Industrial Nitrocellulose From the People's Republic of China: Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

A-570-802

Industrial Nitrocellulose From the People's Republic of China:

Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On August 8, 1997, the Department of Commerce (the Department)

published the preliminary results of its administrative review of the

antidumping duty order on industrial nitrocellulose (INC) from the

People's Republic of China (PRC). This review covers one producer/

exporter, China North Industries Guangzhou Corporation (CNIGC), and

entries of the subject merchandise into the United States during the

period July 1, 1995 through June 30, 1996.

We gave interested parties an opportunity to comment on our

preliminary results. On September 8, 1997, we received case briefs from

respondent and petitioner. On September 15, 1997, we received rebuttal

comments from both parties. We rejected respondent's September 8, 1997

case brief because it contained new information. Respondent resubmitted

its case brief on November 14, 1997. On November 21, 1997, we placed on

the record new data concerning the price of steel drums in Indonesia.

On November 25, 1997, respondents submitted comments on this data.

Based on our analysis of the comments received, we have changed the

margin from that presented in our preliminary results of review.

EFFECTIVE DATE: December 15, 1997.

FOR FURTHER INFORMATION CONTACT: Rebecca Trainor or Maureen Flannery,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington, DC 20230; telephone: (202) 482-0666 and (202) 482-3020,

respectively.

Applicable Statutes and Regulations: Unless otherwise stated, 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. In

addition, unless otherwise indicated, all citations to the Department's

regulations are to the regulations as codified at 19 CFR part 353

(April 1, 1996).

SUPPLEMENTARY INFORMATION:

Background

On August 8, 1997, the Department published in the Federal Register

(62 FR 42747) the preliminary results of the administrative review of

the antidumping duty order on INC from the PRC (55 FR 28267, July 10,

1990). The preliminary results indicated the existence of a dumping

margin. As we explained in the preliminary results, we did not grant

CNIGC a separate rate. However, because U.S. import statistics indicate

that CNIGC was the only exporter of the subject merchandise to the

United States during the review period, we based the PRC-wide rate on

the information submitted by CNIGC for this review. See, Memorandum to

the File from Rebecca Trainor, dated July 23, 1997, on file in room B-

099 of the Commerce Department. We received comments and rebuttal

comments from the petitioner and the respondent. The Department has now

completed this administrative review in accordance with section 751 of

the Act.

Scope of the Review

Imports covered by this review are shipments of industrial

nitrocellulose (INC) from the PRC. INC is a dry, white, amorphous

synthetic chemical with a nitrogen content between 10.8 and 12.2

percent, and is produced from the reaction of cellulose with nitric

acid. INC is used as a film-former in coatings, lacquers, furniture

finishes, and printing inks. The scope of this order does not include

explosive grade nitrocellulose, which has a nitrogen content of greater

than 12.2 percent.

INC is currently classified under Harmonized Tariff System (HTS)

subheading 3912.20.00. While the HTS item number is provided for

convenience and Customs purposes, the written description remains

dispositive as to the scope of the product coverage.

The period of review (POR) is July 1, 1995 through June 30, 1996.

Changes From the Preliminary Results

1. In the preliminary results we valued steel packing drums using

the Monthly Statistics of the Foreign Trade of India: Imports, Volume

II (Indian import statistics) for the period of April 1995 through

March 1996, and April through June 1996. For the final results, we have

valued steel drums using Indonesian prices contained in a facsimile

from the American embassy in Jakarta, placed on the record for the

investigation of furfuryl alcohol from the PRC. See Comment 4, and

Final Determination of Sales at Less than Fair Value; Furfuryl Alcohol

from the People's Republic of China, 60 FR 22544 (May 8, 1995)

(Furfuryl Alcohol).

2. In the preliminary results, we incorrectly converted the water

usage rate reported by respondent from tons to kilograms. We also

assigned a separate surrogate value to water. For the final results, we

have corrected the conversion error, and have not assigned a separate

surrogate value to water, as it is included in the factory overhead

value we have used. See Comment 6.

3. For the distance between packing materials suppliers and the INC

factory in the preliminary results, we used the average distance

between the supplier and factory for all other materials. For the final

results, we have used the actual distances between packing materials

suppliers and the respondent's factory, which we requested from

respondent on November 5, 1997. See Comment 5.

