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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-825]

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

Sebacic Acid From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: May 31, 1994.

FOR FURTHER INFORMATION CONTACT: Brian C. Smith, 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-

1766.

FINAL DETERMINATION: We determine that sebacic acid 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 733 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 December 28, 1993, issuance of the preliminary

determination (59 FR 565, January 5, 1994), the following events have

occurred.

On January 3, 1994, Sinochem International Chemical Company (SICC),

Tianjin Chemical Import & Export Corporation (Tianjin), Sinochem

Jiangsu Import & Export Corporation (Jiangsu), and Guangdong Chemical

Import & Export Corporation (Guangdong) (collectively referred to as

respondents) withdrew their claim that the sebacic acid industry in the

PRC is a market-oriented industry (MOI). On January 4, 1994, the

Department issued to respondents a request for clarification of

previously provided information, as well as for additional, published

information. On January 5, 1994, respondents' counsel requested a

hearing and asked for an extension to submit its clarification comments

on previously provided published information and to submit additional

published information. On January 7, 1994, the Department granted the

extension. On January 11, 1994, petitioner, which is Union Camp

Corporation, requested a hearing. On January 14, 1994, the Department

sent to the respondents verification agendas. On January 25, 1994, the

Department issued to petitioner and respondents a questionnaire asking

for the material requirements for producing sebacic acid. On January

31, 1994, respondents indicated that they could not provide any

additional published information for the period of investigation (POI).

On February 2, 1994, petitioner alleged that India was not the proper

surrogate country in this investigation. On February 3, 1994,

respondents' counsel submitted financial statements for three of the

four factories under investigation. On February 8, 1994, petitioner and

respondents submitted their responses to the January 25, 1994, material

requirements questionnaire. On February 14, 1994, petitioner submitted

its verification comments. From February 21 to March 19, 1994,

Department officials conducted verifications of four trading companies

and four factories and met with officials from the Ministry of Foreign

Trade and Economic Cooperation (MOFTEC) and other government agencies

in the PRC. From March 24 to April 2, 1994, the Department issued the

verification reports. On April 8, 1994, petitioner and respondents

submitted hearing briefs. On April 13, 1994, the parties submitted

rebuttal briefs. On April 15, 1994, a public hearing was held.

Scope of Investigation

The products covered by this investigation are all grades of

sebacic acid, a dicarboxylic acid with the formula

(CH2)8(COOH)2, which include but are not limited to CP

Grade (500ppm maximum ash, 25 maximum APHA color), Purified Grade

(1000ppm maximum ash, 50 maximum APHA color), and Nylon Grade (500ppm

maximum ash, 70 maximum ICV color). The principal difference between

the grades is the quantity of ash and color. Sebacic acid contains a

minimum of 85 percent dibasic acids of which the predominant species is

the C10 dibasic acid. Sebacic acid is sold generally as a free-

flowing powder/flake.

Sebacic acid has numerous industrial uses, including the production

of nylon 6/10 (a polymer used for paintbrush and toothbrush bristles

and paper machine felts), plasticizers, esters, automotive coolants,

polyamides, polyester castings and films, inks and adhesives,

lubricants, and polyurethane castings and coatings.

Sebacic acid is currently classifiable under subheading

2917.13.00.00, of the Harmonized Tariff Schedule of the United States

(HTSUS). Although the HTSUS subheading is provided for convenience and

customs purposes, our written description of the scope is dispositive.

Period of Investigation

The period of investigation is January 1, 1993, through June 30,

1993.

Separate Rates

The respondents have each requested that they be assigned separate

rates. Their business licenses indicate that they are ``owned by all

the people.'' As stated in the Final Determination of Sales at Less

Than Fair Value: Silicon Carbide from the People's Republic of China

(PRC) (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, SICC, Tianjin, Jiangsu, and Guangdong are

eligible for consideration for separate rates.

To establish whether a company is sufficiently independent to be

entitled to a separate rate, the Department analyzes each exporting

entity under a test established in the Final Determination of Sales at

Less Than Fair Value: Sparklers from the PRC (56 FR 20588, May 6, 1991)

(``Sparklers''), as amplified in Silicon Carbide. Under the separate

rates test, the Department assigns separate rates only where

respondents can demonstrate the absence of both de jure and de facto

government control over export activities.

1. Absence of De Jure Government Control

Three PRC laws that have been placed on the record in this case

indicate that the responsibility for managing these enterprises ``owned

by all of the people'' is with the enterprises themselves and not with

the government. 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 and 1992 Regulations shifted

government control to the enterprises themselves. The 1988 Law provides

that enterprises owned ``by the whole people'' shall make their own

management decisions, be responsible for their own profits and losses,

choose their own suppliers and purchase their own goods and materials.

The 1988 Law also has other provisions which indicate that enterprises

have management independence from the government. The 1992 Regulations

provide that these same enterprises can, for example, set their own

prices (Article IX); make their own production decisions (Article XI);

use their own retained foreign exchange (Article XII); allocate profits

(Article II); sell their own products without government interference

(Article X); make their own investment decisions (Article XIII);

dispose of their own assets (Article XV); and hire and fire their

employees without government approval (Article XVII).

