Sebacic Acid From the People's Republic of China; Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-570-825]

Sebacic Acid From the People's Republic of China; Preliminary

Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

[[Page 46441]]

ACTION: Notice of Preliminary Results of Antidumping Duty

Administrative Review of Sebacic Acid from the People's Republic of

China.

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

SUMMARY: The Department of Commerce (the Department) is conducting an

administrative review of the antidumping duty order on sebacic acid

from the People's Republic of China (PRC) in response to requests from

petitioner, Union Camp Corporation and three respondents: Tianjin

Chemicals Import and Export Corporation (Tianjin), Guangdong Chemicals

Import and Export Corporation (Guangdong) and Sinochem International

Chemicals Company, Ltd. (SICC). This review covers four exporters of

the subject merchandise, including the three respondent companies above

and Sinochem Jiangsu Import and Export Corporation (Jiangsu). The

period of review (POR) is July 13, 1994 through June 30, 1995.

We have preliminarily determined that sales have been made below

normal value (NV) during this period. If these preliminary results are

adopted in our final results of administrative review, we will instruct

the U.S. Customs Service to assess antidumping duties equal to the

difference between United States price (USP) and NV. Interested parties

are invited to comment on these preliminary results.

EFFECTIVE DATE: September 3, 1996.

FOR FURTHER INFORMATION CONTACT: Elizabeth Patience or Jean Kemp,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th and Constitution Avenue, NW., Washington,

DC 20230; telephone: (202) 482-3793.

Applicable Statute

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations are to the

current regulations, as amended by the interim regulations published in

the Federal Register on May 11, 1995 (60 FR 25130).

SUPPLEMENTARY INFORMATION:

Background

The Department published in the Federal Register an antidumping

duty order on sebacic acid from the PRC on July 14, 1994 (59 FR 35909).

On July 3, 1995, the Department published in the Federal Register (60

FR 34511) a notice of opportunity to request an administrative review

of the antidumping duty order on sebacic acid from the PRC covering the

period July 13, 1994 through June 30, 1995.

On July 26, 1995, in accordance with 19 CFR 353.22(a), Union Camp

requested that we conduct an administrative review of Tianjin,

Guangdong, SICC, and Jiangsu. On July 28, 1996, Tianjin, Guangdong and

SICC requested that we conduct an administrative review. We published a

notice of initiation of this antidumping duty administrative review on

September 15, 1995 (60 FR 47930). The Department is conducting this

administrative review in accordance with section 751 of the Act.

Scope of Review

The products covered by this order 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 of this

proceeding remains dispositive.

This review covers the period July 13, 1994 through June 30, 1995,

and four exporters of Chinese sebacic acid.

Verification

We conducted verifications of the sales and factor information

provided by SICC and Tianjin Zhong He Chemical Plant (Zhong He) in

Beijing and Tianjin, PRC. We conducted the verifications using standard

verification procedures, including onsite inspection of the

manufacturer's facilities, the examination of relevant sales and

financial records, and selection of original documentation containing

relevant information. Our verification results are outlined in the

public versions of the verification reports.

Separate Rates

1. Background and Summary of Findings

It is the Department's standard policy to assign all exporters of

the merchandise subject to review in non-market-economy countries a

single rate, unless an exporter can demonstrate an absence of

government control, both in law and in fact, with respect to exports.

To establish whether an exporter is sufficiently independent of

government control to be entitled to a separate rate, the Department

analyzes the exporter in light of the criteria established in 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), as

amplified 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). Evidence supporting, though not requiring,

a finding of de jure absence of government control over export

activities includes: (1) An absence of restrictive stipulations

associated with an individual exporter's business and export licenses;

(2) any legislative enactments decentralizing control of companies; and

(3) any other formal measures by the government decentralizing control

of companies. Evidence relevant to a de facto absence of government

control with respect to exports is based on four factors, whether the

respondent: (1) Sets its own export prices independent from the

government and other exporters; (2) can retain the proceeds from its

export sales; (3) has the authority to negotiate and sign contracts;

and (4) has autonomy from the government regarding the selection of

management. See Silicon Carbide at 22587; see also Sparklers at 20589.