4. In the preliminary results, we applied an Indonesian factory

overhead rate which we obtained from the record for Furfuryl Alcohol.

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

rates, we used Indonesian data which we obtained from the record for

Certain Carbon Steel Butt-Weld Pipe Fittings from the People's Republic

of China, 57 FR 21058 (May 18, 1992)(Pipe Fittings). For the final

results, we have used data obtained from the financial statements of

six Indian chemical-producing companies. See Comment 7.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received case briefs and rebuttal briefs from

petitioner and respondent.

Comment 1: Surrogate country selection: Respondent argues that the

Department should use India instead of Indonesia as the primary

surrogate country in this review because: (1) The volume of Indonesian

exports of the subject merchandise were very small, unlike the volume

of India's exports; (2)

[[Page 65668]]

like India, and unlike Indonesia, China does not import cotton linters

and; (3) the lack of Indonesian surrogate value information for several

factors sent the Department back to India anyway, as the ``secondary''

surrogate country. Respondent states that the Department should use

either data from the secondary surrogate country, India, for factory

overhead, SG&A and profit values, or use India as the primary surrogate

country and resort to Indonesian values only for cotton linters, since

there is no Indian data on cotton linters.

Department's Position: We agree with respondent in part. We have

continued to use Indonesia as the surrogate country for the purposes of

valuing all of the raw material inputs. We have also used Indonesian

data as surrogate values for packing materials. However, as we discuss

in Comment 7, we have determined that Indian data is the best

information we have with which to value factory overhead, SG&A and

profit.

In choosing the surrogate country, we first determined that both

India and Indonesia were at a level of economic development comparable

to the PRC, and that both are significant producers of the subject

merchandise. See Memorandum to Maureen Flannery from David Mueller,

dated January 29, 1997, and Memorandum to the File dated March 24,

1997, on file in Room B-099 of the Commerce Department. Although India

is a larger exporter of INC, we chose Indonesia as the surrogate

country because we could obtain price data from Indonesian sources for

all of the factors of production except for steel drums. This was not

true of India, from where no data was available for cotton linters, one

of the primary raw materials.

Thus, contrary to respondent's assertion, the only surrogate value

for which we preliminarily resorted to Indian data was for steel drums.

We note that for the final results, we valued steel drums using an

Indonesian source. (See Comment 4.) Our preference is to value all

factors of production in a single surrogate country, when possible. See

section 351.408(c)(2) of the Antidumping Duties; Countervailing Duties;

Final Rule, 62 FR 27296 (May 19, 1997) (Final Rule) (``Except for

labor, as provided in paragraph (d)(3) of this section, the Secretary

normally will value all factors in a single surrogate country.'')

1 However, we were unable to obtain the most reliable data

from just one country for this review, and have relied upon Indian data

for factory overhead, SG&A and profit. We have continued to use

Indonesia as the primary surrogate country, however, because we can

value all other inputs in this country. This not true for India.

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\1\ Although this administrative review is not being conducted

under these new regulations, these regulations serve as a

restatement of the Department's interpretation of the Act. Id. at

27378.

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Furthermore, that China does not import cotton linters is

irrelevant to our surrogate country selection. In using surrogate

values, our goal is to substitute market-economy prices for non-market-

economy (NME) prices. We use import data for no other reason than that

they are a reliable source of market prices, not because the inputs may

have been imported in the respondent country. In this case, we were

unable to value all factors in a single country; however, our use of

Indonesia as the primary surrogate country is consistent with this

principle.

Comment 2: Surrogate Value for Cotton Linters: Petitioner argues

that the Indonesian import statistics that the Department used to value

cotton linters are flawed in several respects, and advocates that the

Department use U.S. export data to either China, India or Indonesia

(see Comment 3). However, petitioner asserts that, if the Department

must use unit values related to a surrogate country, the Department

should use certain surrogate unit values petitioner has identified from

Indonesia or India. First, petitioner contends, the Indonesian import

statistics are not reliable, because the amount of cotton linter

imports they report are almost 15 times less than the amount that the

U.S. Census reports were exported to Indonesia by the United States

alone in 1995. Furthermore, the 1996 Indonesian statistics show no

imports from any country at all, in contradiction with U.S. export

figures that show that the United States exported 92,006 kg. to

Indonesia in the second half of the POR (January through June 1996).

