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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-834]

Notice of Preliminary Determination of Sales at Less Than Fair

Value: Disposable Pocket Lighters From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: December 13, 1994.

FOR FURTHER INFORMATION CONTACT: Julie Anne Osgood or Todd Hansen,

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) 482-0167 or 482-1276, respectively.

Preliminary Determination

We preliminarily determine that disposable pocket lighters from the

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

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

733 of the Tariff Act of 1930 (the ``Act''), as amended. The estimated

margins of sales at less than fair value are shown in the ``Suspension

of Liquidation'' section of this notice.

Case History

Since the initiation of this investigation on May 31, 1994 (59 FR

29412, June 7, 1994), the following events have occurred:

On June 23, 1994, the United States International Trade Commission

(``ITC'') issued an affirmative preliminary injury determination (see

ITC Investigation No. 303-TA-25).

On June 13, 1994, we sent a letter to the China Chamber of Commerce

for Machinery and Electronic Products Import and Export (``CCCME'')

requesting names and addresses of PRC producers and exporters of

disposable pocket lighters (``lighters'') sold in the United States. On

June 22, 1994, we received a list of producers and exporters of

lighters from the CCCME. A questionnaire was presented on July 1, 1994,

to the CCCME and to the Ministry of Foreign Trade and Economic

Cooperation (``MOFTEC'') for distribution to PRC producers and

exporters of lighters.

On September 20, 1994, we postponed the preliminary determination

until December 5, 1994 (59 FR 48284).

On September 9, 1994, responses to the Department's questionnaire

were received from the following exporters of lighters: China National

Overseas Trading Corporation (Ningbo) (``COTCO''), Guangdong Light

Industrial Products Import and Export (``GLIP''), Gao Yao (Hong Kong)

Hua Fa Industrial Company, Ltd. (``Gao Yao''), PolyCity Industrial,

Ltd. (``PolyCity''), and Cli-Claque Company Limited (``Cli-Claque'').

On October 12 and 18, 1994, we sent supplemental/deficiency

questionnaires to the respondents. Responses to the supplemental

questionnaires were received on November 14, 1994. On November 23,

1994, petitioner alleged critical circumstances.

Scope of the Investigation

The products covered by this investigation are disposable pocket

lighters, whether or not refillable, whose fuel is butane, isobutane,

propane, or other liquified hydrocarbon, or a mixture containing any of

these, whose vapor pressure at 75 degrees fahrenheit (24 degrees

celsius) exceeds a gage pressure of 15 pounds per square inch. Non-

refillable pocket lighters are imported under subheading 9613.10.0000

of the Harmonized Tariff Schedule of the United States (``HTSUS'').

Refillable, disposable pocket lighters would be imported under

subheading 9613.20.0000. Although the HTSUS subheadings are provided

for convenience and Customs purposes, our written description of the

scope of this proceeding is dispositive.

Windproof refillable lighters, as described in a memorandum to

Barbara R. Stafford, dated December 5, 1994, are excluded from the

scope of this investigation.

Period of Investigation

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

May 31, 1994.

Nonmarket Economy Country Status

The Department has treated the PRC as a nonmarket economy country

(``NME'') in all past antidumping investigations (see, e.g., Notice of

Final Determination of Sales at Less than Fair Value: Saccharin from

the PRC (59 FR 58818, November 15, 1994). 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 foreign market value (``FMV'')

on the NME producers' factors of production, valued in a market economy

that is at a level of economic development comparable to that of the

NME under investigation and that is a significant producer of

comparable 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 in the FMV

section below.

