Persulfates From the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

The Department of Commerce is conducting an administrative review of the antidumping duty order on persulfates from the People's Republic of China in response to a request by the Petitioner, FMC Corporation. The period of review is July 1, 2002, through June 30, 2003.

We have preliminarily determined that U.S. sales have been made at not less than normal value. If these preliminary results are adopted in our final results, we will instruct U.S. Customs and Border Protection (“CBP”) to assess no antidumping duties on the exports subject to this review.

EFFECTIVE DATE:

August 6, 2004.

FOR FURTHER INFORMATION CONTACT:

John D. A. LaRose or Christopher C. Welty, AD/CVD Enforcement, Group III, Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-3794 or (202) 482-0186 respectively.

SUPPLEMENTARY INFORMATION:

Background

On July 2, 2003, the Department published in the Federal Register a notice of “Opportunity to Request an Administrative Review” of the antidumping duty order on persulfates from the People's Republic of China (PRC) covering the period July 1, 2002, through June 30, 2003. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 68 FR 39511 (July 2, 2003).

On July 31, 2003, in accordance with 19 CFR 351.213(b), the Petitioner, FMC Corporation, requested an administrative review of Shanghai AJ Import & Export Corporation (Ai Jian) and Degussa-AJ (Shanghai) Initiators Co. (Degussa-AJ). We published a notice of initiation of this review on August 22, 2003. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for Revocation in Part, 68 FR 50750 (August 22, 2003).

On August 13, 2003, we issued an antidumping questionnaire to Ai Jian and Degussa-AJ. Ai Jian and Degussa-AJ jointly submitted a timely response to sections A, C and D of the questionnaire on October 27, 2003. On December 15, 2003, the Petitioners submitted comments on this response.

We issued a supplemental questionnaire to Ai Jian and Degussa-AJ on February 13, 2004. We received the response to this questionnaire on March 17, 2004.

On March 5, 2004, Ai Jian submitted publicly available information for consideration in valuing the factors of production. The Petitioner submitted information for this purpose on March 10, 2004.

On June 17, 2004, we issued a supplemental questionnaire to Ai Jian. We received a response to this questionnaire on June 28, 2004.

Scope of Review

The products covered by this review are persulfates, including ammonium, potassium, and sodium persulfates. The chemical formula for these persulfates are, respectively, (NH₄)₂ S₂ O₈, K₂ S₂ O₈, and Na₂ S₂ O₈. Potassium persulfates are currently classifiable under subheading 2833.40.10 of the Harmonized Tariff Schedule of the United States (HTSUS). Sodium persulfates are classifiable under HTSUS subheading 2833.40.20. Ammonium and other persulfates are classifiable under HTSUS subheadings 2833.40.50 and 2833.40.60. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this review is dispositive.

Separate Rates

It is the Department's policy to assign all exporters of the merchandise subject to review in non-market-economy (NME) 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 adapted and 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. With respect to evidence of a de facto absence of government control, the Department considers the following four factors: (1) Whether the respondent sets its own export prices independently from the government and other exporters; (2) whether the respondent can retain the proceeds from its export sales; (3) whether the respondent has the authority to negotiate and sign contracts; and (4) whether the respondent has autonomy from the government regarding the selection of management. See Silicon Carbide, 59 FR at 22587; see also Sparklers, 56 FR at 20589.

With respect to Ai Jian, for purposes of our final results covering the period of review (POR) July 1, 2001, through June 30, 2002, the Department found an absence of de jure and de facto government control of its export activities and determined that it warranted a company-specific dumping margin. See Persulfates From the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 68 FR 68030, (Dec. 5, 2003) (Persulfates Fifth Review Final). For purposes of this POR, Ai Jian has responded to the Department's request for information regarding separate rates. We have found that the evidence on the record is consistent with the final results in Persulfates Fifth Review Final and continues to demonstrate an absence of government control, both in law and in fact, with respect to Ai Jian's exports, in accordance with the criteria identified in Sparklers and Silicon Carbide. Therefore, for the same reasons as in the Persulfates Fifth Review Final, we have granted Ai Jian a separate rate for purposes of this administrative review.