In our final determination of sales at less than fair value, the

Department determined that there was de jure and de facto absence of

government control and determined that each company warranted a

company-specific dumping margin. See 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). For this period of review,

SICC, Tianjin, and Guangdong have responded to the Department's request

for information regarding separate rates. We have found that the

[[Page 46442]]

evidence on the record is consistent with the final determination in

the LTFV investigation and continues to demonstrate an absence of

government control, both in law and in fact, with respect to their

exports, in accordance with the criteria identified in Sparklers and

Silicon Carbide. For SICC, although we applied the PRC, country-wide

rate to two sales reported by SICC, we have preliminarily determined

that SICC is separate from government control and Jiangsu. During

verification of SICC, we examined its business license and charter,

government notices announcing its separation from the government, its

tax registration certificate, company management election ballots, and

financial statements. These documents showed no evidence of government

control of SICC or of any affiliation between Jiangsu and SICC.

2. Separate Rate Determination for Non-responsive Company

For Jiangsu, which did not respond to the questionnaire, we

preliminarily determine that this company does not merit a separate

rate. Although Jiangsu met the Department's criteria for separate rates

in the LTFV investigation, because it failed to respond in this review,

we have no information to support continued application of a separate

rate. Therefore, because the Department assigns a single rate to

companies in a non-market economy unless an exporter can demonstrate

absence of government control, we preliminarily determine that Jiangsu

is subject to the country-wide rate for this case.

United States Price

For SICC, Tianjin, and Guangdong, the Department based USP on

export price (EP), in accordance with section 772(a) of the Act. We

made deductions from EP, where appropriate, for foreign inland freight,

ocean freight, brokerage and handling, and marine insurance. We valued

these adjustments using surrogate data based on Indian internal freight

costs and international shipping costs. We selected India as the

surrogate country for the reasons explained in the ``Normal Value''

section of this notice.

Normal Value

Section 773(c)(1) of the Act provides that the Department shall

determine the normal value (NV) using a factors-of-production

methodology if: (1) The merchandise is exported from an NME country;

and (2) the information does not permit the calculation of NV using

home-market prices, third-country prices, or constructed value under

section 773(a) of the Act.

The Department has treated the PRC as an NME country in all

previous antidumping cases. In accordance with section 771(18)(C)(i) of

the Act, any determination that a foreign country is a NME country

shall remain in effect until revoked by the administering authority.

None of the parties to this proceeding has contested such treatment in

this review. Furthermore, available information does not permit the

calculation of NV using home market prices, third country prices or CV

under section 773(a) of the Act. Therefore, we treated the PRC as a NME

country for purposes of this review and calculated NV by valuing the

factors of production in a comparable market economy country which is a

significant producer of comparable merchandise. In such cases, the

factors include, but are not limited to: (1) Hours of labor required;

(2) quantities of raw materials employed; (3) amounts of energy and

other utilities consumed; and (4) representative capital cost,

including depreciation.

In accordance with section 773(c)(4) of the Act and section

353.52(b) of the Department's regulations, we determined that India is

comparable to the PRC in terms of per capita gross national product

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

of labor. (See Memorandum from Director, Office of Policy, to Division

Director, Office of Antidumping Compliance, dated March 4, 1996.) 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 statute also requires that, to the extent possible, the

Department use a surrogate country that is a significant producer of

merchandise comparable to sebacic acid. 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. However, we found

that India was a significant producer of comparable merchandise (e.g.,

oxalic acid) during the POR. 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.

For purposes of calculating NV, we valued PRC factors of

production, in accordance with section 773(c)(1) of the Act. 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 POR if submitted by an

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

specific; and (4) tax-exclusive. We chose values with a preference for

prices representative of the POR because these prices more closely

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

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

selected a value in accordance with the remaining criteria mentioned

above and which was closest in time to the POR. In accordance with this

section methodology, we valued the factors of production as follows:

For castor oil, the Department valued this material at the market

rate as reported in The Economic Times (Bombay) for Calcutta, Delhi,

Hyderabad, Kanpur, and Madras during the months of July, August, and

November 1994. These values were reported by counsel for the

respondents. The Department adjusted these values to account for

freight costs between the supplier and the respondents' sebacic acid

manufacturing facilities.

