Notice of Preliminary Determination of Sales at Less Than Fair Value: Saccharin From the People's Republic of China

COMMISSION ON CIVIL RIGHTS

International Trade Administration

[A-570-829]

Notice of Preliminary Determination of Sales at Less Than Fair

Value: Saccharin From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 23, 1994.

FOR FURTHER INFORMATION CONTACT:

Gary Bettger or Jennifer Yeske, Office of Countervailing

Investigations, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-

2239 or (202) 482-0189, respectively.

Preliminary Determination

We preliminarily determine that saccharin 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 (LTFV), 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 initiation of this investigation on December 8, 1993 (58

FR 65335; December 14, 1993), the following events have occurred:

During December 1993 and January 1994, the Department attempted to

identify possible PRC exporters of saccharin to the United States

during the period of investigation (POI). We learned of 18 potential

respondents through the petition, Port Import Export Reporting Service

(``PIERS'') data and other sources of information.

On January 3, 1994, 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 materially injured

by reason of saccharin imports from the PRC that are alleged to be sold

at less than fair value.

On January 18, 1994, the Department of Commerce (the Department)

sent its antidumping duty questionnaire to the Ministry of Foreign

Trade and Economic Cooperation (MOFTEC) and the above-referenced 18 PRC

companies. We asked MOFTEC to submit a comprehensive list of all

producers and exporters of saccharin to the United States within two

weeks of the receipt of the questionnaire and to provide copies of the

questionnaire to those producers and exporters. On February 24, 1994,

MOFTEC designated the China Chamber of Commerce of Medicines and Health

Products Importers and Exporters (``Chamber'') as the contact

organization for this investigation.

On March 4, 1994, the Department determined that this investigation

was extraordinarily complicated due to the large number of producers

and resellers. We also determined that respondent parties to the

proceeding were cooperating in this investigation. Therefore, we

determined that it was appropriate under section 733(c)(1)(B) of the

Tariff Act, as amended (``the Act''), and 19 CFR 353.15(b), to postpone

the date of the preliminary determination until no later than June 16,

1994.

On March 24, 1994, MOFTEC submitted a list of four exporters and

six supplying manufacturers which sold or manufactured saccharin

exported to the United States during the POI. On March 8, 1994, and

April 8, 1994, respectively, we received unofficially filed facsimiles

from one company on the MOFTEC list, Xia Men Electrochemical Company,

and also from another factory, Shanghai Fortune Chemical Company (which

is not on the MOFTEC list). Both companies stated that they did not

sell the subject merchandise to the United States during the POI.

During the period March through June, 1994, the Department received

responses to its questionnaire from the following respondents: Shanghai

KJ Import and Export Corporation (``Shanghai IE'') and Suzhou Cereals

Import and Export Corporation (``Suzhou IE'').

On June 14, 1994, two days before the preliminary determination in

this investigation, Shanghai IE reported that it would provide factors

of production for a second workshop of its supplier factory at a later

date, without giving any indication how much production was accounted

for by this second workshop. Prior to this submission, we had no

indication on the record that Shanghai IE had failed to report certain

factor information. On June 16, 1994, the date of this determination,

Shanghai IE provided factor information for this second workshop. This

submission also contained new factor information for both Suzhou IE's

and Shanghai IE's supplier factories. Due to the timing of this June

16th submission, it was administrably infeasible to use this

information for purposes of our preliminary determination.

Scope of Investigation

The product covered by this investigation is saccharin. Saccharin

is a non-nutritive sweetener used in beverages and foods, personal care

products such as toothpaste, table-top sweeteners, animal feeds, and

metalworking fluids. Three forms of saccharin are typically available

as referenced in the American Chemical Society's Chemical Abstract

Service (CAS). These forms are sodium saccharin (CAS #128-44-9),

calcium saccharin (CAS #6485-34-3), and acid (or insoluble) saccharin

(CAS #81-07-2). Saccharin is classified under subheading 2925.11.00 of

the Harmonized Tariff Schedule of the United States (HTS). The scope of

this investigation includes all types of saccharin imported under this

HTS subheading including research and specialized grades.

Although the HTS 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 June 1, 1993, through November 30, 1993.

Separate Rates

Shanghai IE and Suzhou IE have each requested a separate rate.

Shanghai IE's and Suzhou IE's business licenses each 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 (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, Shanghai IE and Suzhou IE

are eligible for consideration for separate rates.

