Petroleum Wax Candles from the People's Republic of China: Notice of Preliminary Results of Antidumping Duty New Shipper Review of Shandong Huihe, Ltd.

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

On September 30, 2003 the Department of Commerce (the Department) initiated three new shipper reviews of the antidumping duty order on petroleum wax candles from the People's Republic of China (PRC) covering the period August 1, 2002, through July 31, 2003. See Petroleum Wax Candles from the People's Republic of China: Initiation of Antidumping Duty New Shipper Reviews, 68 FR 57876 (October 7, 2004) (Initiation Notice). These new shipper reviews covered three exporters: Shanghai R&R Imp./Exp. Co., Ltd. (Shanghai R&R); Changshan Import/Export Co., Ltd. (Changshan); and Shandong Huihe., Ltd (Shandong). The Department is addressing the preliminary results for Shanghai R&R and Changshan in separate notices. The review of Shandong covers the period August 1, 2002 through August 15, 2003.

We preliminarily determine that sales have not been made below normal value (NV). The preliminary results are listed below in the section titled “Preliminary Results of Review.” If these preliminary results are adopted in our final results, we will instruct U.S. Customs and Border Protection (CBP) to assess antidumping duties based on the difference between the export price (EP) and NV. Interested parties are invited to comment on these preliminary results. (See the “Preliminary Results of Review” section of this notice.)

EFFECTIVE DATE:

August 3, 2004.

FOR FURTHER INFORMATION CONTACT:

Dara Iserson or Douglas Kirby, Office of AD/CVD Enforcement VII, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, D.C. 20230; telephone: (202) 482-4052 or (202) 482-3782, respectively.

SUPPLEMENTARY INFORMATION:

Background

The Department published in the Federal Register an antidumping duty order on petroleum wax candles from the PRC on August 28, 1986. See Notice of Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Petroleum Wax Candles from the People's Republic of China, (51 FR 30686). On August 12, 2003, the Department received from Shandong Huihe a timely request for a new shipper review this in accordance with section 751(a)(2)(B) of the Tariff Act of 1930, as amended (theAct) and section 351.214(c) of the Department's regulations. In its request, Shandong Huihe identified itself as the company that produced the petroleum wax candles exported for its new shipper sale. On September 30, 2003, the Department initiated this new shipper review for the period August 1, 2002 through July 31, 2003. See Petroleum Wax Candles From the People's Republic of China: Initiation of Antidumping Duty New Shipper Review, 68 FR 57876 (October 7, 2003).

On October 22, 2003 we issued a questionnaire to Shandong Huihe.¹ On December 16, 2003, we received the company's sections A, C, and D questionnaire response. On April 27, 2004, we issued a supplemental questionnaire to Shandong Huihe. We received the response to this questionnaire on May 11, 2004.

On January 26, 2004, we requested information from the U.S. importer of Shandong Huihe's new shipper sales. We received the importer's response to the questionnaire on May 12, 2004.On June 26, 2004, Shandong Huihe requested that the Department extend the period of review in order to capture the entry of its new shipper sales.

On March 11, 2004, the Department extended the preliminary results of this new shipper review by 120 days until July 26, 2004. See Petroleum Wax candles from the People's Republic of China: Extension of Time Limit of Preliminary Results of New Shipper Review, 69 FR 12641 (March 17, 2004).

On July 20, 2004, the National Candle Association, petitioner, submitted comments regarding the sales under review. We received these comments too late for them to be considered for these preliminary results. These comments will be fully considered and addressed for the final results of this new shipper review. In addition, on July 26, 2004, the Department issued a supplemental questionnaire to Shandong Huihe. The response to this questionnaire will be fully analyzed for the final results of this new shipper review.

Period of Review

Pursuant to section 351.214(g)(1)(i)(A), the standard period of review (POR) in a new shipper proceeding initiated in the month immediately following the anniversary month is the one-year period immediately preceding the anniversary month. Shandong Huihe requested that the Department extend the normal one-year period. The Department's regulations provide it with the discretion to expand the normal POR to include an entry and sale to an unaffiliated customer in the United States of subject merchandise if the expansion of the period would likely not prevent the completion of the review within the time limits set forth in Section 351.214(i)(1). See Antidumping Duties; Countervailing Duties; Notice of Proposed Rulemaking and Request for Public Comment, 61 FR 7308, 7318 (February 27, 1996); Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27319-20 (May 19, 1997). See also 19 CFR 351.214(f)(2)(ii).

Because we determine that this short expansion of the period will not likely prevent the completion of the review within the prescribed time limits, we have expanded the annual review period. Therefore, the POR for Shandong Huihe's new shipper review has been defined as August 1, 2002 through August 15, 2003.

