Sebacic Acid From the People's Republic of China: Preliminary Results of Changed Circumstances Review and Intent To Reinstate the Antidumping Duty Order

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of preliminary results of changed circumstances review.

SUMMARY:

In November 2002, the Department of Commerce (the Department) revoked the antidumping duty order on sebacic acid from the People's Republic of China (PRC) in part with respect to subject merchandise exported by Tianjin Chemicals Import and Export Corporation (Tianjin) and produced by Hengshui Dongfeng Chemical Co., Ltd. (Hengshui). See Sebacic Acid From the People's Republic of China: Final Results of Antidumping Duty Administrative Review and Determination To Revoke Order in Part, 67 FR 69719, 69720 (Nov. 19, 2002) (2000-2001 Final Results). As the result of an adequate allegation from a domestic interested party in this proceeding, the Department, pursuant to section 751(b)(1) of the Tariff Act of 1930, as amended (the Act), is now conducting a changed circumstances review to determine whether Tianjin has resumed dumping and whether the antidumping order should be reinstated for subject merchandise exported by Tianjin and produced by Hengshui. See Sebacic Acid From the People's Republic of China: Notice of Initiation of Changed Circumstances Review, 69 FR 39906 (July 1, 2004) (CCR Initiation). We preliminarily determine that Tianjin has sold subject merchandise at less than normal value (NV) and that the order should be reinstated on sebacic acid from the PRC related to subject merchandise exported by Tianjin and produced by Hengshui. We will instruct U.S. Customs and Border Protection (CBP) to suspend liquidation of all entries of subject merchandise exported by Tianjin and manufactured by Hengshui, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register.

EFFECTIVE DATE:

November 26, 2004.

FOR FURTHER INFORMATION CONTACT:

Jennifer Moats or Brian Ledgerwood, China/NME Group, AD/CVD Operations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-5047 or (202) 482-3836, respectively.

SUPPLEMENTARY INFORMATION:

Background

On July 14, 1994, the Department published in the Federal Register the antidumping duty order on sebacic acid from the PRC. See Antidumping Duty Order: Sebacic Acid From the People's Republic of China, 59 FR 35909 (July 14, 1994). In the 2000-2001 administrative review of the order, we found that one of the respondent companies, Tianjin, and its supplier, Hengshui, met the requirements for revocation from the order under 19 CFR 351.222(b)(2) and (3). See 2000-2001 Final Results. As part of its request for revocation, pursuant to 19 CFR 351.222(b)(2)(i)(B), Tianjin agreed to the immediate reinstatement of the antidumping duty order if the Department concludes that, subsequent to the revocation, Tianjin sold the subject merchandise at less than NV. Id. Due to allegations of resumed dumping submitted by SST Materials, Inc. d/b/a Genesis Chemicals, Inc. (Genesis), we initiated a changed circumstance review on June 25, 2004, to determine whether Tianjin has resumed dumping and whether we should reinstate the antidumping order for subject merchandise produced by Hengshui and exported by Tianjin. See CCR Initiation. On June 25, 2004, we documented our analysis regarding the reasonableness of the data presented by Genesis in its allegations. See the June 25, 2004, Memorandum to the File from Greg Kalbaugh entitled “Calculations Performed for Assessing the Reasonableness of SST Materials, Inc.'s Allegation of the Resumption of Dumping by Tianjin Chemicals Imports and Export Corporation and its Producer Hengshui Dongfeng Chemcials Co., Ltd. for the Changed Circumstances Review of Sebacic Acid from the PRC.” On June 30, 2004, we issued a questionnaire to Tianjin; a response was received on August 18, 2004. Based on our review of the response, we preliminarily determine that Tianjin sold the subject merchandise at less than NV during the July 1, 2002, through June 30, 2003, period of review.