Export Price

We calculated export price (EP) in accordance with section 772(a) of the Tariff Act of 1930, as amended (the Act), because the subject merchandise was sold directly to the first unaffiliated purchaser in the United States prior to importation and constructed export price methodology was not otherwise warranted given the facts on record. We calculated EP based on packed, cost-insurance-freight (CIF) U.S.-port, or free-on-board, PRC-port prices to unaffiliated purchasers in the United States, as appropriate. We made deductions from the starting price, where appropriate, for ocean freight services, which were provided by market economy suppliers. We also deducted from the starting price, where appropriate, an amount for foreign inland freight, foreign brokerage and handling, and marine insurance expenses. As these movement services were provided by NME suppliers, we valued them using Indian rates. For further discussion of our use of surrogate data in an NME proceeding, as well as selection of India as the appropriate surrogate country, see the “Normal Value” section of this notice, below.

For foreign inland freight, we obtained publicly-available information which was published in the October 2002 through March 2003 editions of Chemical Weekly. For foreign brokerage and handling expenses, we used a publicly summarized version of the average value for brokerage and handling expenses reported in Final Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products from India, 67 FR 50406 (Oct. 3, 2001), and used in the 2000-2001 administrative review of freshwater crawfish tail meat from the PRC. See the memorandum to the file from Mathew Renkey and Adina Teodorescu dated September 30, 2002, and entitled “Administrative Review of Freshwater Crawfish Tail Meat from the People's Republic of China: Factor Values Memorandum,” which is on file in the Central Records Unit (CRU), Room B-099 of the main Commerce building. We inflated the per kilogram price (in rupees) to the POR using wholesale price index (WPI) data from the International Monetary Fund (IMF). For marine insurance, we used a price quote obtained from Roanoke Trade Services, Inc., a provider of marine insurance. See the memorandum to the File from Greg Kalbaugh entitled “Marine Insurance Rates,” in the administrative review of sebacic acid from the PRC, dated July 9, 2002, and the memorandum to the File from Christopher C. Welty entitled “Preliminary Valuation of Factors of Production” for the preliminary results of the 2002-2003 administrative review of persulfates from the People's Republic of China, dated July 30, 2004 (FOP Memo), which are on file in the CRU. We inflated this value to the POR using WPI data from the IMF.

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 (CV) under section 773(a) of the Act.

The Department has treated the PRC as an NME country in all previous antidumping cases. 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. In accordance with section 771(18)(C)(i) of the Act, any determination that a foreign country is an 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. Therefore, we treated the PRC as an NME country for purposes of this review and calculated NV by valuing the factors of production in a surrogate country.

A. Surrogate Country

Section 773(c)(4) of the Act requires the Department to value an NME producer's factors of production, to the extent possible, in one or more market-economy countries that: (1) Are at a level of economic development comparable to that of the NME country, and (2) are significant producers of comparable merchandise.

India has been identified as a country that is at a level of economic development comparable to that of the PRC. See the February 12, 2004, memorandum from Ronald Lorentzen to Louis Apple entitled “Surrogate Country Selection,” which is on file in the CRU. Moreover, for purposes of the most recent segment of this proceeding, we found that India is a significant producer of persulfates. See Persulfates Fifth Review Final. For these preliminary results, we continue to find that India is a significant producer of persulfates. Accordingly, we find that India fulfills both statutory requirements for use as a surrogate country and have continued to use India as the surrogate country in this administrative review. We have therefore calculated NV using Indian values for the PRC producers' factors of production. We have obtained and relied upon publicly available information wherever possible.

B. Factors of Production

In accordance with 19 CFR 351.408(c)(1), the Department will normally use publicly available information to value factors of production. However, the Department's regulations also provide that where a producer sources an input from a market economy and pays for it in market economy currency, the Department employs the actual price paid for the input to calculate the factors-based NV. Id.; see also Lasko Metal Products v. United States, 43 F. 3d 1442, 1445-1446 (Fed. Cir. 1994).

In accordance with section 773(c) of the Act, we calculated NV based on factors of production reported by Ai Jian for the POR. To calculate NV, the reported per-unit factor quantities were multiplied by publicly available Indian surrogate values. Factors of production 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 examining surrogate values, we selected, where possible, the publicly available value which was: (1) An average non-export value; (2) representative of a range of prices within the POR or most contemporaneous with the POR; (3) product-specific; and (4) tax-exclusive. For a more detailed explanation of the methodology used in calculating various surrogate values, see the FOP Memo.