Secondly, petitioner claims that the unit value for cotton linters

derived from the Indonesian import statistics is aberrationally low,

compared to the unit value derived from U.S. export figures. Petitioner

asserts that it is the Department's normal practice to disregard prices

for factors of production inputs which are aberrational, and cites

Final Results of Antidumping Duty Administrative Review; Heavy Forged

Hand Tools, Finished or Unfinished, With or Without Handles, From the

People's Republic of China (Hand Tools), 60 FR 49251, 49252 (September

22, 1995).

Third, petitioner claims the 1995 Indonesian import statistics show

imports of cotton linters into Indonesia for only one month in the

review period (August). Moreover, petitioner argues, Indonesian import

statistics show no imports of cotton linters for 1996. Therefore,

petitioner argues it is inappropriate for the Department to use figures

based on one month of the POR and only one month of a 24-month period

because the Indonesian import statistics do not provide an accurate

portrayal of the import price for cotton linters over the entire review

period. Petitioner also notes that the Department routinely seeks to

use surrogate values ``from a time period that is contemporaneous to

the period of investigation or the period of review.'' Hand Tools, 60

FR at 49253.

Fourth, petitioner asserts that the Indonesian import statistics

reflect imports from Batam, which it claims is a separate customs zone

of Indonesia. Because Batam is not a separate country from Indonesia,

petitioner reasons, the data recorded in the Indonesian import

statistics regarding cotton linter imports do not reflect true imports,

and thus are not eligible for use as a basis for determining a market-

economy price for cotton linters.

Finally, petitioner states that, because the unit values reflected

in the import statistics are low, they may represent internal transfer

prices. Moreover, they may represent a single transaction at a single

port from a single supplier. Petitioner points out that the Department

disregarded respondents' data for similar reasons in Final

Determination of Sales at Less Than Fair Value; Brake Drums and Brake

Rotors from the People's Republic of China, 62 FR 9160 (February 28,

1997) (Brake Drums and Rotors).

Respondent claims that the Indonesian import statistics do not

underreport the volume of imports of cotton linters. Respondent points

out that the import data record imports entered for consumption in

Indonesia, while the U.S. export data include all exports sent into

free trade zones in Indonesia including those which are re-exported

without ever entering the Indonesian domestic market. Moreover, just

because U.S. export data show shipments of U.S. cotton linters to

China, India and Indonesia at a wide range of prices, this does not

mean that those prices were actually paid in those countries, which is

what the statute requires. Thus, respondent concludes, there can be no

meaningful comparison of the two sets of data.

Respondent further argues that import data are inherently more

reliable than export data. While there is little incentive for accuracy

on the part of the providers of export data according to

[[Page 65669]]

respondent, import data is compiled by customs officials who use the

value of the imported merchandise to determine the customs duties to be

paid on the merchandise. Moreover, understating import values would

subject an importer to civil or criminal fines and penalties.

Respondent notes that there are no similar consequences from

inaccurately or negligently reporting U.S. export data. Therefore, it

is the U.S. export data that should be called into question.

Assuming the accuracy of the U.S. export data, respondent states

that the fact that the United States exports cotton linters at a wide

range of prices that are different from the Indonesian import values

does not discredit the latter.

Respondent argues that it is irrelevant that import data used by

the Department were based on imports into Indonesia during only one

month of the review period, because the data nonetheless constitute a

surrogate value that was paid during the review period. Moreover,

respondent argues, it does not detract from their accuracy.

Contrary to petitioner's assertion, respondent argues that the

Indonesian import values are true import values, as Batam is a free

trade zone. As such, the majority of products sent to Batam from

outside Indonesia are not entered into the Indonesian market for

consumption, but are re-exported. Those that do enter for consumption

are recorded as imports and are assessed customs duties. Therefore, the

imports into Indonesia through the Batam free trade zone fairly

represent the value of cotton linters in Indonesia.

Respondent states that there is no evidence that the Indonesian

import values represent internal transfer prices or that they represent

a single transaction. Furthermore, the total imported quantity of 42

tons is not so small that the Department should assume that it

constitutes a single transaction.

