[Federal Register Volume 68, Number 166 (Wednesday, August 27, 2003)]
[Notices]
[Pages 51551-51557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21903]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-602-805, A-484-802, A-419-802, A-588-864, A-791-818, A-570-889]


Notice of Initiation of Antidumping Duty Investigations: 
Electrolytic Manganese Dioxide From Australia, Greece, Ireland, Japan, 
South Africa and the People's Republic of China

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

ACTION: Initiation of Antidumping Duty Investigations.

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EFFECTIVE DATE: August 27, 2003.

FOR FURTHER INFORMATION CONTACT: Catherine Bertrand (Australia) at 202-
482-3207, Doug Kirby (Greece) at 202-482-3782, John Drury (Ireland) at 
202-482-0195, Brandon Farlander (Japan) at 202-482-0182, Matthew Renkey 
(South Africa) at 202-482-2312, Rachel Kreissl (PRC) at 202-482-0409 or 
Alex Villanueva at 202-482-3208, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, D.C. 20230.

SUPPLEMENTARY INFORMATION:

Initiation of Investigations

The Petition

    On July 31, 2003, the Department of Commerce (``Department'') 
received an antidumping duty petition (``Petition'') filed in proper 
form by Kerr-McGee Chemical LLC (``Kerr-McGee or Petitioner''). Kerr-
McGee is a domestic producer of electrolytic manganese dioxide 
(``EMD''). On August 13, 2003, Petitioner submitted information to 
supplement the Petition (``Supplemental Response''). Additionally, on 
August 13, 2003, the Department asked Petitioner to clarify the sales-
below-cost allegations and the countries for which the allegations were 
made. See Memorandum to the File from Alex Villanueva, Case Analyst 
through James C. Doyle, Program Manager; EMD: Regarding Sales- Below-
Cost Allegations, dated August 13, 2003. On August 14, 2003, Petitioner 
submitted a letter indicating that the sales-below-costs allegations 
were made only for Ireland, Japan and South Africa. Consequently, 
Petitioner did not request a sales-below-cost allegation for Australia 
and Greece. On August 20, 2003, Petitioner submitted revised lost sales 
and revenue information. In accordance with section 732(b) of the 
Tariff Act of 1930, as amended (``the Act''), Petitioner alleges 
imports of EMD from Australia, Greece, Ireland, Japan, South Africa and 
the People's Republic of China (``PRC'') are being, or are likely to 
be, sold in the United States at less than fair value within the 
meaning of section 731 of the Act, and that such imports are materially 
injuring, or threatening material injury to, the U.S. industry.
    The Department finds that Petitioner filed its Petition on behalf 
of the domestic industry because it is an interested party as defined 
in section 771(9)(C) of the Act, and it has demonstrated sufficient 
industry support with respect to the investigations it is presently 
seeking. See Determination of Industry Support for the Petition section 
below.

[[Page 51552]]

Scope of the Investigations

    These investigations cover all manganese dioxide (MnO[bdi2]) that 
has been manufactured in an electrolysis process, whether in powder, 
chip or plate form. Excluded from the scope are natural manganese 
dioxide (``NMD'') and chemical manganese dioxide (``CMD''), including 
high-grade chemical manganese dioxide (``CMD-U'').
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (``HTSUS'') at 
subheading 2820.10.0000. The tariff classifications are provided for 
convenience and Customs purposes; however, the written description of 
the scope of these investigations is dispositive.
    As discussed in the preamble to the Department's regulations, we 
are setting aside a period for parties to raise issues regarding 
product coverage. See Antidumping Duties; Countervailing Duties; Final 
Rule, 62 FR 27296, 27323 (May 19, 1997). The Department encourages all 
interested parties to submit such comments within 20 days of 
publication of this notice. Comments should be addressed to Import 
Administration's Central Records Unit, Room 1870, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 
20230. This period of scope consultations is intended to provide the 
Department with ample opportunity to consider all comments and consult 
with parties prior to the issuance of the preliminary determinations.

