Bulk Aspirin From the People's Republic of China: Preliminary Results of 2002/2003 Antidumping Duty Administrative Review and Notice of Intent To Revoke Order in Part

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to requests from interested parties, the Department of Commerce is conducting an administrative review of the antidumping duty order on bulk aspirin from the People's Republic of China with respect to Shandong Xinhua Pharmaceutical Co., Ltd. This review covers sales of bulk aspirin to the United States during the period July 1, 2002, through June 30, 2003.

We preliminarily find that, during the period of review, Shandong Xinhua Pharmaceutical Co., Ltd. has not made sales below normal value. We also preliminarily find that the antidumping duty order with respect to Shandong Xinhua Pharmaceutical Co., Ltd. should be revoked. If these preliminary results are adopted in our final results of this administrative review, we will instruct the U.S. Customs and Border Protection not to assess antidumping duties. We invite interested parties to comment on these preliminary results. We will issue the final results no later than 120 days from the date of publication of this notice.

EFFECTIVE DATE:

April 8, 2004.

FOR FURTHER INFORMATION CONTACT:

Julie Santoboni or Scott Holland, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-4194, or (202) 482-1279, respectively.

SUPPLEMENTARY INFORMATION:

Background

On July 11, 2000, the Department of Commerce (“the Department”) published an antidumping order on bulk aspirin from the People's Republic of China (“PRC”). See Notice of Antidumping Duty Order: Bulk Aspirin from the People's Republic of China, 65 FR 42673 (July 11, 2000) (“Bulk Aspirin Order”). On July 2, 2003, the Department published in the Federal Register a notice of the opportunity to request an administrative review in the above-cited segment of the antidumping duty proceeding (see 68 FR 39511). We received a timely filed request for review of Jilin Henghe Pharmaceutical Company Ltd. (“Jilin”) and Shandong Xinhua Pharmaceutical Co., Ltd. (“Shandong”) from Rhodia, Inc. (“the petitioner”). We also received a timely filed request for review from Shandong. Shandong also requested that the Department revoke the antidumping duty order with regard to its sales of subject merchandise, in accordance with 19 CFR 351.222(b). On August 22, 2003, we initiated an administrative review of Jilin and Shandong. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 68 FR 50750 (August 22, 2003). The period of this review (“POR”) is July 1, 2002, through June 30, 2003.

We issued antidumping questionnaires to Jilin and Shandong on September 15, 2003. We received responses to the questionnaires from Shandong on October 16 and November 7, 2003, and Jilin on October 30 and November 7, 2003.

On November 12, 2003, the Department invited interested parties to comment on surrogate country selection and to provide publicly available information for valuing the factors of production. We received responses from Jilin and Shandong on December 10, 2003 and January 9, 2004, respectively.

On January 5, 2004, the petitioner withdrew its request for review of Jilin. Although this withdrawal was received by the Department after the regulatory deadline of November 20, 2003, 19 CFR 351.213(d)(1) permits the Department to extend the deadline if “it is reasonable to do so.” Because the petitioner was the only party to request the review, we found it is reasonable to extend the deadline to withdraw the review request. On February 3, 2004, in accordance with 19 CFR 351.213(d)(1), we rescinded the administrative review with respect to Jilin. See Bulk Aspirin from the People's Republic of China: Notice of Partial Rescission of Antidumping Duty Administrative Review, 69 FR 5126 (February 3, 2004).

We issued supplemental questionnaires to Shandong in January and February 2004, and received responses from Shandong in January, February and March 2004. In January 2004, Perrigo Company, an interested party, responded to certain supplemental questions issued to Shandong. The Department verified the sales and factors of production responses submitted by Shandong during March 2004.

Scope of the Order

The product covered by this review is bulk acetylsalicylic acid, commonly referred to as bulk aspirin, whether or not in pharmaceutical or compound form, not put up in dosage form (tablet, capsule, powders or similar form for direct human consumption). Bulk aspirin may be imported in two forms, as pure ortho-acetylsalicylic acid or as mixed ortho-acetylsalicylic acid. Pure ortho-acetylsalicylic acid can be either in crystal form or granulated into a fine powder (pharmaceutical form). This product has the chemical formula C₉ H₈ O₄. It is defined by the official monograph of the United States Pharmacopoeia 23 (“USP”). It is currently classifiable under the Harmonized Tariff Schedule of the United States (“HTSUS”) subheading 2918.22.1000.

Mixed ortho-acetylsalicylic acid consists of ortho-acetylsalicylic acid combined with other inactive substances such as starch, lactose, cellulose, or coloring materials and/or other active substances. The presence of other active substances must be in concentrations less than that specified for particular nonprescription drug combinations of aspirin and active substances as published in the Handbook of Nonprescription Drugs, eighth edition, American Pharmaceutical Association. This product is currently classifiable under HTSUS subheading 3003.90.0000.

Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise under review is dispositive.

Verification

As provided in section 782(i) of the Tariff Act of 1930, as amended (“the Act”), during March 2004, we verified the information provided by Shandong in the PRC using standard verification procedures, including on-site inspection of the manufacturer's facilities, examination of relevant sales, cost and financial records, and selection of original documentation containing relevant information. The Department will report its findings from the Shandong sales and factors-of-production verifications at a later date.

Separate Rates

It is the Department's standard policy to assign all exporters of the merchandise subject to review in nonmarket 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 amplified in the Notice of 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”).

Absence of De Jure Control

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. See Sparklers, 56 FR at 20589.

Absence of De Facto Control

A de facto analysis of absence of government control over exports is based on four factors—whether the respondent: (1) Sets its own export prices independently of the government and other exporters; (2) retains the proceeds from its export sales and makes independent decisions regarding the disposition of profits or financing of losses; (3) has the authority to negotiate and sign contracts and other agreements; and (4) has autonomy from the government regarding the selection of management. See Silicon Carbide, 59 FR at 22587; see also Sparklers, 56 FR at 20589.

In the Notice of Final Determination of Sales at Less Than Fair Value: Bulk Aspirin from the People's Republic of China, 65 FR 33805 (May 25, 2000) (“LTFV Investigation”), we determined that there was an absence of both de jure and de facto government control of Shandong's export activities and determined that Shandong warranted a company-specific dumping margin. Shandong responded to the Department's request for information regarding separate rates during the POR. Specifically, Shandong provided the company's business license and information on its ownership, management, and business and financial practices. We examined this information at verification. We find that the evidence on the record is consistent with the LTFV Investigation and Shandong continues to demonstrate an absence of government control, both in law and in fact, with respect to its exports, in accordance with the criteria identified in Sparklers and Silicon Carbide.

Intent To Revoke

On July 30, 2003, Shandong requested the revocation of the antidumping duty order covering bulk aspirin from the PRC as it pertains to its sales. Under section 751(d)(1) of the Act, the Department “may revoke, in whole or in part” an antidumping duty order upon completion of a review. Although Congress has not specified the procedures that the Department must follow in revoking an order, the Department has developed a procedure for revocation that is set forth under 19 CFR 351.222. Under section 351.222(b), the Department may revoke an antidumping duty order in part if it concludes that (i) an exporter or producer has sold the merchandise at not less than normal value for a period of at least three consecutive years, (ii) the exporter or producer has agreed in writing to its immediate reinstatement in the order if the Secretary concludes that the exporter or producer, subsequent to the revocation, sold the subject merchandise at less than normal value, and (iii) the continued application of the antidumping duty order is no longer necessary to offset dumping. Section 351.222(b)(3) states that, in the case of an exporter that is not the producer of subject merchandise, the Department normally will revoke an order in part under section 351.222(b)(2) only with respect to subject merchandise produced or supplied by those companies that supplied the exporter during the time period that formed the basis for revocation.

A request for revocation of an order in part must address three elements. The company requesting the revocation must do so in writing and submit the following statements with the request: (1) The company's certification that it sold the subject merchandise at not less than normal value during the current review period and that, in the future, it will not sell at less than normal value; (2) the company's certification that, during each of the consecutive years forming the basis of the request, it sold the subject merchandise to the United States in commercial quantities; and (3) the agreement to reinstatement in the order if the Department concludes that the company, subsequent to revocation, has sold the subject merchandise at less than normal value. See 19 CFR 351.222(e)(1).

We preliminarily find that the request from Shandong meets all of the criteria under 19 CFR 351.222(e)(1). Shandong's revocation request includes the necessary certifications in accordance with 351.222(e). Shandong has also agreed in writing to the immediate reinstatement in the order, as long as any exporter or producer is subject to the order, if the Department concludes that Shandong, subsequent to the revocation, sold the subject merchandise at less than normal value. With regard to the criteria of section 351.222(b)(2), our preliminary margin calculations show that Shandong sold bulk aspirin at not less than normal value during the current review period. See Dumping Margins below. In addition, it sold bulk aspirin at not less than normal value in the two previous administrative reviews in which it was involved. See Notice of Amended Final Results of Antidumping Duty Administrative Review: Bulk Aspirin from the People's Republic of China, 68 FR 12036 (March 13, 2003), covering the period July 6, 2000, through June 30, 2001, and Notice of Amended Final Results of Antidumping Duty Administrative Review: Bulk Aspirin from the People's Republic of China, 68 FR 54890 (September 19, 2003), covering the period July 1, 2001, through June 30, 2002. Based on our examination of the sales data submitted by Shandong, we preliminarily find that Shandong sold the subject merchandise in the United States in commercial quantities in each of the consecutive years cited by Shandong to support its request for revocation. See Preliminary Results Calculation Memorandum for Shandong, dated April 1, 2004, which is in the Department's Central Records Unit (“CRU”), Room B-099. Also, we preliminarily find that application of the antidumping order to Shandong is no longer warranted for the following reasons: (1) The company had zero or de minimis margins for a period of at least three consecutive years; (2) the company has agreed to immediate reinstatement of the order if the Department finds that it has resumed making sales at less than fair value; and (3) the continued application of the order is not otherwise necessary to offset dumping.

