[Federal Register Volume 77, Number 108 (Tuesday, June 5, 2012)]
[Notices]
[Pages 33167-33181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13585]



[[Page 33167]]

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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-938]


Citric Acid and Certain Citrate Salts From the People's Republic 
of China: Preliminary Results of Countervailing Duty Administrative 
Review

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

SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty (CVD) order on citric 
acid and citrate salts from the People's Republic of China for the 
period January 1, 2010, through December 31, 2010. These preliminary 
results cover RZBC Group Shareholding Co., Ltd., RZBC Co., Ltd., RZBC 
Juxian Co., Ltd., and RZBC Imp. & Exp. Co., Ltd. (collectively, the 
RZBC Companies). If these preliminary results are adopted in our final 
results of this review, we will instruct U.S. Customs and Border 
Protection (CBP) to assess countervailing duties as detailed in the 
``Preliminary Results of Review'' section of this notice. Interested 
parties are invited to comment on these preliminary results.

DATES: Effective Date: June 5, 2012.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Patricia Tran, AD/
CVD Operations, Office 3, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW., Washington, DC 20230; telephone (202) 482-4793 
and (202) 482-1503, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On May 29, 2009, the Department published a CVD order on citric 
acid and certain citrate salts (citric acid) from the People's Republic 
of China (PRC).\1\ On May 2, 2011, we published a notice of 
``Opportunity to Request Administrative Review'' of the order.\2\
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    \1\ See Citric Acid and Certain Citrate Salts from the People's 
Republic of China: Notice of Countervailing Duty Order, 74 FR 25705 
(May 29, 2009) (CVD Order).
    \2\ See Antidumping or Countervailing Duty Order, Finding, or 
Suspended Investigation; Opportunity To Request Administrative 
Review, 76 FR 24460 (May 2, 2011).
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    On May 20, 2011, we received a request to conduct an administrative 
review from the RZBC Companies.\3\ On May 27, 2011, we received a 
request for administrative review from Yixing Union Biochemical Co., 
Ltd. (Yixing Union Co.) and Yixing Union Cogeneration Co., Ltd. 
(Cogeneration) (collectively, the Yixing Union Companies). On May 31, 
2011, we received a request for administrative review from Huangshi 
Xinghua Biochemical Co., Ltd. (Xinghua). On June 14, 2011, the Yixing 
Union Companies withdrew their request for review. In accordance with 
19 CFR 351.221(c)(1)(i), we published a notice of initiation of the 
review on June 28, 2011, covering the RZBC Companies and Xinghua.\4\
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    \3\ This public document and all other public documents and 
public versions generated in the course of this proceeding by the 
Department and interested parties are available to the public 
through Import Administration's Antidumping and Countervailing Duty 
Centralized Electronic Service System (IA ACCESS), located in Room 
7046 of the main Department building.
    \4\ See Initiation of Antidumping and Countervailing Duty 
Administrative Reviews and Request for Revocation in Part, 76 FR 
37781 (June 28, 2011).
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    On July 26, 2011, the Department issued the initial questionnaire 
to the Government of the People's Republic of China (GOC), the RZBC 
Companies, and Xinghua. On July 27, 2011, Xingua withdrew its review 
request. On August 11, 2011, the Department published a partial 
rescission of review for Xingua.\5\
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    \5\ See Citric Acid and Certain Citrate Salts from the People's 
Republic of China: Partial Rescission of Countervailing Duty 
Administrative Review, 76 FR 49735 (August 11, 2011).
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    On September 27, 2011, the GOC and the RZBC Companies submitted 
their responses to the initial questionnaire. Based on a request by 
Petitioners,\6\ on October 12, 2011, the Department extended the 
regulatory deadline to submit factual information until November 17, 
2011. On October 17, 2011, Petitioners submitted comments on the 
initial questionnaire responses filed by the GOC and the RZBC 
Companies.
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    \6\ Petitioners are Archer Daniels Midland Company, Cargill, 
Incorporated, and Tate & Lyle Ingredients Americas LLC.
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    On November 17, 2011, Petitioners submitted new factual information 
concerning world market prices and international freight prices for 
steam coal and sulfuric acid as well as internal freight charges for 
steam coal. On November 28, 2011, the RZBC Companies submitted new 
factual information concerning world prices for sulfuric acid in 
response to Petitioners' November 17, 2011, submission. On December 13, 
2011, Petitioners replied to the RZBC Companies' November 28, 2011, 
submission and submitted additional factual information. On December 
15, 2011, the Department issued letters to the RZBC Companies and 
Petitioners in which it rejected the factual information contained in 
their respective November 28 and December 13, 2011, submissions on the 
grounds that the submissions were untimely. On December 21, 2011, the 
RZBC Companies submitted a letter objecting to the Department's 
decision to reject its factual information. On December 22, 2011, 
Department officials met with counsel representing the RZBC Companies 
to discuss the Department's decision to reject the November 28, 2011, 
new factual information submitted by the RZBC Companies.
    On December 30, 2011, the Department published a notice of 
postponement for the preliminary results of this review until no later 
than May 30, 2012.\7\
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    \7\ See Citric Acid and Certain Citrate Salts from the People's 
Republic of China: Extension of Time Limit for Preliminary Results 
of Countervailing Duty Administrative Review, 76 FR 82275 (December 
30, 2011).
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    On January 3, 2012, the Department issued a letter to the RZBC 
Companies regarding the November 28, 2011, submission, stating that the 
companies' arguments were considered, but that the Department continues 
to reject the document on the grounds that it was untimely.
    On January 9, 2012, the Department issued a supplemental 
questionnaire to the RZBC Companies regarding the provision of steam 
coal for less than adequate remuneration (LTAR) and provision of 
sulfuric acid for LTAR programs. On February 1, 2012, the Department 
issued a supplemental questionnaire to the GOC and a second 
supplemental to the RZBC Companies. On February 6 and March 2, 2012, 
the RZBC Companies submitted their supplemental questionnaire 
responses. On February 15 and 29, 2012, the GOC submitted its 
supplemental questionnaire responses.
    On February 27, 2012, Petitioners submitted deficiency comments on 
and filed rebuttal factual information to the GOC's February 15, 2012, 
supplemental questionnaire response regarding the provision of steam 
coal for LTAR.
    On March 8 and 16, 2012, the Department issued supplemental 
questionnaires to the GOC and received the GOC's responses on March 23 
and 29, 2012. On March 20, 2012, Petitioners submitted deficiency 
comments on the RZBC Companies' March 2, 2012, supplemental 
questionnaire response. On March 21, 2012, the Department issued a 
third supplemental questionnaire to the RZBC Companies and received the 
questionnaire response on April 11, 2012.

[[Page 33168]]

    On May 18, 2012, Petitioners filed pre-preliminary comments on the 
provision of steam coal for LTAR program.

Scope of the Order

    The scope of the order includes all grades and granulation sizes of 
citric acid, sodium citrate, and potassium citrate in their unblended 
forms, whether dry or in solution, and regardless of packaging type. 
The scope also includes blends of citric acid, sodium citrate, and 
potassium citrate; as well as blends with other ingredients, such as 
sugar, where the unblended form(s) of citric acid, sodium citrate, and 
potassium citrate constitute 40 percent or more, by weight, of the 
blend. The scope of the order also includes all forms of crude calcium 
citrate, including dicalcium citrate monohydrate, and tricalcium 
citrate tetrahydrate, which are intermediate products in the production 
of citric acid, sodium citrate, and potassium citrate. The scope of the 
order does not include calcium citrate that satisfies the standards set 
forth in the United States Pharmacopeia and has been mixed with a 
functional excipient, such as dextrose or starch, where the excipient 
constitutes at least 2 percent, by weight, of the product. The scope of 
the order includes the hydrous and anhydrous forms of citric acid, the 
dihydrate and anhydrous forms of sodium citrate, otherwise known as 
citric acid sodium salt, and the monohydrate and monopotassium forms of 
potassium citrate. Sodium citrate also includes both trisodium citrate 
and monosodium citrate, which are also known as citric acid trisodium 
salt and citric acid monosodium salt, respectively. Citric acid and 
sodium citrate are classifiable under 2918.14.0000 and 2918.15.1000 of 
the Harmonized Tariff Schedule of the United States (HTSUS), 
respectively. Potassium citrate and crude calcium citrate are 
classifiable under 2918.15.5000 and 3824.90.9290 of the HTSUS, 
respectively. Blends that include citric acid, sodium citrate, and 
potassium citrate are classifiable under 3824.90.9290 of the HTSUS. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the merchandise is dispositive.

Scope Rulings

    On November 2, 2010, Aceto Corporation (Aceto) requested that the 
Department find its calcium citrate USP to be outside the scope of the 
CVD Order and the antidumping duty orders on citric acid and certain 
citrate salts from the PRC and Canada. See CVD Order, 74 FR 25703. On 
February 14, 2011, the Department issued a final scope ruling, finding 
that Aceto's product is within the scope of those orders. See 
Memorandum from Christopher Siepmann, International Trade Analyst, to 
Christian Marsh, Deputy Assistant Secretary for Antidumping and 
Countervailing Duty Operations, ``Citric Acid and Certain Citrate 
Salts: Scope Ruling for Calcium Citrate USP,'' (February 14, 2011).
    On July 26, 2010, Global Commodity Group LLC (GCG) requested that 
the Department find a blend of citric acid it imports containing 35 
percent citric acid from the PRC and 65 percent citric acid from other 
countries is outside the scope of the CVD Order and the antidumping 
duty order on citric acid and certain citrate salts from the PRC. On 
May 2, 2011, the Department issued a final scope ruling, finding that 
GCG's product is within the scope of those orders. See Memorandum from 
Christopher Siepmann, International Trade Analyst, to Christian Marsh, 
Deputy Assistant Secretary for Antidumping and Countervailing Duty 
Operations, ``Citric Acid and Certain Citrate Salts: Final 
Determination on Scope Inquiry for Blended Citrate Acid from the 
People's Republic of China and Other Countries,'' (May 2, 2011). 
Pursuant to this ruling, we have instructed CBP that the quantity of 
citric acid from the PRC in the commingled merchandise is subject to 
the CVD and antidumping orders. We have also instructed CBP that if the 
quantity of citric acid from the PRC in a commingled shipment cannot be 
accurately determined, then the entire commingled quantity is subject 
to the orders.

Period of Review

    The period for which we are measuring subsidies, i.e., the period 
of review (POR), is January 1, 2010, through December 31, 2010.

Application of the CVD Law to Imports From the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) 
(Coated Paper from the PRC), and the accompanying Issues and Decision 
Memorandum (Coated Paper Decision Memorandum). In Coated Paper from the 
PRC, the Department found that:

given the substantial difference between the Soviet-style economies 
and China's economy in recent years, the Department's previous 
decision not to apply the CVD law to these Soviet-style economies 
does not act as {a{time}  bar to proceeding with a CVD investigation 
involving products from China.

See Coated Paper Decision Memorandum at Comment 6. The Department has 
affirmed its decision to apply the CVD law to the PRC in numerous 
subsequent determinations.\8\ Furthermore, on March 13, 2012, Public 
Law 112-99 was enacted which makes clear that the Department has the 
authority to apply the CVD law to non-market economies (NMEs) such as 
the PRC. The effective date provision of the enacted legislation makes 
clear that this provision applies to this proceeding.\9\
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    \8\ See, e.g., Circular Welded Carbon Quality Steel Pipe from 
the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Affirmative Determination of Critical 
Circumstances, 73 FR 31966 (June 5, 2008), (CWP from the PRC), and 
accompanying Issues and Decision Memorandum (CWP Decision 
Memorandum) at Comment 1.
    \9\ See Public Law 112-99, Sec.  1(b), 126 Stat. 265 (2012).
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    Additionally, for the reasons stated in the CWP Decision 
Memorandum, we are using the date of December 11, 2001, the date on 
which the PRC became a member of the World Trade Organization (WTO), as 
the date from which the Department will identify and measure subsidies 
in the PRC. See CWP Decision Memorandum at Comment 2.

