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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-830]

Preliminary Determination of Sales at Less Than Fair Value:

Coumarin From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Commerce.

EFFECTIVE DATE: August 4, 1994.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Michelle A.

Frederick, Office of Antidumping Investigations, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-4136 or (202) 482-0186, respectively.

Preliminary Determination

We preliminarily determine that coumarin 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. We

have also determined that critical circumstances exist.

Case History

Since the initiation of this investigation on January 19, 1994, (59

FR 3841, January 27, 1994), the following events have occurred.

On January 31, 1994, we sent a survey to the PRC's Ministry of

Foreign Trade and Economic Cooperation (MOFTEC) and certain companies

in the PRC requesting information on production and sales of coumarin

exported to the United States. The names of the companies were found in

the petition and in data supplied by the Port Import Export Reporting

Service (PIERS). We requested MOFTEC's assistance in forwarding the

survey to all exporters and producers of coumarin and in submitting

complete responses on their behalf.

On February 14, 1994, the U.S. International Trade Commission (ITC)

notified the Department of Commerce (the Department) of its preliminary

determination that there is a reasonable indication that an industry in

the United States is materially injured by reason of imports of

coumarin from the PRC that are alleged to be sold at less than fair

value.

On February 26 and 27, 1994, responses to the survey were received

from Tianjin No. 1 Perfumery Factory (Tianjin Perfumery) and Shanghai

Perfumery General Factory (Shanghai Perfumery), both of whom

manufacture coumarin. These responses helped us identify other

producers and exporters of coumarin.

On February 28, 1994, MOFTEC and those PRC producers and exporters

identified in the course of this proceeding, for which we had

addresses, were sent full questionnaires. Additionally, during the

month of March, the Department held a questionnaire presentation with

MOFTEC and company officials in Beijing.

In a March 28, 1994, filing, MOFTEC advised the Department that the

following companies produced or exported the subject merchandise to the

U.S. during the POI: Tianjin Perfumery, Shanghai Perfumery, Gaoyo

Perfumery Factory (Gaoyo Perfumery), Changzhou No. 2 Chemical Plant

(Changzhou Chemical) (producers); China Foreign Trade Development

Companies (CFTD), Tianjin Chemicals Import & Export (Tianjin

Chemicals), Tianjin Native Produce Import & Export Corporation (Tianjin

Native), Jiangsu Native Produce Import & Export (Jiangsu Native), and

China Tuhsu Flavors and Fragrances Import and Export Corporation (China

Tuhsu) (exporters).

In March and April, 1994, responses to section A of our

questionnaire were received from the following producers and exporters:

Shanghai Perfumery and CFTD, Tianjin Chemicals and Gaoyo Perfumery,

Tianjin Perfumery and Tianjin Native, and Jiangsu Native and Changzhou

Chemical.

On April 13, 1994, pursuant to section 353.15(c) of the

Department's regulations, we postponed the preliminary determination in

this investigation (see, 59 FR 19692, April 25, 1994).

In April 1994, we received responses to section C of our

questionnaire from Tianjin Chemicals, Tianjin Native, CFTD, and Jiangsu

Native; and responses to section D of our questionnaire from Gaoyo

Perfumery, Tianjin Perfumery, Shanghai Perfumery, and Changzhou

Chemical. China Tuhsu did not respond to any portion of our

questionnaire.

On April 28, 1994, counsel for Shanghai Perfumery and CFTD

submitted public information concerning surrogate values for factors of

production for coumarin. On May 20, 1994, petitioners provided the

Department with Indian prices for certain factors used in the

production of coumarin, and on July 15, 1994, counsel for the remaining

participating respondents submitted information regarding surrogate

values.

On May 13 and 19, 1994, the Department issued supplemental

questionnaires to all producers and exporters in the investigation

except China Tuhsu. On June 9, 1994, counsel for Shanghai Perfumery and

CFTD advised the Department that it was withdrawing its representation

of the companies. On May 27 and June 9, we received responses to our

supplemental questionnaires from all respondents except Shanghai

Perfumery, CFTD, and China Tuhsu. On June 23, 1994, Changzhou Chemical

submitted minor revisions to its factors of production data.

On May 27, 1994, the Department issued a questionnaire to all

respondents except China Tuhsu regarding the issue of separate rates.