Scope of the Order

The products covered by this order are certain scented or unscented petroleum wax candles made from petroleum wax and having fiber or paper-cored wicks. They are sold in the following shapes: tapers, spirals, and straight-sided dinner candles; rounds, columns, pillars, votives; and various wax-filled containers. The products were classified under the Tariff Schedules of the United States (TSUS) item 755.25, Candles and Tapers. The products are currently classified under the Harmonized Tariff Schedule of the United States (HTSUS) item 3406.00.00. Although the HTSUS subheading is provided for convenience and customs purposes, our written description of the scope of this proceeding remains dispositive.

Verification

As provided in section 782(i) of the Act, we will conduct verification of Shandong Huihe following the issuance of the preliminary results.

Separate Rates

Shandong Huihe has requested a separate, company-specific rate. In its questionnaire responses, the company states that it is an independent legal entity.

To establish whether a company operating in a non-market economy (NME) country is sufficiently independent to be eligible for a separate rate, the Department analyzes each exporting entity under the test established in Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, 56 FR 20588 (May 6, 1991), as amplified by Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994). Under this policy, exporters in NMEs are entitled to separate, company-specific margins when they can demonstrate an absence of government control, both in law and in fact, with respect to export activities. 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. De facto absence of government control over exports is based on four factors: 1) whether each exporter sets its own export prices independently of the government and without the approval of a government authority; 2) whether each exporter retains the proceeds from its sales and makes independent decisions regarding the disposition of profits or financing of losses; 3) whether each exporter has the authority to negotiate and sign contracts and other agreements; and 4) whether each exporter has autonomy from the government regarding the selection of management.

De Jure Control

With respect to the absence of de jure government control over the export activities of the company reviewed, evidence on the record indicates that Shandong Huihe's export activities are not controlled by the government. Shandong Huihe submitted evidence of its legal right to set prices independently of all government oversight. The business license of the company indicates that it is permitted to engage in the exportation of candles. We find no evidence of de jure government control restricting this company's exportation of candles.

The following laws, which have been placed on the record of this review, indicate a lack of de jure government control over privately-owned companies, such as Shandong Huihe, and that control over these enterprises rests with the enterprises themselves. The Administrative Regulations of the People's Republic of China Governing the Registration of Enterprises as Legal Persons, issued on June 3, 1988, by the State Council of the PRC, the Company Law of the People's Republic of China, issued on December 29, 1993, by the National People's Congress, the Regulations of the People's Republic of China for Controlling the Registration of Enterprises as Legal Persons, promulgated by the State Administration for Industry and Commerce on June 13, 1988, and the General Principles of the Civil Law of the People's Republic of China, effective on January 1, 1987, all placed on the record of this review, provide that, to qualify as legal persons, companies must have the “ability to bear civil liability independently” and the right to control and manage their businesses. These regulations also state that, as an independent legal entity, a company is responsible for its own profits and losses. See Notice of Final Determination of Sales at Less Than Fair Value: Manganese Metal from the People's Republic of China, 60 FR 56045 (November 6, 1995) (Manganese Metal). Unless verification shows otherwise, we preliminarily determine that there is an absence of de jure control over export activity with respect to this firm.

De Facto Control

With respect to the absence of de facto control over export activities, the information provided in the questionnaire responses, which will be reviewed at verification, indicates that the management of Shandong Huihe is responsible for the determination of export prices, profit distribution, marketing strategy, and contract negotiations. Our analysis indicates that there is no government involvement in the daily operations or the selection of management for this company. In addition, we have found that the respondent's pricing and export strategy decisions are not subject to any outside entity's review or approval, and that there are no governmental policy directives that affect these decisions.

There are no restrictions on the use of export earnings. The company's general manager has the right to negotiate and enter into contracts, and may delegate this authority to employees within the company. There is no evidence that this authority is subject to any level of governmental approval. Shandong Huihe has stated that its management is selected by its board of directors and/or its employees and that there is no government involvement in the selection process. Lastly, decisions made by respondent concerning purchases of subject merchandise from other suppliers are not subject to government approval. Consequently, because evidence on the record indicates an absence of government control, both in law and in fact, over its export activities, we preliminarily determine that Shandong Huihe is eligible for a separate rate for purposes of this new shipper review.

Normal Value Comparisons

To determine whether respondent's sales of the subject merchandise to the United States were made at prices below NV, we compare the United States prices to NV, as described in the “United States Price” and “Normal Value” sections of this notice.