Therefore, we preliminarily find that Shandong qualifies for revocation of the order on bulk aspirin from the PRC pursuant to 19 CFR 351.222(b)(2) and that the order with respect to merchandise produced and exported by Shandong should be revoked. If these preliminary findings are affirmed in our final results, we will revoke the order in part with respect to bulk aspirin from the PRC produced and exported by Shandong. In accordance with 19 CFR 351.222(f)(3), we will terminate the suspension of liquidation for bulk aspirin produced and exported by Shandong that was entered, or withdrawn from warehouse, for consumption on or after July 1, 2003, and will instruct the U.S. Customs and Border Protection (“CBP”) to refund any cash deposits for such entries.

Export Price and Constructed Export Price

For certain sales made by Shandong to the United States, we used constructed export price (“CEP”) in accordance with section 772(b) of the Act, because the first sale to an unaffiliated purchaser occurred after importation of the merchandise into the United States. For other sales made by Shandong, we used export price (“EP”), in accordance with section 772(a) of the Act, because the subject merchandise was sold outside the United States to unaffiliated purchasers in the United States prior to importation into the United States and constructed export price methodology was not otherwise indicated.

We calculated EP based on the FOB prices to unaffiliated purchasers. We calculated CEP based on delivered prices from Shandong's U.S. subsidiary to unaffiliated customers. In accordance with section 772(c) of the Act, as appropriate, we deducted from the starting price foreign inland freight, international freight, marine insurance, U.S. inland freight, U.S. customs duties, and U.S. warehousing expenses. We valued the deductions for foreign inland freight using surrogate data based on Indian freight costs. We selected India as the surrogate country for the reasons explained in the “Normal Value” section of this notice, below.

Where Shandong used a market-economy shipper for more than an insignificant portion of its sales and paid for the shipping in a market-economy currency, we used the average price paid by Shandong to value international freight for all of its sales. See Tapered Roller Bearings from the People's Republic of China; Notice of Preliminary Results of 2000-2001 Review, Partial Rescission of Review, and Notice of Intent to Revoke Order, in Part, 67 FR 45451, 45453 (July 9, 2002). Where Shandong used a market-economy marine insurance provider for more than an insignificant portion of its sales and paid for the insurance in a market-economy currency, we used the average price for marine insurance paid by Shandong for all of its sales.

In accordance with section 772(d)(1) of the Act, for CEP sales, we made deductions for the following selling expenses that related to economic activity in the United States: credit expenses, indirect selling expenses, and direct selling expenses. Since Shandong did not have U.S. dollar-denominated borrowings during the POR, we calculated credit expenses using the short-term interest rate during the POR, as stated by the Federal Reserve Board. In accordance with section 772(d)(3) of the Act, we deducted from the starting price an amount for profit.

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 a 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 a NME country in all previous antidumping cases. In accordance with section 771(18)(C)(i) of the Act, any determination that a foreign country is a NME country shall remain in effect until revoked by the administering authority. The parties in this proceeding have not contested such treatment in this review. Therefore, we treated the PRC as a NME country for purposes of this review and calculated NV by valuing the factors of production in a surrogate country.

Section 773(c)(4) of the Act requires the Department to value the 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, and (2) are significant producers of comparable merchandise. The Department has determined that India, Pakistan, Indonesia, Sri Lanka, and the Philippines are countries comparable to the PRC in terms of overall economic development. For a further discussion of our surrogate selection, see Memorandum from Ron Lorentzen, Office of Policy, to Susan Kuhbach, Director, AD/CVD Enforcement, Office 1, “Antidumping Administrative Review of Bulk Aspirin from the People's Republic of China: Request for a List of Surrogate Countries,” dated October 31, 2003, which is on file in the Department's CRU. According to the available information on the record, we determined that India is a significant producer of comparable merchandise. None of the interested parties contested the selection of India as the surrogate country. Accordingly, we calculated NV using Indian values for the PRC producer's factors of production.

We obtained and relied upon publicly available information wherever possible. In many instances, we used the Monthly Statistics of the Foreign Trade of India; Volume II Imports (“MSFTI” ) to value factors of production, energy inputs and packing materials. Consistent with the 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) and accompanying Issues and Decision Memorandum, we excluded import data reported in the MSFTI for Korea, Thailand and Indonesia in our surrogate value calculations. In addition to the MSFTI data, we used Indian domestic prices from Indian Chemical Weekly (“ICW”) to value certain chemical inputs. See Memorandum from Team to Susan Kuhbach, Director, AD/CVD Enforcement, Office 1, “Factors of Production Valuation for the Preliminary Results,” dated April 1, 2004 (“FOP Memo”).