The Export Provisions designate those export products specifically

under government control. Sebacic acid does not appear on the lists in

Export Provisions and, therefore, is not subject to export constraints.

The existence of these laws indicates the respondents are not de

jure subject to control. However, there is some evidence 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).

Therefore, it is critical that we conduct a de facto analysis to

determine whether these respondents were, in fact, subject to

governmental control.

2. Absence of De Facto Government Control

The Department has considered four factors in evaluating whether

each respondent is subject to de facto government control: (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 the disposition of profits or financing of losses

(see Silicon Carbide).

During verification, we examined bank account records, sales

contracts, fixed assets on the financial statements, management

selection practices and tax records for each respondent. Based on our

examination, we find that each respondent:

(1) Establishes its own export prices; (2) negotiates its own sales

without guidance from any government entities; (3) selects its own

management without interference from any government entities; and (4)

retains its own proceeds from the sale of the subject merchandise. (See

May 20, 1994, final concurrence memorandum, and individual verification

reports for further discussion.)

3. Conclusion

Given that the record of this investigation demonstrates an absence

of de jure or de facto governmental control over the export functions

of SICC, Tianjin, Jiangsu, and Guangdong, we determine that these

companies are eligible for separate rates. See comments 1 and 2 for

further discussion.

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 comparable to the PRC in terms

of overall economic development, per capita gross national product

(GNP), the national distribution of labor and growth rate in per capita

GNP. (See memorandum from David P. Mueller to David L. Binder, dated

September 29, 1993.) Though it is possible that India may no longer be

a producer of the subject merchandise, the Department has determined

that India is a significant producer and exporter of comparable

merchandise (see comment 5 for further discussion). Therefore, because

India fulfills both requirements outlined in the statute, India is the

preferred surrogate country for purposes of valuing the factors of

production used in producing the subject merchandise. Except for one

factor of production, we have used publicly available published values

obtained in India. For that one factor, we used information from

Pakistan. We have relied upon publicly available published information

wherever possible.

Fair Value Comparisons

To determine whether sales of sebacic acid 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.

United States Price

We based USP on purchase price, in accordance with section 772(b)

of the Act, because the subject merchandise was sold to unrelated

purchasers in the United States prior to importation and because

exporter's sales price methodology was not otherwise indicated.

For those exporters that responded to the Department's

questionnaire, we calculated purchase price based on packed, CIF prices

to unrelated purchasers in the United States. We made deductions for

foreign inland freight, ocean freight, marine insurance, and foreign

brokerage and handling expenses.

For foreign inland freight, we based the deduction on freight rates

in India and on the verified distance from the factory to the port of

exportation (see comment 18 for further discussion). For ocean freight,

the respondents all used PRC transportation services in incurring this

charge during the POI. Therefore, we based the deduction for ocean

freight on the current tariff rate in the Asia North America Eastbound

Rate Agreement.

For foreign brokerage and handling expenses and marine insurance,

we used publicly summarized versions of these two expenses reported in

the antidumping duty investigation of Sulfur Dyes, Including Sulfur Vat

Dyes, from India (see memorandum to the file dated December 27, 1993).

Foreign Market Value

We calculated FMV based on the verified factors of production used

by the factories which produced the subject merchandise for the four

respondents (see comments 4 and 11 for further discussion). In

accordance with section 773(c)(3) of the Act, the factors to value

include materials, labor, energy and capital costs (e.g., factory

overhead), and we have valued these factors in this case. To calculate

FMV, the verified factors of production were multiplied by the

appropriate surrogate values for the different inputs. (For a complete

analysis of the surrogate values used and a detailed discussion of the

source publications referred to in this notice, see the May 20, 1994,

final concurrence memorandum.)

In determining which surrogate value to use for valuing each factor

of production, we selected, where possible, the publicly available

published value which was: (1) An average non-export value; (2)

representative of a range of prices within the POI if submitted by an

interested party, or most contemporaneous with the POI; (3) product-

specific; and (4) tax-exclusive. We have expressed a preference for

prices representative of the POI because these prices more closely

reflect the prices paid for inputs in the surrogate during the POI.

Where we could not obtain a POI-representative price for an input, we

have selected a value in accordance with the remaining criteria

mentioned above and which is closest in time to the POI.

In accordance with this selection methodology, we have obtained

more current values for eight material inputs since the preliminary

determination. In addition, for four of those eight materials, we

reassigned values based on additional product-specific information. We

also established a POI price range for the publicly available published

values that we used and which were submitted by the respondents (see

comment 6 for further discussion). As a result of applying the

selection methodology noted above, we changed the values used in the

preliminary determination for the following nine materials: Castor oil,

cresol, activated carbon, a substitute for activated carbon, steam

coal, electricity, one type of packing material, glycerine, and fatty

acid. In addition, we valued a substitute for cresol as a result of our

verification findings.

In the case of material inputs, we also used surrogate

transportation rates to value the transportation of inputs to the

factories. In those cases where a respondent provided incorrect

transportation distances, we valued the verified distances (see comment

10 for further discussion).