Responses were received from Jiangsu Native, Tianjin Native, and

Tianjin Chemical on June 13, 1994 (see, ``Separate Rates'' section

below).

On June 20, 1994, petitioners, pursuant to section 353.16 of the

Department's regulations, amended the petition in this investigation to

allege the existence of critical circumstances with respect to imports

of coumarin from the PRC. On June 22, 1994, the Department sent letters

to Jiangsu Native, Tianjin Chemicals, and Tianjin Native requesting

information on volume and value of shipments of the subject merchandise

to the United States. We received their responses on July 12, 1994.

On July 15, 1994, we sent supplemental ``Separate Rates''

questionnaires to Jiangsu Native, Tianjin Chemicals, and Tianjin

Native.

Scope of Investigation

The product covered by this investigation is coumarin. Coumarin is

an aroma chemical with the chemical formula C9H6O2 that

is also known by other names, including 2H-1-benzopyran-2-one, 1,2-

benzopyrone, cis-o-coumaric acid lactone, coumarinic anhydride, 2-Oxo-

1,2-benzopyran, 5,6-benzo-alpha-pyrone, ortho-hydroxyc innamic acid

lactone, cis-ortho-coumaric acid anhydride, and tonka bean camphor.

All forms and variations of coumarin are included within the scope

of the investigation, such as coumarin in crystal, flake, or powder

form, and ``crude'' or unrefined coumarin (i.e. prior to purification

or crystallization). Excluded from the scope are ethylcoumarins

(C11H10O2) and methylcoumarins (C10H8O2).

Coumarin is classifiable under subheading 2932.21.0000 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 of this investigation is dispositive.

Period of Investigation

The period of investigation (POI) is July 1, 1993, through December

31, 1993.

Separate Rates

Jiangsu Native, Tianjin Chemicals, and Tianjin Native have each

requested a separate, company-specific rate. Their respective 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,

22586, May 2, 1994) (``Silicon Carbide''), and the Final Determination

of Sales at Less than Fair Value: Sebacic Acid from the People's

Republic of China (59 FR 28053, May 31, 1994 (``Sebacic Acid''),

``ownership of a company by all the people does not require the

application of a single rate.'' Accordingly, these three respondents

are eligible for consideration for separate rates.

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

The respondents in this investigation have submitted a number of

documents to demonstrate absence of de jure control, including three

enactments indicating that the responsibility for managing 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 control from the

government 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 support a finding 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. Coumarin is not included in the Export Provisions

list and does not, therefore, appear to be subject to the export

constraints of these provisions.

The existence of these enactments indicates that Jiangsu Native,

Tianjin Chemicals, and Tianjin Native are not de jure subject to

governmental 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, the Department has determined that an analysis of de facto

control is critical to determining whether respondents are, in fact,

subject to governmental control.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental 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 and Sebacic Acid).

Jiangsu Native, Tianjin Chemicals, and Tianjin Native have each

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, questionnaire responses

indicate that company-specific pricing during the POI does not suggest

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

products differ among companies). This information supports a

preliminary finding that there is a de facto absence of governmental

control of export functions.

Consequently, Jiangsu Native, Tianjin Chemicals, and Tianjin Native

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, Jiangsu Native, Tianjin Chemicals, and Tianjin Native have

indicated that the appointments of their general managers are subject

to approval by the local Foreign Trade and Economic Cooperation Bureaus

(local Bureaus). Second, each of the responding exporters has reported

that they are ``administratively subject to'' the local Bureaus. While

the significance of the involvement of the local Bureaus is unclear,

the respondents have reported that the local bureaus do not control the

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

verification the precise nature of the authority that the local Bureaus

exercise over the enterprises.

Nonmarket Economy Country Status

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

all past antidumping investigations (see, e.g., Sebacic Acid and

Silicon Carbide). No information has been provided in this proceeding

that would lead us to overturn our former determinations. Therefore, in

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

as an NME for purposes of this investigation.

Where the Department is investigating imports from an NME, section

773(c)(1) of the Act directs us to base FMV on the NME producers'

factors of production, valued in a comparable market economy that is a

significant producer of the merchandise. Section 773(c)(2) of the Act

alternatively provides that where available information is inadequate

for using the factors of production methodology, FMV may be based on

the export prices for comparable merchandise from market economy

countries at a comparable level of economic development.

