Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Paper Clips From the People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-826]

Preliminary Determination of Sales at Less Than Fair Value and

Postponement of Final Determination: Certain Paper Clips From the

People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: May 18, 1994.

FOR FURTHER INFORMATION CONTACT: Dorothy Tomaszewski or Erik Warga,

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) 482-0631 or (202) 482-0922, respectively.

PRELIMINARY DETERMINATION: We preliminarily determine that certain

paper clips (paper clips) from the People's Republic of China (PRC) are

being, or are likely to be, sold in the United States at less than fair

value (LTFV), as provided in section 733 of the Tariff Act of 1930, as

amended (the Act). The estimated margin is shown in the ``Suspension of

Liquidation'' section of this notice.

Case History

Since the initiation of this investigation on November 2, 1993, (58

FR 59239, November 8, 1993), the following events have occurred.

During November and December 1993, the Department attempted to

identify possible PRC exporters of paper clips to the United States

during the period of investigation (POI). To that end, on November 4,

1993, we sent a survey to the PRC's Ministry of Foreign Trade and

Economic Cooperation (MOFTEC) and 21 PRC companies requesting

information on U.S. exports of the subject merchandise. The names of

the 21 potential respondents were identified by petitioners, and

through examination of PIERS data and other sources of information. We

received information from several of these companies stating that they

did not export the subject merchandise during the POI.

On November 29, 1993, the U.S. International Trade Commission (ITC)

notified us of its preliminary determination that there is a reasonable

indication that an industry in the United States is threatened with

material injury by reason of imports of paper clips from the PRC that

are alleged to be sold at less than fair value.

On December 13, 1993, the Department of Commerce (the Department)

sent MOFTEC, the China Chamber for Import and Export of Machinery, and

Electronic Products (CCME), and 14 PRC companies the antidumping

questionnaire. (The antidumping questionnaire was divided into three

sections: section A requesting general information on each company;

section C requesting information on, and a listing of, U.S. sales made

during the POI; and, section D requesting information on the production

process, including specific amounts of each input used in manufacturing

paper clips.) We requested MOFTEC's assistance in forwarding the

questionnaire to all exporters and producers of paper clips and

submitting complete questionnaire responses on their behalf.

On December 15 and December 16, 1994 we sent antidumping

questionnaires to four additional companies.

On March 9, 1994, MOFTEC designated the CCME as the contact

organization for this investigation. Subsequently, the CCME submitted a

list of seven companies (four exporters and three supplying

manufacturers) which sold or manufactured the subject merchandise

exported to the United States during the POI. We are accepting this

list as dispositive for the purposes of our preliminary determination.

On December 27, 1993, the Department sent a letter to all

interested parties providing them with the opportunity to submit

published, publicly-available information for the Department to

consider when valuing the factor inputs. Petitioners submitted their

information on January 26, 1994; Respondents submitted none.

On January 12, 1994, Abel Industries International, one of the four

identified exporters, advised the Department that it would not respond

to the questionnaire.

During January 1994, the Department received responses to sections

A and C from the following exporters: Shanghai Lansheng Corp.

(Lansheng), Zhejiang Machinery & Equipment Import & Export Corporation

(ZMEC), and Zhejiang Light Industrial Products & Export Corporation

(ZLIP). The Department also received responses to sections A and D from

the following manufacturers: Wuyi Cultural and Education Commodities

General Factory (Wuyi), Shanghai Stationery Pins Factory Fengbin

(Fengbin), and Jiaxing Stationery Pins Factory (Jiaxing).

The Department requested clarifications of the submitted

questionnaire responses on February 17, 1994. The six respondents

submitted additional response information on March 18, 1994.

On March 2, 1994, the Department postponed its preliminary

determination until May 11, 1994 (59 FR 11250, March 10, 1994).

The Department requested additional information from the six

respondents on April 28, 1994, and received responses on May 0, 1994.

However, because of the deadline established for its submission, the

information was not considered for this preliminary determination.

Postponement of Final Determination

Pursuant to section 735(a)(2)(A) of the Act, on May 4, 1994,

respondents requested that, in the event of an affirmative preliminary

determination in this investigation, the Department postpone the final

determination to 135 days after the date of publication of the

affirmative preliminary determination. Therefore, we are postponing the

final determination until the 135th day after the publication of this

notice in the Federal Register.