For caustic soda, the Department used the value reported in the

publication Indian Chemical Weekly, using data from the months of

October-December 1994, and January and April, 1995. These reported

values were adjusted to include freight expense incurred from the

suppliers to the respondents' sebacic acid manufacturing facilities.

For cresol, also referred to as orthol cresol, respondents reported

the market value as indicated in Chemical Weekly. Respondents provided

information concerning prices during the months of October and

November, 1994. The Department reviewed pricing information for other

months of the POR which indicated that the market prices reported by

respondents is representative of the market price of the material for

the entire POR.

The valuation of activated carbon, which is interchangeable with

macropore resin, was based upon information found in the publication

India's Imports by Commodities-Countries (Monthly Statistics of the

Foreign Trade of India (IMF). This pricing information reflects the

average unit price for the period April-October, 1994. This average

unit value was adjusted to account for inland freight expense.

The market value for sodium chloride (also referred to as sodium

chlorite or vacuum salt) and zinc oxide was based upon the published

market prices

[[Page 46443]]

reported in Chemical Weekly. Respondents provided information

concerning the market price of sodium chloride on December 27, 1994 and

March 28, 1995, and of zinc oxide on March 28, 1995. The Department

reviewed other dates throughout the POR and determined that the market

prices published on these dates were representative of the prices for

the entire POR.

For direct labor, we used 1994 data from Investing, Licensing &

Trading Conditions Abroad, India, published in November 1994 by the

Economist Intelligence Unit. We then adjusted the 1994 labor value to

the POR to reflect inflation using wholesale price indices (WPI) of

India as published in the International Financial Statistics by the

International Monetary Fund (IMF).

For factory overhead, we used information obtained from the April

1995 Reserve Bank of India Bulletin. From ``Statement 1--Combined

Income, Value of Production, Expenditure and Appropriation Accounts,

Industry Group-wise'' of that report for the Indian metals and

chemicals industries, we summed those components which pertain to

overhead expenses and divided them by the sum of those components

pertaining to the cost of manufacturing to calculate an overhead rate

of 10.74 percent.

For coal we used prices published in the Gazette of India for June

1994; for electricity we used information obtained from the Current

Energy Scene in India for July 1995.

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

information from the same source as was used for factory overhead. We

summed the values which comprised the components of SG&A and divided

that figure by the same cost of manufacturing figure used to determine

factory overhead, to arrive at an SG&A rate of 17.99 percent.

For the calculation of profit, we used information from the same

Reserve Bank of India Bulletin. We divided the reported before-tax

profit by the sum of those components pertaining to the cost of

manufacturing plus SG&A to calculate a profit rate of 5.71 percent.

For the value of export packing (plastic bags), the Department used

the value of imports into India during April 1994-February 1995 and for

April 1995, as obtained from the Indian Import Statistics, for HTS

number 3923.21.

For foreign inland freight, the Department relied upon the trucking

freight rates reported to the Department in an August 1993 embassy

cable from India, pursuant to the less-than-fair-value investigation of

certain helical spring lock washers from the PRC. This is the same

information we used in the sebacic acid less-than-fair-value

investigation. We adjusted these rates to the POR to reflect inflation.

For ocean freight, the Department used the information provided by

respondents, which is based upon the common rates tariff filed by

Nippon Yusen Kaisha with the Federal Maritime Commission for rates from

China to New York.

To calculate the expense for marine insurance, the Department used

information from a publicly summarized version of the questionnaire

response for the investigation of sales of less than fair value of

sulphur dyes from India. The marine insurance rate reported in the

public version of the October 8, 1992 response was adjusted to reflect

marine insurance charges during the POR.

