[Federal Register Volume 69, Number 126 (Thursday, July 1, 2004)]
[Notices]
[Pages 39906-39908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14983]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-825]


Sebacic Acid From the People's Republic of China: Notice of 
Initiation of Changed Circumstances Review

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

ACTION: Notice of initiation of changed circumstances review.

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SUMMARY: In November 2002, the Department of Commerce (the Department) 
revoked, in part, the antidumping duty order on sebacic acid from the 
People's Republic of China (PRC) related to subject merchandise 
exported by Tianjin Chemicals Import and Export Corporation (Tianjin) 
and produced by Hengshui Dongfeng Chemical Co., Ltd. (Hengshui). The 
Department has received an allegation from SST Materials, Inc. d/b/a/ 
Genesis Chemicals, Inc. (Genesis), a domestic interested party in this 
proceeding, that Tianjin has resumed dumping of sebacic acid produced 
by Hengshui in the United States, as described below. Genesis requests 
that the Department reinstate the antidumping duty order on Tianjin's 
sales of Hengshui-produced sebacic acid to the United States. The 
Department finds that the information submitted provides a sufficient 
basis to warrant the initiation of a changed circumstances review of 
the antidumping duty order on sebacic acid from the PRC. In this 
review, we will consider whether the Department should reinstate the 
order with respect to subject merchandise produced by Hengshui and 
exported to the United States by Tianjin.

EFFECTIVE DATE: July 1, 2004.

FOR FURTHER INFORMATION CONTACT: Robert Bolling, Office 9, AD/CVD 
Enforcement Group III, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
3434.

SUPPLEMENTARY INFORMATION:

Background

    On July 14, 1994, the Department published in the Federal Register 
the antidumping duty order on sebacic acid from the PRC. See 
Antidumping Duty Order: Sebacic Acid From the People's Republic of 
China, 59 FR 35909 (July 14, 1994). In the 2000-2001 administrative 
review of sebacic acid from the PRC, we found that one of the 
respondent companies, Tianjin, and its supplier, Hengshui, qualified 
for revocation, in part, of the antidumping duty order on sebacic acid 
under 19 CFR 351.222(b)(2) and (3). The Department found that Tianjin 
did not sell subject merchandise at less than normal value (NV) during 
the three-year period that formed the basis for the revocation request. 
Consequently, the Department revoked the order in part, with respect to 
Tianjin's sales of subject merchandise produced by Hengshui. See 
Sebacic Acid From the People's Republic of China: Final Results of 
Antidumping Duty Administrative Review and Determination To Revoke 
Order in Part, 67 FR 69719, 69720 (Nov. 19, 2002) (2001-2002 Final 
Results).
    As part of Tianjin's request for revocation, pursuant to 19 CFR 
351.222(b)(2)(i)(B), Tianjin agreed to the immediate reinstatement of 
the antidumping duty order if the Department concludes that, subsequent 
to the revocation, Tianjin sold the subject merchandise at less than 
NV. Id.
    On February 10, 2004, Genesis submitted an allegation, including 
supporting documentation, that Tianjin has resumed dumping sebacic acid 
in the United States since revocation of the order in part.\1\ Genesis 
requested that the Department reinstate the antidumping duty order on 
Tianjin's exports to the United States of sebacic acid that is produced 
by Hengshui.
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    \1\ Genesis submitted this document as part of the ongoing 2002-
2003 administrative review of the order on sebacic acid from the 
PRC. We have placed this document on the record of this changed 
circumstances review.
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    On February 17, 2004, Tianjin submitted a letter to the Department 
in which it argued that Genesis' request should be rejected because: 
(1) It is outside the scope of the 2002-2003 administrative review; and 
(2) it was untimely filed in that segment of the proceeding. Tianjin 
argued that Genesis' allegation should instead be considered in the 
context of a changed circumstances review, pursuant to 19 CFR 351.216.

Scope of the Review

    The products covered by this order are all grades of sebacic acid, 
a dicarboxylic acid with the formula 
(CH2)8(COOH)2, which include but are not limited 
to CP Grade (500 ppm maximum ash, 25 maximum APHA color), Purified 
Grade (1000 ppm maximum ash, 50 maximum APHA color), and Nylon Grade 
(500 ppm maximum ash, 70 maximum ICV color). The principal difference 
between the grades is the quantity of ash and color. Sebacic acid 
contains a minimum of 85 percent dibasic acids of which the predominant 
species is the C10 dibasic acid. Sebacic acid is sold 
generally as a free-flowing powder/flake.
    Sebacic acid has numerous industrial uses, including the production 
of nylon 6/10 (a polymer used for paintbrush and toothbrush bristles 
and paper machine felts), plasticizers, esters, automotive coolants, 
polyamides, polyester castings and films, inks and adhesives, 
lubricants, and polyurethane castings and coatings.
    Sebacic acid is currently classifiable under subheading 
2917.13.00.30 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheading is provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding is dispositive.

