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

DEPARTMENT OF COMMERCE

[A-570-824]

Notice of Final Determination of Sales at Less Than Fair Value:

Silicon Carbide From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: May 2, 1994.

FOR FURTHER INFORMATION CONTACT:

Steve Alley or Andrew McGilvray, Office of Antidumping Investigations,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW.,

Washington, DC 20230; telephone: (202) 482-5288 or (202) 482-0108,

respectively.

FINAL DETERMINATION: We determine that silicon carbide from the

People's Republic of China (PRC) is being, or is likely to be, sold in

the United States at less than fair value, as provided in section 735

of the Tariff Act of 1930, as amended (the Act). The estimated margins

are shown in the ``Suspension of Liquidation'' section of this notice.

Case History

Since the preliminary determination on November 29, 1993, (58 FR

64549, December 8, 1993), the following events have occurred:

On December 1, 1993, the Department of Commerce (the Department)

received a letter from Hainan Feitian Electrontech Company, Limited

(Hainan), Shaanxi Minmetals (Shaanxi) and Xiamen Abrasive Company

(Xiamen), three of the six respondents in this investigation,

requesting that the Department postpone the final determination to not

later than April 22, 1994, or 135 days after the date of the

publication of the preliminary determination. The letter from these

three respondents also requested the Department to (1) collect

information on third-country sales to use as foreign market value

(FMV); (2) find that Treibacher and Saint-Gobain do not qualify as

``interested parties'' in this proceeding, bar them from further

participation in this case, and re-examine the Department's decision

that petitioner has standing to file the petition; and (3) verify fully

respondents' answers to the Department's questionnaire. On the same

day, the other three respondents in this investigation--Inner Mongolia

Import and Export Corporation (IMI/E), Qinghai Metals Import and Export

Corporation (QI/E), and Seventh Grinding Wheel Factory Import and

Export Corporation (SGW--also requested a disclosure conference and a

postponement of the final determination.

On December 7, 1993, Hainan, Shaanxi and Xiamen submitted letters

alleging ministerial errors in the Department's calculations for the

preliminary determination. (For specific details of these allegations

and our analysis of them, see Memorandum from Richard W. Moreland to

Barbara R. Stafford of December 20, 1993.) One of these exporters,

Hainan, alleged that the Department made certain errors with respect to

the valuation of freight rates and packing materials. The Department

agreed with this one allegation, and in accordance with procedures set

forth in the proposed regulations, published an amended preliminary

dumping margin for Hainan (59 FR 570, January 5, 1994).

On December 29, 1993, petitioner submitted comments on issues

relating to verification. On December 30, 1993, petitioner submitted

publicly available information on electricity rates in India and

Pakistan as well as information on electricity capacity in the PRC.

Hainan, Shaanxi, and Xiamen submitted additional information on

December 30 regarding the price and quantity of their U.S. sales and

the mode of transportation used to transport coal. The Department sent

verification agendas to all six respondents in this investigation on

December 30, 1993.

On January 3, 1994, IMI/E, QI/E, and SGW submitted publicly

available information about Indian electricity rates and additional

information regarding freight distances. IMI/E supplemented its freight

information on January 7, 1994.

On January 4, 1994, the Department wrote to SGW regarding the

Department's intention to visit two other exporters during verification

to confirm that U.S. sales of silicon carbide had been reported for all

entities related to SGW. We also wrote to Xiamen regarding out

intention to visit China Abrasives Export Corporation (CAEC), the

parent corporation of Xiamen, to confirm that all U.S. sales during the

period of investigation (POI) had been reported. On January 5, 1994, we

requested the assistance of the Ministry of Foreign Trade and Economic

Cooperation of the PRC (MOFTEC) in arranging these meetings as well as

interviews with appropriate MOFTEC officials. WE wrote to MOFTEC again

on January 13, 1994, to request assistance in arranging additional

meetings for the verification teams with Quinghai and Inner Mongolia

provincial government officials and CAEC representatives. The

Department verified responses in the PRC from January 10 to February 5,

1994 and its verification reports between February 15 and March 14,

1994.

Requests for a public hearing were received by the Department on

January 5, 1994, from IMI/E, QI/E, and SGW, and on January 10, 1994,

from Hainan, Shaanxi, and Xiamen.

On March 1, 1994, petitioner alleged that critical circumstances

exist with regard to imports of silicon carbide from the PRC. We

requested shipment data from the six respondents in this investigation

on March 4, 1994, and received respondents' data on March 17, 18, 21

and 22. (Because Hainan, Shaanxi, and Xiamen failed to file public

versions of their original March 11, 1994 submissions of shipment data,

we rejected these submissions. Hainan, Shaanxi, and Xiamen refiled

these submissions in proper form on March 17.) On March 31, 1994, we

issued our preliminary affirmative determination of critical

circumstances for two respondents in this investigation--Shaanxi and

Xiamen. The other four respondents were found not to have massive

increases in imports. In addition, the Department found that critical

circumstances exist for all exporters who did not participate in this

investigation (59 FR 16795, April 8, 1994). On April 6, 1994, Shaanxi

and Xiamen requested that we base our calculations for critical

circumstances on the date of shipment rather than the date of

importation into the United States (the date used in the preliminary

determination of critical circumstances). Petitioner also submitted

comments on our preliminary affirmative determination of critical

circumstances on April 6, 1994.