To value castor oil, we used publicly available published

information from The Times of India because this source provided a non-

export price during the POI. We calculated an average price

representative of the POI based on prices submitted by respondents and

prices we obtained from the U.S. embassy in India. We did not have the

necessary information to deduct taxes from these prices (see comment 6

for further discussion).

To value caustic soda, sodium chloride, zinc oxide, and phenol, we

used publicly available published information from Chemical Business.

This source provided a representative range of non-export prices during

the POI which did not include Indian excise or provincial sales taxes.

For caustic soda, we used a price for liquid caustic soda for all four

factories. We did not adjust the selected value to account for

different percentage strengths of the solution used by the factories

because the selected value did not indicate a percentage strength for

the solution (see comment 12 for further discussion).

To value sulfuric acid, cresol, and caproyl alcohol, we used

publicly available published information from Chemical Weekly. This

source provided a representative range of non-export prices during the

POI which was inclusive of taxes. We did not have the necessary

information to deduct taxes from these prices. In the case of cresol,

we calculated an average price of the three types of cresol used by the

factories (see comment 14 for further discussion). In addition, we used

the factories' verified cresol amounts (see comments 13 and 15 for

further discussion). In the case of caproyl alcohol (which is also

called octanol-2), we used a price for octanol (see comment 8 for

further discussion).

To value activated carbon, fatty acid, substitutes for cresol and

activated carbon, and steam coal, we used more recent publicly

available published information from the Monthly Statistics of the

Foreign Trade of India (Monthly Statistics). With the exception of

steam coal, this source was the only one we found which provided

publicly available published price information for these material

inputs. For steam coal, we used an import value from Monthly Statistics

rather than the domestic value from the publication OECD IEA

Statistics, because the import value was more contemporaneous with the

POI (see comment 19 for further discussion). For fatty acid, we used

the price for a general type of fatty acid (see comment 8 for further

discussion).

To value glycerine, we used a value for crude glycerine in the

publication Monthly Statistics of the Foreign Trade of India and not

the value for industrial water grade glycerine in the Indian

publication Chemical Business, because the value in Monthly Statistics

was more product-specific (see comment 7 for further discussion).

To value electricity, we used publicly available published

information from the Asian Development Bank (ADB). We used a 1990 value

from the ADB publication instead of a published POI Pakistani

industrial usage value because the ADB value was specific to industrial

usage in India and because India is the first-choice surrogate country.

In the ADB publication, there are three types of electricity rates

(e.g., low-tension, high-tension and power-intensive). In this case, we

took an average of the low-tension and high-tension rates provided in

the ADB publication because we could not ascertain whether the sebacic

acid industry in the PRC incurs a low-tension or high-tension rate. We

were able to ascertain that the PRC sebacic acid industry does not

incur power-intensive rates because the electricity used by the sebacic

acid factories in the PRC did not account for a major portion of the

production cost.

To value water, we used a public cable from the U.S. consulate in

Pakistan which was originally provided in the investigation of

Sulfanilic Acid from the PRC. We used this cable because we could not

locate a value for water in any Indian or Pakistani publication.

For all material and energy prices we used that were for a period

prior to the POI, we adjusted the factor values to account for

inflation between the time period in question and the POI using

wholesale price indices (WPIs) published in International Financial

Statistics (IFS) by the International Monetary Fund (IMF).

To value labor costs, we used the International Labor Office's 1992

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

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

1990. Because the published labor rate was prior to the POI, we

adjusted the factor values to account for inflation between the time

period in question and the POI using the consumer price indices

published in IFS by the IMF. In addition, for one factory in question,

we considered the additional labor amounts to be indirect labor and a

part of factory overhead (see comment 16 for further discussion).

To value factory overhead, selling, general and administrative

expenses, and profit, we calculated percentages based on elements of

industry group income statements from The Reserve Bank of India

Bulletin. We did not include an amount for energy in our factory

overhead calculation or inflate the percentages to the POI.

To calculate the FMV for one metric ton of sebacic acid, we added

each of the costs derived above. We also added to FMV, where

appropriate, an amount for packing labor based on the appropriate

Indian wage rate, and an amount for packing materials based on more

current Indian prices than those values previously used from the

Monthly Statistics of the Foreign Trade of India. Since the packing

material prices were also prior to the POI, we used WPIs from IFS to

inflate the values to the POI. We made no adjustments for selling

expenses. Finally, we added surrogate freight costs for the delivery of

inputs and packing materials to the factories producing sebacic acid.

In this investigation, we have verified that the factories produce

three subsidiary products (glycerine, fatty acid, and capryl alcohol)

in the course of producing sebacic acid.

We have used the same methodology established in the preliminary

determination to determine whether each of the three products in

question are by-products or co-products.

However, for the final determination, we have not considered the

factories' costs and profits because we have not found an MOI, and we

have obtained more current values than those used in the preliminary

determination for sebacic acid, glycerine, and fatty acid. Consistent

with the preliminary determination and after incorporating these values

into the analysis, we still find that fatty acid is a by-product

because the overall value of fatty acid is insignificant compared to

the relative value of the ``subsidiary'' products and the subject

merchandise. As a by-product, we subtracted the sales revenue of fatty

acid from the production costs of sebacic acid. This treatment of by-

products is consistent with generally accepted accounting principles.