In selecting the surrogate values, we considered the quality, specificity, and contemporaneity of the data. Where appropriate, we adjusted surrogate values to reflect inflation up to the POR using the WPI published by the IMF. In accordance with this methodology, we valued the factors of production as follows:

To value ammonium sulfate, caustic soda, and sulfuric acid, we used public information from the Indian publication Chemical Weekly. For caustic soda and sulfuric acid, because price quotes reported in Chemical Weekly are for chemicals with a 100 percent concentration level, we made chemical purity adjustments according to the particular concentration levels of caustic soda and sulfuric acid used by Degussa-AJ, Ai Jian's PRC supplier. Where necessary, we adjusted the values reported in Chemical Weekly to exclude sales and excise taxes. For potassium sulfate and anhydrous ammonia, we relied on import prices reported in the Monthly Statistics of the Foreign Trade of India (MSFTI), and contained in the World Trade Atlas. All values were contemporaneous with the POR; therefore, it was not necessary to adjust for inflation.

During the POR, Degussa-AJ self-produced ammonium persulfates, which is a material input in the production of potassium persulfates and sodium persulfates. In order to value ammonium persulfates, we calculated the sum of the materials, labor, and energy costs based on the usage factors submitted by Degussa-AJ in its questionnaire responses. Consistent with our methodology used in Persulfates Fifth Review Final, we then applied this value to the reported consumption amounts of ammonium persulfates used in the production of potassium and sodium persulfates.

We valued labor based on a regression-based wage rate, in accordance with 19 CFR 351.408(c)(3).

To value electricity, we used data from the International Energy Agency's Key World Energy Statistics 2003 report. For further discussion, see the FOP Memo.

To value water, we relied on public information reported in the October 1997 publication of Second Water Utilities Data Book: Asian and Pacific Region. We adjusted this value to reflect inflation up to the POR using the WPI published by the IMF. To value coal, we relied on import prices reported in the MSFTI, and contained in the World Trade Atlas.

For the reported packing materials—polyethylene bags, woven bags, polyethylene sheet/film and liner, fiberboard, paper bags, and wood pallets—we relied on import prices reported in the MSFTI, and contained in the World Trade Atlas.

As appropriate, we adjusted input prices by including freight costs to make them delivered prices. We made adjustments to account for freight costs between the suppliers and Degussa-AJ's manufacturing facilities for each of the factors of production identified above. In accordance with our practice, for inputs for which we used CIF import values from India, we calculated a surrogate freight cost using the shorter of the reported distances either from the closest PRC ocean port to the factory or from the domestic supplier to the factory. See Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From the People's Republic of China, 62 FR 61964, 61977 (Nov. 20, 1997) and the Court of Appeals for the Federal Circuit's decision in Sigma Corp. v. United States, 117 F.3d 1401 (Fed. Cir. 1997).

For factory overhead, selling, general, and administrative expenses (SG&A), and profit, we relied on the experience of a producer of identical merchandise, Gujarat Persalts (P) Ltd. (“Gujarat”), as reflected in its March 31, 2002, annual report. See the Preliminary Valuation of Factors of Production Memorandum, dated July 30, 2004, at pages 7 and 8 (“Factors of Production Memorandum”). Because we believe that SG&A labor is not classified as part of the SG&A costs reflected on Gujarat's financial statements, we have accounted for SG&A labor hours by calculating the number of labor hours per MT of production and adding this amount to the total labor figure. For further discussion, see the July 30, 2004, memorandum from the Team, entitled U.S. Price and Factors of Production Adjustments for the Preliminary Results. We calculated factory overhead as a percentage of the total raw materials, labor, and energy costs for subject merchandise. See the Factors of Production Memorandum, at pages 7 and 8.

The Department did not rely on the financial statements of two producers of comparable merchandise, National Peroxide Ltd. (for the surrogate profit ratio) and Asian Peroxides Limited (for the surrogate factory overhead and SG&A ratios), as requested by the Petitioner, because these producers did not produce persulfates during their respective fiscal years. See Issues and Decision Memorandum for the 2001—2002 Antidumping Duty Administrative Review of Persulfates from the People's Republic of China, at Comment 1 (December 5, 2003); see also, Persulfates from the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 68 FR 6712 (Feb. 10, 2003) and accompanying decision memorandum at Comments 9 and 10. The Department's NME practice establishes a preference for selecting surrogate value sources that are producers of identical merchandise, provided that the surrogate value data is not distorted or otherwise unreliable. See id; see also, Persulfates from the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review (July 31, 2003). Based upon the Department's analysis for the preliminary results, we do not believe we have a sufficient basis at this time to reach the conclusion that the surrogate data from Gujarat is distorted.