Initiation of Changed Circumstances Review

    Pursuant to section 751(b)(1) of the Tariff Act of 1930, as amended 
(the Act), the Department will conduct a changed circumstances review 
upon receipt of information concerning, or a request from an interested 
party for a review of, an antidumping duty order which shows changed 
circumstances sufficient to warrant a review. Genesis contends that the 
information it submitted to the Department demonstrates that, since 
revocation of the order in part, Tianjin's average U.S. import price 
during the period July 2002 through June 2003 has decreased while the 
NV for sebacic acid sold by Tianjin and produced by Hengshui has 
increased during the same period. Based on the information submitted by 
Genesis, we find that there is sufficient basis to initiate a changed 
circumstances review to determine whether in fact Tianjin has resumed 
dumping of sebacic acid in the Unites States. See the ``Export Price'' 
and ``Normal Value'' sections of this notice, below.

Allegation of Resumption of Dumping

    Genesis argued that Tianjin's U.S. import prices have decreased 
during the period July 2002 through June 2003 (i.e., the period of 
review (POR) for the ongoing 2002-2003 administrative review), as 
evidenced by publicly available import data for the POR from the U.S. 
Census Bureau. According to Genesis, this data shows a decline in the 
average import prices of sebacic acid

[[Page 39907]]

from the PRC relative to data from the same source for the period July 
2000 through June 2001 (i.e., the POR for the 2000-2001 administrative 
review in which Tianjin/Hengshui was revoked from the order).
    To derive the specific import prices charged by Tianjin, Genesis 
removed from this data the volume and value of U.S. imports made by the 
respondent in the 2002-2003 administrative review (i.e., Guangdong 
Chemicals Import and Export Corporation (Guangdong)), and concluded 
that the remaining volume and value data constituted the entirety of 
Tianjin's U.S. sales during the POR.\2\ Genesis calculated Tianjin's 
U.S. price based on the average unit value (AUV) of the remaining data 
and deducted amounts for foreign inland freight and foreign brokerage 
and handling to determine Tianjin's net U.S. sales price.
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    \2\ Genesis asserted that this was appropriate because: (1) With 
a 243.40 percent PRC country-wide antidumping duty rate on imports 
of subject merchandise from the PRC, the commercial reality must be 
that Tianjin and Guangdong account for virtually all imports; and 
(2) the Web site for Garvey Schubert Barer, counsel for Tianjin and 
Guangdong, notes that Tianjin is ``one of two Chinese exporters that 
continues to export sebacic acid to the United States.'' See 
Genesis' February 10, 2004, submission at Exhibit 7.
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    In order to assess the reasonableness of this methodology, we 
examined proprietary import data from U.S. Customs and Border 
Protection concerning imports into the United States of sebacic acid 
sold by Tianjin. See the June 25, 2004, memorandum from Greg Kalbaugh 
to the file entitled, ``Calculations Performed for Assessing the 
Reasonableness of SST Materials, Inc.'s Allegation of the Resumption of 
Dumping by Tianjin Chemicals Import and Export Corporation (Tianjin) 
and its Producer Hengshui Dongfeng Chemical Co., Ltd. (Hengshui) for 
the Changed Circumstances Review of Sebacic Acid from the PRC,'' 
(Initiation Memorandum) at Attachment I. We confirmed that Genesis' 
allegation of the resumption of dumping did not undervalue the AUV of 
these imports.