(See Cost Accounting: A Managerial Emphasis (1991) at pages 539-544).

We also find that glycerine and caproyl alcohol are co-products.

The value of glycerine for two of the four factories and the value of

caproyl alcohol for all four factories is significant compared to the

relative value of all of the products manufactured as a result of, or

during, the process of manufacturing sebacic acid. We also find that

the quantity of glycerine production is subject to manipulation by

management based on the variation in the quantity yield among the four

factories, and because there is no information on the record which

indicates other reasons for why the quantity would vary.

Therefore, we have allocated the factor inputs, (e.g., materials

used to produce glycerine and caproyl alcohol), based on the relative

quantity of output of these two products and sebacic acid. In addition,

we have used the production times necessary to complete each production

stage of sebacic acid as a basis for allocating the amount of labor,

energy usage and factory overhead among the products (see May 20, 1994,

concurrence memorandum, memorandum to the file dated May 9, 1994, and

comment 9 for further discussion). This treatment of co-products is

consistent with generally accepted accounting principles. (See Cost

Accounting: A Managerial Emphasis (1991) at pages 528-533).

Best Information Available (BIA)

As stated in the preliminary determination, the Department must

receive an adequate questionnaire response from an entity requesting a

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

that entity. Non-respondent entities must receive a PRC country-wide

rate. We have based the PRC country-wide rate on BIA.

Section 776(c) of the Act provides that whenever a party refuses or

is unable to produce information requested in a timely manner and in

the form required, or otherwise significantly impedes an investigation,

the Department shall use BIA. We have done so in this investigation

with regard to the non-responding entities.

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

tiered methodology based on the degree of respondents' cooperation.

According to the Department's two-tiered BIA methodology, 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. This methodology for assigning BIA has been upheld by

the U.S. Court of Appeals for the Federal Circuit. (See Allied-Signal

Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir. 1993); see

also Krupp Stahl AG et al. United States, 822 F. Supp. 789 (CIT 1993).)

We find those PRC exporters which refused to answer the Department's

questionnaire to have been uncooperative in this investigation. As BIA

for these exporters, we are assigning the highest margin alleged in the

petition (243.40 percent) as the PRC country-wide rate, in accordance

with the two-tiered BIA methodology under which the Department imposes

the most adverse rate upon those respondents who refuse to cooperate or

otherwise significantly impede the proceeding. We made no adjustment to

petitioner's amended calculations.

Consistent with our preliminary determination, no ``All Others''

rate will be established for the PRC. Instead, a country-wide rate is

applied to all imports of sebacic acid from the PRC for those PRC

exporters which were unable to demonstrate that they were entitled to a

separate rate. Because we are assigning a country-wide rate in this

situation, there is no need to assign an ``All Others'' cash deposit

rate for PRC entities.

Verification

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

provided by respondents by using standard verification procedures,

including on-site inspection of the manufacturers' facilities,

examination of relevant sales and financial records, and selection of

original source documentation containing relevant information.

Analysis of Comments Received

Comment 1: Petitioner contends that the four respondents should not

receive separate rates because each is a state-owned company subject to

central control by the PRC government.

Respondents contend that the issue determining separate rates is

not state-ownership but government control. Therefore, respondents

request that the Department return to its policy set forth in the

Sparklers to determine if the PRC trading companies are entitled to

separate rates. Respondents maintain that if the Sparklers criteria is

applied, there can be no question that the four trading companies

should receive separate rates.

DOC Position: As described in the ``Separate Rates'' section above,

we have found that the four responding exporters ``owned by all the

people'' are not controlled by the central government. Further, the

information on the record relating to provincial and local governments

shows that their activities with regard to the four respondents are

limited to such functions as taxation, business licensing, and the

collection of export statistics. There is no evidence that these

governments (1) manipulate export prices or (2) interfere with other

aspects of conducting business with the United States. Therefore, we

have found that the four respondents are not subject to government

control of their sebacic acid exports.

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, 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 (e.g., government

approval is necessary for companies to receive bank loans and companies

can only use their profits if they have increased the value of their

assets). 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

addition, petitioner contends that there is evidence that shows that

the provincial or municipal governments regulate prices between the

domestic producers and the four respondents and the prices between

domestic producers and their suppliers. In conclusion, petitioner

states that, based on the record of this investigation, respondents are

ineligible for separate rates.

Respondents state that the Department should apply the Sparklers

criteria and find them eligible for separate dumping margins.

Respondents state that they have cooperated completely in this

investigation and have provided information indicating a lack of

control by the PRC central government. Moreover, respondents assert

that they are not owned by the central government because the

appropriate test of ownership is control of property rather than simple

legal title. Respondents state that the record also provides evidence

of a de facto absence of central control with respect to exporters.

DOC Position: During verification, we found no evidence that

respondents are controlled by the central government. On the contrary,

we found evidence that the respondents are not controlled by the PRC

government. Such evidence included the laws on the record of this

proceeding, an examination of the respondents' bank accounts, and

documentation showing the financial independence of each of the

respondents. In addition, we did not find that respondents had to seek

approval from the central government to receive loans or had to report

their profits to the central government before using them. As discussed

at length in the ``Separate Rates'' section above, respondents are

eligible for separate rates.