Determination of Industry Support for the Petition

    Section 732(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that the Department's industry support determination, which is 
to be made before the initiation of the investigation, be based on 
whether a minimum percentage of the relevant industry supports the 
petition. A petition meets this requirement if the domestic producers 
or workers who support the petition account for: (i) at least 25 
percent of the total production of the domestic like product; and (ii) 
more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition. Moreover, section 732(c)(4)(D) of the Act 
provides that, if the petition does not establish support of domestic 
producers or workers accounting for more than 50 percent of the total 
production of the domestic like product, the Department shall: (i) poll 
the industry or rely on other information in order to determine if 
there is support for the petition, as required by subparagraph (A), or 
(ii) determine industry support using a statistically valid sampling 
method.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, to determine whether a 
petition has the requisite industry support, the statute directs the 
Department to look to producers and workers who produce the domestic 
like product. The International Trade Commission (``ITC''), which is 
responsible for determining whether ``the domestic industry'' has been 
injured, must also determine what constitutes a domestic like product 
in order to define the industry. While both the Department and the ITC 
must apply the same statutory definition regarding the domestic like 
product (section 771(10) of the Act), they do so for different purposes 
and pursuant to a separate and distinct authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
like product, such differences do not render the decision of either 
agency contrary to law. See USEC, Inc. v. United States, 132 F. Supp. 
2d 1, 8 (Ct. Int'l Trade 2001), citing Algoma Steel Corp. Ltd. v. 
United States, 688 F. Supp. 639, 642-44 (Ct. Int'l Trade 1988).
    Section 771(10) of the Act defines the domestic like product as ``a 
product which is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this title.'' Thus, the reference point from which the domestic 
like product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
Petition.
    With regard to the domestic like product, Petitioner does not offer 
a definition of domestic like product distinct from the scope of the 
investigation. Based on our analysis of the information submitted in 
the Petition we have determined there is a single domestic like 
product, EMD, which is defined further in the ``Scope of the 
Investigations'' section above, and we have analyzed industry support 
in terms of that domestic like product. For more information on our 
analysis and the data upon which we relied, see Antidumping Duty 
Investigation Initiation Checklist (``Initiation Checklist''), dated 
August 20, 2003, Appendix II - Industry Support on file in the Central 
Record Unit (``CRU'') in room B-099 of the main Department of Commerce 
building.
    In determining whether the domestic petitioner has standing, we 
considered the industry support data contained in the petition with 
reference to the domestic like product as defined above in the ``Scope 
of the Investigations'' section. To estimate 2002 production for all 
domestic EMD producers named in the Petition, Petitioner estimated 
production data using Roskill Information Service Ltd. and 
conservatively assumed that the remaining company produced to capacity. 
For purposes of determining industry support, Petitioner combined its 
year 2002 production data with Erachem Comilog, Inc. (``Erachem''), 
also a domestic producer, and supporter of the Petition. To estimate 
2002 production for all other domestic EMD producers named in the 
Petition, Petitioner estimated production data using Roskill 
Information Services Ltd. and conservatively assumed the remaining 
company produced to capacity. This estimated production data was added 
to the actual production data detailed above to arrive at total 
estimated U.S. production of EMD for the year 2002 in short tons. See 
Petition at Exhibit 9 describing how this production data was 
estimated.
    Using the data described above, the share of total estimated U.S. 
production of EMD in year 2002 represented by Petitioner and Erachem, a 
supporter of the Petition, equals over 50 percent of total domestic 
production. Therefore, the Department finds the domestic producers who 
support the Petition account for at least 25 percent of the total 
production of the domestic like product. In addition, as no domestic 
producers have expressed opposition to the Petition, the Department 
also finds the domestic producers who support the Petition account for 
more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the Petition.
    Therefore, we find that Petitioner has met the requirements of 
section 732(c)(4)(A) of the Act.

Export Price and Normal Value

    The following are descriptions of the allegations of sales at less 
than fair value upon which the Department based its decision to 
initiate these investigations. The source or sources of data for the 
deductions and adjustments relating to U.S. and foreign market prices 
and cost of production (``COP'') and constructed value (``CV'') have 
been accorded

[[Page 51553]]

treatment as business proprietary information. Petitioner's sources and 
methodology are discussed in greater detail in the business proprietary 
version of the Petition and in our Initiation Checklist. We corrected 
certain information contained in the Petition's margin calculations; 
these corrections are set forth in detail in the Initiation Checklist. 
Should the need arise to use any of this information as facts available 
under section 776 of the Act in our preliminary or final 
determinations, we may re-examine this information and revise the 
margin calculations, if appropriate.

Periods of Investigation

    The anticipated period of investigation (``POI'') for Australia, 
Greece, Ireland, Japan and South Africa will be July 1, 2002 through 
June 30, 2003. The anticipated POI for the PRC will be January 1, 2003 
through June 30, 2003. See 19 CFR 351.204(b).