To value fatty acid, we used publicly available published

information from the Monthly Statistics of the Foreign Trade of India

(Monthly Statistics) and adjusted the value to account for inflation

between the time period applicable to the value in question and the POR

using wholesale price indices (WPI) published in International

Financial Statistics (IFS) by the IMF. To value glycerine, we used a

value for crude glycerine in the publication Monthly Statistics of the

Foreign Trade of India and adjusted the value to account for inflation

between the time period applicable to the value in question and the POR

using WPI published in IFS by the IMF. Consistent with the methodology

employed in the final determination in the less-than-fair-value

investigation, we have determined that fatty acid and glycerine are by-

products. See Sebacic Acid at 28056. Therefore, as by-products, we

subtracted the sales revenue of fatty acid and glycerine 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).

To value caproyl alcohol, we used publicly available published

information from Chemical Weekly. Consistent with the methodology

employed in the final determination in the less-than-fair-value

investigation, we have determined that caproyl alcohol is a co-product.

Therefore, we have allocated the factor inputs, based on the relative

quantity of output of this product and sebacic acid. Additionally, 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. This treatment

of co-products is consistent with generally accepted accounting

principles. (See Cost Accounting: A Managerial Emphasis (1991) at pages

528-533).

Margin Calculation

For SICC, at verification we found that certain sales reported as

SICC sales were in fact sales by another respondent company, Jiangsu,

(See Memorandum from Analyst to File: Verification of Sales

Questionnaire Response of Sinochem International Chemicals Company,

dated August 26, 1996.) Therefore, for these sales, we applied the rate

applicable to Jiangsu's sales, 243.40 percent, and then weighted these

sales into the overall calculation of SICC's margin. (See Memorandum

from Edward Yang, Office Director for AD/CVD Enforcement to Joseph

Spetrini, Deputy Assistant Secretary for AD/CVD Enforcement:

Appropriate Rate for Certain Sales Reported by Sinochem International

Chemical Corporation, First Administrative Review of the Antidumping

Duty Order on Sebacic Acid from the People's Republic of China, dated

August 27).

Preliminary Results of Review

We preliminarily determine that the following dumping margins

exist:

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

Margin

Manufacturer/exporter Time period (percent)

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

Tianjin Chemicals I/E Corp.... 7/13/94-6/30/95............ 35.42

Guangdong Chemicals I/E Corp.. 7/13/94-6/30/95............ 14.06

Sinochem International 7/13/94-6/30/95............ 70.55

Chemicals Corp.

Country-Wide Rate............. 7/13/94-6/30/95............ 243.40

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

[[Page 46444]]

Parties to the proceeding may request disclosure within 5 days of

the date of publication of this notice. Any interested party may

request a hearing within 10 days of publication. Any hearing, if

requested, will be held 44 days after the publication of this notice,

or the first workday thereafter. Interested parties may submit written

comments (case briefs) within 30 days of the date of publication of

this notice. Rebuttal comments (rebuttal briefs), which must be limited

to issues raised in the case briefs, may be filed not later than 37

days after the date of publication. The Department will publish a

notice of final results of this administrative review, which will

include the results of its analysis of issues raised in any such

comments, within 180 days of publication of these preliminary results.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and NV may vary from the percentages stated

above. The Department will issue appraisement instructions directly to

the Customs Service.

Furthermore, the following cash deposit requirements will be

effective upon publication of the final results of this administrative

review for all shipments of the subject merchandise entered, or

withdrawn from warehouse, for consumption on or after the publication

date, as provided for by section 751(a)(1) of the Act: (1) the cash

deposit rates for the reviewed companies named above which have

separate rates (SICC, Tianjin and Guangdong) will be the rates for

those firms established in the final results of this administrative

review; (2) for all other PRC exporters, the cash deposit rates will be

243.40 percent; and (3) the cash deposit rates for non-PRC exporters of

subject merchandise from the PRC will be the rates applicable to the

PRC supplier of that exporter. These deposit rates, when imposed, shall

remain in effect until publication of the final results of the next

administrative review.

Notification of Interested Parties

This notice also serves as a preliminary reminder to importers of

their responsibility under 19 CFR 353.26 to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during this review period. Failure to comply

with this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22

of the Department's regulations.

Dated: August 26, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-22413 Filed 8-30-96; 8:45 am]

BILLING CODE 3510-DS-P