Scope of the Review

The products covered by this order are all grades of sebacic acid, a dicarboxylic acid with the formula (CH2)₈ (COOH)₂, which include but are not limited to CP Grade (500 ppm maximum ash, 25 maximum APHA color), Purified Grade (1000 ppm maximum ash, 50 maximum APHA color), and Nylon Grade (500 ppm maximum ash, 70 maximum ICV color). The principle difference between the grades is the quantity of ash and color. Sebacic acid contains a minimum of 85 percent dibasic acids of which the predominant species is the C₁₀ dibasic acid. Sebacic acid is sold generally as a free-flowing powder/flake.

Sebacic acid has numerous industrial uses, including the production of nylon 6/10 (a polymer used for paintbrush and toothbrush bristles and paper machine felts), plasticizers, esters, automotive coolants, polyamides, polyester castings and films, inks and adhesives, lubricants, and polyurethane castings and coatings.

Sebacic acid is currently classifiable under subheading 2917.13.00.30 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheading is provided for convenience and customs purposes, our written description of the scope of this proceeding is dispositive.

Basis for Reinstatement

Section 351.222(b)(2) of the Department's regulations provides that the Department may revoke an antidumping duty order, in part, if the Secretary concludes, inter alia, that one or more exporters or producers covered by the order have sold the merchandise at not less than NV for a period of at least three consecutive years. To obtain a company-specific revocation under section 351.222(b)(2) for any exporter or producer which the Department determined previously to have sold the subject merchandise at less than NV, that exporter or producer must agree to immediate reinstatement in the antidumping duty order if the Department concludes that, subsequent to the revocation, that exporter or producer sold the subject merchandise at less than NV. See 19 CFR 351.222(b)(2)(i)(B). In addition, section 351.222(b)(3) provides that, for any exporter that is not a producer of subject merchandise, the Department will normally revoke the order only with respect to subject merchandise produced or supplied by those companies that supplied the exporter. Thus, under the Department's regulations, as long as an antidumping duty order remains in force, an entity previously granted a revocation may be reinstated under that order if it is established that the entity has resumed the dumping of subject merchandise.

In this case, because another exporter in the PRC remains subject to the antidumping duty order on sebacic acid from the PRC, the order remains in effect, and the exporter-producer combination of Tianjin and Hengshui can be reinstated in the order. See 2000-2001 Final Results. Tianjin was found to have sold the subject merchandise at less than NV previously. See Sebacic Acid From the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 64 FR 69503 (December 13, 1999) (1997-1998 Final Results). Accordingly, after the exporter-producer combination of Tianjin and Hengshui met the revocation requirements under 351.222(b) of the Department's regulations, the Department granted Tianjin revocation based upon its agreement to immediate reinstatement in the antidumping duty order if the Department were to find that the company resumed dumping of sebacic acid from the PRC. See 2000-2001 Final Results at 69720.

As described in the “Export Price” and “Normal Value” sections, below, we have examined Tianjin's response and have preliminarily found that Tianjin's dumping margin for the review period is greater than de minimis.

Separate Rates

We initiated this changed circumstance review for the sole purpose of determining whether Tianjin has resumed dumping of sebacic acid from the PRC. We did not require Tianjin to answer questions related to separate rates because no administrative review has been initiated that would require Tianjin to substantiate a de facto and de jure absence of government control of its export activities and no interested party in this review has made an allegation that Tianjin is not eligible for a separate rate. Additionally, we found in the 2000-2001 administrative review that Tianjin was a company that merited a separate rate. See 2000-2001 Final Results. Thus, we did not examine the issue of whether Tianjin continues to merit a separate rate absent information indicating otherwise. Accordingly, we will examine Tianjin's entitlement to a separate rate in the context of any future administrative review in which Tianjin may participate.