Export Price for All Countries

    In calculating the U.S. price, Petitioner has relied exclusively on 
average unit value (``AUV'') data with respect to the HTSUS number 
2820.10.0000. This HTS number is a ``basket category'' as it includes 
both subject and non-subject merchandise. This HTS number includes the 
subject merchandise, EMD, as well as non-subject merchandise, CMD, and 
possibly NMD\1\. Historically, the Department has not accepted basket 
category AUV's as the basis for U.S. price unless petitioners can 
provide evidence that the imports classified under the basket category 
overwhelmingly consist of subject merchandise. In this case, Petitioner 
has provided information on the record that supports its position that 
the overwhelming percentage of the imports from the subject countries 
are, in fact, within the scope of the investigation.
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    \1\ Note that Petitioner indicated at footnote 11 on page 6 of 
its July 31, 2003, petition, that NMD would be in the basket 
category HTS number 2820.10.0000. However, it would appear that NMD 
is properly classified under HTS 2602.00.0000, with 10-digit 
designations varying according to manganese weight. As a result, NMD 
should not be included in the basket category.
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    Petitioner used PIERS data to corroborate its contention that the 
imports under HTSUS number 2820.10.0000 are in fact overwhelmingly 
subject merchandise because PIERS provides greater product 
identification information than official U.S. Census data as reported 
on the International Trade Commission's Dataweb import statistics 
(``Dataweb'').
    Petitioner points out that for the subject countries, in many 
instances, PIERS data clearly identifies EMD for individual shipments. 
For other shipments, PIERS often identifies them as simply ``Manganese 
Dioxide.'' These shipments could very well be of subject merchandise 
but PIERS' lack of specificity prevents a clear identification as such. 
Given the reluctance of the Department to rely on basket category AUV's 
for U.S. price, we requested that Petitioner demonstrate that the PIERS 
data captures the universe of subject merchandise sales during the POI. 
Additionally, for subject countries where a portion of total POI 
imports cannot be clearly identified as EMD, we requested that 
Petitioner demonstrate through other means that all (or at least an 
overwhelming majority) of the imports were in fact EMD. In order to 
show the completeness of the PIERS data, Petitioner provided a ratio of 
total imports according to the PIERS data, as divided by total imports 
as reported by Dataweb for each of the six countries in the petition. A 
review of the concordance between PIERS and Dataweb show that for five 
of the six countries, a substantial majority of the imports are EMD. 
See Supplemental Response at Exhibit A.
    In the case of Ireland, the PIERS import volume is significantly 
less than the Dataweb volume. Petitioner suggests that the discrepancy 
between PIERS and Dataweb is due to systematic under-reporting of Irish 
EMD imports in PIERS. According to Petitioner, EMD imports from Ireland 
as shown in PIERS are likely mis-labeled as imports from the UK, 
because there is no EMD production in England, Scotland, or Wales. In 
addition, Petitioner believes that some imports from Ireland are 
entering the United States via Canada, and PIERS may have excluded such 
entries entirely as PIERS does not report on truck, plane, or railway 
entries. See Supplemental Response at pages 22-24. We found this 
explanation reasonable because we found no evidence to contradict these 
statements after conducting a review of the data submitted by 
Petitioner. See Initiation Checklist. Therefore, we find that there is 
a sufficient basis to accept the Irish AUV data as a basis for U.S. 
price.
    As the second step in its analysis, Petitioner examined each PIERS 
import entry and compared those which specifically identified the 
imported product as EMD to those identifying another product, which was 
usually simply ``manganese dioxide,'' thereby generating another set of 
ratios.\2\ For five countries (Australia, Greece, Ireland, Japan, and 
South Africa), the PIERS-based EMD-to-total-imports ratios show that at 
least approximately eight-seven percent of the entries in the basket 
HTS category were EMD, while two of the countries (South Africa and 
Greece) were one-hundred percent. Extrapolating the PIERS-based results 
to the Dataweb figures, the Department is able to adequately conclude 
that the overwhelming portion of imports reflected in the Dataweb 
figures are EMD, and are therefore adequate figures upon which to base 
export price for Australia, Greece, Ireland, Japan, and South Africa.
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    \2\ Note that these ratios only counted those PIERS entries 
which could be positively identified as EMD in the numerator. 
However, the remaining entries may include EMD, so the actual EMD-
to-total imports ratios may in fact be higher. Moreover, Petitioner 
also provided additional evidence that it is likely that only EMD is 
being imported under this HTS category. Petitioner provided 
information that CMD is produced only in Belgium and the PRC, while 
NMD is predominantly produced in Gabon, Ghana, Brazil, the PRC, 
Mexico, and India See Petition at Exhibit 9 and 13.
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    Finally, we note that the PIERS EMD-to-total imports ratio does not 
demonstrate that all imports from the PRC are EMD and that there is 
evidence on the record that the PRC does produce CMD and NMD. As a 
result, Petitioner provided further information to corroborate its 
argument that the Chinese imports to the United States were EMD. 
Specifically, Petitioner provided Dataweb statistics that showed that 
there were entries of Chinese merchandise in only three months of the 
POI to two different ports. Petitioner provided an affidavit to attest 
to the fact that the material was significantly EMD. See Petition at 
Exhibit 5. The volumes indicated in the affidavit match two of the 
three entries listed in the Dataweb statistics, and represent 
approximately eighty-nine percent of the volume entered into the United 
States under the relevant HTS number. Petitioner did not have any 
information regarding the third and final month's entry volume. 
However, the average unit value of the third month's entries is 
significantly higher than the others. Therefore, Petitioner notes that 
the inclusion of this data point is conservative since it lowers the 
overall margin. See Initiation Checklist. Therefore, we find that there 
is a sufficient basis to accept the Chinese AUV data as a basis for 
U.S. price.