To establish whether a firm is 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

The respondents submitted a number of documents to demonstrate

absence of de jure control, including two PRC laws indicating that the

responsibility for managing enterprises ``owned by all 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'');

and the ``Regulations for Transformation of Operational Mechanism of

State-Owned Industrial Enterprises,'' approved on August 23, 1992

(``1992 Regulations''). The record of this investigation also includes

the ``Temporary Provisions for Administration of Export Commodities,''

approved on December 21, 1992 (``Export Provisions'').

The 1988 Law and 1992 Regulations shifted control from the

government to the enterprises themselves. The 1988 Law provides that

enterprises owned by ``all the 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 contains 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 list those products subject to direct

government control. Saccharin does not appear on the Export Provisions

list and is not, therefore, subject to export constraints.

The existence of these laws indicates that Shanghai IE and Suzhou

IE are not de jure subject to central government control with respect

to export sales and pricing decisions. 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, the Department has determined that a de facto analysis is

critical in determining whether respondents are subject to governmental

control over export sales and pricing decisions.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto government control of

its export functions: (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).

Shanghai IE and Suzhou IE have both asserted that (1) they

establish their own export prices; (2) they negotiate contracts without

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

operate with a high degree of management autonomy; and (4) they retain

the proceeds of their export sales and have the authority to sell

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 of export functions.

Consequently, Shanghai IE and Suzhou IE 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 is an additional issue relating to governmental control that

we will consider further for purposes of our final determination.

First, the companies have indicated that they are ``under the

jurisdiction'' of their respective city or province. While the meaning

and significance of this phrase is unclear, the evidence cited above

indicates that the local governments do not control the key functions

of the enterprises. However, we will address the precise nature of the

authority that these governments exercise over the enterprises at

verification and in our final determination.

Market-Oriented Industry Claim

Respondents have argued that they should be treated as a market-

oriented industry (``MOI''). However, we have received MOI information

from only two saccharin producers in the PRC. We have no information on

the remaining producers, of which there are at least four (according to

information provided by MOFTEC). Consequently, we have no basis to

determine whether the production and sales practices of these two

producers are representative of PRC saccharin producers as a whole.

Therefore, we have preliminarily determined that an MOI does not exist

with respect to the PRC saccharin industry.

Nonmarket-Economy

The PRC has been treated as a nonmarket-economy (NME) in past

antidumping investigations. (See, e.g., Final Determination of Sales at

Less than Fair Value: Sebacic Acid from the People's Republic of China

(59 FR 28053 (May 31, 1994)). No information has been provided in this

proceeding that would lead us to determine otherwise. Therefore, in

accordance with section 771(18)(c) of the Act, we have treated the PRC

as an NME for purposes of this investigation.

Surrogate Country

Section 773(c)(4) of the Act requires the Department to value the

NME producers' 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 nonmarket-economy country, and

that are significant producers of comparable merchandise. The

Department has determined that India is the country most comparable to

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

the Office of Policy to the file, dated May 17, 1994, on file in the

Central Records Unit, Room B099, Department of Commerce Main Building,

14th and Constitution, Washington DC 20230.) In addition, there is

evidence on the record that saccharin is produced in India.

Fair Value Comparisons

To determine whether sales of saccharin from the PRC to the United

States by Suzhou IE 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 Shanghai IE failed to report complete production and factor

information, we do not have information on all of the saccharin

produced for export by Shanghai IE. Therefore, we are basing Shanghai

IE's margin on best information available (``BIA''). Finally, because

other exporters listed by MOFTEC decided not to participate in this

investigation, we also based their margins on BIA. (See ``Best

Information Available'' section 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 directly by Suzhou

IE to unrelated parties in the United States prior to importation into

the United States and because ESP methodology is not indicated by any

other circumstances. We calculated purchase price based on packed, CIF

delivered prices to unrelated purchasers in the United States. We made

deductions for containerization expenses, foreign inland freight,

foreign handling and brokerage fees, and marine insurance. The deducted

amounts were calculated using Indian values. We also deducted ocean

freight, which was calculated on the basis of market-economy,

international freight rates paid in U.S. dollars from Shanghai to New

York.

Foreign Market Value

In accordance with section 773(c) of the Act, we calculated FMV

using factors of production reported by the factory which produced

saccharin for Suzhou IE. The factors used to produce saccharin include

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

were multiplied by the appropriate surrogate values for the different

inputs. For Suzhou IE, we made adjustments to material costs for

recovery of by-products in the production process. In determining which

surrogate value to use for valuing each factor of production, we

selected, where possible, a value based on publicly-available published

information (``PAPI'') 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 note that we have used Indian

import statistics for eight of the chemicals used in the production of

saccharin.

