Certain Cased Pencils from the People's Republic of China; Preliminary Results of Antidumping Duty Administrative Review and Intent to Rescind in Part, 2115-2121 [05-604]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 70, Number 8 (Wednesday, January 12, 2005)]
[Notices]
[Pages 2115-2121]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-604]


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DEPARTMENT OF COMMERCE

International Trade Administration

A-570-827


Certain Cased Pencils from the People's Republic of China; 
Preliminary Results of Antidumping Duty Administrative Review and 
Intent to Rescind in Part

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) has preliminarily 
determined that sales by the respondents in this review, covering the 
period December 1, 2002, through November 30, 2003, have been made at 
prices less than normal value (NV). In addition, we are preliminarily 
rescinding this review with respect to Tianjin Custom Wood Processing 
Co., Ltd. (TCW), because TCW reported, and we confirmed, that it made 
no shipments of subject merchandise to the United States during the 
period of review (POR). If these preliminary results are adopted in the 
final results of this review, we will instruct U.S. Customs and Border 
Protection (CBP) to assess antidumping duties on all appropriate 
entries. The Department invites interested parties to comment on these 
preliminary results.

EFFECTIVE DATE: January 12, 2005.

FOR FURTHER INFORMATION CONTACT: Paul Stolz or Marin Weaver, AD/CVD 
Operations, Office 8, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-4474 
and (202) 482-2336, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On December 2, 2003, the Department published in the Federal 
Register a notice of ``Opportunity to Request Administrative Review'' 
of the antidumping duty order on certain cased pencils from the 
People's Republic of China (PRC) (the order) covering the period 
December 1, 2002, through November 30, 2003. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended

[[Page 2116]]

Investigation; Opportunity to Request Administrative Review, 68 FR 
67401-02.
    On December 4, 2003, in accordance with 19 CFR 351.213(b), a PRC 
exporter, Shandong Rongxin Import and Export Co., Ltd. (Rongxin), 
requested an administrative review of the order on certain cased 
pencils from the PRC. On December 31, 2003, the petitioners, Sanford 
L.P., Musgrave Pencil Company, RoseMoon Inc., and General Pencil 
Company, requested that the Department conduct an administrative review 
of exports of subject merchandise made by eight producers/exporters.\1\ 
In addition, on December 31, 2003, China First Pencil Company, Ltd. 
requested a review of its exports of subject merchandise to the United 
States.
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    \1\ The eight producers/exporters covered by the petitioners' 
request are Anhui Import/Export Group Corporation, Beijing Light 
Industrial Products Import/Export Corporation, China First Pencil 
Company, Ltd., Orient International Holding Shanghai Foreign Trade 
Co., Ltd., Rongxin, Sichuan Light Industrial Products Import/Export 
Corporation, Shanghai Three Star Stationery Industry Corp., and 
Tianjin Custom Wood Processing Co., Ltd.
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    The Department published a notice announcing its initiation of an 
antidumping duty administrative review covering the exports of the 
above-referenced companies during the POR. See Initiation of 
Antidumping and Countervailing Duty Administrative Reviews and Request 
for Revocation in Part, 69 FR 3117-3119 (January 22, 2004).\2\ On 
January 30, 2004, we issued antidumping duty questionnaires to the 
exporters/producers subject to this review.
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    \2\ The Department initiated separate reviews of China First 
Pencil Company, Ltd. (CFP) and Shanghai Three Star Stationery 
Industry Corp. (Three Star) based on timely requests from domestic 
interested parties. Subsequent to the initiation of this review, in 
the final results of the 2001-2002 administrative review the 
Department collapsed CFP and Three Star for purposes of its 
antidumping analysis. See Certain Cased Pencils from the People's 
Republic of China; Final Results and Partial Rescission of 
Antidumping Duty Administrative Review, 69 FR 29266 (May 21, 2004) 
and the accompanying Issues and Decision Memorandum at Comment 6. In 
light of that decision, the Department for this review continues to 
consider CFP and Three Star as a single entity, hereinafter referred 
to as CFP/Three Star. Also see Memorandum to the File from Charles 
Riggle: Affiliation and Collapsing of China First Pencil Co., Ltd. 
and Shanghai Three Star Stationery Industry Corp., dated December 
30, 2004.
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    In its February 19, 2004, response to the Department's 
questionnaire, TCW stated that it did not export subject merchandise to 
the United States during the POR. CFP/Three Star, Orient International 
Holding Shanghai Foreign Trade Co., Ltd. (SFTC), and Rongxin submitted 
timely questionnaire responses. The remaining exporters/producers did 
not submit questionnaire responses and did not request that we extend 
the applicable deadlines for doing so.\3\
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    \3\ On July 26, 2004, we sent letters to Sichuan Light 
Industrial Products Import Export Corp. (Sichuan) and Anhui Import/
Export Group Corp. (Anhui) notifying them that the applicable 
deadlines for them to respond to our questionnaire had passed and 
that we had not received their questionnaire responses or requests 
to extend the deadline for receipt of their questionnaire responses. 
We asked them to notify us in writing if they had no shipments, 
sales or entries of subject merchandise. We notified Sichuan and 
Anhui that, if they did not respond, we may use facts available 
which could be adverse to their interests. We also sent a letter to 
the Chinese Ministry of Foreign Trade and Economic Cooperation 
(MOFTEC) informing them that Sichuan and Anhui had not responded to 
our questionnaire and that we may use facts available which could be 
adverse to the companies' interests. In addition, we informed MOFTEC 
that the questionnaire that we sent to Beijing Light Industrial 
Products Import Export Corporation (Beijing Light) had been returned 
as undeliverable and asked that MOFTEC forward a copy of the 
questionnaire to Beijing Light. On August 27, 2004, we sent an 
additional letter to MOFTEC notifying them that our letter to them, 
dated July 26, 2004, was returned to us after three unsuccessful 
delivery attempts and repeated the contents of our July 26, 2004, 
letter. We confirmed that this letter was delivered to MOFTEC on 
September 1, 2004. We did not receive any response to our July 26, 
2004, letters or to our August 27, 2004, letter.
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    On August 19, 2003, in accordance with section 751(a)(3)(A) of the 
Tariff Act of 1930, as amended (the Act), the Department extended the 
time limit for the preliminary results of this review until December 
30, 2004. See Certain Cased Pencils from the People's Republic of 
China: Extension of Time Limit for Preliminary Results of Antidumping 
Duty Administrative Review, 69 FR 47866 (August 6, 2004).
    The Department is conducting this administrative review in 
accordance with section 751 of the Act.