Australia

Export Price

    For a description of export price for Australia, see Export Price 
for All

[[Page 51554]]

Countries above. Petitioner also adjusted this AUV data for foreign 
inland freight costs. See Petition at Exhibit 28 and Initiation 
Checklist.

Normal Value

    With respect to normal value (``NV''), Petitioner provided 
information that there were no commercial quantity sales of EMD in the 
home market during the POI and that there is no viable third country 
market on which to base NV. See Petition at Exhibit 6 and 18. 
Therefore, Petitioner based NV on CV. See Supplemental Response at 
Exhibit K.
    Petitioner calculated cost of manufacturing (``COM'') based on its 
own production experience, adjusted for known differences between costs 
incurred to produce EMD in the United States and Australia using 
publicly available data. To calculate interest, Petitioner relied upon 
information from Delta-Australia's corporate parent, Delta PLC, for the 
year 2002. Petitioner based profit on the 2002 experience of Ticor 
Limited, a producer of titanium dioxide, which Petitioner stated was 
similar to the production process of manganese dioxide. See Petition at 
page 21. We have accepted this methodology for purposes of this 
initiation. The price to CV comparison produced an estimated dumping 
margin of 47.01 percent.

Greece

Export Price

    For a description of export price for Greece, see Export Price for 
All Countries above. Petitioner made no deduction for imputed credit 
expenses or foreign inland freight costs. See Initiation Checklist.

Normal Value

    With respect to NV, Petitioner stated it did not know whether the 
home market for Greece was viable and home market prices were not 
reasonably available for Tosoh-Greece's sales of EMD during the POI. 
See Petition at page 23. However, Petitioner provided a third country 
price for EMD offered for sale in Belgium. The Petition provides 
evidence that these sales of EMD in the third-country market were made 
at prices below the fully absorbed COP, within the meaning of section 
773(b) of the Act. We note, however, that Petitioner did not request a 
sales-below-cost of production investigation for Greece. Therefore, 
because the home market prices were unavailable, the home market 
viability is unknown and the largest third country market price is 
below COP, Petitioner's dumping allegation is based on CV.
    Pursuant to section 773(b)(3) of the Act, cost of production 
(``COP'') consists of manufacture (``COM''), selling, general and 
administrative (SG&A) expenses, and packing. Petitioner calculated COM 
based on its own production experience, adjusted for known differences 
between costs incurred to produce EMD in the United States and Greece 
using publicly available data. To calculate interest, Petitioner relied 
upon information based upon the 2002 financial statement of Tosoh 
Corporation, the corporate parent of Tosoh-Greece. To calculate SG&A, 
petitioner relied upon the 2002 financial statement of a similar 
company for which data was reasonably available, Aluminum de Grece 
Industrial and Commercial S.A. (``Aluminum de Grece''). Petitioner 
chose Aluminum de Grece, an aluminum producer, because the production 
of aluminum is similar to EMD production.
    Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, 
Petitioner based NV for Greece on constructed value (``CV''). 
Petitioner calculated CV using the COM, SG&A and interest expense 
figures used to compute Greece home market costs. Consistent with 
section 773(e)(2) of the Act, the petitioner included in CV an amount 
for profit. For profit, Petitioner relied upon amounts reported in 
Aluminum de Grece's 2002 financial statement. See Supplemental Response 
at Exhibit L. Petitioner explained that the production of Aluminum De 
Grece is similar to the process of EMD as they are both energy 
intensive and involve purification of the ore feedstock and 
electrolysis. See Petition at page 24.
    We are initiating this investigation based on constructed value of 
EMD from Greece calculated by Petitioner. Based on the comparison of 
the U.S. price to NV, the estimated dumping margin is 22.86 percent. 
See Initiation Checklist.