Use of Facts Otherwise Available and Adverse Inferences

    Sections 776(a)(1) and (2) of the Tariff Act of 1930, as amended 
(the Act), provide that the Department shall apply ``facts otherwise 
available'' if necessary information is not on the record or an 
interested party or any other person: (A) Withholds information that 
has been requested; (B) fails to provide information within the 
deadlines established, or in the form and manner requested by the 
Department, subject to subsections (c)(1) and (e) of section 782 of the 
Act; (C) significantly impedes a proceeding; or (D) provides 
information that cannot be verified as provided by section 782(i) of 
the Act.
    Section 776(b) of the Act further provides that the Department may 
use an adverse inference in applying the facts otherwise available when 
a party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information.
    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the result is 
sufficiently adverse ``as to effectuate the statutory purposes of the 
adverse facts available rule to induce respondents to provide the 
Department with complete and

[[Page 33169]]

accurate information in a timely manner.'' See Notice of Final 
Determination of Sales at Less than Fair Value: Static Random Access 
Memory Semiconductors from Taiwan, 63 FR 8909, 8932 (February 23, 
1998). The Department's practice also ensures ``that the party does not 
obtain a more favorable result by failing to cooperate than if it had 
cooperated fully.'' See Statement of Administrative Action (SAA) 
accompanying the Uruguay Round Agreements Act, H.R. Doc. No. 103-316, 
vol. 1 at 870 (1994).

GOC--Sulfuric Acid

    In the July 26, 2011, initial questionnaire, we requested ownership 
information from the GOC about the companies that produced the sulfuric 
acid purchased by the RZBC Companies.\10\ We notified the GOC that the 
Department generally treats producers that are majority owned by the 
government or a government entity as controlled by the government and, 
hence, as ``authorities'' within the meaning of section 771(5)(B) of 
the Act. However, for those majority government-owned companies that 
the GOC argues are not ``authorities'' and for each producer that is 
not majority owned by the government, we instructed the GOC to answer 
all questions in Appendix 5 (Information Regarding Input Producers) and 
Appendix 6 (Information on Government and Chinese Communist Party (CCP) 
Officials and Representatives).
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    \10\ See Department's Initial Questionnaire Issued to the GOC 
(July 26, 2011) at II-8.
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    With the exception of one sulfuric acid producer, the GOC did not 
challenge the Department's ``authority'' practice with regard to 
producers that are majority owned by the government or a government 
entity. The GOC attempted to provide information to Appendices 5 and 6 
for only one of the sulfuric acid producers from which the RZBC 
Companies purchased the input during the POR. For that sulfuric acid 
producer, the GOC provided a response to some of the questions 
contained in Appendix 5, but failed to identify owners, members of the 
board of directors, or managers who were also government or CCP 
officials or representatives during the POR.\11\ For the same sulfuric 
acid producer, the GOC did not respond to any questions contained in 
Appendix 6.\12\ To Appendix 6, the GOC stated that the Department's CCP 
questions are not relevant to the investigation of the LTAR program and 
that, as a matter of PRC law the government cannot interfere in the 
management and operation of the sulfuric acid suppliers.\13\ The GOC 
stated that, in prior cases, it explained that the CCP, the People's 
Congress, and the Chinese People's Political Consultative Conference 
are not government bodies.\14\ The GOC also stated that ``because these 
organizations are not governmental bodies, the GOC cannot require them 
to provide the information requested by the Department.'' \15\ 
Furthermore, the GOC stated that ``there is no central informational 
database to search for the requested information, and the industry and 
commerce administrations do not require companies to provide such 
information.'' \16\ As such, the GOC claimed that it was unable to 
respond to the Department's questions.\17\
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    \11\ See GOC's Initial Questionnaire Response (IQR) (September 
27, 2011) at II-12.
    \12\ Id. at II-14 through II-18.
    \13\ Id.
    \14\ Id. at II-14.
    \15\ Id. at II-16.
    \16\ Id.
    \17\ Id.
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    On March 16, 2012, we issued a deficiency questionnaire in which we 
asked the GOC to provide a response to those questions in Appendix 5 
and Appendix 6, which it did not answer in the initial questionnaire 
response.\18\ In its March 23, 2012, response, the GOC did not provide 
an answer to the questions, stating ``The GOC has previously provided a 
response that it believes appropriately addresses these inquires.'' 
\19\
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    \18\ See Department's Deficiency Questionnaire Issued to the GOC 
(March 16, 2012) at 3.
    \19\ See GOC's Deficiency Questionnaire Response (March 23, 
2012) at 5.
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    Regarding the GOC's objection to the Department's questions about 
the role of CCP officials in the management and operations of the 
sulfuric acid producer, we have explained our understanding of the 
CCP's involvement in the PRC's economic and political structure in a 
past proceeding.\20\ Public information suggests that the CCP exerts 
significant control over activities in the PRC.\21\ This conclusion is 
supported by, among other documents, a publicly available background 
report from the U.S. Department of State.\22\ With regard to the GOC's 
claim that Chinese law prohibits GOC officials from taking positions in 
private companies, we have previously found that this particular law 
does not pertain to CCP officials.\23\
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    \20\ See Memorandum to the File from Patricia M. Tran, 
``Additional Documents for the Preliminary Results,'' dated May 30, 
2012 (Additional Documents Memorandum) at Attachments II and III 
(which include the post-preliminary analysis memorandum from certain 
seamless carbon and alloy steel standard, line, and pressure pipe 
and a State Department report, both recognizing the significant role 
the CCP has in the GOC).
    \21\ Id. at Attachment IV.
    \22\ Id.; see also Certain Seamless Carbon and Alloy Steel 
Standard, Line, and Pressure Pipe from the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, Final 
Affirmative Critical Circumstances Determination, 75 FR 57444 
(September 21, 2010) (Seamless Pipe from the PRC), and accompanying 
Issues and Decision Memorandum (Seamless Pipe Decision Memorandum) 
at Comment 7.
    \23\ See Seamless Pipe Decision Memorandum at 16.
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    Because the GOC did not respond to our requests for information on 
this issue, we have no further basis for evaluating the GOC's claim 
that the role of the CCP is irrelevant. Thus, the Department finds, as 
it has in other PRC CVD proceedings, that the information requested 
regarding the role of CCP officials in the management and operations of 
the sulfuric acid producer, and in the management and operations of the 
producer's owners, is necessary to our determination of whether the 
producer is an authority within the meaning of section 771(5)(B) of the 
Act. In addition, the GOC did not promptly notify the Department, in 
accordance with section 782(c), that it was unable to submit the 
information in the requested form and manner, nor did it suggest any 
alternative forms for submitting this information. Further, the GOC did 
not provide any information regarding the attempts it undertook to 
obtain this information, despite the fact that we provided the GOC with 
a second opportunity to provide the information. Therefore, we have no 
basis to accept the GOC's claim that it is unable to provide this 
information. This is particularly appropriate given that the GOC has 
claimed that such information regarding the CCP is irrelevant, when the 
Department has made it clear on the record of this administrative 
review, other segments of this proceeding, as well as other PRC CVD 
proceedings that such information is relevant to our analysis of 
whether input producers are ``authorities'' under the statute.
    Therefore, we preliminarily find that the GOC has withheld 
necessary information that was requested of it and, thus, that the 
Department must rely on ``facts otherwise available'' in conducting our 
preliminary analysis of a sulfuric acid producer.\24\ Moreover, we 
preliminarily find that the GOC has failed to cooperate by not acting 
to the best of its ability to comply with our request for information. 
By stating that the requested information is not relevant, the GOC has 
placed itself in the position of the Department, and only

[[Page 33170]]

the Department can determine what is relevant to this administrative 
review.\25\ Furthermore, by stating that it is unable to obtain the 
information because the CCP is not the government, the GOC is 
substantially non-responsive. The GOC would have the Department reach 
its determination on the role of the CCP with regard to the government 
and the input producer based solely on the conclusory statements of the 
GOC without any of the information that the Department considers 
necessary for its analysis. As this constitutes a failure to cooperate 
to the best of its ability, we find that an adverse inference is 
warranted in the application of facts available.\26\ As AFA, we 
preliminarily find that the sulfuric acid producer for which the GOC 
did not provide complete information is an ``authority'' within the 
meaning of section 771(5)(B) of the Act.
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    \24\ See section 776(a)(2)(A) of the Act.
    \25\ See Ansaldo Componenti, S.p.A. v. United States, 628 F. 
Supp. 198, 205 (CIT 1986) (stating that ``{i{time} t is Commerce, 
not the respondent, that determines what information is to be 
provided''). The Court in Ansaldo criticized the respondent for 
refusing to submit information which the respondent alone had 
determined was not needed, for failing to submit data which the 
respondent decided could not be a basis for the Department's 
decision, and for claiming that submitting such information would be 
``an unreasonable and unnecessary burden on the company.'' Id. See 
also Essar Steel Ltd. v. United States, 721 F. Supp. 2d 1285, 1298-
99 (CIT 2010) (stating that ``{r{time} egardless of whether Essar 
deemed the license information relevant, it nonetheless should have 
produced it {in{time}  the event that Commerce reached a different 
conclusion'' and that ``Commerce, and not Essar, is charged with 
conducting administrative reviews and weighing all evidence in its 
calculation of a countervailing duty margin''); NSK, Ltd. v. United 
States, 919 F. Supp. 442, 447 (CIT 1996) (``NSK's assertion that the 
information it submitted to Commerce provided a sufficient 
representation of NSK's cost of manufacturing misses the point that 
`it is Commerce, not the respondent, that determines what 
information is to be provided for an administrative review.'''); 
Nachi-Fujikoshi Corp. v. United States, 890 F. Supp. 1106, 1111 (CIT 
1995) (``Respondents have the burden of creating an adequate record 
to assist Commerce's determinations.'').
    \26\ See section 776(b) of the Act.
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GOC--Steam Coal

    In the final results of the first administrative review, the 
Department was not able to determine whether steam coal is being 
provided by the GOC to a specific industry or enterprise or group of 
industries or enterprises, because of insufficient record evidence. See 
Citric Acid and Certain Citrate Salts from the People's Republic of 
China: Final Results of Countervailing Duty Administrative Review, 76 
FR 77206 (December 12, 2011) (Citric Acid First Review), and 
accompanying Issues and Decision Memorandum (Citric Acid First Review 
ID Memo) at Comment 6. We stated that we would revisit the de facto 
specificity of the provision of steam coal for LTAR program in a future 
review. Id.
    On February 1, 2012, we issued a supplemental questionnaire in 
which we requested the GOC to provide the following information 
concerning the steam coal industry in the PRC for 2008, 2009, and 2010:

    the number of producers of steam coal;
    the percentage of total volume and value of domestic production 
of steam coal that is accounted for by companies in which the GOC 
maintains an ownership or management interest either directly or 
through other government entities;
    the names and addresses of the top ten steam coal producing 
firms--in terms of sales and quantity produced--in which the GOC 
maintains an ownership or management interest;
    a discussion of what laws or policies govern the pricing of 
steam coal, the levels of production of steam coal, or the 
development of steam coal capacity; and a list of industries in 
China that use steam coal and the volume of steam coal used/consumed 
by each industry and submit official documentation to support the 
response.