On March 11, 1994, petitioner filed information concerning the

Department's surrogate value for electricity. Because this submission

contained untimely filed new information, we rejected this submission.

Petitioner filed new submissions regarding electricity valuation on

March 23, 1994. Certain of these submissions also contained untimely

filed new information and, therefore, were rejected. Petitioner and

respondents submitted case briefs on March 30 and rebuttal briefs on

April 4, 1994. A public hearing was held on April 6, 1994.

Scope of Investigation

The product covered by this investigation is silicon carbide,

regardless of grade or form, containing by weight from 20 to 98

percent, inclusive, silicon carbide and with a grain size coarser than

size 325F (as set by the American National Standards Institute), and

inclusive of split sizes. Silicon carbide covered by this investigation

typically contains additional impurities: iron, aluminum, silica,

silicon, and carbon as well as calcium and magnesium. Silicon carbide

is currently classifiable under subheadings 2849.20.10 and 2849.20.20

of the Harmonized Tariff Schedule (HTS). The HTS numbers are provided

for convenience and customs purposes. The written description is

dispositive.

Period of Investigation

The POI is January 1, 1993, through June 30, 1993.

Best Information Available (BIA)

As stated in the preliminary determination, the Department must

receive an adequate questionnaire response from each entity requesting

a separate dumping margin rate before a separate rate can be applied.

Consequently, all non-respondent entities, as well as respondents that

fail to demonstrate eligibility for a separate rate, must receive a

single ``All Other'' rate. We have based our ``All Other'' rate on BIA.

In determining what to use as BIA, the Department follows a two-

tiered methodology, whereby the Department normally assigns lower

margins to those respondents who cooperated in an investigation and

margins based on more adverse assumptions for those respondents who did

not cooperate in an investigation or who failed to qualify for a

separate rate. According to the Department's two-tiered BIA methodology

outlined in the Final Determination of Sales at Less Than Fair Value:

Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled

Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel

Plate From Belgium, 58 FR 37083 (July 9, 1993), when a company refuses

to provide the information requested in the form required, or otherwise

significantly impedes the Department's investigation, it is appropriate

for the Department to assign to that company the higher of (a) the

highest margin alleged in the petition, or (b) the highest calculated

rate of any respondent in the investigation.

In this case, where some PRC exporters failed to respond to our

questionnaire and, thus, are uncooperative, we are assigning an ``All

Other'' rate of 406.00 percent (the highest margin calculated in the

amendment petition) as BIA to the uncooperative exporters. The 406.00

percent rate also applies to all other exporters that are ineligible

for separate rates.

Separate Rates

Respondents Xiamen, Hainan, and Shaanxi have requested that they be

assigned separate rates. For Xiamen, we cannot consider eligibility for

a separate rate because it failed to submit consolidated responses,

including information on separate rates, for affiliated companies which

it has stated are related to it within the meaning of section 771(13)

of the Act. (See Memorandum dated April 22, 1994, from Richard W.

Moreland to Barbara R. Stafford.)

For Hainan and Shaanxi, we were unable to verify certain

information in their separate rates responses. Specifically, these

respondents did not make available to us the bank records necessary to

verify that they retain the proceeds from their export sales. Given our

inability to verify Hainan's and Shaanxi's separate rate submissions,

we cannot consider applying separate rates to them. (See Ibid.)

In addition to Xiamen, Hainan, and Shaanxi, respondents IMI/E, QI/

E, and SGW have also requested that the Department issue to each of

them a separate rate. These respondents have submitted completed and

verified responses regarding their eligibility for separate rates.

We have analyzed the record in this investigation and agree that it

is appropriate to assign separate rates to IMI/E, QI/E, and SGW. In

making this determination, we have modified our separate rates policy,

previously set forth in Final Determination of Sales at Less Than Fair

Value; Certain Compact Ductile Iron Waterworks Fittings and Accessories

Thereof From the People's Republic of China (``CDIW'') (58 FR 37908,

July 14, 1993) and Final Determination of Sales at Less Than Fair

Value: Certain Helical Spring Lock Washers from the People's Republic

of China (``Lock Washers'') (58 FR 48833, September 20, 1993). In CDIW,

we took the position that state-ownership (i.e. ``ownership by all the

people'') ``provides the central government the opportunity to

manipulate the [exporter's] prices whether or not it has taken

advantage of that opportunity during the period of investigation.''

Thus, we concluded in CDIW that state-owned enterprises would not be

eligible for separate rates.

However, based upon further analysis and information developed in

the course of this investigation, we find that the ownership of IMI/E,

QI/E, and SGW ``by all the people,'' in and of itself, cannot be

considered as dispositive in determining whether those companies can

receive separate rates. At verification, Mr. Zhang Yuqing, the Division

Chief of the Department of Treaty and Law of MOFTEC (the Ministry of

Foreign Trade and Economic Cooperation), explained that the designation

on these respondents' business licenses that they are ``owned by all

the people'' does not mean that the central, provincial, or local

governments control these companies. Instead, ``ownership by the

people'' signifies that ``no individual can take the company; it cannot

become a private company.'' The company ``belongs to the community''

and the company's employees are entrusted with the management of the

company. (See Memorandum from Andrew McGilvray, to Gary Taverman, dated

February 15, 1994.)