Ireland

U.S. Price

    For a description of export price for Ireland, see Export Price for 
All Countries section above. Petitioner made adjustments for foreign 
inland freight to the AUV data. See Petition at Exhibits 3, 33 and 
Initiation Checklist.

Normal Value

    With respect to NV, Petitioner relied on foreign market research 
and third country market price, as Mitsui-Ireland's EMD production was 
not sold in the home market during the POI and Petitioner demonstrated 
that all production was for export activities. See Petition at Exhibit 
34.
    Petitioner used Germany as the viable third country comparison 
market as Germany is the second largest export market for Irish EMD 
after the United States. Pursuant to section 773 of the Act, Petitioner 
retrieved data confirming that Mitsui-Ireland's EMD exports to Germany 
represent at least 22 percent of its total EMD exports to the United 
States during the period July 2000 through May 2003. Petitioner 
calculated an average net third-country price and adjusted for movement 
expenses from Ireland to Germany and for imputed credit expenses. See 
Petition at Exhibit 33 and Supplemental Response at Exhibit M.
    Petitioner alleges that the sales of EMD in the third-country 
market were made at prices below the fully absorbed COP, within the 
meaning of section 773(b) of the Act. Pursuant to that section of the 
Act, COP consists of the COM, SG&A expenses, and packing. In the 
analysis of the third-country market price (above), market prices are 
inclusive of selling expenses, and therefore Petitioner used a COP also 
inclusive of SG&A. In regard to SG&A expense, Petitioner states it was 
unable to obtain specific and detailed financial data for Mitsui-
Ireland, and believes it reasonable to use an SG&A ratio of the most 
similar Irish metals producer for which data was available - Glencar 
Mining, PLC. See Petition at Exhibit 56, page 16 and Supplemental 
Response at Exhibit M.
    Petitioner used its own COM in the CV calculations with adjustments 
for known differences in production costs between Ireland and the U.S. 
for materials, energy and labor costs across the manufacturing process 
of EMD: ore handling (a.k.a. ``leaching''), electrolysis, and 
finishing.
    For interest expense, Petitioner relied upon amounts reported for 
the Japanese parent company Mitsui Mining & Smelting Co., Ltd. (Mitsui 
Kinzoku)'s interest expense for the year ending March 2002. See 
Petition at Exhibit 55, page 14. Consistent with 773(e)(2) of the Act, 
Petitioner included in CV an amount for profit. However, Petitioner 
applied the ``zero'' profit rate of Glencar Mining, PLC. See Petition 
at Exhibit 56, pages 16-17.
    Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, 
Petitioner based NV for sales in Ireland on CV. See Supplemental 
Response at Exhibit M.
    We have accepted this methodology for purposes of this initiation. 
The price to CV comparison produced an estimated dumping margin of 
25.04% percent. See Initiation Checklist.

[[Page 51555]]

Japan

Export Price

    For a description of export price for Japan, see Export Price for 
All Countries above. Petitioner also adjusted the AUV for foreign 
inland freight expenses based upon information obtained from a foreign 
market researcher. See Petition at Exhibit 7 and Supplemental Response 
at pages 28-29 and Exhibit H. Petitioner made no other adjustments to 
U.S. price, claiming this resulted in a conservative estimate.