Export Price

We calculated export price (EP) in accordance with section 772(a) of 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. As appropriate, we calculated EP based on packed, free-on-board, PRC-port prices to unaffiliated purchasers in the United States. We deducted from the starting price amounts for foreign inland truck freight and foreign brokerage and handling. As these movement services were provided by nonmarket-economy (NME) suppliers, we valued them using surrogate values from Indian suppliers. For further discussion of our use of surrogate data in an NME proceeding, as well as the 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 the 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 Jennifer Moats entitled “Preliminary Valuation of Factors of Production for the Preliminary Results of the 2002-2003 Changed Circumstances Review of Sebacic Acid from the People's Republic of China,” dated November 15, 2004 (FOP Memo). We inflated the per-kilogram price (in rupees) to the POR using wholesale price index (WPI) data from the International Monetary Fund (IMF). For further discussion, see the FOP Memo, which is on the record of this review and is on file in the Central Records Unit (CRU), Room B-099 of the main Commerce building.

Normal Value

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 are at a level of economic development comparable to that of the NME country and are significant producers of comparable merchandise.

For purposes of the most recent administrative review of the antidumping duty order on sebacic acid, we found that India is a producer of oxalic acid, a product comparable to sebacic acid. See 2000-2001 Final Results. For purposes of the preliminary results, we continue to find that India is a significant producer of oxalic acid. See the November 15, 2004, Memorandum to the File from Jennifer Moats entitled “Oxalic Acid Production in India During the Period of Review,” which is on the record of this review and is on file in the CRU, Room B-099 of the main Commerce building. Accordingly, as India is at a level of economic development comparable to that of the PRC and a significant producer of a product comparable to the subject merchandise, 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. Accordingly, we have calculated NV using Indian surrogate values for the PRC producer's 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 the factors of production. The Department's regulations also provide that, where a producer purchases an input from a market-economy supplier and pays for it in a market-economy currency, the Department employs the actual price paid for the input to the market-economy supplier 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 the factors of production for the POR which Tianjin reported. To calculate NV, we multiplied the reported per-unit factor quantities by publicly available Indian surrogate values. Factors of production include, but are not limited to the following elements: (1) Hours of labor required; (2) quantities of raw materials employed; (3) amounts of energy and other utilities consumed; (4) representative capital cost, including depreciation. In examining surrogate values, we selected, where possible, the publicly available value which was an average non-export value, representative of a range of prices within the POR or most contemporaneous with the POR, product-specific, and 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. For those Indian rupee values not contemporaneous with the POR, we adjusted for inflation using wholesale price indices for India published in the International Monetary Fund's International Financial Statistics. We also used these surrogate values in the preliminary results of the 2002-2003 administrative review of the antidumping duty order on sebacic acid from the PRC. See the July 30, 2004, Memorandum to the File from Gregory Kalbaugh entitled “Preliminary Valuation of Factors of Production,” which is on the record of the 2002-2003 administrative review of the antidumping duty order on sebacic acid from the PRC and is on file in the CRU. In accordance with this methodology, we valued the factors of production as follows:

To value caustic soda, cresol, phenol, sulfuric acid, and zinc oxide, we obtained information from the Indian publication Chemical Weekly. Where necessary, we adjusted the values reported in Chemical Weekly to exclude sales and excise taxes. To value activated carbon, inner polyethylene bags, woven plastic bags, jumbo plastic bags, and bag-closing thread, we obtained import prices from the Government of India's Department of Commerce Import/Export Data for the period April 2002 through March 2003. To value steam coal, we obtained import prices from the Monthly Statistics of the Foreign Trade of India (MSFTI) and from in the World Trade Atlas for the period April 2002 through March 2003.

Consistent with the methodology we have employed in previous administrative reviews, we have determined that capryl alcohol is a co-product and have allocated the factor inputs based on the relative surrogate values for this product and sebacic acid. See 2000-2001 Final Results. Additionally, we have used the production times necessary to complete each production stage of sebacic acid as a basis for allocating the amount of labor, energy usage, and factory overhead among the co-product(s). This treatment of co-products is consistent with generally accepted accounting principles. See Cost Accounting: A Managerial Emphasis (1991) at pages 528-533. To value capryl alcohol, we used data published in Government of India's Department of Commerce Import/Export Data.