Department's Position: We find no evidence that the Indonesian

import data for cotton linters are aberrational or unreliable, or that

they represent a single transaction. The data cover imports into

Indonesia from January to November 1995, and report 42 tons of cotton

linters, not an insignificant amount. When appropriate, we compare

surrogate value data to other available market-economy data to test the

reliability of the data we intend to use in the factor analysis. See,

e.g. Hand Tools. In this case, as petitioner and respondent have

acknowledged, there is no other available data from countries with

comparable economies with which to compare the Indonesian prices. Thus,

we have no basis on which to conclude that the Indonesian import data

is aberrational. Other than Indonesian import statistics or U.S. export

data (see Comment 3), the only price data that we have been able to

locate for cotton linters are import statistics from the United States

and Canada. Such comparisons are not meaningful here, however, because

all that they tell us is that cotton linters imported into Indonesia

are priced lower than those imported into two countries with very

different economies. Absent evidence that the Indonesian values are

aberrational, to reject the Indonesian price simply because it is ``too

low'' could be an overly subjective assumption. See Final Determination

of Sales at Less Than Fair Value: Certain Helical Spring Lock Washers

from the People's Republic of China, 58 FR 48833 (September 20, 1993)

(``We agree that rejecting certain Indian import values simply because

those are `too high' is potentially overly subjective, but would add

that so is rejecting certain values simply because they are `too low.'

'')

With respect to petitioner's assertion that the Indonesian import

data are unreliable because they do not comport with United States

export data, it stands to reason that all of the merchandise entering

Batam would not appear as imports in the Indonesian import statistics,

because Batam is a free trade zone and a bonded area. As such, it is

entirely reasonable to assume that a large proportion of imported goods

are re-exported from Batam, without ever entering the Indonesian

customs area.

Moreover, if the Batam prices were not ``true'' imports, as

petitioner suggests, then they must represent domestic prices in

Indonesia, which are also suitable to use as a surrogate value.

Comment 3: Use of U.S. Export Data: Petitioner contends that

instead of Indonesian import data, the Department should value cotton

linters based on U.S. export statistics for merchandise exported to the

PRC during the review period. Petitioner argues that unit values

derived from U.S. export values: (1) Provide the most realistic figure

for cotton linters; (2) are based on publicly available information;

(3) come from a reliable source; (4) represent a large volume of U.S.

exports to China; and (5) is on the record of this proceeding.

Petitioner emphasizes that these export values are the most accurate

prices available because they are based on actual prices paid by

Chinese importers for cotton linters during the POR.

Petitioner claims that it is the Department's longstanding practice

to use actual market-economy purchase prices instead of surrogate

values if such market-economy prices exist for material inputs.

Therefore, the Department should not have looked to any surrogate value

for cotton linters at all. Petitioner maintains that there is ample

evidence that the Department routinely uses actual prices paid by PRC

importers to U.S. suppliers. Petitioner argues that in a non-market

economy such as the PRC, the Department's practice calls for using a

combination of surrogate values and actual market-economy prices when

the latter are available. Petitioner cites the following determinations

as evidence of the Department's practice of using actual prices: Final

Determination of Sales at Less Than Fair Value; Bicycles from the

People's Republic of China (Bicycles), 61 FR 19026, 19029 (April 30,

1996) and Final Determination of Sales at Less Than Fair Value;

Coumarin from the People's Republic of China (Coumarin), 59 FR 66895,

66897 (December 28, 1994). Petitioner also cites Lasko Metal Products,

Inc. v. United States, 43 F.3d 1442 (Fed. Cir. 1994), to support its

contention that using actual prices paid to U.S. suppliers by Chinese

importers conforms with the antidumping statute's intent to determine

margins as accurately as possible and to use the ``best information

available'' to it.

The petitioner contends that, if the Department determines that it

must use unit values relating to a surrogate country, the Department

should use a price derived from U.S. export data for cotton linters

exported to either India or Indonesia during the review period, which

petitioner claims are more reliable than the Indonesian import data the

Department used for the preliminary results. Petitioner notes that both

countries were determined to be surrogate market-economy countries and

both countries produced INC. Petitioner also notes the Department's

reluctance to use export figures is based on existence of subsidies and

other distorting schemes. However, petitioner argues U.S. export

statistics are the most reliable official indicators of market-economy

prices. Moreover, petitioner cites to Saccharin from the People's

Republic of China, 59 FR 58818 (November 15, 1995), and Coumarin from

the People's Republic of China, 59 FR 66895 (December 28, 1994) as

examples where the Department used export statistics as a reliable

indicator of price and to test the reliability of import figures.