Normal Value

    With respect to NV, Petitioner relied on the same foreign market 
researcher to obtain price quotes for the foreign like product sold in 
Japan. Petitioner obtained from the market researcher price quote for 
alkaline grade, powder form EMD sold in the Japanese home market which 
the researcher indicates is the same type and grade sold in the United 
States. See Petition at Exhibit 7 and Supplemental Response Exhibit H. 
Petitioner adjusted this price by deducting total movement expenses. 
Petitioner made no deduction for imputed credit expenses. See 
Initiation Checklist. Petitioner claimed this was a conservative 
estimate, as foreign market research revealed payment terms in a range 
of periods.
    Claiming that the Japanese producer's sales of the foreign like 
product were made at prices below the fully absorbed COP, within the 
meaning of section 773(b) of the Act, Petitioner requested that the 
Department initiate a country-wide sales-below-cost investigation. See 
Petitioner's August 14, 2003 letter. Pursuant to section 773(b)(3) of 
the Act, COP consists of the COM, SG&A expenses, and packing. 
Petitioner calculated COM based on Petitioner's own experience, 
adjusted for known differences based on the foreign market research of 
Japanese EMD producers' operations and publicly available data.
    Based upon the comparison of the prices of the foreign like product 
in the home market to the calculated COP of the product, we find 
reasonable grounds to believe or suspect that sales of the foreign like 
product were made below the COP within the meaning of section 
773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating a 
country-wide cost investigation.
    Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, 
Petitioner based NV for sales in Japan on CV. Petitioner calculated CV 
using the same COM, SG&A, and interest expense figures used to compute 
the COP. Consistent with section 773(e)(2) of the Act, Petitioner 
included in CV an amount for profit. Petitioner relied upon the profit 
ratio reported in Tosoh's 2002 annual report. See Petition at Exhibit 
53 and Supplemental Response at page 30.
    We have accepted this methodology for purposes of this initiation. 
The price to CV comparison produced an estimated dumping margin of 
87.96 percent. See Initiation Checklist.

South Africa

Export Price

    For a description of export price for South Africa, see Export 
Price for All Countries above. Petitioner adjusted this AUV data for 
foreign inland freight costs. See Petition at Exhibit 38.

Normal Value

    With respect to NV, Petitioner provided a home market price 
obtained through foreign market research for EMD comparable to the 
product exported to the United States which serve as a basis for EP. 
Petitioner made no adjustments to this calculated average home market 
price. Petitioner also provided information demonstrating reasonable 
grounds to believe or suspect that sales of EMD in the home market were 
made at prices below the fully absorbed COP, within the meaning of 
section 773(b) of the Act, and requested that the Department conduct a 
country-wide sales-below-cost investigation.
    Pursuant to section 773(b)(3) of the Act, COP consists of COM, SG&A 
expenses, and packing. Petitioner calculated COM based on its own 
production experience, adjusted for known differences between costs 
incurred to produce EMD in the United States and South Africa using 
publicly available data. To calculate interest, Petitioner relied upon 
information from Delta SA's corporate parent, Delta PLC, for the year 
2002. To calculate SG&A, Petitioner relied upon the 2002 financial 
statement of the most similar company for which data was reasonably 
available, Highveld. Based upon a comparison of the prices of the 
foreign like product in the home market to the calculated COP of the 
product, we find reasonable grounds to believe or suspect that sales of 
the foreign like product were made below the COP, within the meaning of 
section 773(b)(2)(A)(i) of the Act. Accordingly, the Department is 
initiating a country-wide cost investigation.
    Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, 
Petitioner based NV for South Africa on CV. Petitioner calculated CV 
using the same COM, SG&A and interest expense figures used to compute 
South African home market costs. Consistent with section 773(e)(2) of 
the Act, Petitioner included in CV an amount for profit. For profit, 
Petitioner relied upon amounts reported in Highveld's 2002 financial 
statement.
    We have accepted this methodology for purposes of this initiation. 
The price to CV comparison produced an estimated dumping margin of 
24.82 percent. See Initiation Checklist.

PRC

Export Price

    For a description of export price for the PRC, see Export Price for 
All Countries above. Petitioner also deducted an amount for foreign 
inland freight in the PRC from the starting U.S. Price. The calculation 
of foreign inland freight was derived using an inflated value used in 
the recent preliminary determination on polyvinyl alcohol from the PRC. 
See Petition at Exhibit 41 and Supplemental Response at page 37.

Normal Value

    Petitioner asserts that the Department considers the PRC to be a 
non-market economy country (``NME'') and therefore, constructed NV 
based on the factors of production methodology pursuant to section 
773(c) of the Act. In previous cases, the Department has determined 
that the PRC is an NME country. See e.g., Notice of Final Determination 
of Sales at Less Than Fair Value: Barium Carbonate From the People's 
Republic of China, 68 FR 46577 (August 6, 2003) and Notice of 
Initiation of Antidumping Investigation: Floor-Standing, Metal-Top 
Ironing Tables and Certain Parts Thereof from the People's Republic of 
China, 68 FR 44040 (July 25, 2003). In accordance with section 
771(18)(C)(i) of the Act, the NME status remains in effect until 
revoked by the Department. The NME status of the PRC has not been 
revoked by the Department and, therefore, remains in effect for 
purposes of the initiation of this investigation. Accordingly, the NV 
of the product appropriately is based on factors of production valued 
in a surrogate market economy country in accordance with section 773(c) 
of the Act. In the course of this investigation, all parties will have 
the opportunity to provide relevant information related to the issues 
of the PRC's NME status and the granting of separate rates to 
individual exporters.
    For NV, Petitioner based the factors of production, as defined by 
section 773(c)(3) of the Act, on its own consumption rates because 
information regarding Chinese producers' consumption rates is not 
reasonably available. See Supplemental Response