A recent analysis by the Central Intelligence Agency supports

MOFTEC's statement that ownership ``by all the people'' is not

synonymous with central government control. (See 1992 report to the

Joint Economic Committee, Hearings on Global Economic and Technological

Change: Former Soviet Union and Eastern Europe and China, Pt. 2 (102

Cong., 2d Sess), 143, 196 (hereinafter, ``CIA report''). The report

states that a state-owned enterprise was subject to central government

control prior to 1980, but that ``[t]he reform decade of the 1980s

brought significant changes to this scheme'' and that the central

government devolved control of enterprises owned ``by all the people''.

We have, therefore, come to the conclusion that ownership ``by all the

people'' does not require the application of a single rate. Thus, we

believe a PRC respondent may receive a separate rate if it establishes

on a de jure and de facto basis that there is an absence of

governmental control. We have, therefore, adapted and amplified the

test set out in Final Determination of Sales at Less Than Fair Value:

Sparklers From the People's Republic of China (56 FR 20588, May 6,

1991) to determine whether the respondents in this case are entitled to

separate rates.

1. Absence of De Jure Control

Three enactments that have been placed on the record in this case

indicate that the responsibility for managing state-owned enterprises

has been shifted from the government to the enterprise itself. These

are the ``Law of the People's Republic of China on Industrial

Enterprises Owned by the Whole People,'' adopted on April 13, 1988

(``1988 Law''); ``Regulations for Transformation of Operational

Mechanism of State-owned Industrial Enterprises,'' approved on August

23, 1992) ``1992 Regulations''; and the ``Temporary Provisions for

Administration of Export Commodities,'' approved on December 21, 1992

(``Export Provisions''. The 1988 Law states that enterprises have the

right to set their own prices (see Article 26). This principle is

restated in the 1992 Regulations (see Article IX). The Export

Provisions list those products subject to direct government control.

Silicon carbide does not appear on this list and is not, therefore,

subject to the constraints of these provisions.

The existence of these laws indicate that respondents IMI/E, QI/E,

and SGW are not subject to de jure control. However, there is publicly

available information indicating that the PRC central government has

acknowledged that the provisions of the above-cited laws and

regulations have not been implemented uniformly among different sectors

and/or jurisdictions in the PRC. See ``[PRC] Government Findings on

Enterprise Autonomy'' in Foreign Broadcast Information Service-China-

93-133 (July 14, 1993).

Given this report of uneven implementation of the PRC government's

laws on devolution of government control, it is critical that we

conduct a de facto analysis to determine whether these respondents

were, in fact, not subject to governmental control.

2. Absence of De Facto Control

For the reasons stated below, we have determined that these

respondents are not de facto controlled by the central, provincial or

municipal governments. In conducting this analysis, we are aware that

the CIA report stated that the central government has ``decentralized

the supervision and planning control over most state enterprises to

provincial or municipal authorities.'' As elaborated below and in the

responses to Comments 1 and 2, we have verified that these respondents

are not, in fact, subject to provincial control. Municipal control is

not an issue in this case as there is no tie between these companies

and any municipality.

We have taken the following factors into account in our

determination of absence of de facto control: First, the respondents'

export prices are not set by, nor subject to approval by, a

governmental authority. Second, the respondents also have authority to

negotiate and sign contracts and other agreements. These points were

confirmed by examination of correspondence files and other

documentation relating to sales negotiations, as noted in the

verification reports.

Third, we have determined, based on our investigation, that the

respondents have autonomy from the central government in making

decisions regarding selection of management, based on our examination

of management election/evaluation forms completed by employees. Lastly,

we have determined that the respondents retain the proceeds of their

export sales and make independent decisions regarding disposition of

profits or financing of losses. This last point was confirmed through

examination of bank records, and company accounting records relating to

investment and other activities. (See also Concurrence Memorandum and

various verification reports.)

3. Conclusion

Given that the record of this investigation demonstrates a de jure

and de facto absence of governmental control over the export functions

of IMI/E, QI/E, and SGW, we determine that IMI/E, QI/E, and SGW are

eligible for separate rates.

Surrogate Country

Section 773(c) of the Act requires the Department to value the

factors of production, to the extent possible, in one or more market

economy countries that are at a level of economic development

comparable to that of the non-market economy country, and that are

significant producers of comparable merchandise. The Department has

determined that India and Pakistan are the most comparable to the PRC

in terms of overall economic development, based on per capita gross

national product (``GNP''), the national distribution of labor, and

growth rate in per capita GNP. (See memorandum from the Office of

Policy to Gary Taverman, dated August 17, 1993, on file in room B-099

of the Main Commerce Department Building.) Because India fulfills both

requirements outlined in the statute, India is the preferred surrogate

country for purposes of calculating the factors of production used in

producing the subject merchandise. Accordingly, for this final

determination, we have used the values for the factors of production,

as appropriate, from Indian sources. As in our preliminary

determination, we have used a world market price in one instance where

no appropriate surrogate value was available. We have obtained and

relied upon published, publicly available information, wherever

possible.

Fair Value Comparisons

To determine whether sales of silicon carbide from the PRC to the

United States were made at less than fair value for those exporters

deemed eligible to receive a separate rate, we compared the United

States price (USP) to FMV, as specified in the ``United States Price''

and ``Foreign Market Value'' sections of this notice.