    On February 15, 2012, the GOC provided an inadequate response to 
the Department's questions regarding steam coal, stating that ``the GOC 
only collects information on general coal producers and does not 
disaggregate the data it collects about the coal industry by different 
segments within that industry.'' \27\ The GOC added that ``most of the 
Chinese coal producers also produced steam coal and, thus, the GOC 
believes that providing information on general coal producers and the 
general coal industry will provide a reasonable indication of nature of 
the steam coal industry.'' \28\
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    \27\ See GOC's First Supplemental Questionnaire Response--Part A 
(February 15, 2012) (GOC Part A SQR) at 1.
    \28\ Id.
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    Specifically, to the Department's request for the number of 
producers of steam coal for 2008, 2009, and 2010, the GOC provided 
information on coal producers.\29\ Similarly, to the Department's 
request for the percentage of total volume and value of domestic 
production of steam coal that is accounted for by companies in which 
the GOC maintains an ownership or management interest, the GOC limited 
its response to only ``coal producers that are wholly state-owned or 
state-controlled'' and submitted those ``companies' share of gross 
industry revenue.'' \30\ In response to the Department's request for 
the names and addresses of the top ten steam coal producing firms, in 
terms of sales and quantity produced, in which the GOC maintains an 
ownership or management interest, the GOC provided a list of ten coal 
companies for each year, but failed to submit the requested ``sales and 
quantity produced'' for the listed companies.\31\ Additionally, to the 
Department's request for a list of industries in China that use steam 
coal and the volume of steam coal used/consumed by each industry, the 
GOC provided a list of industries that purchase steam coal directly 
with no associated volume data and no explanation about how the list 
was compiled.\32\
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    \29\ Id.
    \30\ Id. at 1-2
    \31\ Id. at 2-4.
    \32\ Id. at 5 and Exhibit 2.
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    On March 8, 2012, we issued a second supplemental questionnaire in 
which we again asked the GOC to provide a response to the provision of 
steam coal questions.\33\ In its March 29, 2012, response, the GOC 
explained that after receiving the February 1, 2012, questionnaire, the 
government contacted the National Bureau of Statistics of China (NBSC) 
to obtain information on the steam coal industry, but the NBSC stated 
that it did not have such information.\34\ The GOC stated that it also 
consulted with the China National Coal Association (CNCA), which 
responded that:
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    \33\ See Department's Supplemental Questionnaire Issued to the 
GOC (March 8, 2012).
    \34\ See GOC's Second SQR (March 29, 2012) (GOC Second SQR) at 
1.

    ``At present, relevant Chinese agencies and institutions have 
not collected information on the total number of steam coal 
producers. At present, almost all coal producers produce both steam 
coal and coking coal. Until now, there is not a single coal producer 
that produces solely coking coal. Therefore {the total number of 
Chinese coal producers{time}  should be the total number of Chinese 
steam coal producers.'' \35\
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    \35\ Id.

    As such, the GOC stated that it submitted information on the steam 
coal industry/production in its February 15, 2012, response and had no 
additional information to provide to the Department.\36\ Concerning the 
Department's second request for a list of industries in China that use 
steam coal and the volume of steam coal used/consumed by each industry, 
the GOC, in its March 29, 2012, response stated that ``this information 
has already been provided by the GOC, to the best of its ability'' in 
its February 15, 2012, response.\37\ However, in response to the 
Department's request for this data, in its February 15, 2012, response, 
the GOC simply submitted a list of industries that

[[Page 33171]]

it claims purchase steam coal directly and failed to submit the 
requested volume data.\38\ The GOC also failed to provide documentation 
supporting its response that those listed industries actually purchase 
steam coal.\39\
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    \36\ Id.
    \37\ Id. at 4.
    \38\ See GOC Part A SQR at 5 and Exhibit 2.
    \39\ Id.
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    With respect to the GOC's failure to provide the information 
requested about steam coal, we preliminarily find that necessary 
information is not available on the record and that the GOC has 
withheld necessary information that was requested of it and, thus, the 
Department must rely on facts otherwise available.\40\ Concerning the 
PRC steam coal industry/production, we preliminarily find that the GOC 
acted to the best of its ability in responding to the Department's 
information request. The GOC provided a detailed explanation of the 
efforts it took to obtain information regarding steam coal. Because the 
GOC's explanation is sufficient to determine that it acted to the best 
of its ability, we are relying on the ``facts available'' on the record 
and are not applying an adverse inference for the preliminary finding 
on whether PRC prices from actual transactions involving Chinese buyers 
and sellers are significantly distorted by the involvement of the GOC.
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    \40\ See sections 776(a)(1) and (a)(2)(A) of the Act.
---------------------------------------------------------------------------

    As noted above, the GOC submitted information for the coal industry 
and stated that the information on general coal producers and the 
general coal industry can provide a reasonable indication of the steam 
coal industry. We, therefore, are relying on that general coal 
information to determine whether the PRC steam coal market is distorted 
by the involvement of the GOC. In its February 15, 2012, supplemental 
questionnaire response, the GOC reported that Chinese wholly state-
owned or state controlled coal producers accounted for 60.59, 61.94, 
and 59.13 percent of gross industry revenue in 2008, 2009, and 2010, 
respectively.\41\ The fact that Chinese state-owned enterprises were 
responsible for such a large percentage of domestic production volume, 
as reflected in their share of gross industry revenue, we preliminarily 
find that it is reasonable to conclude that actual transaction prices 
are significantly distorted as a result of the government's involvement 
in the market. See Preamble to Countervailing Duty Regulations, 63 FR 
65348, 65377 (November 25, 1998) (Preamble); see also ``Provision of 
Steam Coal for LTAR,'' below.
---------------------------------------------------------------------------

    \41\ See GOC Part A SQR at 2.
---------------------------------------------------------------------------

    We preliminary find, however, that the GOC failed to cooperate by 
not acting to the best of its ability in responding to the Department's 
information request about the PRC industries that use steam coal and 
the volume of steam coal used/consumed by each of those industries. 
Despite two opportunities to submit volume data for the industries 
reported to purchase steam coal, the GOC chose to not provide such data 
to the Department. The GOC did not notify the Department, in accordance 
with section 782(c) of the Act, that it was unable to submit the 
information in the requested form and manner, nor did it suggest any 
alternative forms of data. As a result, the record is void of any 
evidence that would allow the Department to conduct an analysis to 
determine whether there is predominant or disproportionate use of steam 
coal by an industry(ies) reported by the GOC. Consequently, we 
preliminarily find that an adverse inference is warranted in the 
application of facts available with regard to the specificity of the 
provision of steam coal for LTAR.\42\ As AFA, we preliminarily find 
that the provision of steam coal for LTAR is de facto specific. See 
``Provision of Steam Coal for LTAR,'' below.
---------------------------------------------------------------------------

    \42\ See section 776(b) of the Act.
---------------------------------------------------------------------------

GOC--Other Subsidies

    The financial statements submitted by the RZBC Companies indicated 
that they received potentially countervailable subsidies in the form of 
grants. Consequently, we sought further information from the companies 
about these grants, and also asked the GOC to provide information about 
the programs under which the grants were provided.\43\
---------------------------------------------------------------------------

    \43\ See Department's Supplemental Questionnaires Issued to the 
GOC on February 1 and March 16, 2012, and Supplemental 
Questionnaires Issued to the RZBC Companies on February 1 and March 
21, 2012.
---------------------------------------------------------------------------

    The Department normally relies on information from the government 
to assess program specificity; however, the GOC did not submit such 
information in all instances. Where the RZBC Companies submitted 
information which showed the specificity of a program, we relied upon 
that information to make our preliminary finding. Where neither the 
RZBC Companies nor the GOC provided information that would allow us to 
determine the specificity of a program, we relied upon AFA to make our 
preliminary finding. For those particular programs, we preliminarily 
find that the GOC withheld necessary information that was requested of 
it and, thus, the Department must rely on facts available for these 
preliminary results. See section 776(a)(2)(A) of the Act. Moreover, we 
preliminarily find that the GOC has failed to cooperate by not acting 
to the best of its ability to comply with our request for information. 
Consequently, an adverse inference is warranted in the application of 
facts available. See section 776(b) of the Act.
    Due to the GOC's failure to provide the requested information about 
the programs under which the RZBC Companies received grants, we are 
assuming adversely that these grants are being provided to a specific 
enterprise or industry, or group of enterprises or industries. See 
section 771(5A) of the Act.

Subsidies Valuation Information

Allocation Period

    The average useful life (AUL) period in this proceeding, as 
described in 19 CFR 351.524(d)(2), is 9.5 years according to the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System for assets used to manufacture the subject merchandise. 
Consistent with the Department's practice, we have rounded the 9.5 
years up to 10 years for purposes of setting the AUL. See Polyethylene 
Terephthalate Film, Sheet, and Strip from India: Preliminary Results 
and Rescission, in Part, of Countervailing Duty Administrative Review, 
72 FR 43607, 43608 (August 6, 2007), unchanged in final, 73 FR 7708.

Attribution of Subsidies

    The Department's regulations at 19 CFR 351.525(b)(6)(i) state that 
the Department will normally attribute a subsidy to the products 
produced by the corporation that received the subsidy. However, 19 CFR 
351.525(b)(6)(ii)-(iv) direct the Department to attribute subsidies 
received by certain other companies to the combined sales of those 
companies if (1) cross-ownership exists between the companies, and (2) 
the cross-owned companies produce the subject merchandise, are a 
holding or parent company of the subject company, or produce an input 
that is primarily dedicated to the production of the downstream 
product. In the case of a transfer of a subsidy between cross-owned 
companies, 19 CFR 351.525(b)(6)(v) directs the Department to attribute 
the subsidy to the sales of the company that receives the transferred 
subsidy.
    According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists

[[Page 33172]]

between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. This regulation states that 
this standard will normally be met where there is a majority voting 
interest between two corporations or through common ownership of two 
(or more) corporations.
    The Court of International Trade (CIT) has upheld the Department's 
authority to attribute subsidies based on whether a company could use 
or direct the subsidy benefits of another company in essentially the 
same way it could use its own subsidy benefits. See Fabrique de Fer de 
Charleroi v. United States, 166 F. Supp. 2d 593, 600-604 (CIT 2001).

The RZBC Companies

    The RZBC Companies consist of the RZBC Group Shareholding Co. Ltd. 
(RZBC Group),\44\ RZBC Co., Ltd. (RZBC Co.), RZBC (Juxian) Co., Ltd. 
(RZBC Juxian), and RZBC Imp. & Exp. Co., Ltd. (RZBC IE). All companies 
are domestically owned PRC companies. RZBC Co., RZBC Juxian, and RZBC 
IE are wholly owned by RZBC Group and, hence, are cross-owned within 
the meaning of 19 CFR 351.525(b)(6)(vi). RZBC Co. and RZBC Juxian are 
producers of the subject merchandise; RZBC IE is the exporter of the 
subject merchandise; and RZBC Group is a headquarters company and does 
not produce any merchandise. Consequently, the subsidies received by 
these companies are being attributed according to the rules established 
in 19 CFR 351.525(b)(6)(ii),(c) and (b)(6)(iii), respectively.
---------------------------------------------------------------------------

    \44\ During the POR, there was a name change from ``RZBC Group 
Co., Ltd.'' to ``RZBC Group Shareholding Company.'' See RZBC 
Companies' IQR (September 27, 2011) at ``RZBC Group'' page III-7.
---------------------------------------------------------------------------

    In its initial questionnaire response, the RZBC Companies also 
reported their ownership history and affiliations prior to the POR, but 
since the cut-off date of December 11, 2001. RZBC Co. reported that the 
company ``Sisha'' was a prior owner.\45\ In the first administrative 
review of this order, the Department determined that Sisha Co., Ltd. 
(Sisha) was cross-owned with RZBC Co. and instructed the company to 
file a response on behalf of Sisha.\46\ See Citric Acid First Review ID 
Memo at ``Attribution of Subsidies--RZBC.'' The Department found that 
Sisha received a countervailable, allocable subsidy in 2003. See Citric 
Acid First Review ID Memo at ``Enterprise Development Fund from Zibo 
City Financial Bureau.''
---------------------------------------------------------------------------