Finally, petitioner notes that when prices in both countries used for

comparison (Indonesia and India) were found aberrational, the

Department used

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the median export price to arrive at a surrogate value.

Respondent argues that it would be illegal to use U.S. export

values to China as a surrogate value for cotton linters, and

petitioner's interpretation of the court's decision in Lasko and the

Department's decisions in Bicycles and Coumarin are inapposite.

Respondent points out that the Department declines to use surrogate

values for inputs only when the manufacturer under investigation has

purchased those inputs from a market-economy country. Respondent also

notes that it does not use imported cotton linters to make the subject

merchandise; therefore, there are no actual costs paid to market-

economy countries in this case. Respondent argues that petitioner's

suggested methodology is neither the intent of the law, nor of Lasko,

which affirmed the Department's use of actual market-economy prices

paid by an NME producer. Respondent further objects that petitioner's

proposal to add its own freight rates to U.S. export values would

further distort surrogate values.

Respondent further contends that the use of U.S. export prices

would contravene section 773(c)(4) of the Act requiring the Department

to value NME producers' factors of production using the prices of the

factors in one or more market-economy countries that are (A) at a level

of economic development comparable to that of the NME country, and (B)

significant producers of comparable merchandise, as the United States

is much more economically developed than Indonesia.

Respondent contends that, for all of the reasons noted above, the

Department should not use U.S. export data for exports to India or

Indonesia, as petitioner suggests, but should use Indian import

statistics. However, if the Department chooses to use export values,

the Department should calculate a value that relates most closely to

the market of Indonesia, the Department's chosen surrogate country.

Department's Position: As discussed in Comment 2, we have continued

to use the Indonesian import price to value cotton linters. We do not

consider the use of U.S. export data to be an appropriate option in

this case, when we have an import price for a surrogate country that is

both a significant producer and at a level of economic development

comparable to the PRC. Furthermore, the Indonesian import prices are

derived from a range of countries, and thus are a better indicator of

domestic market prices than would be prices from a single country, the

United States. That the imports reflected in the Indonesian import

statistics may come from Batam, a free trade zone, does not contradict

this, because merchandise re-exported from Batam into Indonesia would

have originated from a number of different countries.

Petitioner misinterprets Lasko and the Department's practice,

articulated in Bicycles and Coumarin, with respect to using market-

economy prices instead of surrogate values in certain instances. In

these cases and many others, we have established the practice of using

actual prices instead of surrogate values when respondents have

purchased certain inputs from market-economy suppliers and paid for

them in a market-economy currency. In Lasko at 1446, the CIT affirmed

this practice, which we recently codified in Section 351.408(c)(1) of

the Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296,

27413 (May 19, 1997) (`` However, where a factor is purchased from a

market economy supplier and paid for in a market economy currency, the

Secretary normally will use the price paid to the market economy

supplier.'') In the present case, the respondent specifically stated in

its questionnaire response that it purchases cotton linters only from

PRC suppliers. Thus, there is no basis in this case for deviating from

the surrogate value methodology used in the preliminary determination

to value cotton linters.

Comment 4: Surrogate Value for Steel Drums: Respondent contends

that the Department's calculated surrogate value for steel drums is an

unreliable measure of iron drum costs. Respondent argues that the HTS

category that the Department used in the preliminary results is a

basket category, containing a variety of different products besides the

galvanized iron sheet drums it used during the review period, as

evidenced by the fact that unit values varied from country to country

by up to 2843%. Respondent claims that the Department's valuation

results in a per-drum dollar amount of $141.25, a figure that is

excessive and aberrational.

Respondent adds that the Department generally rejects HTS-derived

values that are aberrational compared to other available data, and

cites Chrome-Plated Lug Nuts from the People's Republic of China; Final

Results of Antidumping Duty Administrative Review, 61 FR 58514, 58517-

518 (November 15, 1996) (Lug Nuts), in which the Department rejected

steel values from a basket HTS category as aberrational compared to

other available data. Respondent also cites the April 22, 1996 Factors

Valuation Memorandum from the Bicycles Team to the File, Bicycles, at

22, in which the Department used an export value for one of the

chemical inputs because the import value had been deemed aberrational

in another case.