Finally, petitioner's concerns regarding the ability of provincial

or municipal governments to regulate prices between domestic producers

and exporters are not relevant to these respondents' eligibility for

separate rates. The Department's separate rates analysis focuses on

governmental control over the respondents' export activities. The

Department's separate rates analysis does not focus on the prices

between domestic producers and exporters or on the prices between the

domestic producers and their suppliers.

Comment 3: Respondents contend that the Department's PRC policy is

not based on the antidumping statute or regulations. Therefore, the

Department has no basis for disallowing separate rates to PRC trading

companies.

Petitioner contends that since Congress never provided for a

separate rates provision in the 1988 amended statute, Congress in

effect approved the Department's policy of issuing country-wide rates

in NME antidumping investigations. Therefore, the lack of legislative

and regulatory provisions indicates that the Department does not have

the authority to issue separate rates in NME antidumping

investigations.

DOC Position: The statute does not contain specific guidelines for

issuing separate rates. The NME provision of the statute only contains

guidelines for calculating a foreign market value. It does not address

how U.S. price should be established in NME cases. Therefore, it has

been left to the Department to determine the circumstances in which

separate rates should be calculated. In an NME, the government

exercises a significant degree of control over economic activity. Given

the nature of NMEs, we have determined that a respondent ``owned by all

the people'' should receive a country-wide rate unless it can

demonstrate that it is not subject to de facto or de jure government

control. As discussed in the ``Separate Rates'' section and in comments

1 and 2 above, four companies in this proceeding have demonstrated

their independence from de jure and de facto government control and, as

such, are entitled to separate rates. PRC exporters that did not

respond and, therefore, did not demonstrate eligibility for separate

rates, are presumed to be part of state-controlled operations and will

receive the PRC country-wide rate.

Comment 4: Petitioner contends that Tong Liao has been repeatedly

late and unresponsive to the Department's requests for information

throughout the course of this investigation. In addition, Tong Liao has

exhibited an extreme lack of cooperation by not bringing to the

verification site requested documentation which would have enabled the

Department to tie Tong Liao's response to its financial statements.

Finally, the errors found in Tong Liao's response at verification were

numerous. Therefore, the Department should use BIA for Tong Liao.

Respondents contend that the raw material inputs reported by Tong

Liao factory were in fact verified by the Department. Therefore, Tong

Liao's factor information should be used in the final determination.

DOC Position: We find that Tong Liao has not been unresponsive in

the course of this proceeding. With the exception of its financial

statements, Tong Liao provided information requested by the Department

in a timely manner.

Regarding whether Tong Liao has been cooperative during this

investigation, the verification team was able to tie 11 out of 13

factor amounts reported in Tong Liao's response to actual consumption

and production reports which Tong Liao brought to verification. Even

though the verification team was not provided the financial statements

so that it could tie the amounts to those statements, the verification

team was able to establish that the reports recorded actual consumption

amounts of materials and actual production of the subject merchandise

and its subsidiary products because the reports were authentic and kept

by the factory in the ordinary course of business. Therefore, we have

used Tong Liao's verified factors for the final determination.

For the two factors which were unverified (e.g., labor and coal),

we have used as BIA the higher of (1) the highest amount verified for

any of the other three factories, or (2) the amount reported by Tong

Liao.

Comment 5: Petitioner contends that the Department should not use

India as the surrogate country for valuing the factors of production of

sebacic acid because India may not be a producer of sebacic acid.

Respondents contend that the Department should continue to use

India as the surrogate country because there is no evidence on the

record that India did not produce sebacic acid during the POI.

DOC Position: We agree with respondents. The statute directs us to

select a country that is comparable economically to the PRC. Based on

the list of possible surrogate countries, we find that India is a

comparable economy to the PRC. The countries that we were able to

confirm still produce sebacic acid, such as Japan and the United

States, do not have economies comparable to the PRC. Even though we are

not certain whether sebacic acid was produced in India during the POI,

we still find that India was a significant producer of comparable

merchandise (e.g., oxalic acid) during the POI. Though sebacic acid and

oxalic acid have different end uses, both are dicarboxylic acids. In

addition, many of the inputs used to produce sebacic acid are also used

to produce oxalic acid. Therefore, we find that India fulfills both

requirements of the statute.

Comment 6: Respondents contend that the published information from

India submitted by respondents was what was reasonably available to

them. Since the published data contains Indian chemical prices for

various inputs and subsidiary products during the POI, the Department

should use them. The Department should not use Indian import values

when it has actual POI domestic input prices.

Petitioner contends that since respondents were unable to provide

the Department with Indian published information which was more

representative of the POI, the Department should resort to BIA and rely

on the published information provided in the petition.

DOC Position: For the three chemicals (sulfuric acid, capryl

alcohol, glycerine), we obtained late December 1992 prices from the

same periodical submitted by respondents (see ``FMV section'' for

further discussion). Therefore, we were able to establish a price range

during the POI for the three chemicals listed above and we have used

them in the final determination in accordance with the selection

methodology outlined in the FMV section of this notice.