Scope of Investigation

The products covered by this investigation are certain paper clips,

wholly of wire of base metal, whether or not galvanized, whether or not

plated with nickel or other base metal (e.g., copper), with a wire

diameter between 0.025 inches and 0.075 inches (0.64 to 1.91

millimeters), regardless of physical configuration, except as

specifically excluded. The products subject to this investigation may

have a rectangular or ring-like shape and include, but are not limited

to, clips commercially referred to as ``No. 1 clips'', ``No. 3 clips'',

``Jumbo'' or ``Giant'' clips, ``Gem clips'', ``Frictioned clips'',

``Perfect Gems'', ``Marcel Gems'', ``Universal clips'', ``Nifty

clips'', ``Peerless clips'', ``Ring clips'', and ``Glide-On clips''.

Specifically excluded from the scope of this investigation are

plastic and vinyl covered paper clips, butterfly clips, binder clips,

or other paper fasteners that are not made wholly of wire of base metal

and are covered under a separate subheading of the Harmonized Tariff

Schedule of the United States (HTSUS).

The products subject to this investigation are classifiable under

subheading 8305.90.3010 of the HTSUS. Although the HTSUS subheading is

provided for convenience and customs purposes, our written description

of the scope of this investigation is dispositive.

Period of Investigation

The POI is May 1, 1993, through October 30, 1993.

Separate Rates

ZMEC, ZLIP, and Lansheng have each requested a separate rate.

ZMEC's and ZLIP's business licenses each indicate that they are owned

``by all the people.'' Lansheng has reported that it is a publicly-held

company whose shares are traded on the Shanghai Security Market. As

stated in the Final Determination of Sales at Less than Fair Value:

Silicon Carbide from the People's Republic of China (59 FR 22585, May

2, 1994) (``Silicon Carbide'') ``ownership of a company by all the

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

Accordingly, ZMEC and ZLIP are eligible for consideration for separate

rates. Lansheng is not owned by the central government and is therefore

eligible for consideration for a separate rate.

To establish whether a firm is sufficiently independent to be

entitled to a separate rate, the Department analyzes each exporting

entity under a test arising out of the Final Determination of Sales at

Less Than Fair Value: Sparklers from the People's Republic of China (56

FR 20588, May 6, 1991) (``Sparklers'') and amplified in Silicon

Carbide. Under the separate rates criteria, the Department assigns

separate rates only where respondents can demonstrate the absence of

both de jure and de facto governmental control over export activities.

1. Absence of De Jure Control

In this investigation, MOFTEC stated in its March 9, 1994, letter

to the Department that it does not have any control in the business of

this industry. Lansheng, ZLIP, and ZMEC have submitted copies of the

following laws in support of their claim of absence of de jure control:

``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 was restated in

the 1992 Regulations (see Article IX). The Export Provisions list those

products subject to direct government control. Paper clips do not

appear on the Export Provisions list and are not, therefore, subject to

the constraints of these provisions.

The Department stated in Silicon Carbide that the existence of the

1988 Law and the 1992 Regulations support a finding that the

respondents are not subject to de jure control either by the central

government or otherwise.\1\ However, we found in Silicon Carbide that

the laws shifting control from the government to the enterprises

themselves have not been implemented uniformly. Therefore, the

Department has determined that an analysis of de facto control is

critical to determining whether respondents are, in fact, subject to

governmental control.

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\1\Additionally, Lansheng has submitted a copy of the PRC

Company Law approved on December 29, 1993, (effective on July 1,

1994) which states that ``the shareholders of a company shall, as

contributors of the capital, have the right of ownership, be

entitled, in proportion to the amount of capital contributed by

each, to the interests of assets of the company, and have the right

to participate in important decision making processes and in

selecting management, personnel, etc.'' Although not yet in effect

this law lends support to a finding of an absence of de jure

governmental control. As this investigation continues, we will

consider any additional information on publicly traded enterprises

and the implementation of the Company Law.

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2. Absence of De Facto Control

The Department has considered four factors in evaluating whether de

facto control exists: (1) Whether the export prices are set by or

subject to the approval of a governmental authority; (2) whether the

respondent has authority to negotiate and sign contracts and other

agreements; (3) whether the respondent has autonomy from the government

in making decisions regarding the selection of management; and (4)

whether the respondent retains the proceeds of its export sales and

makes independent decisions regarding disposition of profits or

financing of losses (see Silicon Carbide).

Each of the three cooperating exporters has asserted that: (1) It

establishes its own export prices; (2) it negotiates contracts without

guidance from any governmental entities or organizations; (3) its

management operates with a high degree of autonomy and there is no

information on the record that suggests central government control over

selection of management; and (4) it retains the proceeds of its export

sales, and has the authority to sell its assets and to obtain loans. In

addition, company-specific pricing during the POI does not suggest any

coordination among exporters (i.e., the prices for comparable products

appear to differ among companies). This information supports a

preliminary finding that there is a de facto absence of governmental

control.