Instead of the weighted average value of all steel drum imports

into India, which the Department used in the preliminary results,

respondent suggests that the Department use only the collected data on

imports of steel drums into India from Indonesia. Respondent claims

that this value would be appropriate, because it is based on two

surrogate country values, and would be more reasonable than the $141.25

per drum figure used in the preliminary results.

Petitioner contends that the Department was correct in calculating

the average unit value for steel drums, in keeping with its preference

for using average non-export values. Petitioner cites Lug Nuts and

Final Determination of Sales at Less Than Fair Value; Polyvinyl Alcohol

from the People's Republic of China, 61 FR 14057 (March 29, 1996).

Petitioner points out that respondent suggested both the source and the

HTS number that the Department ultimately used in the preliminary

results, but now is suggesting that the Department distort the

statistics by valuing steel drums based on imports from just one

country--Indonesia. Petitioner claims that to value steel drums based

on imports from only one of the several countries listed in the Indian

import statistics would undermine the Department's purpose in

calculating a surrogate unit value--namely to determine a price that

would be paid by an average Indian importer of steel drums--and result

in a skewed unit value. Petitioner also objects to respondent's

suggested methodology because it would cover only one month of the

review period, even though statistics for the full POR were available

from the same source respondent used. Petitioner also alleges that

respondent distorted relevant information by creating a table showing

imports of steel drums into India from only Indonesia and Singapore,

and excluding imports from the United States, which accounted for 90%

of all steel drums imported into India. Thus, petitioner advocates that

the Department adhere to its preliminary weighted-average unit value,

based on all Indian imports, and covering the entire review period.

Petitioner states that there is ample precedent for the

Department's use of basket categories without finding that they lead to

aberrational results. Moreover, the Department has used various steel

drum subheadings, including the one used in the

[[Page 65671]]

preliminary results, in recent investigations.

Department's Position: As noted above, for the final results we

have used an Indonesian steel drum price used in the less than fair

value (LTFV) investigation of furfuryl alcohol from the PRC, adjusted

for inflation. These data are superior to the Indian import statistics

that we used in the preliminary results, because they are from the

primary surrogate country and are for drums of approximately the same

size as those used by respondent to pack a chemical product. These new

data are better than the basket category provided in the Indian import

statistics because they better approximate the cost of the input used

by respondent.

We placed these data on the record of this review after the

preliminary results. See Memorandum to the File from R. Trainor dated

November 21, 1997, on file in room B-099 of the Commerce Department. We

received comments from respondent supporting the use of the Indonesian

data as more reasonably reflecting the market price of steel drums in a

country that the Department has determined to be an accurate surrogate

country in this review. We received no comments on the new data from

petitioner.

Comment 5: Packing Distances: Petitioner argues that since

respondent did not report shipping distances between packing materials

suppliers and the factory, the Department should use as facts available

the highest freight rate and the longest of all reported distances,

instead of the simple average of all reported distances, which the

Department used in the preliminary results.

Department's Position: As we stated above, for the final results we

have used the actual distances between CNIGC's packing suppliers and

its factory. On November 5, 1997, we requested that the respondent

provide this information for the final results because we had not

requested it in our questionnaires. Petitioners were provided an

opportunity to submit comments regarding this data but did not comment.

Comment 6: Water Valuation: Respondent states that the Department

miscalculated water usage in the preliminary results, because of a

misunderstanding of the questionnaire response. Respondent contends

that the Department understood the response to report water usage on

the basis of tons used to produce one kilogram of subject merchandise,

when in fact, it reported water usage in tons of water needed to

produce a ton of subject merchandise. Thus, no conversion from tons to

kilograms was necessary.

Respondent also argues that, in past cases, the Department has

recognized that water used in the production process is included as

part of factory overhead, and is not separately valued as a raw

material input. Respondent notes that water itself is not a component

of the final product, and cites Final Determination of Sales at Less

Than Fair Value; Saccharin From the People's Republic of China, 59 FR

58818, 58824 (November 15, 1994) (Saccharin). Thus, the Department

should not assign a separate factor value to water for the final

results.