Separate Rates

All five respondents have requested separate antidumping duty

rates. In cases involving non-market economies, the Department's policy

is to assign a separate rate only when an exporter can demonstrate the

absence of both de jure and de facto governmental control over export

activities. In determining whether companies should receive separate

rates, we focus our attention on the exporter rather than the

manufacturer, as our concern is manipulation of export prices, and we

examine PRC government control of the exporter. In this case, two of

the five respondents are Hong Kong exporters that are involved in joint

ventures in the PRC that manufacture lighters. Since PolyCity and Cli-

Claque are located outside the PRC, the PRC government does not have

jurisdiction over them. Moreover, the PRC government does not have any

ownership interest in these exporters and, therefore, it cannot

exercise control through ownership of these companies. Further, we have

no evidence on the record indicating that the PRC government exerts

control over these exporters. (See, business proprietary memorandum to

the file dated December 5, 1994.) On this basis, we preliminarily

determine that there is no need to apply our separate rates analysis

and that PolyCity and Cli-Claque are entitled to individual rates.

In contrast to PolyCity and Cli-Claque, Gao Yao is a 50/50 joint

venture between a Chinese company and Hong Kong company. The joint

venture owns both the production and export facilities used to

manufacture and export the lighters it sells to the United States.

Given the direct PRC ownership in Gao Yao's export facilities, we have

preliminarily determined that it is appropriate to apply our separate

rates analysis to this company.

COTCO's and GLIP's 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 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, these

companies are eligible for consideration for a separate rate under our

criteria.

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 PRC (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''). Respondents' submission also included 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 employees

without government approval (Article XVII).

The Export Provisions indicate those products subject to direct

government control. Lighters do not appear on the Export Provisions

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

Consistent with Silicon Carbide, we determine that the existence of

these laws demonstrates that COTCO, GLIP, and Gao Yao are not subject

to de jure 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 to

determine whether COTCO, Gao Yao and GLIP 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 a 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).

In response to our questionnaire, COTCO, GLIP, and Gao Yao have

each asserted that they:

Are able to borrow at market rates from commercial banks;

Maintain their own bank accounts, including foreign

exchange earnings;

Are not restricted in their access to their bank accounts;

Operate at a profit;

Make independent business decisions, including what to

export;

Set their own prices independently and that the prices are

not subject to review by trading companies or government authorities;

Base their relationships with suppliers and customers on

arm's length negotiations without governmental interference;

Are not subject to foreign exchange targets set by either

the central or provincial governments;

Have the ability to sell, transfer, or acquire assets;

Exporter-Specific Information:

The following is a summary of additional information provided by

the exporters:

Gao Yao has stated that:

It is a Sino-Hong Kong 50-50 joint venture;

It has no legal relationship with either the local,

regional and/or national government;

It maintains a bank account in Hong Kong where all monies

received from Gao Yao's foreign sales are deposited and that the

allocation of foreign currency is not subject to governmental review or

approval;

Chinese joint venture and other laws confirm Gao Yao's

independence (Gao Yao submitted an exhibit consisting of laws

pertaining to Sino-Foreign joint ventures in its response);

Management is selected by the board of directors, without

any governmental interference;

Profits are divided evenly between the joint venture

partners according to the shares invested;

The managing director of Gao Yao is a Hong Kong resident;

and

All contracts are negotiated and signed by the officials

of Gao Yao's Hong Kong sales office.

GLIP has stated that:

Management is selected by its board of directors;

Current ownership of the company is by ``all the people.''

The company received authorization to privatize on March 5, 1993, and

``is in the process of totally privatizing;'' and

It is independently managed and operated (a statement to

this effect from CCCME was included in the response as an exhibit).

COTCO has stated that:

It is a limited liability company, owned by COTCO Beijing,

which, in turn, is an ``all the people'' company;

It is independently managed and operated (a statement to

this effect from CCCME was included in the response as an exhibit);

Its manager is hired following a public notice of vacancy,

screening, and hiring negotiations; the manager then selects the

company's management committee; the decisions regarding the selection

and promotion of management are not subject to any entity's review or

approval.

The information submitted on behalf of each of the three companies

supports a preliminary finding that there is a de facto absence of

governmental control of export functions of each of the three

companies.

Consequently, COTCO, Gao Yao and GLIP 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.

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 economies 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 Indonesia

is the most suitable surrogate for purposes of this investigation.