For castor oil, we obtained additional POI prices from the U.S.

embassy in India, and these prices were from the same periodical from

which respondents obtained their prices. Therefore, we were also able

to establish a price range during the POI for castor oil. To calculate

an average POI price for castor oil, we have used the January 1993

prices from respondents and the April and June 1993 prices obtained

from the U.S. embassy in India.

Comment 7: Petitioner contends that the Department should not value

the glycerine produced at the factories using the Indian published

value for industry water grade glycerine. Instead, the Department

should use the value for crude grade glycerine.

DOC Position: We agree with petitioner. Based on verification, we

have determined that the factories produce crude glycerine and not

industry water grade glycerine during the sebacic acid production

process. Therefore, we have selected a more product-specific Indian

published value for crude glycerine.

After reassigning a value to glycerine, we still find that

glycerine is not a by-product, but a co-product, of the sebacic acid

production process (see May 20, 1994, concurrence memorandum for

further discussion).

Comment 8: Petitioner contends that the Department should not value

the amount of fatty acid or capryl alcohol produced by the factories

because respondent did not provide product-specific values for the two

products. Therefore, if values must be assigned to these subsidiary

products, then the Department should assign the correct values and not

use values which do not reflect the actual products.

Respondents contend that values should be assigned to fatty acid

and capryl alcohol. Therefore, the Department should continue to value

fatty acid and capryl alcohol using the Indian published values from

the preliminary determination.

DOC Position: We agree with respondents. We find that octanol-1 and

capryl alcohol (i.e., octanol-2) share very similar molecular formulae

though they are not identical products. We were able to obtain an

Indian price for octanol-1. We were unsuccessful in locating a price

for octanol-2 either in Indian publications or in publications from our

other recommended surrogate countries.

Therefore, because we cannot find an exact Indian price for capryl

alcohol, we have relied on the price of octanol-1, in valuing this

factor. To properly value this capryl alcohol, we must assign a value

to this subsidiary product. Since product-specific price information is

not available from our recommended surrogate countries, we must rely on

the price of the closest product we could obtain to value capryl

alcohol.

As for fatty acid, the factories do not produce a fatty acid which

is classifiable. The only thing we could establish through verification

is that this fatty acid results from producing a carboxylic acid and is

used to make soap. Throughout the course of this investigation, neither

we nor respondents could establish the specific type of fatty acid

produced by the factories. The problem is that the factories' fatty

acid is comprised of many different acids (e.g., oleic, palmitic, etc.)

and the percentage concentrations can vary.

As in the case of capryl alcohol, we have relied on the price of

the closest Indian product we could obtain to value fatty acid.

Comment 9: Petitioner contends that it is unclear based on the

description of the sebacic acid production process how much energy,

labor, and overhead should be allocated to the production of glycerine

and capryl alcohol. Therefore, the Department should not allocate any

non-material amounts to the subsidiary products.

Respondents contend that the Department should also allocate

amounts for energy, labor, and overhead to glycerine and capryl alcohol

since the production process is continuous and it is possible to

identify an amount for factors associated specifically with sebacic

acid and each of the subsidiary products.

DOC Position: We agree with respondents. For two of the four

factories, we established at verification the amount of time required

to perform each stage of the sebacic acid production process. This

information now provides us with the means for devising a method which

reasonably allocates amounts for labor, coal, electricity and factory

overhead to glycerine and capryl alcohol production at each factory.

For the two factories where we did not examine production times, we

used the information from the factories (where we did establish

production times) to calculate an average time for each production

stage. We applied the average times to the two factories where we did

not examine production times to determine the amount of labor, coal,

electricity, and factory overhead associated with glycerine and capryl

alcohol production at those two factories. We did not allocate

materials, energy, labor, or factory overhead amounts to fatty acid

because it is a by-product, and as such, we simply subtracted its

assigned value from the cost of manufacture of sebacic acid.

Comment 10: Petitioner contends that in instances where the

respondents have misreported distances or not reported certain factors

of production or sales expenses, the Department should use BIA. The

Department should use as BIA the longest freight distance reported by a

given factory for determining the freight expense associated with each

input reported by that same factory.

Respondents contend that the Department should use the verified

amounts for factors and distances in the final determination.

DOC Position: We agree with respondents. We obtained the correct

distances at verification. Respondents satisfactorily explained that

the mistakes in their data were the result of providing estimated

distances to the Department. In addition, we find that the correction

of the mistakes has had a negligible impact on the amount calculated

for delivery charges for each factory. Therefore, we have used the

correct distances in the final determination.

As for the unreported factor of production (e.g., packing material

amounts), we obtained at verification the factor amounts which we could

not previously value. At verification, we found that respondents'

failure to include these amounts in their responses was simply an

oversight. Therefore, we have valued the additional packing materials

in accordance with the publicly available published information

selection methodology noted above.

Finally, the Department has used surrogate values for all of the

respondents' sales expenses. Therefore, we have not used the sales

expense amounts reported by the respondents.