Consequently, these three cooperating exporters have preliminarily

met the criteria for the application of separate rates. We will examine

this issue in detail at verification and determine whether the

questionnaire responses are supported by verifiable documentation.

There are two additional issues relating to governmental control

that we will consider further for purposes of our final determination.

First, ZMEC has indicated that it is ``administratively subject to''

the Zhejiang Machinery Bureau, and ZLIP has stated that it is

``administratively subject to'' the Zhejiang Foreign Trade and Economic

Cooperation Bureau. While the meaning and significance of these phrases

are unclear, the evidence cited above indicates that the bureaus do not

control the key functions of the enterprises. However, we will examine

the precise nature of the authority that these bureaus exercise over

the enterprises at verification and in our final determination.

Second, Lansheng's questionnaire response indicates that a

``municipal government'' owns 70 percent of its shares. There is no

evidence on the record that this municipality controls other exporters

that made sales of the subject merchandise to U.S. customers during the

POI. We will also evaluate this issue carefully during verification to

make sure that the municipality in fact does not exercise control over

other exporters.

Surrogate Country

Section 773(c)(4) 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: (1) At a level of economic development

comparable to that of the non-market economy country, and (2)

significant producers of comparable merchandise. The Department has

determined that India and Pakistan are the countries most comparable to

the PRC in terms of overall economic development. (See memorandum from

the Office of Policy to the file, dated November 29, 1993.) Although

India is the preferred surrogate country for purposes of calculating

the factors of production used in producing the subject merchandise, we

have resorted to Pakistan for certain surrogate values where Indian

values were either unavailable or significantly outdated. We have

therefore used the values for the factors of production, as

appropriate, from India and Pakistan. We have obtained and relied upon

published, publicly available information, wherever possible.

Fair Value Comparisons

To determine whether sales by the three responding exporters of

paper clips from the PRC to the United States were made at less than

fair value, we compared the United States price (USP) to the foreign

market value (FMV), as specified in the ``United States Price'' and

``Foreign Market Value'' sections of this notice. Because Abel

Industries decided not to participate in this investigation, we based

its margin on the best information available (BIA). (See ``Best

Information Available'' section of this notice.)

United States Price

We based USP on purchase price sales, in accordance with section

772(b) of the Act, because the subject merchandise was sold directly by

the Chinese exporters to unrelated parties in the United States prior

to importation into the United States.

For those exporters that responded to the Department's

questionnaire, we calculated purchase price based on packed, CIF or FOB

foreign-port prices to unrelated purchasers in the United States. We

made deductions for foreign inland freight, which was calculated on the

basis of surrogate Indian freight rates; for CIF-prices, we also

deducted ocean freight and marine insurance.

Since Lansheng reported only FOB sales to the U.S. during the POI,

no deductions for ocean freight or marine insurance were necessary.

In the case of ZLIP, we used the reported ocean freight and marine

insurance charges for its CIF sales since these charges were reported

as being based on market-economy rates paid in U.S. dollars to

international carriers.

ZMEC reported the use of PRC-based providers of ocean freight and

marine insurance. Since no surrogate country information was available

for these expenses, we used the reported U.S. dollar charges for those

expenses as best information available, pursuant to section 773(c)(1)

of the Act, for this preliminary determination. (See Final

Determination of Sales at Less Than Fair Value: Sulfanilic Acid from

PRC, 57 FR 29705, July 6, 1992.)

Foreign Market Value

We calculated FMV based on factors of production reported by the

factories which produced the subject merchandise for the three

exporters. The factors used to produce paper clips include materials,

labor, and energy. To calculate FMV, the reported quantities were

multiplied by the appropriate surrogate values for the different

inputs. (For a complete analysis of surrogate values, see our

calculation memorandum.)

We used surrogate transportation rates to value inland freight

between the source of the production factor and the paper clip

factories. In those cases where a respondent failed to provide any

information on transportation distances and modes, we applied, as best

information available, the most expensive distance/modes combination

(i.e., the longest truck rates) that was available from the surrogate

information we had selected.

To value the raw materials, we used publicly available information

from the Monthly Trade Statistics of Foreign Trade of India, Volume

II--Imports for April-December 1992. We adjusted the factor values to

the POI using wholesale price indices published by the International

Monetary Fund.

