Final 
Determination of Sales at Less than Fair Value: Furfuryl Alcohol from 
the People's Republic of China (Furfuryl Alcohol) 60 FR 22544 (May 8, 
1995), and Preliminary 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 29571 (June 5, 1995). We have no new 
information in this review which would cause us to reconsider this 
determination with regard to Liyang.

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 a 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.
    Liyang asserted the following: (1) It establishes its own export 
prices; (2) it negotiates contracts without guidance from any 
governmental entities or organizations; (3) it makes its own personnel 
decisions; and (4) it retains the proceeds of its export sales, uses 
profits according to its business needs, and has the authority to sell 
its assets and obtain loans. Furthermore, our analysis of Liyang's 
questionnaire responses reveals no other information indicating 
government control. This information supports a preliminary finding 
that there is an absence of de facto governmental control of Liyang's 
export functions. Consequently, we preliminarily determine that Liyang 
has met the criteria for the application of a separate rate.

Fair Value Comparisons

    To determine whether sales of the subject merchandise by Liyang to 
the United States were made at prices below normal value, we compared 
the export price to the normal value, as described in the ``Export 
Price'' and ``Normal Value'' sections of this notice, below.

Export Price

    We used export price methodology in accordance with section 772(a) 
of the Act, because the subject merchandise was sold prior to 
importation by the exporter outside the United States directly to 
unaffiliated purchasers in the United States and constructed export 
price methodology was not otherwise indicated.
    We calculated export price based on the packed, CIF price to the 
first unaffiliated purchaser in the United States. Where appropriate, 
we made deductions from the starting price (gross unit price) for 
foreign inland freight, foreign brokerage and handling, international 
freight, and marine insurance, in accordance with section 772(c) of the 
Act. Because these movement services were provided by NME service 
providers or paid for in an NME currency, we based these expenses on 
surrogate values from India. To value foreign inland trucking charges, 
we used a November 1999 average truck freight value based on price 
quotes from Indian trucking companies obtained in the less-than-fair-
value (LTFV) investigation of Bulk Aspirin from the PRC. For rail 
freight costs, we used 1999-2000 rates published in the July 2001 
Reserve Bank of India Bulletin. Foreign brokerage and handling expenses 
were based on November 1999 price quotes from Indian freight forwarders 
used in the LTFV investigation of Synthetic Indigo from the PRC. Ocean 
freight was based on publicly available shipping rates between 
Shanghai, PRC and a U.S. east coast port obtained from the market-
economy shipping company Maersk Sealand. For marine insurance, we used 
public information that was used in the 2000-2001 administrative review 
of the antidumping duty order on tapered roller bearings and parts 
thereof, finished and unfinished, from the People's Republic of China. 
A more detailed discussion of the valuation methodology for these 
expenses is described in Preliminary Results Valuation Memorandum, 
Memorandum to the File dated March 3, 2003 (Valuation Memo).

[[Page 11373]]

Normal Value

A. Non-Market Economy Status

    In every case conducted by the Department involving the PRC, the 
PRC has been treated as an NME country. Neither party to this review 
has contested such treatment. Accordingly, we calculated normal value 
in accordance with section 773(c) of the Act, which applies to NME 
countries.

B. 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, Indonesia, Sri Lanka, 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 Davina Hashmi, Senior Import Compliance Specialist, Office 2, dated 
July 22, 2002). 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 normal value using Indian values for the PRC producer's 
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.

C. Factors of Production

    In accordance with section 773(c) of the Act, we calculated normal 
value based on the factors of production reported by Liyang's 
affiliated producer, Liyang Brothers Chemical Company, Ltd. To 
calculate normal value, the reported unit factor quantities for 
materials, energy and utilities were multiplied by publicly available 
Indian values, where possible, or, in the case of the auxiliary agent 
and the wetting agent, by the weighted-average purchase price of 
materials manufactured in a market-economy country and paid for in a 
market-economy currency, in accordance with 19 CFR 351.408.
    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 POR 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 
description of the surrogate values, see the Valuation Memo.
    We valued raw materials used in the producer's production of the 
subject merchandise based on data derived from one or more of the 
following sources:
    [sbull] The average Indian domestic unit price during the POR 
derived from the Indian publication Chemical Weekly during the POR. We 
adjusted the average price to exclude the Indian excise tax and state 
sales tax, where appropriate.
    [sbull] The average unit import value derived from various editions 
of Monthly Statistics of Foreign Trade of India (Indian Import 
Statistics).
    [sbull] The average daily Indian price based on the Indian 
newspaper Economic Times of Bombay.
    For certain materials reportedly consumed in small to very small 
quantities, such as the dispersing, permeating, integration, and water 
stabilization agents, we were unable to identify appropriate surrogate 
values. Therefore, we have not included these factors in our 
preliminary results normal value calculation.
    We have been unable to identify a surrogate value for the input 
phenylglycinonitrile, which Liyang consumes in one of two production 
methods used during the POR to produce the intermediate input potassium 
salt. Therefore, for purposes of the preliminary results, we are 
valuing all of Liyang's internal potassium salt production using the 
consumption factors and corresponding surrogate values applicable to 
the other production method, which does not involve the consumption of 
phenylglycinonitrile. We will reconsider this methodology for the final 
results if we obtain surrogate value information for 
phenylglycinonitrile.
    Liyang reported that it resold 33% ferric hydroxide and a mixture 
of sodium hydroxide and potassium hydroxide as by-products from its 
synthetic indigo production. However, we did not make an offset 
deduction to the surrogate cost of production in the preliminary 
results because we were unable to identify appropriate surrogate values 
for these materials.
    We valued labor based on a regression-based wage rate, in 
accordance with 19 CFR 351.408(c)(3).
    To value electricity, we used the 2000-2001 ``revised estimate'' 
average rate for industrial consumption as published in the Government 
of India's Planning Commission report, The Working of State Electricity 
Boards & Electricity Departments Annual Report (2001-02). We based the 
value of steam coal on the weighted-average unit price data derived 
from the Indian Import Statistics and the financial statements of 
Indian chemical companies.
    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 (FOH) because the financial statements used 
to derive FOH and SG&A surrogate values appeared to exclude water 
consumption expenses (see Valuation Memo).
    As we have no available information from an Indian producer of 
synthetic indigo, we based our calculation of FOH, SG&A expenses, and 
profit on data contained in the 2001-2002 annual reports of Daurala 
Organics Ltd., an Indian producer of various chemicals including 
phenylglycine, a chemical intermediate which may be produced during the 
manufacture of synthetic indigo, and Atul Limited (Atul), an Indian 
producer of dyes and dye intermediates, as well as bulk and 
intermediate chemicals, agrochemicals and pharmaceuticals. We have 
relied on the data from these two companies because a significant 
portion of each of their businesses is devoted to the manufacture of 
products similar to synthetic indigo or its intermediate inputs. See 
the Valuation Memo for further discussion.
    For the reported packing materials, we used April 2001-December 
2001 average unit values derived from Indian Import Statistics.
    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.