For purposes of the preliminary determination, we have relied on

the methodology provided by section 773(c)(1) of the Act to determine

FMV. The sources of individual factor prices are discussed under the

FMV section, below.

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 (1) are at a level of economic

development comparable to that of the NME country, and (2) 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 David

Mueller, Director Office of Policy, to Gary Taverman, Director of

Division I of Office of Antidumping Investigations, dated March 10,

1994). In addition, there is evidence on the record that coumarin is

produced in India.

Fair Value Comparisons

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

States by Jiangsu Native, Tianjin Chemicals, and Tianjin Native 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 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 and were found to be eligible for a separate rate, we

calculated purchase price based on packed, FOB foreign-port prices to

unrelated purchasers in the United States. As necessary, we made

deductions for foreign inland freight, containerization, loading, port

handling expenses, foreign inland and marine insurance, valued in a

surrogate country. We were unable to obtain surrogate value information

for ocean freight, so we valued ocean freight on international shipping

rates between the PRC and U.S. ports, as quoted by a market-economy

shipping company. (For a complete analysis of USP deductions, see the

Calculation Memorandum for this investigation).

Foreign Market Value

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

based on factors of production reported by the factories in the PRC

which produced the subject merchandise for the three exporters. The

factors used to produce coumarin include materials, labor, and energy.

To calculate FMV, the reported quantities were multiplied by the

appropriate surrogate values from India and Indonesia for the different

inputs. We made adjustments to materials costs for the recovery of by-

products, where applicable. In determining which surrogate value to use

for valuing each factor of production, we selected, where possible,

from publicly available, published information (public information).

For a complete analysis of surrogate values, see the Calculation

Memorandum for this investigation.

We used surrogate transportation rates to value inland freight

between the source of the production factor and the coumarin factories,

and between factories and exporters/ports. In those cases where a

respondent failed to provide any information on transportation

distances, we applied, as best information available, the farthest

distance reported for the input in the public version of questionnaire

responses.

To value certain raw materials, we used public information from

Chemical Business of India for July-October 1993, and India Chemical

Weekly for July-November 1993. For raw materials not listed in Chemical

Business of India, or India Chemical Weekly, we used the Monthly Trade

Statistics of Foreign Trade of India, Volume II--Imports (Indian Import

Statistics) for April 1992-March 1993. We adjusted the factor values to

the POI using wholesale price indices published in International

Financial Statistics (IFS) by the International Monetary Fund. For

materials sourced from market-economy countries and purchased in

convertible currencies, we applied the actual purchase price paid

during the POI, or the time period closest to the POI. No product-

specific public information pertaining to India or any other potential

surrogate country was available for certain raw materials. With respect

to these raw materials, we have used, privately researched Indian price

quotes, Indian import statistics for categories that include the

specific raw materials (i.e., ``basket'' categories), or Indonesian

import statistics. (For a complete analysis of raw material valuations,

see the Calculation Memorandum for this investigation).

To value electricity, we used public information 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 India, our preferred surrogate country. To value water, we

have used public information for India from the Water Utilities Data

Book for the Asian and Pacific Region (November 1993) which is also

published by the Asian Development Bank. To value coal, we used Indian

Import Statistics. We adjusted the factor values to the POI using

wholesale price indices published in the IFS.

To value hourly labor rates in India, we used the International

Labor Office's 1993 Yearbook of Labor Statistics and Country Reports:

Human Rights Practices for 1990.

To value factory overhead, we calculated percentages based on

relevant data from The Reserve Bank of India Bulletin (RBI), December

1993. We based our overhead percentage calculations on the RBI summary

income statement data applicable to the chemical manufacturing

industry, and adjusted to reflect an energy-exclusive overhead

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

calculated percentages based on the RBI summary income statement data.

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 RBI percentage was less than eight percent.

We added packing based on Indian values obtained from Indian Import

Statistics.

Best Information Available (BIA)

Because information has not been presented to the Department to

prove otherwise, any PRC company that did not respond fully to the

Department's questionnaires or otherwise did not participate in this

investigation, are assumed to be under government control, and,

therefore, are not entitled to separate dumping margins. In the absence

of responses from those companies that did not fully respond to the

Department's questionnaire, and other PRC exporters during the POI, we

are basing the All Other rate on BIA, pursuant to section 776(c) of the

Act (see 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 more adverse margins for those respondents which

did not cooperate in an investigation. 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 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). In this investigation, since some PRC exporters failed to

respond to our questionnaire, we are assigning to them the highest

margin based on information submitted in the petition (see Initiation

of Antidumping Duty Investigation: Coumarin from the People's Republic

of China, 59 FR 3841, January 27, 1994). This rate applies to all

exporters other than those responding exporters that are receiving

separate rates.