[[Page 51556]]

at pages 39-40. Thus, Petitioner has assumed, for purposes of the 
Petition, that producers in the PRC use the same inputs in the same 
quantities as Petitioner, adjusted for any known differences. Based on 
the information provided by Petitioner, we believe that its factors of 
production methodology represents information reasonably available to 
Petitioner and is appropriate for purposes of initiating this 
investigation.
    Petitioner asserts that India is the most appropriate surrogate 
country for the PRC, claiming that India is: (1) a significant producer 
of comparable merchandise; and (2) at a level of economic development 
comparable to the PRC. Based on the information provided by Petitioner, 
we believe that Petitioner's use of India as a surrogate country is 
appropriate for purposes of initiating this investigation.
    Petitioner based the factors of production (raw materials, labor, 
energy and packing), as defined by section 773(c)(3) of the Act, for 
EMD from the PRC on its own experience and adjusted for known 
differences. Pursuant to section 773(c)(4), Petitioner valued these 
factors using a variety of sources, including Monthly Statistics of 
Foreign Trade of India, Volumes I and II, Directorate General of 
Commercial Intelligence & Statistics (Monthly) (``MSFTI''), Chemical 
Weekly, the Department's factor valuation memoranda from other NME 
proceedings, Government of India and pricing lists from Indian chemical 
manufacturers.
    For manganese dioxide ore, the main raw material, Petitioner 
provided a surrogate value based on the prices from the financial 
statements of Eveready Industries India, Ltd. (``Eveready India''), an 
Indian manufacturer of the subject merchandise. For certain chemical 
inputs (e.g., sulfuric acid), Petitioner provided a surrogate value 
based on pricing information from Chemical Weekly. For other inputs 
such as caustic soda, lime (high calcium), harbonite 800S, Petitioner 
used pricing data from MSFTI to calculate surrogate values.
    With regard to energy (electricity), Petitioner provided a 
surrogate value using Eveready India's financial statements. In 
addition, Petitioner provided a surrogate value for natural gas, a 
second energy source, using pricing information from the Gas Authority 
of India website.
    Labor was valued using the regression-based wage rate for the PRC 
provided by the Department, in accordance with 19 CFR 351.408(c)(3). 
With regard to certain packing materials, Petitioner used MSFTI pricing 
data as the basis for the surrogate values.
    Petitioner has provided values for inputs that represent almost 99 
percent of the total cost of materials, energy, and packing in the NV 
calculation. Petitioner explained that the estimated value of the 
inputs for which it was unable to identify Indian surrogate values 
represents a minuscule portion of the NV calculation.
    For some inputs, Petitioner did not provide a surrogate value using 
Indian imports statistics or any of the sources identified above. 
Instead, Petitioner used its own U.S. acquisition costs to value those 
inputs. Petitioner explained that the U.S. acquisition cost was used 
because there were no known differences in Chinese production processes 
and any differences would be immaterial. The inputs for which 
Petitioner used a U.S. acquisition cost included: packing materials and 
certain minor factors used in the production of EMD. See Initiation 
Checklist at Attachment V.
    Petitioner contends that it has attempted to identify surrogate 
values for as many inputs as possible, including those that are common 
to other Chinese antidumping cases before the Department. Petitioner 
also explains that it has not been able to identify surrogate values 
for inputs that are unusual and used in very small amounts.
    We have decided not to accept Petitioner's reliance on the U.S. 
acquisition costs to value the packing materials and certain minor 
factors of production because our practice in NME cases is to obtain 
surrogate values from a surrogate country. In the instant case, 
Petitioner did not provide surrogate values for certain inputs using 
information from a surrogate country. Therefore, in accordance with the 
Department's practice, we have not included those surrogates in the 
calculation of NV provided by Petitioner. By doing so, the Department 
is lowering the normal value, which is conservative. See Notice of 
Initiation of Antidumping Duty Investigations: 4,4'- Diamino-2,2'-
Stilbenedisulfonic Acid (DAS) and Stilbenic Fluorescent Whitening 
Agents (SFWA) from Germany, India, and the People's Republic of China, 
68 FR 34579 (June 10, 2003) and Initiation Checklist.
    Eveready India was selected by Petitioner as the surrogate producer 
in India to compute factory overhead and SG&A expenses. See Initiation 
Checklist. Petitioner calculated the overhead ratio by dividing 
Eveready India's total overhead expenses (including ``Depreciation,'' 
``Repairs to Machinery and Buildings,'' and ``Stores and Spares 
Consumed'') by Eveready India's material and energy expenses.
    Petitioner excluded labor expenses from the denominator in the 
calculation of the overhead ratio on the grounds that Eveready India's 
Tea Division employs over 44,000 people while its Battery, Flashlights 
and Packet Tea Division (which produces EMD) employs 3,400 people. See 
Petition at 40. While the Department agrees it is appropriate to 
exclude non-EMD related labor expenses from the denominator of the 
overhead ratio, we do not agree it is appropriate to deduct EMD related 
labor expenses. Therefore, the Department added EMD-related labor 
expenses into the overhead ratio and COM calculations. The Department 
then applied the ratio to the labor expense inclusive COM as per its 
standard practice. With regard to SG&A, Petitioner calculated a ratio 
by dividing all the SG&A expense by Eveready India's total COM 
(inclusive of labor expenses). See Initiation Checklist.
    Eveready India did not report a profit in its financial statements, 
therefore, Petitioner based the profit ratio on aggregate data 
published by the Reserve Bank of India (``RBI'') (See Final 
Determination of the Antidumping Duty Investigation of Saccharin from 
the People's Republic of China, (Issues and Decision Memoranda at 
Comment 9) 68 FR 27530 (May 20, 2003)), for the accounting period 2000-
2001, the most current data available from the RBI. Petitioner 
calculated profit as a percentage of the COP for public companies and 
private companies, and then averaged these two ratios to obtain a 
single profit ratio. See Initiation Checklist.
    After revising the NV calculation submitted by Petitioner as 
discussed above, the Department accepted Petitioner's calculation of NV 
for initiation purposes based on the above arguments which resulted in 
an estimated dumping margin of 31.38 percent. See Initiation Checklist 
at Attachment V.