    \45\ Id. at ``RZBC Co. Ltd.'' page III-5.
    \46\ In the first administrative review, the Department also 
found that the company ``HTI'' was a prior owner of RZBC Co. and, 
thus, was cross-owned with the RZBC Companies. See Citric Acid First 
Review ID Memo at ``Attribution of Subsidies--RZBC.'' All subsidies 
received by HTI that the Department found to be countervailable were 
expensed. See Citric Acid First Review ID Memo at ``Shandong 
Province Financial Special Fund for Supporting High and New 
Technology Industry Development Project.''
---------------------------------------------------------------------------

    Consistent with the Citric Acid First Review, we continue to find 
that Sisha was cross-owned with RZBC Co. (see 19 CFR 351.525(b)(6)(vi)) 
and have attributed the allocable benefit for Sisha's grant to the RZBC 
Companies for the POR. For more information, see ``Enterprise 
Development Fund from Zibo City Financial Bureau,'' below.
    Also, RZBC IE reported that it exports subject merchandise produced 
by other, unaffiliated companies, but that this merchandise was not 
exported to the United States during the POR.\47\ Although any 
subsidies to the unaffiliated producers would normally be cumulated 
with those of the trading company that sold their merchandise pursuant 
to 19 CFR 351.525(c), the Department has, in some instances, limited 
the number of producers it examines where the merchandise was not 
exported to the United States during the POR or accounted for a very 
small share of respondent's exports to the United States.\48\ In this 
review, we have not issued CVD questionnaires to the unaffiliated 
producers of citric acid whose merchandise was exported by RZBC IE, 
because such merchandise was not exported to the United States during 
the POR. Also, we have removed the sales of these products from RZBC 
IE's 2010 sales to derive the denominator for purposes of calculating 
countervailable subsidy rates for the RZBC Companies. This approach is 
consistent with the Department's treatment of RZBC IE's exports of 
subject merchandise produced by unaffiliated companies in Citric Acid 
First Review. See Citric Acid First Review ID Memo at ``Attribution of 
Subsidies--RZBC.''
---------------------------------------------------------------------------

    \47\ See RZBC Companies' IQR at ``RZBC IE'' page III-6.
    \48\ See, e.g., Certain Pasta from Italy: Final Results of the 
Fourth Countervailing Duty Administrative Review, 66 FR 64214 
(December 12, 2001), and accompanying Issues and Decision Memorandum 
at ``Attribution.''
---------------------------------------------------------------------------

Sales Denominators

    We preliminarily determine that multiple sales denominators are 
appropriate for use in the attribution of subsidies to the RZBC 
Companies. To attribute a subsidy received by RZBC Co., RZBC Juxian, or 
RZBC IE, we used as the denominator the total consolidated sales of all 
three companies, exclusive of sales among affiliated companies, for 
2010. To attribute a subsidy received by RZBC Group, we used as the 
denominator the total consolidated sales of RZBC Group, RZBC Co., RZBC 
Juxian, and RZBC IE, exclusive of sales among affiliated companies, for 
2010. Lastly, to attribute an export subsidy received by a company, we 
used as the denominator the 2010 export sales of RBZC IE, exclusive of 
sales of merchandise produced by unaffiliated companies.

Benchmarks and Discount Rates

    The Department is investigating loans received by the RZBC 
Companies from Chinese policy banks and state-owned commercial banks 
(SOCBs), as well as non-recurring, allocable subsidies (see 19 CFR 
351.524(b)(1)). The derivation of the benchmark and discount rates used 
to value these subsidies is discussed below.

Short-Term RMB Denominated Loans

    Section 771(5)(E)(ii) of the Act explains that the benefit for 
loans is the ``difference between the amount the recipient of the loan 
pays on the loan and the amount the recipient would pay on a comparable 
commercial loan that the recipient could actually obtain on the 
market.'' Normally, the Department uses comparable commercial loans 
reported by the company as a benchmark.\49\ If the firm did not have 
any comparable commercial loans during the period, the Department's 
regulations provide that we ``may use a national average interest rate 
for comparable commercial loans.'' \50\
---------------------------------------------------------------------------

    \49\ See 19 CFR 351.505(a)(3)(i).
    \50\ See 19 CFR 351.505(a)(3)(ii).
---------------------------------------------------------------------------

    As noted above, section 771(5)(E)(ii) of the Act indicates that the 
benchmark should be a market-based rate. For the reasons explained in 
Coated Paper from the PRC,\51\ loans provided by Chinese banks reflect 
significant government intervention in the banking sector and do not 
reflect rates that would be found in a functioning market. Because of 
this, any loans received by respondents from private Chinese or 
foreign-owned banks would be unsuitable for use as benchmarks under 19 
CFR 351.505(a)(2)(i). Similarly, we cannot use a national interest rate 
for commercial loans as envisaged by 19 CFR 351.505(a)(3)(ii). 
Therefore, because of the special difficulties inherent in using a 
Chinese benchmark for loans, the Department is selecting an

[[Page 33173]]

external market-based benchmark interest rate. The use of an external 
benchmark is consistent with the Department's practice. For example, in 
Softwood Lumber from Canada, the Department used U.S. timber prices to 
measure the benefit for government-provided timber in Canada.\52\
---------------------------------------------------------------------------

    \51\ See Coated Paper Decision Memorandum at Comment 10.
    \52\ See Notice of Final Affirmative Countervailing Duty 
Determination and Final Negative Critical Circumstances 
Determination: Certain Softwood Lumber Products from Canada, 67 FR 
15545 (April 2, 2002) (Softwood Lumber from Canada), and 
accompanying Issues and Decision Memorandum (Softwood Lumber 
Decision Memorandum) at ``Analysis of Programs, Provincial Stumpage 
Programs Determined to Confer Subsidies, Benefit.''
---------------------------------------------------------------------------

    In past proceedings involving imports from the PRC, we calculated 
the external benchmark using the methodology first developed in Coated 
Paper from the PRC \53\ and more recently updated in Thermal Paper from 
the PRC.\54\ Under that methodology, we first determine which countries 
are similar to the PRC in terms of gross national income, based on the 
World Bank's classification of countries as: Low income; lower-middle 
income; upper-middle income; and high income. As explained in Coated 
Paper from the PRC, this pool of countries captures the broad inverse 
relationship between income and interest rates. For 2001 through 2009, 
the PRC fell in the lower-middle income category.\55\ Beginning in 
2010, however, the PRC is in the upper-middle income category. 
Accordingly, as explained further below, we are using the interest 
rates of upper-middle income countries to construct the 2010 benchmark.
---------------------------------------------------------------------------

    \53\ See Coated Paper Decision Memorandum at Comment 10.
    \54\ See Lightweight Thermal Paper from the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 73 FR 
57323 (October 2, 2008) (Thermal Paper from the PRC), and 
accompanying Issues and Decision Memorandum (Thermal Paper Decision 
Memorandum) at 8-10.
    \55\ See The World Bank Country Classification, http://econ.worldbank.org/.
---------------------------------------------------------------------------

    After identifying the appropriate interest rates, the next step in 
constructing the benchmark has been to incorporate an important factor 
in interest rate formation, the strength of governance as reflected in 
the quality of the countries' institutions. The strength of governance 
has been built into the analysis by using a regression analysis that 
relates the interest rates to governance indicators. In each of the 
years from 2001-2009, the results of the regression analysis reflected 
the intended, common sense result: stronger institutions meant 
relatively lower real interest rates, while weaker institutions meant 
relatively higher real interest rates. For 2010, however, the 
regression does not yield that outcome for the PRC's income group.
    This contrary result for a single year in ten does not lead us to 
reject the strength of governance as a determinant of interest rates. 
As confirmed by the Federal Reserve, ``there is a significant negative 
correlation between institutional quality and the real interest rate, 
such that higher quality institutions are associated with lower real 
interest rates.'' \56\ However, for 2010, incorporating the governance 
indicators in our analysis does not make for a better benchmark. 
Therefore, while we have continued to rely on the regression-based 
analysis used since Coated Paper from the PRC to compute the benchmarks 
for loans taken out prior to the POI, for the 2010 benchmark we are 
using an average of the interest rates of the upper-middle income 
countries. Based on our experience for the 2001-2009 period, in which 
the average interest rate of the lower-middle income group did not 
differ significantly from the benchmark rate resulting from the 
regression for that group, use of the average interest rate for 2010 
does not introduce a distortion into our calculations.
---------------------------------------------------------------------------

    \56\ See Additional Documents Memorandum at Attachment I for 
Federal Reserve Consultation Memorandum.
---------------------------------------------------------------------------

    Many of the countries in the World Bank's upper-middle and lower-
middle income categories reported lending and inflation rates to the 
International Monetary Fund, and they are included in that agency's 
international financial statistics (IFS). With the exceptions noted 
below, we have used the interest and inflation rates reported in the 
IFS for the countries identified as ``upper middle income'' by the 
World Bank for 2010 and ``lower middle income'' for 2001-2009. First, 
we did not include those economies that the Department considered to be 
non-market economies for antidumping purposes for any part of the years 
in question, for example: Armenia, Azerbaijan, Belarus, Georgia, 
Moldova, and Turkmenistan. Second, the pool necessarily excludes any 
country that did not report both lending and inflation rates to IFS for 
those years. Third, we removed any country that reported a rate that 
was not a lending rate or that based its lending rate on foreign-
currency denominated instruments. For example, Jordan reported a 
deposit rate, not a lending rate, and the rates reported by Ecuador and 
Timor L'Este are dollar-denominated rates; therefore, the rates for 
these three countries have been excluded. Finally, for each year the 
Department calculated an inflation-adjusted short-term benchmark rate, 
we have also excluded any countries with aberrational or negative real 
interest rates for the year in question.
    The resulting inflation-adjusted benchmark lending rates are in the 
Department's Interest Rate Benchmark Memorandum.\57\ Because these 
rates are net of inflation, we adjusted the benchmark to include an 
inflation component.
---------------------------------------------------------------------------

    \57\ See Memorandum to the File from Patricia M. Tran, 
International Trade Analyst, AD/CVD Operations, Office 3, regarding 
``Preliminary Results Interest Rate Benchmark Memorandum,'' dated 
May 30, 2012 (Interest Rate Benchmark Memorandum).
---------------------------------------------------------------------------

Long-Term RMB-Denominated Loans

    The lending rates reported in the IFS represent short- and medium-
term lending, and there are not sufficient publicly available long-term 
interest rate data upon which to base a robust benchmark for long-term 
loans. To address this problem, the Department has developed an 
adjustment to the short- and medium-term rates to convert them to long-
term rates using Bloomberg U.S. corporate BB-rated bond rates.\58\
---------------------------------------------------------------------------

    \58\ See, e.g., Light-Walled Rectangular Pipe and Tube from 
People's Republic of China: Final Affirmative Countervailing Duty 
Investigation Determination, 73 FR 35642 (June 24, 2008) 
(Rectangular Pipe from the PRC), and accompanying Issues and 
Decision Memorandum (Rectangular Pipe Decision Memorandum) at 8.
---------------------------------------------------------------------------

    In Citric Acid from the PRC, this methodology was revised by 
switching from a long-term mark-up based on the ratio of the rates of 
BB-rated bonds to applying a spread which is calculated as the 
difference between the two-year BB bond rate and the n-year BB bond 
rate, where n equals or approximates the number of years of the term of 
the loan in question.\59\ Finally, because these long-term rates are 
net of inflation as noted above, we adjusted the benchmark to include 
an inflation component.
---------------------------------------------------------------------------

    \59\ See Citric Acid and Certain Citrate Salts from the People's 
Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 16836 (April 13, 2009) (Citric Acid 
Investigation), and accompanying Issues and Decision Memorandum 
(Citric Acid Investigation ID Memo) at Comment 14.
---------------------------------------------------------------------------

Foreign Currency-Denominated Loans

    To calculate benchmark interest rates for foreign currency-
denominated loans, the Department is again following the methodology 
developed over a number of successive PRC investigations. For US dollar 
short-term loans, the Department used as a benchmark the one-year 
dollar London Interbank Offering Rate (LIBOR), plus the average spread 
between LIBOR and the one-year corporate bond rates for companies with 
a BB rating. Likewise, for any loans denominated in other foreign

[[Page 33174]]

currencies, we used as a benchmark the one-year LIBOR for the given 
currency plus the average spread between the LIBOR rate and the one-
year corporate bond rate for companies with a BB rating.
    For any long-term foreign currency-denominated loans, the 
Department added the applicable short-term LIBOR rate to a spread which 
is calculated as the difference between the one-year BB bond rate and 
the n-year BB bond rate, where ``n'' equals or approximates the number 
of years of the term of the loan in question.