On March 10, 2004, and on June 4, 2004, the Petitioner submitted information on the record for the purpose of demonstrating that the use of surrogate financial information from Gujarat would distort the production experience of respondent Degussa-AJ, specifically pointing to differences in size and scale between the Indian persulfates producer and the respondent that would distort the factory overhead and SG&A ratios applied to the respondent. The Petitioner also submitted information to support the use of data from Asian Peroxides Limited, a producer of comparable merchandise, as a source of surrogate values for factory overhead and SG&A ratios, and the use of data from National Peroxides, Ltd. as a source for the surrogate value for profit. On July 26, 2004, and July 27, 2004, the Petitioner made additional submissions addressing the differences between batch and continuous chemical production processes, the types of equipment used in batch and continuous chemical production processes, and the nature of Gujarat's chemical production processes. On July 30, the Respondent responded to the Petitioner's filings. In a number of respects, the information the Petitioner has provided is different from and expands upon the information submitted in prior reviews that the Department has addressed. Moreover, we note that the Department had limited time to examine the July 26, 2004, and July 27, 2004 submissions by the Petitioner. The information presented by the Petitioner warrants further clarification and development prior to the final results. This clarification and development will entail an examination of: (1) The difference between batch and continuous processes in the production of persulfates; (2) the equipment and capital investments required by these processes; (3) the impact of scale and size on the production process; and (4) the usage and costs of raw material inputs, the overhead structure, and the use of a sales labor force. Therefore, the Department will open the record of this proceeding subsequent to the publication of this notice in the Federal Register to collect additional information. In particular, the Department intends to issue a set of questions to the Petitioner requesting certain clarifications and additional information regarding the Petitioner's claims that Gujarat's financial ratios are distortive. All interested parties are encouraged to comment on the current and additional information on the record regarding this issue. In the event that the Department determines that the surrogate financial ratios should be revised from the ones used in these preliminary results, parties will be afforded a meaningful opportunity to comment on the new valuation methodology and margin calculations. Taking these comments into consideration, the Department will then reach the final results of this administrative review.

Preliminary Results of Review

We preliminarily determine that the following margins exist for the period July 1, 2002, through June 30, 2003:

The Department will disclose to parties the calculations performed in connection with these preliminary results within five days of the date of publication of this notice. Interested parties may request a hearing within 30 days of the 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 case briefs not later than 30 days after the date of publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than 35 days after the date of publication of this notice. The Department will publish a notice of the final results of this administrative review, which will include the results of its analysis of issues raised in any such written briefs, within 120 days of the publication of these preliminary results.

The Department will determine and CBP shall assess antidumping duties on all appropriate entries. The Department will issue appropriate appraisement instructions directly to CBP upon completion of this review. The final results of this review will be the basis for the assessment of antidumping duties on entries of merchandise covered by this review and for future deposits of estimated duties.

For assessment purposes in this case, we do not have the information to calculate entered value. Therefore, we have calculated importer-specific duty assessment rates for the merchandise by aggregating the dumping margins calculated for all U.S. sales and dividing this amount by the total quantity of those sales. To determine whether the duty assessment rates were de minimis (i.e. less than 0.50 percent), in accordance with the requirement set forth in 19 CFR 351.106(c)(2), we calculated importer-specific ad valorem ratios based on the EPs.

Furthermore, the following 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 by section 751(a)(1) of the Act: (1) The cash deposit rate for Ai Jian will be that established in the final results of this administrative review; (2) for any company previously found to be entitled to a separate rate and for which no review was requested, the cash deposit rate will be the rate established in the most recent review of that company; (3) the cash deposit rate for all other PRC exporters will be 119.02 percent, the PRC-wide rate established in the less than fair value investigation; and (4) for all other non-PRC exporters of subject merchandise from the PRC to the United States, the cash deposit rate will be the rate applicable to the PRC exporter that supplied that non-PRC exporter. These requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification of Interested Parties

This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) 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 Department's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

This administrative review is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.