Factors of Production

In accordance with section 773(c) of the Act, we calculated NV based on factors of production reported by the respondent. To calculate NV, the reported unit factor quantities were multiplied by either price quotes or publicly available Indian surrogate values.

In selecting the surrogate values, we considered the quality, specificity, and contemporaneity of the data. As appropriate, we adjusted input prices to make them delivered prices. For the distances reported, we added to Indian CIF surrogate values a surrogate freight cost using the reported distances from the PRC port to the PRC factory, or from the domestic supplier to the factory. This adjustment is in accordance with the United States Court of Appeals for the Federal Circuit's decision in Sigma Corp. v. United States, 117 F. 3d 1401, 1407-1408 (Fed. Cir. 1997). For those values not contemporaneous with the POR, we adjusted for inflation using the appropriate wholesale or producer price index published in the International Monetary Fund's International Financial Statistics.

Material Inputs: We valued these inputs from MSFTI, ICW, or price quotes, as appropriate. See FOP Memo.

Labor: We valued labor using the method described in 19 CFR 351.408(c)(3).

Energy: We calculated the surrogate value for electricity based on electricity rate data reported by the International Energy Agency (“IEA”), 4th quarter 2002. For coal, we used import values from the MSFTI. We based the value of fuel oil on prices reported by the IEA, 4th quarter 2002. We valued water using the Second Water Utilities Data Book, Asian and Pacific Region, October 1997, adjusted for inflation.

Factory Overhead, SG&A, and Profit: We based our calculation of factory overhead and SG&A on the 2001-2002 financial data of Alta Laboratories Ltd. (“Alta”), an Indian producer of identical merchandise. Because Alta did not realize a profit during the financial period, we relied on the financial data of two other Indian producers of comparable merchandise, Andhra Sugars Ltd. (“Andhra”), and Gujarat Organics Ltd. (“Gujarat”) for 2002-2003 and 2001-2002, respectively.

Packing Materials: For packing materials we used import values from the MSFTI.

Inland Freight Rates: To value truck freight rates, we used an average of trucking rates quoted in ICW. For rail freight, we based our calculation on 1999 price quotes from Indian rail freight transporters, adjusted for inflation.

Preliminary Results of the Review

We preliminary find that the following dumping margin exists for the period July 1, 2002, through June 30, 2003:

Assessment Rates

Pursuant to 19 CFR 351.212(b), the Department calculates an assessment rate for each importer of the subject merchandise for each respondent. Upon issuance of the final results of this administrative review, if any importer-specific assessment rates calculated in the final results are above de minimis (i.e., at or above 0.5 percent), the Department will issue appraisement instructions directly to CBP to assess antidumping duties on appropriate entries. To determine whether the duty assessment rates covering the period were de minimis, in accordance with the requirement set forth in 19 CFR 351.106(c)(1), we calculate importer (or customer)-specific ad valorem rates by aggregating the dumping margins calculated for all U.S. sales to that importer (or customer) and dividing this amount by the total value of the sales to that importer (or customer). Where an importer (or customer)-specific ad valorem rate is greater than de minimis, we calculate a per unit assessment rate by aggregating the dumping margins calculated for all U.S. sales to that importer (or customer) and dividing this amount by the total quantity sold to that importer (or customer).

All other entries of the subject merchandise during the POR will be liquidated at the antidumping duty rate in place at the time of entry.

The Department will issue appropriate assessment instructions directly to CBP within 15 days of publication of the final results of this review.

Cash Deposit Rates

The following deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of bulk aspirin from the PRC entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(1) of the Act: (1) Because Shandong has a zero margin, no cash deposit shall be required; (2) for a 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) for all other PRC exporters of subject merchandise, the rate will be the PRC country-wide rate, which is 144.02 percent; and (4) for non-PRC exporters of subject merchandise from the PRC, the cash deposit rate will be the rate applicable to the PRC exporter that supplied that exporter. Because Jilin is no longer covered by the antidumping duty order, no cash deposit is required for entries manufactured and exported by Jilin.

These requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Public Comment

Any interested party may request a hearing within 30 days of publication of this notice. A hearing, if requested, will be held 37 days after the publication of this notice, or the first business day thereafter. Interested parties may submit case briefs within 30 days of the date of publication of this notice. Rebuttal briefs, which must be 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 issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days of publication of the preliminary results.

Notification to Importers

This notice also 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 Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

This administrative review and notice are in accordance with sections 751(a)(1) and 777(i)(1) of the Act.