Normal Value

    Genesis argued that, in conjunction with a decrease in U.S. price, 
there has been a corresponding increase in NV. In the most recently 
completed administrative review (i.e., covering 2000-2001), the 
Department valued castor oil using a surrogate value obtained from The 
Economic Times of India. See the July 31, 2002, memorandum from Gregory 
Kalbaugh to the File entitled, ``Preliminary Valuation of Factors of 
Production,'' in the 2000-2001 administrative review of sebacic acid 
from the PRC.\3\ (This document has been placed on the record of this 
changed circumstances review.) As part of its allegation of the 
resumption of dumping, Genesis submitted updated surrogate value 
information for castor oil from The Economic Times of India for the 
2002-2003 POR. In comparison, the updated surrogate value for castor 
oil submitted by Genesis shows an increase of greater than fifteen 
percent in the price of castor oil (i.e., an increase in the price of 
castor oil from $685.54 per metric ton to $790.01 per metric ton 
between the 2000-2001 and 2002-2003 administrative review periods.) 
Moreover, based upon the factors of production and surrogate value data 
submitted during the 2000-2001 POR, as a percentage of the cost of 
manufacture, castor oil constitutes, by far, the largest material input 
into sebacic acid. See the proprietary version of the November 7, 2002, 
memorandum from Patrick Connolly to the File entitled, ``Tianjin 
Chemicals Import and Export Corporation U.S. Price and Factors of 
Production Adjustments for the Final Results.'' (This document has been 
placed on the record of this changed circumstances review.)
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    \3\ The surrogate value for castor oil was unchanged in the 
final results of review.
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    To calculate NV, Genesis used proprietary factor value information 
and publicly available surrogate value information which are on the 
record in the 2002-2003 administrative review. We examined Genesis' 
calculated NV in order to assess its reasonableness. We confirmed that 
Genesis used Hengshui's reported factors of production for the 2002-
2003 administrative review. See the Initiation Memorandum at Attachment 
II.
    Regarding the factor values, we noted that, in its calculation of 
the alleged weighted-average dumping margin, Genesis valued castor oil 
using Hengshui's market economy purchase of this material input rather 
than the updated surrogate value it placed on the record of the 2002-
2003 review, as noted above. However, because Hengshui purchased this 
input from a country that has been found to have broadly-available 
export subsidies, it is not appropriate to rely on this purchase. 
Therefore, to value castor oil, we have relied on the updated surrogate 
value information from The Economic Times of India placed on the record 
by Genesis in its February 10, 2004, submission. In addition, Genesis 
miscalculated freight expenses on packing factors. For example, Genesis 
calculated freight on certain jumbo bags to be more than seven times 
the calculated factor value for the bags themselves. However, after 
adjusting NV to use the revised surrogate value for castor oil and 
excluding packing expenses in their entirety from the margin 
calculation, we found the alleged dumping margin in this case to be 
above de minimis. For the specifics of these calculations, see the 
Initiation Memorandum.
    Furthermore, we tested the reasonableness of Genesis' NV using two 
additional methodologies: (1) In addition to valuing castor oil using 
the updated castor oil surrogate value from The Economic Times of India 
submitted by Genesis, we also valued the remaining components of NV by 
inflating forward the 2000-2001 costs to be contemporaneous with the 
2002-2003 administrative review period; and (2) using the updated 
castor oil surrogate value, we performed the same calculations except 
that we based NV on the factors of production currently reported by 
Hengshui in the ongoing 2002-2003 administrative review. While these 
two NVs were lower than Genesis' NV, all calculated NVs in this case 
were significantly higher than the net U.S. prices. (See the ``Basis 
for Reinstatement'' section below.) For further discussion, see the 
Initiation Memorandum at page 2 and Attachments IV and V.

Basis for Reinstatement

    Section 351.222(b)(2) of the Department's regulations provides that 
the Department may revoke an antidumping duty order in part if the 
Secretary concludes, inter alia, that one or more exporters or 
producers covered by the order have sold the merchandise at not less 
than NV for a period of at least three consecutive years. To obtain a 
company-specific revocation under Sec.  351.222(b)(2), for any exporter 
or producer that the Department previously determined to have sold the 
subject merchandise at less than normal value, that exporter or 
producer must agree to immediate reinstatement in the antidumping duty 
order, as long as any exporter or producer is subject to the order, if 
the Department concludes that, subsequent to the revocation, that 
exporter or producer sold the subject merchandise at less than NV. See 
19 CFR 351.222(b)(2)(i)(B). In addition, Sec.  351.222(b)(3) provides 
that for any exporter that is not a producer of subject merchandise, 
the Department will normally revoke the order only with respect to 
subject merchandise produced or supplied by those companies that 
supplied the exporter. Thus, under the Department's regulations, as 
long as an antidumping duty order remains in force, an entity