United States Price

United States price was calculated on the same basis as in the

preliminary determination. Minor adjustments were made to the reported

U.S. prices of IMI/E and SGW, pursuant to finding at verification. We

also adjusted foreign inland freight based on verification findings.

(See Calculation Memorandum, attached to the Department's Concurrence

Memorandum of April 22, 1994, on file in room B-099 of the Main

Commerce Department Building.)

Foreign Market Value

We calculated FMV based on factors of production cited in the

preliminary determination, making adjustments for specific verification

findings (see Calculation Memorandum). To calculate FMV, the verified

amounts for factors of production were multiplied by the appropriate

surrogate values for the different inputs. We have used the same

surrogate values as in the preliminary determination with the exception

of the value for electricity.

In our November 29, 1993, preliminary determination, we had used

publicly available information for Pakistan regarding electricity rates

for industrial use during the POI. We did so because the publicly

available information at the time for India either was out of date or

was not necessarily specific to industrial use. After the preliminary

determination, petitioner's December 30, 1993, submission provided new

publicly available information from the Asian Development Bank (ADB)

showing Indian electricity prices for industrial use in FY1990. Since

this new ADB data shows recent electricity rates specific to industrial

use for India (our first-choice surrogate), we have used the ADB data

for the final determination in preference to data for Pakistan (our

second-choice surrogate). (For a complete analysis of surrogate values,

see Calculation Memorandum.)

Verification

As provided in section 776(b) of the Act, we verified all the

information relied upon for this final determination.

Critical Circumstances

In our preliminary affirmative determination of critical

circumstances of March 31, 1994, we found that critical circumstances

exist for two respondents in this investigation--Shaanxi and Xiamen. We

also preliminary determined that critical circumstances exist for all

exporters who did not participate in this investigation.

Pursuant to section 733(e)(1) of the Act, we based that preliminary

determination on a finding of 1) a history of dumping of silicon

carbide in the European Community (EC), and 2) massive imports of

silicon carbide over a relatively short period by examining

respondents' shipment data. Because the timing of petitioner's

allegation (after the completion of verification) precluded on-site

verification of this information, the Department also referred to U.S.

Customs IM-115 entry data to corroborate respondents' reported shipment

information, pursuant to section 771(18)(E) of the Act. (See 59FR

16795, April 8, 1994).

For the final determination, we have continued to use BIA as the

basis for our determination of critical circumstances for non-

respondent exporters. The BIA margin (406.00 percent) for those

exporters exceeds the 25 percent threshold for imputing a knowledge of

dumping to the importers of the merchandise. In addition, we have

adversely assumed, as BIA, a massive increase in imports from these

non-respondent exporters. We, therefore, determine that critical

circumstances exist for all non-respondent exporters in this

investigation.

Since the preliminary determination of critical circumstances, we

have determined that Hainan, Shaanxi and Xiamen are ineligible for

rates separate from non-respondent PRC exporters. Because Hainan,

Shaanxi and Xiamen are ineligible for rates separate from non-

respondent exporters, we must extend to them the same BIA-based

determination of critical circumstances applied to the non-respondent

exporters.

For respondents IMI/E, QI/E, and SGW, we determine that critical

circumstances do not exist. The shipment data for these respondents,

which we have corroborated using U.S. Customs IM-115 entry data, shows

that there has been no massive increase in shipments from these

respondents in the period following the filing of the petition (See

Preliminary Affirmative Determination of Critical Circumstances).

Interested Party Comments

Because respondents Hainan, Shaanxi, and Xiamen, are not eligible

for calculated separate rates, we have not addressed comments made by

these parties regarding calculations for this determination.

Comment 1: Petitoner maintains that the Department cannot assign

separate rates to respondents because not all relevant entities in the

PRC have participated in the investigation. Petitioner states that: (1)

The silicon carbide industry in the PRC is characterized by significant

provincial and/or local government ownership; (2) information on the

record demonstrates a number of non-responding producers of silicon

carbide in each province in which respondents and/or their suppliers

are located; (3) respondents and the non-responding producers are owned

by the governments of the provinces in which they are located; and (4)

respondents have offered no reason why cooperation is not required of

the non-responding producers. Petitioner further states that, while PRC

law prohibits the central government from controlling prices for

silicon carbide, there is no evidence that provincial governments

cannot regulate prices between silicon carbide producers and exporters.

Petitioner concludes that the respondents are thus ineligible for

separate rates.

IMI/E, QI/E, and SGW maintain that petitioner has confused the

Department's market-oriented industry (MOI) policy with its separate

rates policy. They state that PRC export companies do not need to prove

that the product under investigation was produced in a market

environment to be eligible for separate dumping margins. These

respondents conclude that every PRC exporter and producer of silicon

carbide does not need to participate in the case for participating

exporters to qualify for separate rates.

DOC Position

We disagree with petitioner. Pursuant to the discussion in the

``Separate Rates'' section above, we have found that the three

responding exporters ``owned by all the people'' are not controlled by

the central, provincial, or municipal governments. (See discussion

under ``Separate Rates'' section.) Further, the information on the

record relating to provincial and local governments shows that their

activities with regard to IMI/E, QI/E, and SGW are limited to such

functions as taxation, business licensing, and the collection of export

statistics. There is no evidence that these governments (1) can

manipulate export prices or (2) interfere with other aspects of

conducting business with the United States. Therefore, we determine

that IMI/E, QI/E, and SGW are not subject to government control of

their silicon carbide exports.