Based on available statistical information, Indonesia is at a level of

economic development comparable to that of the PRC, and Indonesian

export statistics indicate that the country is a significant producer

of lighters. Based on available information, Indonesia is the only

surrogate country, of those identified by our Office of Policy, that

meet both of these criteria. (See, memorandum to the file from Todd

Hansen to Carole Showers, dated December 5, 1994, Surrogate Country

Selection and memorandum from David Mueller, Director, Office of Policy

to Susan Kuhbach, Director, Office of Countervailing Investigations,

dated September 8, 1994, Lighters from the People's Republic of China,

Non-Market Economy Status and Surrogate Country Selection.)

Fair Value Comparisons

To determine whether sales of lighters from the PRC by COTCO, Gao

Yao, GLIP, PolyCity and Cli-Claque were made at less than fair value,

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

the ``United States Price'' and ``Foreign Market Value'' sections of

the notice.

United States Price

For all respondents, we based USP on purchase price, in accordance

with section 772(b) of the Act, because lighters were sold directly to

unrelated parties in the United States prior to importation into the

United States, and because exporter's sales price (``ESP'') methodology

was not indicated by other circumstances.

We calculated purchase price based on packed, FOB foreign-port

prices to unrelated purchasers in the United States, and packed, CIF

prices, where appropriate. We made deductions for foreign inland

freight, containerization, loading, port handling expenses, and marine

insurance, as indicated. Generally, costs for these items were valued

in the surrogate country. However, where inland freight was purchased

from market economy suppliers and paid for in a market economy

currency, we used the cost actually incurred by the exporter.

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 five responding

exporters. The factors used to produce lighters include materials,

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

multiplied by the appropriate surrogate values from Indonesia for those

inputs purchased domestically from PRC suppliers. Where inputs were

imported from market economy countries and paid for in a market economy

currency, we used the actual costs incurred by the producers to value

those factors (see, e.g., Final Determination of Sales at Less Than

Fair Value: Oscillating Ceiling Fans From the People's Republic of

China, 56 FR 55271, October 25, 1991). Where a respondent failed to

provide certain factor information in a usable form, we have used

publicly available information from the petition and other respondents

as best information available in valuing these factors.

Cli-Claque has argued that since it purchases certain input parts

produced in the PRC from a Hong Kong reseller, the Department should

accept these prices as market-determined and use them when calculating

FMV. We disagree with this argument and have not used the prices for

these inputs in calculating FMV. For purposes of valuing factors of

production, it is the Department's practice not to use prices from one

PRC producer to an unrelated PRC producer because those prices are

distorted. In the present case, the two Hong Kong companies negotiated

prices for inputs produced in the PRC on behalf of their related

production facilities located in the PRC. Therefore, we have determined

that these input prices should not be used to value the factors of

production in this case. We have only used prices for imported inputs

which were produced in market-based economies to value those factors.

In determining which surrogate value to use for each factor of

production which was not sourced from a market-economy country, we

selected, where possible, from 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.

With the exception of butane, we used the Indonesian import price

taken from the Indonesian Foreign Trade Statistical Bulletin--Imports,

November 1993. For butane, however, the amount imported into Indonesia

was negligible compared to the amount exported from that country.

Therefore, for those PRC producers that did not import butane from

market economy sources, we relied on Indonesian export statistics, as

reported in the Indonesian Foreign Trade Statistical Bulletin--Exports,

November 1993.

We used Indonesian transportation rates taken from a September 18,

1991, U.S. State Department cable from the U.S. Embassy in Indonesia to

value inland freight between the source of the production factor and

the disposable lighter factories.

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. To value labor amounts, we

used labor rates published by the Bureau of International Labor

Affairs, U.S. Department of Labor, in Foreign Labor Trends-Indonesia.

We adjusted the factor values, when necessary, to the POI using

wholesale price indices (``WPIs'') published by the International

Monetary Fund (``IMF'').

To value factory overhead, we calculated percentages based on a

December 2, 1994 U.S. State Department cable from the U.S. Embassy in

Jakarta giving elements of industry group income statements.

For general expense percentages, we used the statutory minimum of

10 percent of materials, labor, and overhead costs calculated for each

factory. For profit we used the statutory minimum of eight percent of

materials, labor, factory overhead, and general expenses. We did not

have Indonesian values for either general expenses or profit.