Fair Value Comparisons

    Based on the data provided by Petitioner, there is reason to 
believe imports of EMD from Australia, Greece, Ireland, Japan, South 
Africa and the PRC are being, or are likely to be, sold at less than 
fair value.

Allegations and Evidence of Material Injury and Causation

    With respect to Australia, Greece, Ireland, Japan, South Africa and 
the PRC, Petitioner alleges that the U.S.

[[Page 51557]]

industry producing the domestic like product is being materially 
injured, or threatened with material injury, by reason of the 
individual and cumulated imports of the subject merchandise sold at 
less than NV.
    Petitioner contends the industry's injured condition is evident in 
examining net operating income, profit, net sales volumes, production 
employment, as well as inventory levels, and reduced capacity 
utilization. See Petition at pages 41-60. Petitioner asserts its share 
of the market has declined from 2000 to 2002. See Petition at page 48. 
For a full discussion of the allegations and evidence of material 
injury, see Initiation Checklist at Appendix IV and Supplemental 
Response at pages 42-42.

Initiation of Antidumping Investigations

    Based on our examination of the Petition covering EMD, we find it 
meets the requirements of section 732 of the Act. Therefore, we are 
initiating antidumping duty investigations to determine whether imports 
of EMD from Australia, Greece, Ireland, Japan, South Africa and the PRC 
are being, or are likely to be, sold in the United States at less than 
fair value. Unless this deadline is extended pursuant to section 
733(b)(1)(A) of the Act, we will make our preliminary determinations no 
later than 140 days after the date of this initiation, or January 7, 
2004.

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the Petition has been provided to representatives of 
the governments of Australia, Greece, Ireland, Japan, South Africa and 
the PRC. We will attempt to provide a copy of the public version of the 
Petition to each exporter named in the Petition, as provided in section 
19 CFR 351.203(c)(2).

International Trade Commission Notification

    The ITC will preliminarily determine on September 12, 2003, whether 
there is reasonable indication that imports of EMD from Australia, 
Greece, Ireland, Japan, South Africa and PRC are causing, or 
threatening, material injury to a U.S. industry. A negative ITC 
determination for any country will result in the investigation being 
terminated with respect to that country; otherwise, these 
investigations will proceed according to statutory and regulatory time 
limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    Dated: August 20, 2003.
Jeffrey A. May,
Acting Assistant Secretary for Import Administration.
[FR Doc. 03-21903 Filed 8-26-03; 8:45 am]
BILLING CODE 3510-DS-S