Comment 11: Respondents contend that material inventory write-offs

recorded in the factory's inventory ledgers should be treated as losses

in inventory and not included in the amount of materials necessary to

produce sebacic acid. Instead, the Department should consider the

write-offs as a general and administrative expense.

Petitioner contends that the material losses should be considered

as additional factors of production.

DOC Position: We agree with respondents. Two factories in this

investigation recorded in their inventory ledgers material losses

either before or after the material was transferred to the workshop

producing sebacic acid. In both cases, we find that the workshop at

each factory did not actually incur material losses in producing the

subject merchandise. Specifically, we find that the losses did not

result from the production process, nor did they represent a production

yield loss. Rather, the losses resulted from factors such as leakage

which are unrelated to the production process. Therefore, we have

considered the material losses as a part of factory overhead rather

than part of the general and administrative expense and have not

assigned values to the material losses.

Comment 12: Petitioner contends that the different strengths of

caustic soda used by respondents should be valued differently. In

addition, for those factories that purchase solid caustic soda and then

dilute it, the Department should consider the costs of converting the

solid to a liquid form. In addition, the Department should use the

value of solid caustic soda for those factories.

Respondents contend that the Department should continue to use the

values for liquid caustic soda because the factories reported factors

for liquid caustic soda and this is the input actually used in the

production process.

DOC Position: We agree with respondents. First, the published

values we examined do not indicate a percentage of purity. Therefore,

we would have to make an assumption concerning the purity percentage of

the published value we select. Based on the information on the record,

we have no basis for determining the percentage of purity of a

published value for which no percentage is indicated.

Second, even if we assigned an arbitrary purity percentage figure

to the published value we select, we would have to make an additional

assumption regarding which multipliers we should use to adjust the

value to account for different purity percentages. Based on testimony

at our April 15, 1994, hearing, even petitioner was unsure as to the

correct multipliers we should use.

Finally, we consider the usage amounts reported by the factories to

be for liquid caustic soda, and as such, we have valued them

accordingly. Since the factories used liquid caustic soda, we do not

find it appropriate to use a value for solid caustic soda.

Comment 13: Petitioner contends that because there was a

discrepancy between the amounts of cresol recorded in Nangong factory's

detailed subledger for chemical materials and Nangong's sebacic acid

workshop ledger, the Department should use the cresol amount from the

workshop ledger.

Respondents request that the Department accept the reported and

verified amount in the final determination.

DOC Position: We have used the verified amounts. As we stated in

the verification report, the purity of the cresol stored in the

warehouse was different from the purity of the cresol used by the

workshop. Since we do not have a published price for cresol which

indicates the purity percentage, we have no means of determining

whether the cresol price we are using corresponds more closely to the

type of cresol transferred from the warehouse or more closely to the

type of cresol used by the workshop. Therefore, we have accepted

Nangong factory's reported cresol factor.

Comment 14: Respondents contend that an Indian published value for

mixed cresol should be used rather than a value for a specific type of

cresol because officials from all four factories stated at verification

that they use a mixture of cresol to produce sebacic acid.

DOC Position: We agree with respondents. First, we established that

the prices for cresol in the publication Chemical Weekly, which were

submitted by respondents, were representative of a price range

throughout the POI. Second, we calculated an average Indian POI value

based on the values of three types of cresol (e.g., ortho, para, and

meta) listed in Chemical Weekly. Finally, we used this average price to

value the cresol used by the factories.

Comment 15: Petitioner contends that because the factories recover

cresol used in the production process, the Department should consider

the cresol recovery costs when determining the cost of manufacture.

Respondents contend that the Department captured the costs of

recovering the cresol after establishing the factor for cresol at

verification.

DOC Position: We agree with respondents. We have valued the amounts

of cresol the factories actually used in producing sebacic acid based

on the factories' production records. We find that these amounts used

in production included amounts for recycled cresol. As in the case of

caustic soda, we also have considered any costs associated with

recovering cresol to be included in factory overhead since we did not

discover at verification any unreported and quantifiable factors

associated with the cresol recovery process.

Comment 16: Respondents contend that the additional labor amounts

unreported by Handan factory should be considered as indirect labor,

that is, part of factory overhead, and not production-related.

Petitioner contends that since Handan factory considers such labor

to be part of its cost of manufacture, the Department should value the

additional labor as direct labor in the production process. Petitioner

also cites to a decision made in the Final Determination of Sales at

Less Than Fair Value: Certain Helical Spring Lock Washers from the PRC,

58 FR 48833 (September 20, 1993) (HSLW) in support of its argument.

DOC Position: We agree with respondents. The antidumping

questionnaire instructs responding factories to include in their labor

factors the direct hours associated with producing the subject

merchandise. Handan reported only the direct skilled and unskilled

labor hours associated with producing and packing the subject

merchandise during the POI. As a result of verification, we do not

consider the unreported labor such as work performed by the plant

managers to be direct labor. Rather, we consider the unreported labor

to be indirect labor because such labor is not directly associated with

producing or packing sebacic acid.