Finally, petitioner's concerns regarding the ability of provincial

governments to regulate prices between domestic producers and exporters

are not relevant to those respondents' eligibility for separate rates.

The Department's separate rates analysis focuses on governmental

control over the respondents' export activities, not the regulation of

prices charged by the respondents' suppliers.

Comment 2: Petitioner maintains that the respondents in this case

do not meet the Department's criteria for separate rates because they

have not demonstrated that they are independent of government ownership

or control and, therefore, that the Department must presume central-

government control. Petitioner also maintains that evidence on the

record demonstrates that the respondents are subject to certain types

of control by the central and provincial governments. Further,

petitioner states that various provisions of PRC law demonstrate that

respondents, whose business licenses state that they are owned by ``the

whole people,'' are subject to state control. In conclusion, petitioner

states that, based on the record for this investigation, respondents

are ineligible for separate rates.

IMI/E, QI/E, and SGW state that the Department should apply the

Sparklers criteria and find them eligible for separate dumping margins.

These respondents state that they have cooperated completely in this

investigation and have provided information indicating a lack of

ownership or control by the PRC central government. Moreover, these

respondents emphasize that the appropriate test of ownership is control

of property rather than simple legal title. IMI/E, QI/E, and SGW state

that the record also provides evidence of a de facto absence of central

control with respect to exporters.

Hainan, Shaanix, and Xiamen state that they are not subject to de

jure or de facto control by the central government. As evidence of de

jure absence of control, Hainan, Shaanix and Xiamen cite the specific

law and regulations provided in the MOFTEC verification report which

indicate that: (1) the PRC central government cannot dictate the

decision-making of enterprises; (2) enterprises have the right to enjoy

the benefits from their business activities; and (3) enterprises are

free to select their own management independently from the PRC central

government. These respondents also maintain that evidence on the record

demonstrates a de facto absence of control.

DOC Position: The Department disagrees with petitioner regarding

respondents IMI/E, QI/E, and SGW. As discussed at length in the

``Separate Rates'' section above, IMI/E, QI/E, and SGW are eligible for

separate rates.

Respondents Hainan and Shaanxi have failed to establish their

eligibility for separate rates because, at verification, these

companies failed to produce bank records necessary to prove their

retention of proceeds from export sales. Therefore, these respondents

did not meet an important criterion for separate rates (see ``Separate

Rates'' section above).

Respondent Xiamen has also failed to establish its eligibility for

a separate rate. As noted in the ``Separate Rates'' section above,

Xiamen has stated that certain other PRC exporters of silicon carbide

(i.e., CAEC and its other affiliates) are related parties within the

meaning of section 771(13) of the Act. However, Xiamen has failed to

provide information regarding the eligibility for separate rates of

CAEC, et al. Without such information, the Department cannot consider

assigning a separate rate to Xiamen/CAEC. (See also the Concurrence

Memorandum of April 22, 1994.)

Comment 3: Hainan, Shaanxi, and Xiamen argue that two of the

members of the petitioning coalition, Treibacher and Saint-Gobin,

should be excluded as interested parties in this investigation because

these companies do not sell U.S.-manufactured silicon carbide. These

respondents assert that Treibacher and Saint-Gobain sell silicon

carbide produced in Canadian furnaces that is merely ground and

screened in the United States. Respondents ask the Department to notify

the U.S. International Trade Commission (ITC) that these two companies

should not be considered as part of the domestic silicon carbide

industry because of (1) their insignificant U.S. capital investment

regarding silicon carbide, (2) their negligible U.S. employment, and

(3) their negligible real value-added to the product in the United

States.

Hainan, Shaanxi, and Xiamen assert that, once the Department has

excluded Treibacher and Saint-Gobain from participating as interested

parties in this proceeding, the Department must scrutinize Exolon-ESK,

the sole remaining petitioner with standing as a U.S. producer of

silicon carbide. These respondents point out that Exolon was indicted

in February 1994 for alleged improper commercial activities. These

charges, Hainan, Shaanxi, and Xiamen argue, are ``directly relevant to

the credibility of the certifications on which the Department based the

initiation of this investigation and to the legitimacy of Exolon's

request for import relief.'' These respondents conclude that since (1)

the Department must reject Exolon's submissions as an unreliable basis

for the initiation of this investigation, and (2) Treibacher and Saint-

Gobain are not interested parties and are thus barred from status as

petitioners, there are no remaining petitioners with standing to

continue this investigation. Therefore, these respondents maintain that

the Department should rescind its investigation of silicon carbide from

the PRC,

Petitioner argues that based on long-standing practices, the

Department analyzes petitioner's standing only in the event of a

challenge from other U.S. producers. Petitioner rebuts respondents'

argument by maintaining that the indictment of the petitioner is not

relevant to this investigation, that Exolon, the indicted party, is

innocent of the charges, and that Treibacher and Saint-Gobain are

interested parties to this investigation.