United States Price

For Shandong Huihe, we based United States price on EP, in accordance with section 772(a) of the Act, because the first sale to an unaffiliated purchaser was made prior to importation, and constructed export price (CEP) was not otherwise warranted by the facts on the record. We calculated EP based on the packed price from the exporter to the first unaffiliated purchaser in the United States. We deducted foreign inland freight and foreign brokerage and handling from the starting price (gross unit price) in accordance with section 772(c) of the Act.

Normal Value

Section 773(c)(1) of the Act provides that the Department shall determine NV using a factors-of-production methodology if (1) the merchandise is exported from an NME country, and (2) available 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.

In every case conducted by the Department involving the PRC, the PRC has been treated as an NME country. Pursuant to 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. Shandong Huihe did not contest such treatment in this review. Accordingly, we have applied surrogate values to the factors of production to determine NV. See Factor Values Memo for the Preliminary Results of the Antidumping Duty New Shipper Review of Petroleum Wax Candles from the People's Republic of China, July 26, 2004 (Factor Values Memo).

We calculated NV based on factors of production in accordance with section 773(c)(4) of the Act and section 351.408(c) of our regulations. Consistent with numerous other cases involving the PRC, we determined that India (1) is comparable to the PRC in level of economic development, and (2) is a significant producer of comparable merchandise. See the Memorandum from the Office of Policy regarding surrogate country selection for this review. We valued the factors of production using publicly available information from India. We adjusted the Indian input prices by adding freight expenses to reflect delivered prices.

We valued the factors of production as follows:

To value petroleum wax, we used the average Indian price for paraffin wax derived from rates published in Chemical Weekly for the period August 2001 through July 2002. This price was adjusted on a tax-exclusive basis to account for the Indian excise tax of 16 percent and has been inflated through the POR using the wholesale price index (WPI) published by the Reserve Bank of India (RBI) for the chemicals and chemical products industry sector. See Reserve Bank of India Bulletin, Table 39 Index Numbers of Wholesale Prices in India by Groups and Sub-Groups (Averages), http://www.rbi.org.in.

To value wicks, we used the average Indian import price for HTS number 5908 from the World Trade Atlas. See http://www.gtis.com/. For this unit value, we adjusted the total import value by excluding the value of imports from NME countries, and countries providing their exporters with non-specific export subsidies (South Korea, Thailand, and Indonesia). See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Certain Automotive Replacement Glass Windshields From the People's Republic of China, 67 FR 6482 (February 12, 2002). Also consistent with our policy, we excluded, in a few instances, import data that appeared to be aberrational. See, e.g., Memorandum to Jeff May, Acting Assistant Secretary for Import Administration, from Barbara Tillman, Acting Deputy Assistant Secretary for Import Administration, Group III, Regarding Issues and Decision Memorandum for the Final Determination of the Antidumping Duty Investigation of Saccharin from the People's Republic of China, dated May 20, 2003, at Comment 2, page 5, for a discussion of this issue. We then divided this import value by the total import quantity, which we similarly adjusted to exclude the quantity from NME countries and countries providing non-specific export subsidies, and import data that appeared aberrational. Since this data is contemporaneous with the POR, we did not adjust for inflation.

To value polyethylene wax, we used the average Indian import price for HTS number 34042000 from the World Trade Atlas. See http://www.gtis.com/. For this unit value, we divided the total import value (which we adjusted to exclude the value of imports from NME countries, countries with non-specific export subsidies, and import data that appeared aberrational), by the total import quantity (similarly adjusted). Since this data is contemporaneous with the POR, we did not adjust for inflation.

To value coal we used the average Indian import price for HTS number 27011902 from the Wold Trade Atlas. See http://www.gtis.com. For this unit value, we divided the total import value (which we adjusted to exclude the value of imports from NME countries, countries with non-specific export subsidies, and import data that appeared aberrational), less the value of imports from NME countries, by the total import quantity (similarly adjusted). Since this data is contemporaneous with the POR, we did not adjust for inflation.

To value electricity, we used the value for electricity published in the first quarter 2001 edition of the International Energy Agency's Energy Prices and Taxes. Because this data is reported for 1997, we used the Reserve Bank of India (RBI) Wholesale Price Index (WPI) inflator for the fuel, power, light and lubricants sector to adjust the reported price for electricity to reflect inflation through the POR. See Reserve Bank of India Bulletin, Table 39 Index Numbers of Wholesale Prices in India by Groups and Sub-Groups (Averages), http://www.rbi.org.in.