Department's Position: We agree with respondent that we incorrectly

converted the water usage rate to kilograms in the preliminary results,

and have corrected this error for the final results.

We have not assigned a separate surrogate value to water for the

final results, because the overhead value we have used, derived from

the financial statements of six Indian chemical-producing companies,

includes water in factory overhead, along with power and fuel. See

Comment 7.

Comment 7: Factory Overhead, SG&A and Profit: Respondent objects to

the Indonesian data the Department used in the preliminary results for

factory overhead, SG&A, and profit as being outdated, unreliable, and

non-industry specific. Instead, respondent contends, the Department

should rely on data from the April 1995 Reserve Bank of India Bulletin

(RBIB), which the Department has used numerous times in the past, and

which represent Indian metal and chemical industries.

Respondent argues that the Department should not rely on the data

submitted by the petitioner, because these data, which consist of

excerpts from the financial statements of several Indian companies, (1)

do not represent an appropriate industry sector for comparison to the

nitrocellulose industry; (2) were selectively hand-picked by petitioner

to result in high ratios; and (3) do not allow any judgment as to

whether the companies they represent are normally operative companies,

or if their overhead, SG&A, and profit were abnormally high, because

petitioner did not submit the complete financial statement for each

company. Respondent points out that, although petitioner states that

there are three plants producing nitrocellulose in India, it did not

submit financial statements from any of them.

Finally, respondent claims that, in petitioner's SG&A, overhead and

profit calculations, stores and spares consumed should be included in

the category of ``Raw Materials, Labor, and Energy'' instead of in

factory overhead.

Petitioner denies that it was selective in choosing the Indian

financial data to place on the record. Petitioner states that it chose

these companies because it was unable to obtain the financial

statements of the three Indian INC producers. Furthermore, the six

companies were identified in the Disclosure, Inc. database as the

Indian publicly-traded companies manufacturing products within the SIC

category that includes subject merchandise, and for which FY 1996

annual reports were available.

Petitioner contends that, although none of the six companies for

which petitioner submitted annual reports manufacture the subject

merchandise, they represent a narrower category of merchandise than do

the RBIB data submitted by respondent, which cover the processing and

manufacture of ``metals, chemicals, and products thereof.''

Furthermore, petitioner argues, respondent provides no support for its

assertion that the RBIB industrial group is representative of the INC

industry in India, or that the Indian companies upon which the data are

based include Indian INC manufacturers. Petitioner argues that the data

it submitted are more contemporaneous as well as being more industry-

specific than the RBIB data submitted by respondent.

In response to CNIGC's claim that stores and spares consumed should

be included in the category of ``Raw Materials, Labor, and Energy,''

petitioner argues that it is the Department's practice to include

stores and spares consumed as an overhead element, and cites the

February 28, 1997 final analysis memorandum for the 1994-95

administrative review of Sebacic Acid From the People's Republic of

China, 62 FR 10530 (March 7, 1997).

Department's Position: We agree that the surrogate SG&A, overhead

and profit information we used in the preliminary results was not

current and not specific to the nitrocellulose industry. We requested

more appropriate data from the U.S. embassy in Jakarta, Indonesia, but

were unable to obtain complete data in time for these final results.

Therefore, we have used the information provided by petitioner,

obtained from the financial statements of six Indian chemical-producing

companies. Although we have used the RBIB data in other cases, as

respondent points out, we have determined that the data submitted by

petitioner is preferable in this case, because it represents the

overhead, SG&A and profit ratios of

[[Page 65672]]

several companies that manufacture products of the same SIC

classification as the subject merchandise. The RBIB ratios, on the

other hand, are derived from companies involved in the more general

category of ``chemicals and metals'' industries.

Regardless of whether petitioner ``selectively hand-picked'' the

information it provided on the record, this information is nonetheless

more representative of the experience of Indian producers of comparable

merchandise than is the RBIB data. Petitioner provided available data

from Indian companies identified with an SIC code of 2821, which

includes cellulose nitrate resins. Furthermore, rather than being

uniformly high, the data reflect a wide range of overhead, SG&A and

profit figures. Petitioners submitted the relevant pages of the

financial statements, and there is no evidence on the record that these

companies' overhead, SG&A and profit are abnormally high.