Preliminary Results of the Review

    As a result of this review, we preliminarily determine that the 
following margin applies to Liyang for the period June 1, 2001, through 
May 31, 2002:

------------------------------------------------------------------------
                                                                 Margin
                Manufacturer/producer/exporter                  percent
------------------------------------------------------------------------
Liyang Skyblue Chemical Co., Ltd.............................     46.18
------------------------------------------------------------------------

    Pursuant to 19 CFR 351.309, interested parties may submit written

[[Page 11374]]

comments in response to these preliminary results. Case briefs must be 
submitted within 30 days after the date of publication of this notice, 
and rebuttal briefs, limited to arguments raised in case briefs, must 
be submitted no later than five days after the time limit for filing 
case briefs. Parties who submit case briefs or rebuttal briefs in this 
proceeding are requested to submit with each argument: (1) A statement 
of the issue, and (2) a brief summary of the argument. Parties are also 
encouraged to provide a summary of the arguments not to exceed five 
pages and a table of statutes, regulations and cases cited. Case and 
rebuttal briefs must be served on interested parties in accordance with 
19 CFR 351.303(f).
    In addition, pursuant to 19 CFR 351.310, within 30 days of the date 
of publication of this notice, interested parties may request a public 
hearing on arguments raised in the case and rebuttal briefs. Any 
hearing, if requested, will be held two days after the date for 
submission of rebuttal briefs. 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, Room B-
099, within 30 days of the date of publication of this notice, 
containing: (1) The party's name, address, and telephone number; (2) 
the number of participants; and (3) a list of issues to be discussed. 
Issues raised in the hearing will be limited to those raised in case 
and rebuttal briefs.
    The Department will publish the final results of this 
administrative review with respect to subject merchandise exports by 
Liyang, including the results of its analysis of issues raised in any 
case or rebuttal briefs or at a hearing, not later than 120 days after 
the date of publication of these preliminary results.

Assessment Rates

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Pursuant to 19 
CFR 351.212(b)(1), we will calculate importer-specific ad valorem duty 
assessment rates based on the ratio of the total amount of the dumping 
margins calculated for the examined sale to the total entered value of 
that sale. In accordance with 19 CFR 351.106(c)(2), we will instruct 
the Customs Service to liquidate without regard to antidumping duties 
all entries of subject merchandise during the POR for which the 
importer-specific assessment rate is zero or de minimis (i.e., less 
than 0.50 percent). The Department will issue appropriate appraisement 
instructions for the companies subject to this review directly to the 
Customs Service upon completion of this review. For entries of the 
subject merchandise during the POR from companies not subject to this 
review, we will instruct the Customs Service to liquidate them at the 
cash deposit rate in effect at the time of entry.

Cash Deposit Instructions

    Upon completion of this review, for entries from Liyang, we will 
require a cash deposit at the rate established in the final results as 
further described below.
    The following deposit requirements will be effective upon 
publication of the final results of this administrative review for all 
shipments of synthetic indigo from the PRC entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided by section 751(a)(1) of the Act: (1) The cash deposit rate for 
Liyang will be the rate determined in the final results of review 
(except that if the rate is de minimis, i.e., less than 0.50 percent 
within the meaning of 19 CFR 351.106(c)(1), a cash deposit rate of zero 
will be required); (2) the cash deposit rate for PRC exporters who 
received a separate rate in a prior segment of the proceeding will 
continue to be the rate assigned in that segment of the proceeding; (3) 
the cash deposit rate for the PRC NME entity will continue to be 129.60 
percent; and (4) the cash deposit rate for non-PRC exporters of subject 
merchandise from the PRC will be the rate applicable to the PRC 
supplier of that exporter. These requirements, when imposed, shall 
remain in effect until publication of the final results of the next 
administrative review.

Notification to Importers

    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f)(2) to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during this review period. Failure to comply 
with this requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.213.

    Dated: March 3, 2003.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 03-5632 Filed 3-7-03; 8:45 am]
BILLING CODE 3510-DS-P