DOC Position: We agree, in part, with petitioner. Exolon's

indictment is irrelevant to our analysis and its status as a U.S.

producer of subject merchandise is unchallenged. Further, the ITC

preliminarily determined that Treibacher and Saint-Gobain are engaged

in U.S. ``production'' of subject merchandise and thus qualify as

members of the domestic industry (see Silicon Carbide From the People's

Republic of China, Inv. No. 731-TA-651 (Preliminary) (Pub. 2668, August

1993), at 12-13). We have reviewed the ITC's analysis, which addresses

the same arguments raised by respondents in this proceeding, and we

concur with the ITC. Therefore, we determine that Treibacher and Saint-

Gobain are engaged in ``production'' of silicon carbide in the United

States. Thus, these companies qualify as interested parties to this

proceeding. Given these facts, there is no basis for rescinding the

initiation of this investigation.

Comment 4: Hainan, Shaanxi, and Xiamen argue that, if the

Department decides not to rescind the initiation of this investigation,

the Department should consider crude silicon carbide and refined

silicon carbide to be separate classes or kinds of merchandise.

Petitioner asserts that these respondents have offered no evidence

on the record to support an alternative class or kind analysis.

DOC Position: We agree with petitioner. Hainan, Shaanxi, and Xiamen

have provided no substantial analytical or factual basis for their

claim that crude silocon carbide and refined silicon carbide should be

considered as separate classes or kinds of merchandise.

Comment 5: IMI/E, QI/E, and SGW argue that the Department should

continue to use the Pakistani rates for electricity because the Indian

rates for industrial use from the petitioner's December 30, 1993,

submission were artificially high.

Petitioner asserts that the Department should follow its preference

for using surrogate values from one country when possible. In this

case, the Department has surrogate values from India for all factors of

production, including electricity. Petitioner further asserts that the

Pakistani rate used as the surrogate value for electricity in the

preliminary determination was flawed because it did not completely

capture electricity costs for industrial users.

DOC Position: We agree with petitioner. In its preliminary

determination, the Department relied upon published, publicly-available

information (PPI) regarding Pakistani electricity rates for industrial

use during the POI. We did so because the PPI available at that time

for India either was out of date or was not necessarily specific to

industrial use. Since that time, publicly available electricity rates

for India have become available and these rates more accurately capture

total costs for Indian industrial users.

With regard to the concern raised by IMI/E, QI/E, and SGW regarding

artificially high electricity rates in India, the document which these

respondents cites as evidence of their contention simply fails to

support their position; viz., that document states that ``[t]o

encourage industrial development, many states also offer low rates to

large industries.'' Therefore, the Department has selected the

publicly-available industrial rates for India to value electricity

consumption for the calculations for this determination (see

Calculation Memorandum).

Comment 6: Petitioner states that there is a history of dumping in

the United States and Europe of silicon carbide from the PRC. Moreover,

petitioner states that the import data show there have been massive

imports of silicon carbide from PRC over a relatively short period of

time. Since preliminarily estimated dumping margins in this case exceed

25 percent, petitioner maintains that the importers knew or should have

known that the product was being sold at less than fair value.

Petitioner maintains that the Department should find critical

circumstances in this case.

QI/E, IMI/E, and SGW state that since their exports were not

massive after the petition was filed, the Department should not find

critical circumstances.

Hainan, Shaanxi, and Xiamen state that the EC findings which

petitioner cites as evidence of a history of dumping do not, in fact,

demonstrate such a history. These respondents maintain that, because

the PRC exporters offered the EC ``satisfactory undertakings'' (i.e.,

agreed to eliminate injurious dumping), there is no ``history of

dumping'' in the EC.

DOC Position: As described in the ``Critical Circumstances''

section above, we have analyzed the information on the record regarding

critical circumstances and have found that critical circumstances do

not exist for the three respondents (IMI/E, QI/E, and SGW) that are

eligible for separate rates. For non-respondent exporters during the

POI, we have used BIA to determine the existence of critical

circumstances. Since Hainan, Shaanxi, and Xiamen are ineligible for

rates separate from those non-respondent exporters, we must extend to

them the same BIA-based determination of critical circumstances.

Comment 7: Petitioner maintains that the silicon carbide industry

is not a market-oriented industry due to: (1) State ownership of some

producers; (2) government control of production levels and prices for a

significant portion of the industry; and (3) government control of

prices and production of significant inputs.

IMI/E, QI/E, and SGW contend that, since prices for energy inputs

in the United States are also set by governments, the PRC respondents'

market rates submission should not have been rejected on the basis that

coal rates are set by the Government of the PRC. IMI/E, QI/E, and SGW

further contend that no U.S. industry could ever be considered an MOI

under these criteria. The Department's criteria according to IMI/E, QI/

E, and SGW, are therefore, inherently unreasonable.

According to Hainan, Shaanxi, and Xiamen, the Department's MOI

analysis is inaccurate. They maintain that the Department's MOI test is

a charade since, once the Department determines that a country is a

non-market economy, it is a foregone conclusion that respondents will

be unable to prove that an MOI exists.

DOC Position: We agree with petitioner. And MOI does not exist

because coal, a significant material input used to produce silicon

carbide, is not purchased at market-determined prices. On November 16,

1993, petitioner submitted for the record of this investigation a World

Bank Discussion Paper entitled ``The Sectoral Foundations of China's

Development.'' This paper demonstrates that much of the coal supply of

the PRC is subject to central regulation of both price and allocation.

Coal not subject to central regulation is often subject to regulation

by provincial price boards. The PRC's coal market is also distorted by

substantial ``in plan'' production. Given the many distortions of the

coal market evident from information on the record, we cannot consider

the price of coal in the PRC to be market-determined. (For further

discussion, see the preliminary determination in this investigation (58

FR 64549, December 8, 1993).