Discount Rate Benchmarks

    Consistent with 19 CFR 351.524(d)(3)(i)(A), we have used, as our 
discount rate, the long-term interest rate calculated according to the 
methodology described above for the year in which the government agreed 
to provide the subsidy.
    The resulting interest rate benchmarks that we used in the 
preliminary calculations are provided in the Preliminary Results 
Interest Rate Benchmark Memorandum.

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. Shandong Province Policy Loans Program

    In the underlying investigation and Citric Acid First Review, the 
Department found that the Shandong Province Development Plan of 
Chemical Industry during ``Tenth Five-Year Plan'' Period identifies 
objectives and goals for the development of the citric acid industry 
and calls for lending to support these objectives and goals. See Citric 
Acid Investigation ID Memo at ``Policy Lending,'' and Citric Acid First 
Review ID Memo at ``Shandong Province Policy Loans Program.'' Moreover, 
loan documents, reviewed by the Department in the first administrative 
review, stated that because the food-use citric acid industry ``has 
characteristics of capital and technology concentration and belongs to 
high and new technology * * * the State always takes positive policy to 
encourage its development.'' See Citric Acid and Certain Citrate Salts 
from the People's Republic of China: Preliminary Results of 
Countervailing Duty Administrative Review, 76 FR 33219, 33228 (June 8, 
2011) (Citric Acid First Review Prelim), unchanged in the final 
results.
    On the record of the instant review, the GOC reported that there 
were no changes to this program during the POR.\60\ Therefore, 
consistent with the Citric Acid Investigation and Citric Acid First 
Review, we preliminarily find that Shandong Province policy loans from 
state-owned commercial banks constitute financial contributions from 
``authorities'' within the meaning of sections 771(5)(B) and 
771(5)(D)(i) of the Act. Further, pursuant to section 771(5)(E)(ii) of 
the Act, such financing provides a benefit equal to the difference 
between what the recipients paid on the loans and the amount they would 
have paid on comparable commercial loans. We also preliminarily find 
that the loans are de jure specific within the meaning of section 
771(5A)(D)(i) of the Act because of the Government of Shandong's policy 
to develop the citric acid industry.
---------------------------------------------------------------------------

    \60\ See GOC's IQR at II-2.
---------------------------------------------------------------------------

    RZBC Co., RZBC Juxian, and RZBC IE reported that they had loans and 
bank acceptance notes outstanding during the POR, which were provided 
by state-owned commercial banks. To calculate the benefit under this 
program, we compared the amount of interest each company paid on their 
outstanding loans to the amount of interest they would have paid on 
comparable commercial loans. See 19 CFR 351.505(a). In conducting this 
comparison, we used the interest rates described in the ``Benchmarks 
and Discount Rates'' section above. We have attributed benefits under 
this program to the total consolidated sales of RZBC Co., RZBC Juxian, 
and RZBC IE (exclusive of inter-company sales), as discussed in the 
``Attribution of Subsidies'' section above. On this basis, we 
preliminarily find that the RZBC Companies received a countervailable 
subsidy of 0.40 percent ad valorem.

B. Export Seller's Credit for High- and New-Technology Products

    RZBC IE also reported having outstanding loans from the Export-
Import Bank of China (EXIM) during the POR, which were provided under 
this program. In the underlying investigation and Citric Acid First 
Review, the Department found that loans under this program conferred a 
countervailable subsidy. See Citric Acid Investigation ID Memo at 
``Policy Lending,'' and Citric Acid First Review ID Memo at ``Export 
Seller's Credit for High- and New-Technology Products.''
    On the record of the instant review, the GOC reported that that 
there were no changes to the program during the POR.\61\ Therefore, 
consistent with the Citric Acid Investigation and Citric Acid First 
Review, we preliminarily find that the loans provided by the GOC under 
this program constitute financial contributions under sections 
771(5)(B)(i) and 771(5)(D)(i) of the Act. The loans also provide a 
benefit under 771(5)(E)(ii) of the Act in the amount of the difference 
between the amounts the recipient paid and would have paid on 
comparable commercial loans. Finally, the receipt of loans under this 
program is tied to actual or anticipated exportation or export earnings 
and, therefore, this program is specific pursuant to sections 
771(5A)(A)-(B) of the Act.
---------------------------------------------------------------------------

    \61\ Id. at II-3.
---------------------------------------------------------------------------

    To calculate the benefit under this program, we compared the amount 
of interest RZBC IE paid on the outstanding loans to the amount of 
interest the company would have paid on comparable commercial loans. 
See 19 CFR 351.505(a). In conducting this comparison, we used the 
interest rates described in the ``Benchmarks and Discount Rates'' 
section above. We divided the total benefit amount by the RZBC 
Companies' export sales during the POR. On this basis, we preliminarily 
find that the RZBC Companies received a countervailable subsidy of 0.74 
percent ad valorem.

C. Reduced Income Tax Rate for High or New Technology Enterprises

    In the Citric Acid First Review, the Department found this program 
to be countervailable. See Citric Acid First Review ID Memo at 
``Reduced Income Tax Rate for High or New Technology Enterprises.'' As 
discussed in the preliminary results of the first review, Article 28.2 
of the Enterprise Income Tax Law (EITL) authorizes a reduced income tax 
rate of 15 percent for high- and new-technology enterprises (HNTEs). 
See Citric Acid First Review Prelim, 76 FR at 33229-30. The criteria 
and procedures for identifying eligible HTNEs are provided in the 
Measures on Recognition of High and New Technology Enterprises 
(GUOKEFAHUO {2008{time}  No. 172) (Measures on Recognition of HNTEs) 
and the Guidance on Administration of Recognizing High and New 
Technology Enterprises (GUOKEFA HUO {2008{time}  No. 362). Id. Article 
8 of the Measures on Recognition of HNTEs provides that the science and 
technology administrative departments of each province, autonomous 
region, and municipality directly under the central government or 
cities under separate state planning shall collaborate with the finance 
and taxation departments at the same level to recognize HTNEs in their 
respective jurisdictions. Id.
    The annex of the Measures on Recognition of HNTEs lists eight high-

[[Page 33175]]

and new-technology areas selected for the State's ``primary support'': 
(1) Electronics and Information Technology; (2) Biology and New 
Medicine Technology; (3) Aerospace Industry; (4) New Materials 
Technology; (5) High-tech Service Industry; (6) New Energy and Energy-
Saving Technology; (7) Resources and Environmental Technology; and (8) 
High-tech Transformation of Traditional Industries. Id.
    On the record of the instant review, the GOC reported that there 
were no changes to this program during the POR.\62\ RZBC Co. and RZBC 
Juxian reported that they received tax savings under this program on 
their 2009 income tax returns filed during the POR.
---------------------------------------------------------------------------

    \62\ Id. at II-6, 7.
---------------------------------------------------------------------------

    Consistent with the Citric Acid First Review, we preliminarily find 
that the reduced income tax rate paid by RZBC Co. and RZBC Juxian is a 
financial contribution in the form of revenue foregone by the GOC, and 
provides a benefit to the recipient in the amount of the tax savings. 
See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also 
preliminarily find, consistent with the Citric Acid First Review, that 
the reduction afforded by this program is limited as a matter of law to 
certain new and high technology companies selected by the government 
pursuant to legal guidelines specified in Measures on Recognition of 
HNTEs and, hence, is specific under section 771(5A)(D)(i) of the Act. 
Both the number of targeted industries (eight) and the narrowness of 
the identified project areas under those industries support a finding 
that the legislation expressly limits access to the program to a 
specific group of enterprises or industries.
    To calculate the benefit, we compared the income tax rate that RZBC 
Co. and RZBC Juxian would have paid in the absence of the program (25 
percent) to the income tax rate that the companies actually paid. We 
treated the income tax savings realized by RZBC Co. and RZBC Juxian as 
a recurring benefit, consistent with 19 CFR 351.524(c)(1) and divided 
the company's tax savings received during the POR by the consolidated 
sales (excluding inter-company sales) for RZBC Co., RZBC Juxian, and 
RZBC IE for the POR, pursuant to 19 CFR 351.525(b)(6)(iii) and 19 CFR 
351.525(c). On this basis, we preliminarily find that the RZBC 
Companies received a countervailable subsidy of 0.91 percent ad 
valorem.

D. Income Tax Credits on Purchases of Domestically Produced Equipment

    In the underlying investigation and Citric Acid First Review, the 
Department found that this program provided countervailable subsidies. 
See Citric Acid Investigation ID Memo at ``Income Tax Credits on 
Purchases of Domestically Produced Equipment,'' and Citric Acid First 
Review ID Memo at ``Income Tax Credits on Purchases of Domestically 
Produced Equipment.''
    As discussed in the preliminary results of the first reivew, 
according to the Provisional Measures on Enterprise Income Tax Credit 
for Investment in Domestically Produced Equipment for Technology 
Renovation {Projects{time}  (CAI SHU ZI {1999{time}  No. 290), a 
domestically invested company may claim tax credits on the purchase of 
domestic equipment if the project is compatible with the industrial 
policies of the GOC. See Citric Acid First Review Prelim, 76 FR 33230. 
Specifically, a tax credit up to 40 percent of the purchase price of 
the domestic equipment may apply to the incremental increase in tax 
liability from the previous year. Id.
    On the record of the instant review, the GOC reported that that 
there were no changes to this program during the POR.\63\ RZBC Co. and 
RZBC Juxian reported that they received tax savings under this program 
on their 2009 income tax returns filed during the POR.
---------------------------------------------------------------------------

    \63\ Id. at II-4.
---------------------------------------------------------------------------

    Consistent with the prior segments of this proceeding and prior CVD 
determinations,\64\ we preliminarily find that income tax credits for 
the purchase of domestically produced equipment are countervailable 
subsidies. The tax credits are a financial contribution in the form of 
revenue foregone by the government and provide a benefit to the 
recipients in the amount of the tax savings. See section 771(5)(D)(ii) 
of the Act and 19 CFR 351.509(a)(1). We further preliminarily find that 
these tax credits are contingent upon use of domestic over imported 
goods and, hence, are specific under section 771(5A)(C) of the Act.
---------------------------------------------------------------------------

    \64\ See, e.g., Certain Oil Country Tubular Goods from the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination, Final Negative Critical Circumstances Determination, 
74 FR 64045 (December 7, 2009) (OCTG from the PRC), and accompanying 
Issues and Decision Memorandum (OCTG Decision Memorandum) at 18.
---------------------------------------------------------------------------

    We treated the income tax savings enjoyed by RZBC Co. and RZBC 
Juxian as a recurring benefit, consistent with 19 CFR 351.524(c)(1), 
and divided the companies' tax savings by the consolidated sales 
(excluding inter-company sales) for RZBC Co., RZBC Juxian, and RZBC IE 
for the POR, pursuant to 19 CFR 351.525(b)(6)(iii) and 19 CFR 
351.525(c). On this basis, we preliminarily find that the RZBC 
Companies received a countervailable subsidy of 1.36 percent ad 
valorem.