Critical Circumstances

Petitioners allege that ``critical circumstances'' exist with

respect to imports of coumarin from the PRC. Section 733(e)(1) of the

Act provides that there is a reasonable basis to believe or suspect

that critical circumstances exist if:

(A)(i) there is a history of dumping in the United States or

elsewhere of the class or kind of merchandise which is the subject of

the investigation, or

(ii) the person by whom, or for whose account, the merchandise was

imported knew or should have known that the exporter was selling the

merchandise which is the subject of investigation at less than its fair

value, and

(B) there have been massive imports of the class or kind of

merchandise which is the subject of the investigation over a relatively

short period.

Regarding criterion (A) above, we normally consider margins of 25

percent or more (in purchase price situations) as sufficient to impute

knowledge of dumping (see Silicon Carbide). Since the preliminary

estimated dumping margins for exporters of coumarin in the PRC are in

excess of 25 percent, we can impute knowledge of dumping to the

importers of the subject merchandise.

Regarding criterion (B) above, pursuant to 19 CFR 353.16(f), we

generally consider the following factors in determining whether imports

have been massive over a short period of time: (1) The volume and value

of the imports; (2) seasonal trends (if applicable); and (3) the share

of domestic consumption accounted for by the imports. If imports during

the period immediately following the petition increase by 15 percent

over imports during a comparable period immediately preceding the

filing of a petition, we consider them massive pursuant to section

353.16(f)(2) of the Department's regulations. Three respondents have

responded to the Department's request for the quantity and value of

monthly exports to the U.S. To determine whether there have been

massive imports of coumarin from the PRC, we compared each respondent's

volume of shipments for the period following the petition (January

through June 1994) to the period immediately preceding the petition

(July through December 1993). Based on an analysis of these export

data, we find that imports from Tianjin Chemical and Tianjin Native

have been massive, while imports from Jiangsu Native have not been

massive.

With respect to share of domestic consumption, the information

available to us at this time does not allow us to evaluate whether the

increase in absolute volume of coumarin shipments can be accounted for

by a change in domestic consumption.

For Tianjin Chemical and Tianjin Native, because the preliminary

dumping margins are sufficient to impute knowledge of dumping, and

because we have found that imports of coumarin have been massive, we

preliminarily determine that critical circumstances do exist for these

two exporters.

With respect to Jiangsu Native, because we have found that imports

of coumarin have not been massive, we preliminarily determine that

critical circumstances do not exist for this exporter.

As regards the firms covered by the ``All Others'' rate, we have

used BIA as the basis for determining whether critical circumstances

exist for non-respondent exporters. The BIA margin exceeds the 25

percent threshold for imputing a knowledge of dumping to the importers

of the merchandise. In addition, we have adversely assumed, as BIA, a

massive increase in imports from these non-respondent exporters. We,

therefore, determine that critical circumstances also exist for these

exporters.

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 coumarin

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

consumption on or after the date 90 days before the date of publication

of this notice in the Federal Register, except for imports from Jiangsu

Native, in which case the effective date of suspension of liquidation

is 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-

average Critical

Manufacturer/Producer/Exporter margin circumstances

percentage

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

Tianjin Chemicals I/E Corp............. 143.40 Affirmative.

Jiangsu Native Produce I/E Corp........ 97.61 Negative.

Tianjin Native Produce I/E Corp........ 35.21 Affirmative.

All Others............................. 444.37 Affirmative.

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

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 six copies must be submitted to the Assistant

Secretary for Import Administration no later than September 13, 1994,

and rebuttal briefs, no later than September 20, 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 at

1:00 p.m. on September 22, 1994, at the U.S. Department of Commerce,

Room 3708, 14th Street and Constitution Avenue, NW., 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: July 28, 1994.

Barbara R. Stafford,

Acting Assistant Secretary for Import Administration

[FR Doc. 94-19066 Filed 8-3-94; 8:45 am]

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