In the HSLW decision, the Department did not differentiate between

direct and indirect labor when analyzing this issue. Instead, we based

our decision on the fact that the additional laborers were considered

by the factory to be part of the workshop producing the subject

merchandise. In this case, we have distinguished between direct and

indirect labor. We have found that Handan's additional labor is

indirect labor and have considered the additional labor a part of

factory overhead.

Comment 17: Petitioner contends that the material yield amounts

reported by the factories in their submissions are not chemically

possible. Therefore, the Department should resort to the amounts stated

in the petition for BIA.

Respondents contend that the data of the Chinese producers have all

been verified. Therefore, the Department should use the producers' data

in the final determination.

DOC Position: We agree with respondents. Based on our verification

findings, each factory on the whole correctly reported all of the

materials it used to produce the subject merchandise during the POI. We

checked each factory's reported material amounts at verification using

standard verification procedures such as: (1) Examining the factories'

production cost and consumption usage reports; (2) examining entries in

each factory's material inventory ledger to determine whether the

factory underreported its material usage; (3) examining material draw

tickets from the workshop producing the subject merchandise to

determine actual usage; (4) tying the material inventory ledger to the

factory's financial statements; and (5) examining sales invoices to

determine whether the factories should have included additional

material amounts in their reported material amounts.

In addition to employing standard verification procedures, we

examined two of the four factories' Chinese sebacic acid production

manuals (one was published; the other was not). These manuals

illustrated the general prescribed method for producing sebacic acid in

the PRC. After careful analysis of our verification findings and of

information provided by all the parties to this proceeding, we found no

evidence to support petitioner's contention that the material yield

amounts reported by the factories are inaccurate.

Comment 18: Petitioner contends that since Guangdong underreported

the distance used to determine the foreign inland freight expense, the

Department should use as BIA, in calculating the U.S. price, the

longest distance reported by any of the other three trading companies

to determine the deduction to U.S. price for Guangdong's foreign inland

freight expense.

Respondents contend that the Department should use the verified

amounts for factors and distances in the final determination.

DOC Position: We agree with respondents. We obtained the correct

distance at verification. Therefore, we have used the correct distance

to calculate Guangdong's foreign inland freight in the final

determination.

Comment 19: Respondents contend that the Department should not use

Indian import values to value the factors of production because neither

the Chinese nor the Indian producers use imported inputs to produce the

subject merchandise. Instead, the Department should use Indian domestic

prices to value the factors of production.

DOC Position: We disagree in part with respondents. We have

selected both published import and domestic prices (e.g., non-export

values) to value the factors of production in accordance with the

publicly available published information selection methodology noted in

the ``Foreign Market Value'' section of this notice. If the published

value was representative of a price range within the POI or more

contemporaneous with the POI, product-specific, and tax-exclusive, we

selected that value over all other values regardless of whether the

value was an import or domestic value. In only one case (e.g., steam

coal) has this resulted in the selection of an import value over a

domestic value. We selected the import value because it was one month

outside the POI whereas the domestic value was about three years prior

to the POI and the import value was, therefore, more contemporaneous

with the POI.

Suspension of Liquidation

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

the Customs Service to continue to suspend liquidation of all entries

of sebacic acid from the PRC, as defined in the ``Scope of

Investigations'' section of this notice, that are entered, or withdrawn

from warehouse, for consumption on or after January 5, 1994, which is

the date of publication of our preliminary determination in the Federal

Register.

The Customs Service shall require a cash deposit or posting of a

bond equal to the estimated amount, with respect to the subject

merchandise, by which the FMV of the merchandise subject to this

investigation exceeds the U.S. price, as shown below. The weighted-

average dumping margins are as follows. The PRC country-wide rate

applies to all PRC companies not specifically listed below. This

suspension of liquidation will remain in effect until further notice.

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

Weighted-

average

Manufacturer/Producer/Exporter margin

percentage

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

Sinochem Jiangsu Import & Export Corporation............... 85.45

Tianjin Chemicals Import & Export Corporation.............. 59.67

Guangdong Chemicals Import & Export Corporation............ 57.00

Sinochem International Chemicals Company................... 43.72

PRC country-wide rate...................................... 243.40

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

International Trade Commission (ITC) Notification

In accordance with section 735(d) of the Act, we will notify the

ITC of our determination. The ITC will make its determination whether

these imports materially injure, or threaten material injury to, a U.S.

industry within 45 days of the publication of this notice. If the ITC

determines that material injury or threat of material injury does not

exist, the proceeding will be terminated and all securities posted as a

result of the suspension of liquidation will be refunded or cancelled.

However, if the ITC determines that such injury does exist, we will

issue an antidumping duty order directing Customs officers to assess an

antidumping duty on sebacic acid from the PRC entered, or withdrawn

from warehouse, for consumption on or after the date of suspension of

liquidation, equal to the amount by which the foreign market value of

the merchandise exceeds the United States price.

Notification to Interested Parties

This notice also serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility covering

the return or destruction of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Failure to comply is a

violation of the APO.

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

Act (19 U.S.C. 1673d(d)), and 19 CFR 353.20(a)(4).

Dated: May 20, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-13126 Filed 5-27-94; 8:45 am]

BILLING CODE 3510-DS-P