E. Provision of Sulfuric Acid for LTAR

    The Department is examining the provision of sulfuric acid to the 
RZBC Companies. In the first administrative review of this order, the 
Department found that this program provides countervailable subsidies. 
See Citric Acid First Review ID Memo at ``Provision of Sulfuric Acid 
for LTAR.''
    In the July 26, 2011, initial questionnaire issued to the GOC in 
this review, we informed the GOC that the Department would not 
reevaluate the countervailability of this program. However, if there 
were any changes to the operation of the program during the POR, then 
the GOC was instructed to explain the changes and answer all relevant 
questions in Appendix 1.\65\ In its September 27, 2011, initial 
questionnaire response, the GOC did not report any changes to the 
operation of the program during the POR and did not answer the 
questions in Appendix 1.\66\ As such, the Department continues to find 
that this program is specific, within the meaning of section 
771(5A)(D)(iii)(I) of the Act.
---------------------------------------------------------------------------

    \65\ See Department's Initial Questionnaire Issued to the GOC 
(July 26, 2011) at ``Provision of Sulfuric Acid for LTAR.''
    \66\ See GOC's IQR at II-9 and II-10.
---------------------------------------------------------------------------

    As discussed under ``Use of Facts Otherwise Available and Adverse 
Inferences,'' above, we are relying on AFA to determine that one 
producer of sulfuric acid, from whom the RZBC Companies made purchases, 
is an ``authority'' within the meaning of section 771(5)(B) of the Act. 
Therefore, we preliminarily find that the RZBC Companies received a 
financial contribution in the form of the provision of a good. See 
section 771(5)(D)(iii) of the Act.
    In the Citric Acid First Review, the Department found that actual 
transaction prices for sulfuric acid in China are significantly 
distorted by the government's involvement in the market. As such, we 
determined that domestic prices in the PRC cannot serve as viable, tier 
one benchmark prices. For the same reasons, we determined that import 
prices into the PRC cannot serve as a benchmark. See Citric Acid First 
Review ID Memo at ``Provision of Sulfuric Acid for LTAR.'' No new 
evidence has presented in this review that would call into question 
that finding. Accordingly, to determine

[[Page 33176]]

whether the provision of sulfuric acid conferred a benefit within the 
meaning of section 771(5)(E)(iv) of the Act, consistent with the Citric 
Acid First Review, we applied a tier two benchmark, i.e., world market 
prices available to purchasers in the PRC (see 19 CFR 
351.511(a)(2)(ii)).
    Petitioners placed on the record export values for sulfuric acid 
from Canada, the European Union (EU), Thailand, India, and the United 
States for the year 2010, taken from trade statistics compiled by 
Canadian Customs, Eurostat, Thai Customs, U.S. International Trade 
Commission, and Global Trade Atlas.\67\
---------------------------------------------------------------------------

    \67\ See Petitioners' Submission of Factual Information 
(November 17, 2011) (Petitioners' Factual Information) at 3-4 and 
Exhibit 4. Where we could, we extracted from the pricing data export 
prices to China.
---------------------------------------------------------------------------

    The average of the export prices provided by the Petitioners 
represents an average of commercially available world market prices for 
sulfuric acid that would be available to purchasers in the PRC. Also, 
19 CFR 351.511(a)(2)(ii) states that where there is more than one 
commercially available world market price, the Department will average 
the prices to the extent practicable. Therefore, we have averaged the 
prices to calculate a single benchmark by month.
    Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of 
remuneration under tier two, the Department will adjust the benchmark 
price to reflect the price that a firm actually paid or would pay if it 
imported the product, including delivery charges and import duties. 
Regarding delivery charges, we averaged the international freight rates 
from Canada, the EU, Thailand, India, and the United States to 
Shanghai, submitted by Petitioners.\68\ We also added inland freight in 
the PRC based on the RZBC Companies' sulfuric acid purchase 
information,\69\ import duties as reported by the GOC, and the VAT 
applicable to imports of sulfuric acid into the PRC.\70\ Both RZBC Co. 
and RZBC Juxian reported the prices that they paid for sulfuric acid 
inclusive of inland freight and VAT.
---------------------------------------------------------------------------

    \68\ See Petitioners' Factual Information at 4-5 and Exhibit 5.
    \69\ See RZBC Companies' SQR (February 6, 2012) at Exhibit 10 
(RZBC Co.) and Exhibit 2 (RZBC Juxian).
    \70\ For import duties and VAT, see GOC's Third SQR (March 23, 
2012) at 3.
---------------------------------------------------------------------------

    To derive the benchmark, we did not include marine insurance. In 
prior CVD investigations involving the PRC, the Department has found 
that while the PRC customs authorities impute an insurance cost on 
certain imports for purposes of levying duties and compiling 
statistical data, there is no evidence to suggest that PRC customs 
authorities require importers to pay insurance charges.\71\
---------------------------------------------------------------------------

    \71\ See, e.g., Pre-Stressed Concrete Steel Wire Strand from the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination, 75 FR 28557 (May 21, 2010) (PC Strand from the PRC), 
and accompanying Issues and Decision Memorandum (PC Strand Decision 
Memorandum) at Comment 13.
---------------------------------------------------------------------------

    Comparing the adjusted benchmark prices to the prices paid by RZBC 
Co. and RZBC Juxian for sulfuric acid, we preliminarily find that the 
GOC provided sulfuric acid for less than adequate remuneration, and 
that a benefit exists in the amount of the difference between the 
benchmark and what the respondents paid. See 19 CFR 351.511(a). To 
calculate the benefit, we took the difference between the delivered 
world market price and the price that the companies paid for sulfuric 
acid, including delivery charges, and divided the sum of the price 
differentials by the total consolidated sales of RZBC Co., RZBC Juxian, 
and RZBC IE (exclusive of inter-company sales). On this basis, we 
preliminarily determine that the RZBC Companies received a 
countervailable subsidy of 1.29 percent ad valorem in 2010.

F. Provision of Steam Coal for LTAR

    The Department is examining whether the RZBC Companies purchase 
steam coal for LTAR during the POR. On the record of the instant 
review, the GOC reported that the RZBC Companies purchased steam coal 
from state-owned enterprises during the POR.\72\ Therefore, we 
preliminarily determine that the RZBC Companies received a financial 
contribution from government authorities in the form of the provision 
of a good, pursuant to section 771(5)(D)(iii) of the Act.
---------------------------------------------------------------------------

    \72\ See GOC's IQR at II-9.
---------------------------------------------------------------------------

    Regarding specificity, in the final results of the first 
administrative review, the Department was not able to determine whether 
steam coal is provided to a specific industry or enterprise or group of 
industries or enterprises because of insufficient evidence. See Citric 
Acid First Review ID Memo at Comment 6. The Department stated that it 
would revisit the de facto specificity of this program in a future 
review. Id. As discussed under ``Use of Facts Otherwise Available and 
Adverse Inferences,'' above, we are relying on AFA to preliminarily 
determine that the provision of steam coal for LTAR is specific because 
the GOC failed to provide information, which was requested of it on two 
occasions, regarding the industries that used/consumed steam coal and 
the associated volume data for the years 2008, 2009, and 2010.
    To determine whether the government's provision of steam coal 
conferred a benefit within the meaning of section 771(5)(E)(iv) of the 
Act, we relied on 19 CFR 351.511(a)(2) to identify an appropriate, 
market-determined benchmark for measuring the adequacy of remuneration. 
Potential benchmarks are listed in hierarchical order by preference: 
(1) Market prices from actual transactions within the country under 
investigation (e.g., actual sales, actual imports or competitively run 
government auctions) (tier one); (2) world market prices that would be 
available to purchasers in the country under investigation (tier two); 
or (3) an assessment of whether the government price is consistent with 
market principles (tier three). As we explained in Softwood Lumber from 
Canada, the preferred benchmark in the hierarchy is an observed market 
price from actual transactions within the country under investigation 
because such prices generally would be expected to reflect most closely 
the prevailing market conditions of the purchaser under investigation. 
See Softwood Lumber Decision Memorandum at ``Market-Based Benchmark'' 
section.
    Beginning with tier one, we must determine whether the prices from 
actual sales transactions involving Chinese buyers and sellers are 
significantly distorted. As explained in the Preamble: ``Where it is 
reasonable to conclude that actual transaction prices are significantly 
distorted as a result of the government's involvement in the market, we 
will resort to the next alternative tier two in the hierarchy.'' See 
Preamble, 63 FR 65377. The Preamble further recognizes that distortion 
can occur when the government provider constitutes a majority or, in 
certain circumstances, a substantial portion of the market. Id.
    In the instant review, we are relying on the facts available 
regarding the general coal industry to determine whether the PRC steam 
coal market is distorted by the involvement of the GOC. As discussed in 
the ``Use of Facts Otherwise Available and Adverse Inferences,'' 
section above, the GOC reported that Chinese wholly state-owned or 
state controlled coal producers accounted for 60.59, 61.94, and 59.13 
percent of gross industry revenue in 2008, 2009, and 2010,

[[Page 33177]]

respectively.\73\ The fact that Chinese state-owned enterprises were 
responsible for such a large percentage of domestic production volume, 
as reflected in their share of gross industry revenue, makes it 
reasonable to conclude that actual transaction prices are significantly 
distorted as a result of the government's involvement in the market. 
Id. For this reason, we preliminarily determine that domestic prices 
charged by privately-owned steam coal producers based in the PRC and 
import prices into the PRC may not serve as viable, tier one benchmark 
prices.
---------------------------------------------------------------------------

    \73\ See GOC Part A SQR at 2.
---------------------------------------------------------------------------

    Turning to tier two benchmarks, i.e., world market prices available 
to purchasers in the PRC, we received steam coal benchmark pricing data 
from Petitioners.\74\ Petitioners submitted monthly steam coal prices 
for January 2010, through December 2010, reported by the International 
Monetary Fund (IMF) for Australia (Newcastle) and from the Platts 
International Coal Report (Platts Report) for Colombia, Poland, Russia, 
Australia (Gladstone), Japan and Korea.\75\ The Department's 
regulations at 19 CFR 351.511(a)(2)(ii) state that where there is more 
than one commercially available world market price, the Department will 
average the prices to the extent practicable. Therefore, where more 
than one benchmark price was submitted for a given month, we averaged 
those prices to calculate the single benchmark price for that month.
---------------------------------------------------------------------------

    \74\ See Petitioners' Factual Information at 2 and Exhibit 1.
    \75\ Id.
---------------------------------------------------------------------------

    Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of 
remuneration under tier two, the Department will adjust the benchmark 
price to reflect the price that a firm actually paid or would pay if it 
imported the product, including delivery charges and import duties. 
Accordingly, in deriving the benchmark prices, we included 
international freight and inland freight. The international ocean 
freight rates used are an average of the freight rates submitted on the 
record by Petitioners. Petitioners placed on the record ocean freight 
pricing data from Platts and the Baltic Panamax Index, for the POR, 
pertaining to shipments of steam coal from various world ports (in 
Australia, Colombia, Poland, and Russia) to Qingdao, China.\76\ We 
averaged the international freight rates to derive the amount included 
in our benchmark.
---------------------------------------------------------------------------

    \76\ Id. at 2-3 and Exhibit 2.
---------------------------------------------------------------------------

    For inland freight, we relied on information submitted by 
Petitioners, who provided inland freight charges based on the 
transportation cost of steam coal calculated from the Qingdao Port to 
the respondent's location.\77\ To derive the monthly inland freight 
charges, Petitioners used data published by Haver Analytics and the 
2010 average freight costs of another energy producer in China.\78\ 
Petitioners first divided the average freight cost per metric ton by 
the average cost of rail transportation per metric ton kilometer to 
determine the average distance shipped. Petitioners next divided the 
monthly average freight charge by the average distance shipped to 
determine the monthly average freight charge per metric ton kilometer. 
Petitioners then multiplied that rate by the kilometer distance between 
Qingdao and RZBC and added 17 percent VAT to arrive at the inland 
freight charges, which we include in the monthly benchmark prices.\79\
---------------------------------------------------------------------------

    \77\ Id. at 3 and Exhibit 3.
    \78\ Id.
    \79\ Id.
---------------------------------------------------------------------------

    Additionally, to derive the benchmark, we included import duties 
and the VAT applicable to imports of steam coal into the PRC as 
reported by the GOC.\80\ We did not include marine insurance. In prior 
CVD investigations involving the PRC, the Department found that while 
the PRC customs authorities impute an insurance cost on certain imports 
for purposes of levying duties and compiling statistical data, there is 
no evidence to suggest that PRC customs authorities require importers 
to pay insurance charges. See, e.g., PC Strand Decision Memorandum at 
Comment 13.
---------------------------------------------------------------------------

    \80\ See GOC's Third SQR at 3.
---------------------------------------------------------------------------

    Comparing the adjusted benchmark prices to the prices paid by RZBC 
Co. and RZBC Juxian for steam coal during the POR, we preliminarily 
find that the GOC provided steam coal for less than adequate 
remuneration, and that a benefit exists in the amount of the difference 
between the benchmark price and the price that the companies paid. See 
19 CFR 351.511(a). To calculate the benefit, we took the difference 
between the delivered world market price and the price that the 
companies paid for steam coal, including delivery charges, and divided 
the sum of the price differentials by the total consolidated sales of 
RZBC Co., RZBC Juxian, and RZBC IE (excluding inter-company sales). On 
this basis, we preliminarily determine that the RZBC Companies received 
a countervailable subsidy of 0.19 percent ad valorem in 2010.