Finally, we agree with petitioner that stores and spares consumed

should be included in overhead, as we have done in past cases. See,

Memorandum to the File; Certain Helical Spring Lockwashers from the

People's Republic of China: Factor Values Used for the Preliminary

Results, dated July 3, 1997.

Comment 8: Separate rate for CNIGC: CNIGC argues that the

Department should grant it a separate rate. CNIGC argues that the

Department's decision in the preliminary results was based on analysis

done for a separate antidumping investigation with an entirely

different record. GNIGC alleges that information from the Brake Drums

and Rotors investigation (63 FR 42748) was inserted into this record

without notice to counsel on March 26, 1997. Notwithstanding, CNIGC

argues that verification reports from Brake Drums and Rotors inserted

into this record nevertheless satisfies the Department's requirements

of de jure and de facto independence from government control to warrant

a separate rate. CGIGC states that the focus of the separate rates

analysis is not on whether there might be a general ``relationship''

between the company and the government, but rather on whether there is

operational independence with regard to export sales.

Respondent argues that, in Brake Drums and Rotors, the Department

based its decision that there is a de facto relationship between the

company and government on two pieces of evidence. The first was an

outdated company brochure from 1992 when CNIGC was still a branch of

China North Industries Corporation (NORINCO). Respondent claims that it

does not know why the brochure was given to the Department, but

speculates that company personnel provided it in an effort to be

helpful during verification. As further proof that the brochure was

outdated, respondent notes that it was printed before the company's

name was changed from China North Industries Guangzhou Branch to China

North Industries Guangzhou Corporation, as supported by the company's

pre-1993 and post-1993 business licences. Respondent also provides a

chronology of the company's telephone numbers to show that the brochure

predates the review period. CNIGC asserts that the agreement separating

it from NORINCO makes it clear that the two entities are completely

separate, with only the somewhat similar name suggesting their common

past. CNIGC alleges that the Department's verification in Brake Drums

and Rotors found no evidence contrary to their assertion that there can

be no relationship between itself and NORINCO with respect to any of

the relevant factors examined by the Department.

The second piece of evidence used in the brake drums and rotors

case to deny separate rates was the fact that national NORINCO

maintains an office in the same building as CNIGC. Respondent claims

that many other companies, including a major bank, have offices in that

same building. The fact that NORINCO maintains an office there does not

translate into control over pricing, contractual powers, management

selection, or disposition of profits.

Department's Position: In Brake Drums and Rotors, we found that

this same respondent, CNIGC, had satisfied the Department's criteria

for establishing freedom from de jure government control. However, we

found that other evidence supported the conclusion that, de facto,

CNIGC had not completely severed its ties with NORINCO, its former

parent company which, the evidence showed, was controlled by the PRC

government. We have placed this information on the record of this

review. See, Memorandum to the File; Industrial Nitrocellulose from the

People's Republic of China: Information for the Separate Rates

Determination, dated March 26, 1997.

The fact that respondent would weight the evidence differently does

not alter the fact that there is substantial evidence to support the

Department's determination. Respondent has not provided any further

evidence which indicates that the factual circumstances have changed

and we do not find any basis on the record of this review on which to

overturn our decision. We have, therefore, not granted CNIGC a separate

rate in this review.

Final Results of Review

As a result of our review, we have determined that the following

margin exists for the period July 1, 1995 through June 30, 1996.

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

Margin

Manufacturer/exporter (percent)

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

PRC-wide rate.............................................. 0.00

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between U.S. price and NV may vary from the percentage

stated above. The Department will issue appraisement instructions

directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of this notice of final results of review for all

shipments of INC from the PRC entered, or withdrawn from warehouse, for

consumption on or after the publication date, as provided by section

751(a)(1) of the Act: for all PRC exporters, the cash deposit rate will

be the PRC-wide rate established in these final results of

administrative review; and (2) 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

requirements, when imposed, shall remain in effect until publication of

the final results of the next administrative review.

Notification to Interested Parties

This notice serves as a reminder to importers of their

responsibility under section 353.26 of the Department's regulations 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 notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested.

[[Page 65673]]

Failure to comply with the regulations and the terms of an APO is a

sanctionable violation.

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: December 8, 1997.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-32690 Filed 12-12-97; 8:45 am]

BILLING CODE 3510-DS-P