To value packing materials (inner box, outerbox, and tape), we used average Indian import prices for HTS numbers 48192000, 48191000, and 39191000 respectively from the World Trade Atlas. See http://www.gtis.com/. For each of these unit values, we divided the total import value (which we adjusted to exclude the value of imports from NME countries, countries with non-specific export subsidies, and import data that appeared aberrational), by the total import quantity (similarly adjusted). Since this data is contemporaneous with the POR, we did not adjust for inflation.

To value factory overhead, selling, general, and administrative expenses (SG&A), and profit, in accordance with our decision in the most recent administrative review of petroleum wax candles from the PRC, we used information reported in the January 1997 Reserve Bank of India Bulletin, “Statement 1 - Combined Income, Value of Production, Expenditure and Appropriation Accounts, Industry Group-wise” of that report for the Indian metals and chemicals (and products thereof) industries. See Notice of Final Results and Rescission, in Part, of the Antidumping Duty Administrative Review of Petroleum Wax Candles from the People's Republic of China, 69 FR 12121 (March 15, 2004) (Candles Final).

For labor, we used the PRC regression-based wage rate at Import Administration's home page, Import Library, Expected Wages of Selected NME Countries, revised in September 2001. See http://ia.ita.doc.gov/wages/. Because of the variability of wage rates in countries with similar per capita gross domestic products, section 351.408(c)(3) of the Department's regulations requires the use of a regression-based wage rate. The source of these wage rate data on the Import Administration's web site is the Yearbook of Labour Statistics 2000, International Labour Office (Geneva: 2000), Chapter 5B: Wages in Manufacturing.

To value foreign inland freight, in accordance with our decision in the most recent administrative review of petroleum wax candles from the PRC, we used an average of shipping rates for the Mumbai to Pune route from Chemical Weekly for the period from February 2002 to June 2002. See Candles Final. Because the data were not contemporaneous with the period of review (POR) we inflated the price using the WPI for India taken from the International Monetary Fund's 2003 International Financial Statistics.

Currency Conversion

We made currency conversions pursuant to section 351.415 of the Department's regulations at the rates certified by the Federal Reserve Bank. See http://ia.ita.doc.gov/exchange/index.html.

Preliminary Results of Review

We preliminarily determine that the following dumping margin exists:

Cash Deposit Requirements

At the completion of this new shipper review, the Department will notify the CBP that bonding will no longer be permitted to fulfill the security requirements for shipments of petroleum wax candles produced and exported by Shandong Huihe. If these preliminary results are not modified in the final results of this review, a cash deposit rate of zero will be effective upon the publication of the final results of this new shipper review for all shipments of petroleum wax candles from the PRC produced and exported by Shandong Huihe and entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(2)(C) of the Act. For petroleum wax candles exported, but not produced by Shandong Huihe, we will apply as the cash deposit rate the PRC-wide rate, which is currently 108.30 percent ad valorem.

Assessment Rates

If these preliminary results are not changed by the final results, the Department will direct CBP to liquidate, without regard to antidumping duties, Shandong Huihe's entries covered by this review.

Schedule for Final Results of Review

Pursuant to19 CFR 351.224(b), the Department will disclose calculations performed in connection with the preliminary results of this review within five days of the date of publication of this notice. Any interested party may request a hearing within 30 days of publication of this notice in accordance with section 351.310(c) of the Department's regulations. Any hearing would normally be held 37 days after the publication of this notice, or the first workday thereafter, at the U.S. Department of Commerce, 14th Street and Constitution Avenue NW, Washington, DC 20230. Individuals who wish to request a hearing must submit a written request within 30 days of the publication of this notice in the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Requests for a public hearing should contain: (1) the party's name, address, and telephone number; (2) the number of participants; and, (3) to the extent practicable, an identification of the arguments to be raised at the hearing.

Unless otherwise notified by the Department, interested parties may submit case briefs within 30 days of the date of publication of this notice in accordance with 351.309(c)(ii) of the Department's regulations. As part of the case brief, parties are encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited. Rebuttal briefs, which must be limited to issues raised in the case briefs, must be filed within five days after the case brief is filed. If a hearing is held, an interested party may make an affirmative presentation only on arguments included in that party's case brief and may make a rebuttal presentation only on arguments included in that party's rebuttal brief. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time.

Unless the time limit is extended, the Department will issue the final results of this new shipper review no later than 90 days after the signature date of the preliminary results. The final results will include the analysis of issues raised in the briefs.

Notification to Importers

This notice also serves as a preliminary reminder to importers of their responsibility under 351.402(f) of the Department's regulations to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during these review periods. 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 new shipper review and this notice are published in accordance with sections 751(a)(2)(B) and 777 (i)(1) of the Act.