G. Science and Technology Export Innovation Support

    According to the RZBC Group it received a subsidy from Rizhao City, 
Donggang District, the purpose of which is to encourage export 
development.\81\
---------------------------------------------------------------------------

    \81\ RZBC Companies' March 2, 2012 supplemental questionnaire 
response (SQR) at Exhibit 6.
---------------------------------------------------------------------------

    Because the financial assistance was pursuant to, ``Rizhao City 
Financial Support for Encouraging Export Development{s{time}  Policy,'' 
we preliminarily determine that the program is specific within the 
meaning of section 771(5A)(B) of the Act. We preliminarily determine 
that the grants received by RZBC Group constitute a financial 
contribution and a benefit under sections 771(5)(D)(i) and 771(5)(E) of 
the Act, respectively.
    The grant that RZBC Group received during the POR was less than 0.5 
percent of the exports sales for the POR. Therefore, pursuant to 19 CFR 
351.524(b)(2), we expensed the grant amount to the POR. On this basis, 
we preliminarily determine that the RZBC Companies received a 
countervailable export subsidy of 0.01 percent ad valorem in 2010.

H. Donggang Finance Bureau IPO Preparation Subsidy

    RZBC Group reported that it received a grant from Rizhao City 
Donggang District during the POR because it was preparing to make an 
initial public offering.\82\
---------------------------------------------------------------------------

    \82\ See RZBC Companies' IQR at ``RZBC Group'' page III-23.
---------------------------------------------------------------------------

    We preliminarily determine that the grant received by RZBC Group 
constitute a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. Regarding 
specificity, because the grant is limited to firms undertaking an 
initial public offering, we preliminarily determine the grants to be 
specific under section 771(5A)(D)(i) of the Act.
    The grant that RZBC Group received during the POR was less than 0.5 
percent of the total consolidated sales of RZBC Group, RZBC Co., RZBC 
Juxian, and RZBC IE (excluding inter-company sales) for the POR. 
Therefore, pursuant to 19 CFR 351.524(b)(2), we expensed the grant 
amounts to the POR. On this basis, we preliminarily determine that the 
RZBC Companies received a countervailable subsidy of 0.02 percent ad 
valorem.

I. Shandong Province Science and Technology Development Fund

    The GOC reported that this program was established in 2004, 
pursuant to the Provisional Measures on Shandong

[[Page 33178]]

Province Applied Technology Research and Development Fund (the 
Provisional Measures), to facilitate the development of science and 
technology in Shandong Province.\83\ The program is jointly 
administered by the Shandong Province Department of Finance and 
Shandong Province Science and Technology Department.\84\
---------------------------------------------------------------------------

    \83\ See GOC's First SQR--Part II (February 29, 2012) at 9.
    \84\ Id.
---------------------------------------------------------------------------

    The GOC provided a copy of the Provisional Measures which, at 
Article 2, states that the fund is to promote technological development 
and strengthen technological application.\85\ As stated in Article 8, 
the fund will cover the project fees and plan management fees, i.e., 
labor, equipment, energy, and travel costs.\86\
---------------------------------------------------------------------------

    \85\ Id. at Exhibit 2.
    \86\ Id.
---------------------------------------------------------------------------

    RZBC Co. reported that it received a subsidy under this program 
during the POR. The GOC stated that RZBC Co. received assistance for 
its ``continuous-analog-moving-bed lactic acid production technology'' 
project.\87\
---------------------------------------------------------------------------

    \87\ Id. at 12.
---------------------------------------------------------------------------

    We preliminary find that the grants received by RZBC Co. under 
Shandong Province's Applied Technology Research and Development Fund 
constitute a financial contribution, in the form of a direct transfer 
of funds from the government, which bestows a benefit equal to the 
amount of the grant within the meaning of sections 771(5)(D)(i) and 
771(5)(E) of the Act. We also preliminarily find that, because the 
receipt of assistance under the program is limited in law to certain 
enterprises, i.e., companies with science and technological development 
projects, the program is de jure specific within the meaning of section 
771(5A)(D)(i) of the Act.
    To calculate the benefit in the instant review, we divided the 
grant amount approved by the total consolidated sales of RZBC Co., RZBC 
Juxian, and RZBC IE (excluding inter-company sales) for the year in 
which the grant was approved and found that the amount was less than 
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are 
expensing the total amount of the grant to the year of receipt, which 
is the POR. On this basis, we preliminarily determine that the RZBC 
Companies received a countervailable subsidy of 0.01 percent ad 
valorem.

J. First Industrial Enterprises Development Budget in District Level

    RZBC Co. reported that it received a grant from Donggang District 
Economic and Trade Bureau and the Donggang District Financial Bureau 
during the POR because it promoted the development of the industrial 
enterprises in the district.\88\ RZBC Co. stated that the company 
applied and underwent the approval process in order to receive the 
funds.
---------------------------------------------------------------------------

    \88\ Id. at III-24 and Exhibit 14 of RZBC Companies' March 2, 
2012 supplemental questionnaire response (SQR).
---------------------------------------------------------------------------

    We preliminarily determine that the grant received by RZBC Co. 
constitute a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively.
    As discussed under ``Use of Facts Otherwise Available and Adverse 
Inferences,'' above, the Department is relying on AFA to preliminarily 
determine that the grant program is specific because the GOC failed to 
provide information, which was requested of it on two occasions, 
regarding the details of the government assistance.
    To calculate the benefit in the instant review, we divided the 
grant amount approved by the total consolidated sales of RZBC Co., RZBC 
Juxian, and RZBC IE (excluding inter-company sales) for the year in 
which the grant was approved and found that the amount was less than 
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are 
expensing the total amount of the grant to the year of receipt, which 
is the POR. On this basis, we preliminarily determine that the RZBC 
Companies received a countervailable subsidy of 0.02 percent ad 
valorem.

K. First and Second Industrial Enterprises Development Budget in City 
Level

    According to RZBC Co., it received grants from Rizhao City, the 
purpose of which is to encourage technical improvement and innovation. 
Each grant is linked to a specific area of achievement and the approval 
documents name the companies that received the grants. We preliminarily 
determine that the grants received by RZBC Co. constitute a financial 
contribution and a benefit under sections 771(5)(D)(i) and 771(5)(E) of 
the Act, respectively. As discussed under ``Use of Facts Otherwise 
Available and Adverse Inferences,'' above, the Department is relying on 
AFA to preliminarily determine that the grant program is specific 
because the GOC failed to provide information, which was requested of 
it on two occasions, regarding the details of the government 
assistance. To calculate the benefit in the instant review, we divided 
the grant amount approved by the total consolidated sales of RZBC Co., 
RZBC Juxian, and RZBC IE (excluding inter-company sales) for the year 
in which the grant was approved and found that the amount was less than 
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are 
expensing the total amount of the grant to the year of receipt, which 
is the POR. On this basis, we preliminarily determine that the RZBC 
Companies received a countervailable subsidy of 0.04 percent ad 
valorem.

L. Award for Contribution to City and People

    RZBC Co. reported that it received a grant from Rizhao City during 
the POR because of the company's outstanding contribution to the 
commercial development of the district.\89\ The company did not apply 
for this grant.
---------------------------------------------------------------------------

    \89\ See RZBC Companies' IQR at III-28.
---------------------------------------------------------------------------

    We preliminarily determine that the grant received by RZBC Co. 
constitutes a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. As discussed under 
``Use of Facts Otherwise Available and Adverse Inferences,'' above, the 
Department is relying on AFA to preliminarily determine that the grant 
program is specific because the GOC failed to provide information, 
which was requested of it on two occasions, regarding the details of 
the government assistance.
    The grant that RZBC Co. received during the POR was less than 0.5 
percent of the total consolidated sales of RZBC Co., RZBC Juxian, and 
RZBC IE (excluding inter-company sales) for the POR. Therefore, 
pursuant to 19 CFR 351.524(b)(2), we expensed the grant amount to the 
POR. On this basis, we preliminarily determine that the RZBC Companies 
received a countervailable subsidy of 0.01 percent ad valorem.

M. Award for Enterprise Technology Improvement Project

    RZBC Co. reported that it received a grant from Rizhao City during 
the POR because it operated a technology improvement project.\90\ RZBC 
Co. stated that the company did not apply for this grant program.
---------------------------------------------------------------------------

    \90\ Id. at III-30.
---------------------------------------------------------------------------

    We preliminarily determine that the grant received by RZBC Co. 
constitutes a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. Regarding 
specificity, because the grant is limited to firms operating technology 
improvement projects within the city,

[[Page 33179]]

we preliminarily determine the grants to be specific under section 
771(5A)(D)(i) of the Act.
    The grant that RZBC Co. received during the POR was less than 0.5 
percent of the total consolidated sales of RZBC Co., RZBC Juxian, and 
RZBC IE (excluding inter-company sales) for the POR. Therefore, 
pursuant to 19 CFR 351.524(b)(2), we expensed the grant amount to the 
POR. On this basis, we preliminarily determine that the RZBC Companies 
received a countervailable subsidy of 0.01 percent ad valorem.

N. Special Fund for Pollution Control of Three Rivers, Three Lakes, and 
the Songhua River \91\
---------------------------------------------------------------------------

    \91\ In its questionnaire response, RZBC Juxian referred to this 
program as ``Resource Conservation and Environmental Protection.'' 
See RZBC Companies' IQR at ``RZBC Juxian'' page III-20.
---------------------------------------------------------------------------

    The Department found this program to be countervailable in the 
Citric Acid First Review. See Citric Acid First Review ID Memo at 
``Other Subsidies Received by RZBC'' and ``Special Fund for Pollution 
Control of Three Rivers, Three Lakes, and the Songhua River.'' On the 
record of the instant review, the GOC stated that it does not challenge 
the Department's countervailable finding for this program.\92\ RZBC 
Juxian reported that it received a benefit under this program during 
the POR for a sewage treatment project.\93\
---------------------------------------------------------------------------

    \92\ See GOC's SQR (February 29, 2012) at 2.
    \93\ See RZBC Companies' IQR at ``RZBC Juxian'' page III-19 
through III-21, and March 2, 2012, SQR at ``RZBC Juxian'' Exhibit 
20.
---------------------------------------------------------------------------

    This program was established pursuant to the State Council's 
Comprehensive Work Plan on Energy Conservation and Emission Reduction 
(Guo Fa 2007 No. 7115) and the State Council's mandate to ``strengthen 
pollution control of Three Rivers, Three Lakes, and the Songhua 
River.'' Id. The program is administered by the Shandong Finance 
Department and the Shandong Environmental Protection Bureau. Id. The 
purpose of the program is to enhance pollution control efforts by 
financing projects affecting the Huaihe River, Haihe River, Liaohe 
River, Taihu Lake, Chaohu Lake, Dianchi Lake, and the Songhua River. 
Id.
    Because the fund is limited to enterprises located in these 
designated areas, the Department determined in the first administrative 
review that the program is specific within the meaning of section 
771(5A)(D)(iv) of the Act. Id. The Department also found that these 
grants are direct transfers of funds within the meaning of section 
771(5)(D)(i) of the Act and that they provide a benefit in the amount 
of the grant under 19 CFR 351.504(a). Id. at ``Other Subsidies Received 
by RZBC.''
    To calculate the benefit in the instant review, we divided the 
grant amount approved by the total consolidated sales of RZBC Co., RZBC 
Juxian, and RZBC IE (excluding inter-company sales) for the year in 
which the grant was approved and found that the amount was less than 
0.5 percent. Therefore, in accordance with 19 CFR 351.524(b)(2), we are 
expensing the total amount of the grant to the year of receipt, which 
is the POR. On this basis, we preliminarily determine that the RZBC 
Companies received a countervailable subsidy of 0.16 percent ad 
valorem.