Comment 8: Petitioner maintains that IMI/E has not demonstrated its

independence from other entities listed on its organizational chart or

that these other entities did not export silicon carbide to the United

States during the POI. Further, petitioner maintains that the

Department's failure to find evidence of investments between IMI/E and

these other entities does not indicate a lack of business

relationships. Petitioner concludes that IMI/E's potential relationship

with these other entities renders it ineligible for a separate rate.

IMI/E states that its maintenance of business relationships with

other companies should not disqualify it from receiving a separate

rate.

DOC Position: The Department disagrees with petitioner. first, at

verification the Department examined the completeness of IMI/E's sales

reporting. That examination encompassed IMI/E's records and substantial

other documentation. There was no indication at verification that any

part of IMI/E had failed to report POI sales to the United States.

IMI/E for its part has stated that other entities shown on its

organizational chart are ``not related to IMI/E''. Rather, they contend

that those ``independent and unrelated organizations appear on IMI/E's

organization chart to give the impression that IMI/E is a large company

that is prepared to do business with huge customers requiring enormous

volumes of products.'' IMI/E's explanation is consistent with the

Department's examinations at verification.

Finally, although petitioner concedes that IMI/E's investment

accounts demonstrated no investments between IMI/E and the entities in

question, petitioner maintains that IMI/E is ineligible for a separate

rate because of potential business relationships with these entities.

However, petitioner has not indicated any reasonable basis upon which

the Department can determine that such potential relationships offer

entities an opportunity to manipulate IMI/E's export pricing.

Comment 9: Petitioner states that SGW is ineligible for a separate

rate because other silicon carbide exporters in the same province have

failed to respond to the Department's questionnaire. Further,

petitioner maintains that information on the record links SGW to other

exporters. Petitioner concludes that since exporters of silicon carbide

related to SGW are not cooperating in this investigation, the

Department cannot issue a separate rate for SGW.

SGW states that it is unrelated to any other exporters of silicon

carbide. In particular, SGW maintains that it demonstrated during

verification its independence from its provincial government and, thus,

from other exporters in the same province.

DOC Position: We agree with SGW that it has established its

eligibility for a separate rate. As noted in our ``Separate Rates''

section above, our analysis shows that SGW is not subject to central-

government control of its silicon carbide exports. Further, other than

the now disproven contention of relationships based on the common

``provincial ownership'' of exporters, the only other basis for

petitioner's assertion of a relationship among exporters is the use by

SGW of ledger paper bearing the name of another exporter. SGW has

satisfactorily explained this situation at verification (see

Concurrence Memorandum and Verification Report). There is no other

indication of a relationship between SGW and other exporters of silicon

carbide and, therefore, SGW's eligibility for a separate rate is

unaffected.

Comment 10: Petitioner states that the Department was unable to

verify the factors of production reported by IMI/E, QI/E, and SGW and,

therefore, must base FMV on BIA for the final determination.

IMI/E, QI/E, and SGW request that the Department accept the correct

and verified consumption factors and use these inputs in the final

determination.

DOC Position: The Department agrees with respondents. While the

Department's verification uncovered several inaccuracies in these

respondents' reported data, the inaccuracies do not undermine the

fundamental soundness of their questionnaire responses because the

inaccuracies were not significant and there was no pattern of under-

reporting of the factors of production. Given these findings, the

Department has used the verified factors of production in its

calculations for the final determination.

Comment 11: Petitioner states that, should the Department use the

factors of production for IME/E, QI/E, and SGW, it must adjust these

factors for findings at verification. Specifically, petitioner

maintains that the Department should do the following: (1) For IMI/E,

adjust sand consumption and electricity consumption, account for

previously unreported input materials, reallocate labor hours, and

correct transportation distances for certain raw materials; (2) QI/E,

adjust QI/E's rail freight distance from factory to port, coal

transportation distance and use BIA for sand transportation distance,

electricity consumption, and labor; and (3) for SGW adjust distances

for shipping sand and coal, reverse the number of skilled and unskilled

workers used in the calculations for the preliminary determination

ignore unverified information regarding labor rates, and use BIA for

rail freight distance from factory to port as well as SGW's reported

truck freight distances.

These respondents assert that the Department should use these

respondents' verified factors of production, taking clerical errors at

verification into account, where appropriate.

DOC Position: As stated in the Department's position to the

previous comment, we have used the verified amounts for each of these

respondents' factors of production. Any inaccuracies found at

verification do not undermine the fundamental soundness of the

respondent's questionnaire responses. The inaccuracies were not

significant and there was no pattern of under-reporting of the factors

of production. Given these findings, the Department has used the

verified factors of production in its calculations for the final

determination because the verified factors of production yield the most

accurate measure of the respondents' margins of dumping. (For an in-

depth discussion of verification findings, see our Concurrence

Memorandum).

Comment 12: Petitioner states that, should the Department consider

a separate rate for IMI/E, the Department should adjust IMI/E's U.S.

price to eliminate a claimed bonus payment for product purity in excess

of requirements.

IMI/E requests that the Department use its verified sales prices in

the final determination.

DOC Position: The Department agrees with respondent. The Department

verified the proof of payment for the sales in question. That proof of

payment demonstrated that actual final sales price for the reported

sales, including bonus payments. We have used the verified final sales

prices in the calculations for this determination.