Consistent with the methodology we employed in the 2000-2001 Final Results, we have determined that fatty acid and glycerine are by-products. Because they are by-products, we subtracted the sales revenue of fatty acid and glycerine from the estimated production costs of sebacic acid. This treatment of by-products is also consistent with generally accepted accounting principles. See Cost Accounting: A Managerial Emphasis (1991) at pages 539-544. To value glycerine, we used data published in Chemical Weekly. Consistent with our calculation methodology in past segments of this proceeding, we allocated this offset between sebacic acid and capryl alcohol based on the ratio of the value of sebacic acid to the total value of both sebacic acid and capryl alcohol prior to applying the by-product offset for glycerine. See 2000-2001 Final Results. To value fatty acid, we used data published in Government of India's Department of Commerce Import/Export Data.

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.

We made adjustments to account for freight costs between the suppliers and the respective manufacturing facilities for each of the factors of production identified above. In accordance with our practice, for inputs for which we used cost-insurance-freight 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); see also Sigma Corp. v. United States, 117 F.3d 1401, 1407-1408 (Fed. Cir. 1997).

For truck freight, we obtained publicly available information which was published in the October 2002 through March 2003 editions of Chemical Weekly. See the FOP Memo. To value rail freight, we relied upon price quotes obtained from Indian rail freight companies in November 1999. The Department used these quotes in the investigation of bulk aspirin from the PRC and the 1999-2000 administrative review of tapered roller bearings from the PRC. See Notice of Preliminary Determination of Sales at Less Than Fair Value: Bulk Aspirin From the People's Republic of China, 65 FR 116, 119 (Jan. 3, 2000); and Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China: Preliminary Results of 1999-2000 Administrative Review, Partial Rescission of Review, and Notice of Intent Not To Revoke Order in Part, 66 FR 35937, 35941 (July 10, 2001). We averaged these quotes and then inflated this average value to be contemporaneous with the POR using the WPI data published by the IMF.

We valued labor based on a regression-based wage rate in accordance with 19 CFR 351.408(c)(3). This information is available on the Department's Web site at http://www.ia.ita.doc.gov/wages/01wages/01wages.html.

To value factory overhead, selling, general, and administrative expenses, and profit, we used rates based on data obtained from the Reserve Bank of India Bulletin.

Preliminary Results of Review

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

Manufacturer/Exporter

The Department will disclose to parties the calculations performed in connection with these preliminary results within ten 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 37 days after the date of publication of this notice. Interested parties are also reminded that they have until 20 days after the date of publication of this notice to submit any surrogate-value information that they would like the Department to consider in the course of this review.

As these are preliminary results, the Department may still come to a conclusion that Tianjin has not resumed dumping. Since we have preliminarily established that sebacic acid produced by Hengshui and exported by Tianjin is being sold at less than NV, the antidumping duty order is hereby provisionally reinstated, and we will instruct CBP to suspend liquidation of all entries of subject merchandise exported by Tianjin and manufactured by Hengshui entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. Furthermore, a cash-deposit requirement of 36.74 percent will be in effect for all shipments of the subject merchandise produced by Hengshui and exported by Tianjin that are entered, or withdrawn from warehouse, for consumption on or after the publication date of this notice. This requirement shall remain in effect until publication of the final results of the next administrative review unless the Department finds that Tianjin has not resumed dumping in the final results of this changed circumstance review.

The Department will complete this review within 270 days of the date on which it initiated the changed circumstances review (i.e., March 28, 2005). In accordance with 19 CFR 351.216(e), the final results of the changed circumstance review will set forth the factual and legal conclusions upon which our results are based and a description of any action proposed based on those results. This notice is in accordance with section 751(b)(1) of the Act and 19 CFR 351.216 and 351.222.