O. Shandong Self-Innovation Subsidy

    The GOC reported that this program was established in 2007, 
pursuant to the Measures on Shandong Province Self-Innovation Results 
Commercialization Special Fund (the Measures), to promote the 
commercialization of self-innovation results to facilitate the 
development of high technology industries with intellectual property 
rights, to guide economic growth and to improve the competitiveness of 
Shandong Province.\94\ The program is jointly administered by the 
Shandong Province Department of Finance and Shandong Province Science 
and Technology Department.\95\
---------------------------------------------------------------------------

    \94\ See GOC's First SQR--Part II (February 29, 2012) at 2.
    \95\ Id. at 3.
---------------------------------------------------------------------------

    The GOC provided a copy of the Measures which, at Article 8, states 
that the fund is to strictly adhere to the strategic plan of Shandong 
Province's medium- and long-term technology development plan and focus 
on the development of 15 high-tech industry groups.\96\ As stated in 
Article 10, depending on the characteristics of the project and 
enterprise, assistance under the fund consists of direct funding of 
projects, equity investment, discount loans, financial rewards, and 
reimbursable aid.\97\
---------------------------------------------------------------------------

    \96\ Id. at Exhibit 1.
    \97\ Id. at Exhibit 1.
---------------------------------------------------------------------------

    RZBC Juxian reported that it received a subsidy under this program 
during the POR.\98\ The GOC stated that RZBC Juxian received assistance 
for its ``citric acid bio-manufacturing key technology development and 
application'' project.\99\
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    \98\ See RZBC Companies' IQR at ``RZBC Juxian'' page III-24 and 
III-25.
    \99\ See GOC's First SQR--Part II at 6.
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    We preliminarily find that the grant received by RZBC Juxian under 
Shandong Province's Self-Innovation Results Commercialization Special 
Fund constitutes a financial contribution, in the form of a direct 
transfer of funds from the government, which bestows a benefit equal to 
the amount of the grant within the meaning of sections 771(5)(D)(i) and 
771(5)(E) of the Act. We also preliminarily find that, because the 
receipt of assistance under the program is limited in law to certain 
enterprises, i.e., 15 high-tech industry groups, the program is de jure 
specific within the meaning of section 771(5A)(D)(i) of the Act.
    To calculate the benefit, we divided the grant amount approved by 
the total consolidated sales of RZBC Co., RZBC Juxian, and RZBC IE 
(excluding inter-company sales) for the year in which the grant was 
approved and found that the amount was less than 0.5 percent. 
Therefore, in accordance with 19 CFR 351.524(b)(2), we are expensing 
the grant to the POR, the year of receipt. On this basis, we 
preliminarily determine that the RZBC Companies received a 
countervailable subsidy of 0.03 percent ad valorem.

P. Enterprise Development Supporting Fund From Zibo City Financial 
Bureau

    In Citric Acid First Review, the Department found that Sisha, RZBC 
Co.'s prior cross-owned parent company, received a countervailable 
subsidy under this program in 2003. See Citric Acid First Review ID 
Memo at ``Enterprise Development Fund from Zibo City Financial 
Bureau.'' The Department determined to use Sisha's consolidated sales 
as reported by Sisha as the denominator for the 2003 allocation test 
pursuant to 19 CFR 351.524(b)(2). Id. We found that the 2003 grant was 
greater than 0.5 percent of the reported consolidated sales for 2003. 
Id. Thus, because the 2003 grant was a non-recurring benefit consistent 
with 19 CFR 351.524(c)(2)(iii), we allocated the benefit over the 10-
year AUL.
    Because RZBC Co. and Sisha ceased to be cross-owned after March 
2008, we applied a Sisha/RZBC Co. sales ratio to compute the benefit 
attributable to the RZBC Companies during the POR; this approach is 
consistent with the Department's decision in Citric Acid First Review. 
Id. We then divided that benefit amount by RZBC Co.'s, RZBC IE's, and 
RZBC Juxian's total combined sales (excluding inter-company sales) for 
2010 to obtain the ad valorem subsidy rate. On this basis, we 
preliminary find that the RZBC Companies received a countervailable 
subsidy of 0.07 percent ad valorem.

[[Page 33180]]

II. Programs Preliminarily Determined Not To Provide Countervailable 
Benefits During the POR

A. Award of Financial Construction

    RZBC Juxian reported that it received a benefit under this program 
during the POR.\100\ We preliminarily determine that the benefit from 
this program results in a net subsidy rate that is less than 0.005 
percent ad valorem. Consistent with our past practice, we preliminarily 
have not included this program in our net countervailing duty rate 
calculations. See, e.g., Coated Paper Decision Memorandum at ``Analysis 
of Programs, Programs Determined Not To Have Been Used or Not To Have 
Provided Benefits During the POI for GE;'' see also Certain Steel 
Wheels from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, Final Affirmative Critical 
Circumstances Determination, 77 FR 17017 (March 23, 2012) (Steel Wheels 
from the PRC), and accompanying Issues and Decision Memorandum (Steel 
Wheels Decision Memorandum) at ``Income Tax Reductions for Firms 
Located in the Shanghai Pudong New District.''
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    \100\ See RZBC Companies' IQR at ``RZBC Juxian'' page III-22 and 
III-23.
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III. Programs Preliminarily Determined Not To Be Used \101\
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    \101\ In this section, we refer to programs preliminarily found 
to be not used by the RZBC Companies.
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    We preliminarily find that the RZBC Companies did not use the 
following programs during the POR:

Reduced Income Tax Rates to Foreign Invested Enterprises (FIEs) 
Based on Location
Reduced Income Tax Rate for Tech or Knowledge Intensive FIEs
Two Free, Three Half Tax Program for FIEs
Local Income Tax Exemption & Reduction Program for Productive FIEs
VAT Rebate on Purchases by FIEs of Domestically Produced Equipment
Famous Brands--Yixing City
Anqui City Energy & Water Savings Grant
Land for LTAR in Anqui Economic Development Zone
Land-Use Rights Extension in Yixing City
National Government Policy Lending
Fund for Optimizing Import and Export Structure of Mechanical 
Electronics and High and New Technology Products
International Market Development Fund Grants for Small and Medium 
Enterprises
Fund for Energy-saving Technological Innovation
Jiangsu Province Energy Conservation and Emissions Reduction Program
Rizhao City: Subsidies to Encourage Enterprise Expansion
Rizhao City: Subsidy for Antidumping Investigations
Rizhao City: Special Fund for Enterprise Development
Rizhao City: Technological Innovation Grants
Rizhao City: Technology Research and Development Fund
Shandong Province: Special Fund for the Establishment of Key 
Enterprise Technology Centers
Shandong Province: Subsidy for Antidumping Investigations
Shandong Province: Award Fund for Industrialization of Key Energy-
saving Technology
Shandong Province: Environmental Protection Industry R&D Funds
Shandong Province: Waste Water Treatment Subsidies
Yixing City: Leading Enterprise Program
Yixing City: Tai Lake Water Improvement Program
Loans Provided to the Northeast Revitalization Program
State Key Technology Renovation Project Fund
National Level Grants to Loss-making State-Owned Enterprises (SOEs)
Income Tax Exemption Program for Export-Oriented FIEs
Tax Benefits to FIEs for Certain Reinvestment of Profits
Preferential Income Tax Rate for Research and Development for FIEs
Preferential Tax Programs for Encouraged Industries
Preferential Tax Policies for Township Enterprises
Provincial Level Grants to Loss-making SOEs
Reduced Income Tax Rates for Encouraged Industries in Anhui Province
Provision of Land for Less Than Adequate Remuneration in Anhui 
Province
Funds for Outward Expansion of Industries in Guangdong Province
Income Tax Exemption for FIEs Located in Jiangsu Province
Administration Fee Exemption in the Yixing Economic Development Zone 
(YEDZ)
Tax Grants, Rebates, and Credits in the YEDZ
Provision of Construction Services in the YEDZ for LTAR
Grants to FIEs for Projects in the YEDZ
Provision of Electricity in the YEDZ for LTAR
Provision of Water in the YEDZ for LTAR
Provision of Land in the YEDZ for LTAR
Provision of Land to SOEs for LTAR
Torch Program--Grant
Discounted Loans for Export-Oriented Industries
Provision of Land in the Zhuqiao Key Open Park for LTAR
Special Funds for Energy Saving and Recycling Program
Water Resource Reimbursement Program
Shandong Province: Energy Saving Award
VAT and Import Duty Exemptions on Imported Equipment
Ecology Compensation Subsidy Funds \102\
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    \102\ This program discovered during the course of the review 
was expensed prior to the POR.
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Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated a subsidy 
rate for the RZBC Companies, the only producer/exporter covered by this 
administrative review. We preliminarily determine that the total 
estimated net countervailable subsidy rate for the RZBC Companies is 
5.27 percent ad valorem for 2010.
    If these preliminary results are adopted in our final results of 
this review, 15 days after publication of the final results of this 
review the Department will instruct CBP to liquidate shipments of 
subject merchandise by the RZBC Companies entered or withdrawn from 
warehouse, for consumption from January 1, 2010, through December 31, 
2010, at the applicable rate.

Cash Deposit Instructions

    The Department also intends to instruct CBP to collect cash 
deposits of estimated countervailing duties in the amounts calculated 
for year 2010. For all non-reviewed firms, we will instruct CBP to 
collect cash deposits of estimated countervailing duties at the most 
recent company-specific or all-others rate applicable to the company. 
These rates shall apply to all non-reviewed companies until a review of 
a company assigned these rates is requested. These cash deposit 
requirements, when imposed, shall remain in effect until further 
notice.

Public Comment

    Interested parties may submit written arguments in case briefs 
within 30 days of the date of publication of this notice. Rebuttal 
briefs, limited to issues raised in case briefs, may be filed not later 
than five days after the date of filing the case briefs. Parties who 
submit briefs in this proceeding should 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 
submitted to the Department electronically using IA ACCESS. Copies of 
case briefs and rebuttal briefs must be served on interested parties in 
accordance with 19 CFR 351.303(f).
    Interested parties may request a hearing within 30 days after the 
date of publication of this notice by electronically filing the request 
via IA ACCESS. Unless otherwise specified, the hearing, if requested, 
will be held two days after the scheduled date for submission of 
rebuttal briefs. The Department will publish a notice of the final 
results of this administrative review within 120 days from the 
publication of these preliminary results.
    We are issuing and publishing these results in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.


[[Page 33181]]


    Dated: May 30, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-13585 Filed 6-4-12; 8:45 am]
BILLING CODE 3510-DS-P