We added packing based on Indonesian values obtained from the

Indonesian Foreign Trade Statistical Bulletin--Imports, November 1993.

Cli-Claque argues that since it makes all of its sales/exports from

Hong Kong, has all of its management, administrative and selling

operations in Hong Kong, and is wholly-owned and operated as a market-

economy producer, we should treat Cli-Claque as a market-economy

producer and base FMV on Hong Kong home market prices. Failing this,

Cli-Claque maintains that since the PRC production facility does not

know Cli-Claque's customers or the ultimate destination of the

merchandise and since the products enter the commerce of Hong Kong, we

should, at a minimum, consider Cli-Claque as a third country reseller

and consider Hong Kong a viable home market on which to base FMV.

We disagree with Cli-Claque on both accounts. First, its related

production facility is located in a non-market economy country and,

therefore, the FMV of the subject merchandise must be determined using

the factors of production methodology. Second, given the relationship

between Cli-Claque and the PRC production facility, we do not consider

that there is a ``purchase'' from the PRC production facility by Cli-

Claque within the meaning of section 773(f) of the Act. Therefore, Cli-

Claque is not considered a ``reseller'' within the meaning of that

provision.

Best Information Available

Potential exporters identified by MOFTEC 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

best information available (BIA). When a company refuses to provide

information requested in the form required, or otherwise significantly

impedes the Department's investigation, it is appropriate for the

Department to assign to the 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)

(``Belgium Steel''). Since some PRC exporters failed to respond to our

questionnaire, we are assigning to all other PRC exporters the highest

margin in the May 27, 1994, amendment to the petition.

Critical Circumstances

On November 23, 1994, petitioner alleged that ``critical

circumstances'' exist with respect to imports of disposable pocket

lighters from the PRC. We did not receive the allegation in time to

make a critical circumstance determination in this preliminary

determination. However, we will make a preliminary determination with

respect to critical circumstances no later than December 23, 1994,

pursuant to 19 CFR 353.16(b)(2)(ii).

Verification

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

information used in making our final determination.

Suspension of Liquidation

For Gao Yao, we calculated a zero margin. Consistent with Notice of

Final Determination of Sales at Less Than Fair Value: Certain Cased

Pencils from the People's Republic of China (59 FR 55625, November 8,

1994), merchandise that is sold by Gao Yao but manufactured by other

producers will not receive the zero margin. Instead, such entries will

be subject to the ``All Others'' margin.

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

the Customs Service to suspend liquidation of all entries of disposable

pocket lighters from the PRC, as defined in the ``Scope of the

Investigation'' section of this notice, 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 dumping

margins, as shown below. This suspension of liquidation will remain in

effect until further notice. The weighted-average dumping margins are

as follows:

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

Margin

Manufacture/producer/exporter (Percent)

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

China National Overseas Trading Corp....................... 37.48

Cli-Claque Company Ltd..................................... 7.03

Gao Yao (HK) Hua Fa Industrial Co., Ltd.................... \1\0.10

Guangdong Light Industrial Products Import and Export Corp. 35.08

PolyCity Industrial, Ltd................................... 63.09

All others................................................. 197.85

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

\1\De minimus.

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 whether these imports are materially injuring,

or threaten material injury to, the U.S. industry within 75 days after

our final determination.

Public Comment

Interested parties who wish to request a hearing 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, case briefs or other written

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

Secretary no later than January 20, 1995, and rebuttal briefs no later

than January 27, 1995. A hearing, if requested, will be held on Friday,

February 3, 1995, at 10:00 am at the U.S. Department of Commerce in

Room 1412. Parties should confirm by telephone the time, date, and

place of the hearing 48 hours prior to the scheduled time. In

accordance with 19 CFR 353.38(b), oral presentations will be limited to

issues raised in the briefs.

We will make our final determination not later than 75 days after

of this preliminary determination.

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

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

Dated; December 5, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-30581 Filed 12-12-94; 8:45 am]

BILLING CODE 3510-DS-P