Comment 13: Petitioner states that, should the Department consider

a separate rate for QI/E, the Department must adjust QI/E's U.S. price

based on documentation reviewed at verification. Specifically,

petitioner maintains that the Department must exclude a certain price

adjustment because the Department was unable to verify the silicon

carbide content of one sale.

DOC Position: We disagree with petitioner. The Department verified

the proof of payment for the sale in question. That proof of payment

demonstrated the actual final sales price for the reported sale. Since

the Department's calculations are based on actual sales prices, proof

of the silicon carbide content of the merchandise sold is unnecessary.

We have used the verified final sales price in the calculations for

this determination.

Comment 14: Petitioner states that the Department discovered at

verification that QI/E had failed to report certain U.S. sales. In

addition, petitioner maintains that changes in the terms of the sales,

which Qinghai claims place the dates of sale after the POI, were

immaterial. Petitioner concludes that the sales in question are POI

sales, and that QI/E's failure to report those sales requires that the

Department base its final determination for QI/E on BIA.

QI/E maintains that the changes in question were material changes

in quantity. QI/E states that the date of sale for these sales was

after the POI. QI/E concludes that these sales were properly excluded

from QI/E's questionnaire responses.

DOC Position: We agree with QI/E. The change in question was a

change in the quantity sold under the contract. Petitioner maintains

that the implementation of the change through a quantity variation is

an ``immaterial'' change. However, verification exhibits indicate that

the customer's intent (and the final result) was a change in the

quantity term of the shipment. That change went beyond the allowable

quantity variation of the original contract. Thus, the quantity of the

contract, a material term, was not established until after the POI.

Therefore, the date of sale was after the POI.

Comment 15: Petitioner states that SGW understated its U.S. sales

during the POI, and that the Department must use BIA for SGW's

unreported sale.

SGW requests that the Department include the verified, but

unreported sale, in its final determination because SGW did not benefit

from this oversight.

DOC Position: The Department agrees with SGW. The omission in

question appeared to be inadvertent and had the effect of raising,

rather than lowering, SGW's calculated margin. In addition, we have no

reason to believe that this omission is indicative of a larger pattern

of inaccurate reporting by SGW. Further, this omission does not

approach the magnitude of the omissions, errors, and inadequacies which

we discovered during the verifications of Hainan, Shaanxi, and Xiamen,

requiring us to use BIA for those respondents. Therefore, we have used

the actual, verified information for SGW's unreported sale in our

calculations for this determination because its inclusion yields the

most accurate estimate of SGW's margin of dumping. (See also the

Concurrence Memorandum.)

Comment 16: IMI/E, QI/E, and SGW state that the Department should

not include coal and water in overhead, in order to avoid double-

counting these items.

DOC Position: We agree with respondents that we should not double

count these costs. Therefore, we have not included water as a separate

factor of production because we believe that water costs are captured

in the ``other manufacturing expenses'' category of the Department's

surrogate overhead expense (see the Calculation Memorandum attached to

the Concurrence Memorandum). However, we have continued to account for

coal as a separate factor of production because we have excluded

``power and fuel'' from the surrogate overhead expense.

Continuation of Suspension of Liquidation

In accordance with sections 733(d)(1) and 735(c)(4) (A) and (B) of

the Act, we are directing the Customs Service to continue to suspend

liquidation of entries of silicon carbide from the PRC from three of

the respondents in this investigation--IMI/E, QI/E, and SGW--that are

entered, or withdrawn from warehouse, for consumption on or after

December 8, 1993, which is the date of publication of the preliminary

determination in the Federal Register. For imports of silicon carbide

from all other exporters from the PRC, we are directing the Customs

Service to suspend liquidation on or after September 9 1993, which is

90 days prior to the date of publication of the preliminary

determination in the Federal Register. The Customs Service shall

require a cash deposit or posting of a bond equal to the estimated

amount by which the FMV exceeds the USP as shown below. These

suspensions of liquidation instructions will remain in effect until

further notice.

The weighted-average dumping margins are as follows:

------------------------------------------------------------------------

Weighted-

average

Exporter margin

percentage

------------------------------------------------------------------------

7th Grinding Wheel Factory Import and Export Corporation... 99.52

The Import and Export Trading Corporation of Inner Mongolia

Autonomous Region......................................... 27.41

The Qinghai Metals and Minerals Import and Export

Corporation............................................... 7.50

All Others*................................................ 406.00

------------------------------------------------------------------------

*Including respondents Hainan, Shaanxi, and Xiamen.

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

ITC of our determination. The ITC will now determine, within 45 days,

whether these imports are materially injuring, or threaten material

injury to, the U.S. industry. If the ITC determines that material

injury, or threat of material injury does not exist, the proceeding

will be terminated and all securities posted will be refunded or

cancelled. If the ITC determines that such injury does exist, the

Department will issue an antidumping duty order directing Customs

officials to assess antidumping duties on all imports of the subject

merchandise entered, or withdrawn from warehouse, for consumption on or

after the effective date of the suspension of liquidation.

This determination is published pursuant to section 735(d) of the

Act and 19 CFR 353.20(a)(4).

Dated: April 22, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-10455 Filed 4-29-94; 8:45 am]

BILLING CODE 3510-DS-P