We used surrogate transportation rates to value inland freight

between the source of the production factor and the saccharin

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

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

the most expensive distance/mode combination that was available from

the surrogate information we had selected. For inland water transport,

we were unable to obtain PAPI or cable information in time for this

preliminary determination. To value this mode of transportation, we

have assumed that this form competed effectively with the alternate

form of transportation (e.g., trucking) over similar distances, and

used the applicable rates for the alternate form.

To value certain raw materials, we used PAPI from India Chemical

Weekly for July 1993-November 1993. For packing materials and raw

materials which were not listed in India Chemical Weekly, we used the

Monthly Trade Statistics of Foreign Trade of India, Volume II--Imports

for April 1992-March 1993. We adjusted the factor values, when

necessary, to the POI using wholesale price indices (WPIs) published by

the International Monetary Fund (IMF). No product-specific PAPI

pertaining to India or any other potential surrogate country was

available for the chemical sodium hypochlorite. Therefore, we have used

a price quote obtained by the Department from a U.S. chemical producer

which is neither an interested party, nor related to an interested

party, in this investigation.

To value electricity, we used PAPI from the Electric Utilities Data

Book for the Asian and Pacific Region (January 1993) published by the

Asian Development Bank. We selected this source because it provides an

electricity rate for industrial use during the POI from our preferred

surrogate country. To value water, we have used PAPI information from

the Water Utilities Data Book for the Asian and Pacific Region

(November 1993) which is published by the Asian Development Bank. To

value coal, we used the Monthly Trade Statistics of Foreign Trade of

India, Volume II--Imports for April 1992-March 1993. We adjusted the

factor values, when necessary, to the POI using WPIs published by the

IMF.

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

1993 Yearbook of Labor Statistics. We used the Country Reports: Human

Rights Practices for 1990 to determine the number of hours in an Indian

workday.

To value factory overhead, we calculated percentages based on

elements of industry group income statements from The Reserve Bank of

India Bulletin (RBI), December 1993. For general expense percentages,

we used the RBI data and allocated total general expenses over the

total RBI-based materials, labor, and overhead cost calculated for each

factory. The RBI data yielded a general expense percentage greater than

the ten percent statutory minimum. For profit we used the statutory

minimum of eight percent of materials, labor, factory overhead, and

general expenses, because the RBI percentage was less than eight

percent. We added packing based on Indian values obtained from Indian

Import Statistics.

Best Information Available

Because Shanghai IE failed to report complete factor information

prior to this determination, we were unable to use Shanghai IE's data,

and are basing its margin on BIA. Additionally, because information has

not been presented to the Department to prove otherwise, any PRC

companies not participating in this investigation are not entitled to

separate dumping margins. Potential exporters identified by MOFTEC have

failed to respond to our questionnaire. In the absence of responses

from these and other PRC exporters during the POI, we are basing the

PRC country-wide rate on BIA.

In determining what to use as BIA in this case, 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. When a company

cooperates with our requests for information but fails to provide the

information requested in a timely manner or in the form required, we

use as BIA the higher of: (1) the average of margins in the petition;

or (2) the calculated margin for another firm for the same class or

kind of merchandise from the same country. See, 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) (``Belgium Steel''). Since Shanghai IE has been cooperative in

this proceeding, and since we have preliminarily determined it is

eligible for a separate rate, we are assigning to it the calculated

rate for the other respondent in the investigation, Suzhou IE, which is

higher than the average of the margins in the petitions.

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 (see, Belgium Steel). Here, since some PRC exporters

failed to respond to our questionnaire, we are assigning to all other

PRC exporters the margin calculated for Suzhou IE because it is higher

than the highest margin in the petition.

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 saccharin

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:

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

Weight-

average

Manufacturer/producer/exporter margin

percentage

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

Shanghai IE................................................ 452.85

Suzhou IE.................................................. 452.85

PRC Country-Wide Rate...................................... 452.85

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

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 12, 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 15, 1994, at 10:00 a.m. at the U.S. Department of Commerce, Room

3708, 14th Street and Constitution Avenue, N.W., Washington, D.C.

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 this 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: June 16, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-15329 Filed 6-22-94; 8:45 am]

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