[[Page 39908]]

previously granted a conditional revocation may be reinstated in that 
order if it is established that the entity has resumed dumping of 
subject merchandise.
    In this case, another producer or exporter remains subject to the 
antidumping duty order on sebacic acid from the PRC. See 2001-2002 
Final Results. In addition, Tianjin was previously found to have sold 
the subject merchandise at less than NV. See Sebacic Acid From the 
People's Republic of China: Final Results of Antidumping Duty 
Administrative Review, 64 FR 69503, (December 13, 1999). Accordingly, 
the Department granted Tianjin conditional revocation because of its 
past dumping behavior and based upon its agreement to immediate 
reinstatement in the antidumping duty order if the Department were to 
find that the company resumed dumping of sebacic acid from the PRC. See 
2001-2002 Final Results at 69720.
    In this case, Genesis has alleged that Tianjin has resumed dumping 
at a rate of 49.9 percent based upon its calculated net U.S. price and 
NV for the period July 2002 through June 2003. Genesis argues, 
therefore, that the Department should reinstate the antidumping duty 
order on sebacic acid from the PRC with respect to Tianjin's sales of 
subject merchandise produced by Hengshui.
    As described in the ``Export Price'' and ``Normal Value'' sections, 
above, we have examined Genesis' margin calculation in order to assess 
its reasonableness. We discovered minor discrepancies in Genesis' 
margin calculation; however, with adjustments, we find that Genesis' 
allegation of resumption of dumping has merit and warrants initiation 
of a change circumstances review because it provides a reasonable 
indication that Tianjin's overall dumping margin for the review period 
is greater than de minimis. Accordingly, consistent with 19 CFR 
351.216, we are initiating a changed circumstances review to determine 
whether in fact Tianjin has resumed dumping of sebacic acid from the 
PRC. See the Initiation Memorandum at page 2 and Attachments IV and V.
    Concurrent with the date of publication of this notice, we will 
issue a partial section A and a sections C and D antidumping 
questionnaire to Tianjin.\4\ At this time, we are not requiring Tianjin 
to answer questions related to separate rates. Because we found in the 
2000-2001 administrative review that Tianjin was a company that merited 
a separate rate, and no administrative review has been initiated that 
would require Tianjin to substantiate, once again, a de facto and de 
jure absence of government control of its export activities, we will 
not examine the issue of whether Tianjin continues to merit a separate 
rate, absent information indicating otherwise. Accordingly, we shall 
only examine Tianjin's entitlement to a separate rate in the context of 
any future administrative review in which Tianjin may participate.
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    \4\ Section A of the questionnaire requests general information 
concerning a company's corporate structure and business practices, 
the merchandise under this review that it sells, and the manner in 
which it sells that merchandise in all of its markets. Section B 
requests a complete listing of all home market sales, or, if the 
home market is not viable, of sales in the most appropriate third-
country market (this section is not applicable to respondents in 
non-market economy (NME) cases). Section C requests a complete 
listing of U.S. sales. Section D requests information on the factors 
of production of the merchandise under investigation. Section E 
requests information on further manufacturing.
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    Although Genesis submitted its allegation on the record of the 
ongoing administrative review, we find that a changed circumstances 
review is the proper vehicle in which to make a determination based on 
Genesis' request. Accordingly, we have removed Genesis' allegation from 
the record of the administrative review and have placed it on the 
record of this newly initiated changed circumstances review.
    The Department will publish in the Federal Register a notice of 
preliminary results of changed circumstances review, in accordance with 
19 CFR 351.221(c)(3)(i), which will set forth the factual and legal 
conclusions upon which our preliminary results are based, and a 
description of any action proposed based on those results. In the event 
that the Department preliminarily finds that Tianjin has resumed 
dumping sebacic acid produced by Hengshui, and thus should be 
reinstated in the existing antidumping duty order on sebacic acid from 
the PRC, we will order Customs and Border Protection to suspend 
liquidation of entries for all shipments of the subject merchandise 
entered, or withdrawn from warehouse, for consumption on or after the 
publication date of the preliminary determination. The Department will 
also issue its final results of review within 270 days of the date on 
which the changed circumstances review is initiated, in accordance with 
19 CFR 351.216(e), and will publish these results in the Federal 
Register.
    This notice is in accordance with section 751(b)(1) of the Act and 
19 CFR 351.216 and 351.222.

    Dated: June 25, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 04-14983 Filed 6-30-04; 8:45 am]
BILLING CODE 3510-DS-P