To value electricity, we used publicly available information from

the ``Monthly Statistical Bulletin'' published by the Pakistani Federal

Bureau of Statistics. We selected this source because it provided an

electricity rate for industrial use in the POI. The most recent

published, publicly available Indian electricity rate for industrial

use dated from 1985.

To value labor amounts, we used the International Labor Office's

1993 Yearbook of Labor Statistics. To determine the number of hours in

an Indian workday, we used the Country Reports: Human Rights Practices

for 1990.

To value factory overhead, we calculated percentages based on

elements of industry group income statements from The Reserve Bank of

India Bulletin (RBI), December 1992. We based our overhead percentage

calculations on the RBI data, adjusted to reflect an energy-exclusive

overhead percentage. For selling, general and administrative (SG&A)

expense percentages, we used the RBI data and allocated total expenses

over the total RBI-based materials, labor, and overhead cost calculated

for each factory. We used the calculated SG&A percentages because they

were greater than the ten percent statutory minimum. For profit we used

the statutory minimum of eight percent of materials, labor, factory

overhead, and SG&A expenses, because the calculated figure was less

than eight percent.

We also added, as BIA, the unit value cost for packing materials

based on information in the petition because respondents provided

insufficient information on packing materials to calculate a factor

based on surrogate data. We made no adjustments for selling expenses.

We added surrogate freight costs for the delivery of inputs and packing

materials to the factories producing paper clips.

Best Information Available

One exporter, Abel Industries, indicated that it would not

participate in the investigation. Because information has not been

presented to the Department to prove otherwise, Abel and any other PRC

companies not participating in this investigation are not entitled to

separate dumping margins. Because Abel decided not to participate in

this investigation, we are basing the ``All Other'' rate, which will

also apply to Abel, on BIA. This is similar to our use of the BIA-based

``All Other'' rate in Silicon Carbide.

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

tiered methodology, whereby the Department normally assigns lower

margins to those respondents that cooperated in an investigation and

margins based on more adverse assumptions for those respondents which

did not cooperate in an investigation. As 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. Here, since some PRC exporters

failed to respond to our questionnaire, we are assigning a margin of

126.94 percent (the highest margin in the petition, as recalculated by

the Department for the initiation) as BIA to all exporters other than

those responding exporters which have shown their independence from

central government control.

Verification

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

information determined to be acceptable for use in making our final

determination.

Suspension of Liquidation

In accordance with section 733(d)(1) of the Act, we are directing

the Customs Service to suspend liquidation of all entries of paper

clips from the PRC that are entered, or withdrawn from warehouse, for

consumption on or after the date of publication of this notice 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 suspension of liquidation

instructions will remain in effect until further notice.

The weighted-average dumping margins are as follows:

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

Weighted-

Manufacturer/producer/exporter average margin

percentage

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

Lansheng................................................ 82.01

ZLIP.................................................... 63.60

ZMEC.................................................... 105.88

All Others (including Abel)............................. 126.94

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

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final determination is affirmative,

the ITC will determine before the later of 120 days after the date of

this preliminary determination or 45 days after our final determination

whether these imports are materially injuring, or threaten material

injury to, the U.S. industry.

Public Comment

In accordance with 19 CFR 353.38, case briefs or other written

comments in at least ten copies must be submitted to the Assistant

Secretary for Import Administration no later than August 8, 1994, and

rebuttal briefs, no later than August 15, 1994. In accordance with 19

CFR 353.38(b), we will hold a public hearing, if requested, to afford

interested parties an opportunity to comment on arguments raised in

case or rebuttal briefs. Tentatively, the hearing will be held on

August 17, 1994, at 10 a.m. at the U.S. Department of Commerce, room

3708, 14th Street and Constitution Avenue, N.W., Washington, DC 20230.

Parties should confirm by telephone the time, date, and place of the

hearing 48 hours before the scheduled time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, U.S. Department of Commerce, Room

B-099, within ten days of the publication of this notice. Requests

should contain: (1) The party's name, address, and telephone number;

(2) the number of participants; and (3) a list of the issues to be

discussed. In accordance with 19 CFR 353.38(b), oral presentations will

be limited to issues raised in the briefs. If this investigation

proceeds normally, we will make our final determination by the 135th

day after the date of publication of the affirmative preliminary

determination in the Federal Register.

This determination is published pursuant to section 733(f) of the

Act and 19 CFR 353.15(a)(4).

Dated: May 11, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-12138 Filed 5-17-94; 8:45 am]

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