Scope of the Order

    Imports covered by this order are shipments of certain cased 
pencils of any shape or dimension (except as described below) which are 
writing and/or drawing instruments that feature cores of graphite or 
other materials, encased in wood and/or man-made materials, whether or 
not decorated and whether or not tipped (e.g., with erasers, etc.) in 
any fashion, and either sharpened or unsharpened. The pencils subject 
to the order are classified under subheading 9609.10.00 of the 
Harmonized Tariff Schedule of the United States (HTSUS). Specifically 
excluded from the scope of the order are mechanical pencils, cosmetic 
pencils, pens, non-cased crayons (wax), pastels, charcoals, chalks, and 
pencils produced under U.S. patent number 6,217,242, from paper infused 
with scents by the means covered in the above-referenced patent, 
thereby having odors distinct from those that may emanate from pencils 
lacking the scent infusion. Also excluded from the scope of the order 
are pencils with all of the following physical characteristics: 1) 
length: 13.5 or more inches; 2) sheath diameter: not less than one-and-
one quarter inches at any point (before sharpening); and 3) core 
length: not more than 15 percent of the length of the pencil.
    Although the HTSUS subheading is provided for convenience and 
customs purposes, the written description of the scope of the order is 
dispositive.

Intent to Rescind Review in Part

    We are preliminarily rescinding this review with respect to TCW 
because it made no shipments of subject merchandise to the United 
States during the POR. The Department reviewed CBP data and entry 
documents which indicate that TCW did not export subject merchandise to 
the United States during the POR.

Separate-Rates Determination

    In proceedings involving non-market-economy (NME) countries, the 
Department begins with a rebuttable presumption that all companies 
within the country are subject to governmental control and thus should 
be assessed a single antidumping duty deposit rate. It is the 
Department's policy to assign all exporters of merchandise subject to 
investigation in an NME country this single rate unless an exporter can 
demonstrate that its export activities are sufficiently independent so 
that it should be granted a separate rate. Rongxin, CFP/Three Star, and 
SFTC provided the separate-rates information we requested and reported 
that their export activities are not subject to governmental control.
    We examined the separate-rates information the respondents provided 
in order to determine whether the companies are eligible for a separate 
rate. The Department's separate-rates test, which is used to determine 
whether an exporter is independent from governmental control, does not 
consider, in general, macroeconomic/border-type controls, e.g., export 
licenses, quotas, and minimum export prices, particularly if these 
controls are imposed to prevent dumping. The test focuses, rather, on 
controls over the investment, pricing, and output decision-making 
process at the individual firm level. See Certain Cut- to-Length Carbon 
Steel Plate from Ukraine: Final Determination of Sales at Less than 
Fair Value, 62 FR 61754, 61757 (November 19, 1997), and Tapered Roller 
Bearings and Parts

[[Page 2117]]

Thereof, Finished and Unfinished, from the People's Republic of China: 
Final Results of Antidumping Duty Administrative Review, 62 FR 61276, 
61279 (November 17, 1997).
    To establish whether a firm is sufficiently independent from 
governmental control of its export activities so as to be entitled to a 
separate rate, the Department analyzes each entity exporting the 
subject merchandise under a test arising from 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 by 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). In accordance with the separate-rates criteria, the 
Department assigns separate rates in NME cases only if the respondents 
can demonstrate the absence of both de jure and de facto governmental 
control over export activities.

1. Absence of De Jure Control

    The Department considers the following de jure criteria in 
determining whether an individual company may be granted a separate 
rate: (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 20508 (May 6, 1991).
    Rongxin, CFP/Three Star, and SFTC reported that the merchandise 
under review was not subject to restrictive stipulations associated 
with their business license (e.g., pencils were not on the government's 
list of products subject to export restrictions or subject to export 
licensing requirements). Rongxin, CFP/Three Star, and SFTC submitted 
copies of their business licenses in their questionnaire responses. We 
found no inconsistencies in their statements regarding the absence of 
restrictive stipulations associated with their business licenses. 
Furthermore, Rongxin, CFP/Three Star, and SFTC submitted copies of PRC 
legislation demonstrating the statutory authority for establishing the 
de jure absence of governmental control over the companies. Thus, the 
evidence on the record supports a preliminary finding of the absence of 
de jure governmental control based on an absence of restrictive 
stipulations associated with the business licenses of Rongxin, CFP/
Three Star, and SFTC and the applicable legislative enactments 
decentralizing control of PRC companies.

2. Absence of De Facto Control

    Typically, the Department considers the following four factors in 
evaluating whether a respondent is subject to de facto governmental 
control of its export functions: (1) whether the export prices are set 
by, or are subject to, the approval of a governmental agency; (2) 
whether the respondent has the authority to negotiate and sign 
contracts and other agreements; (3) whether the respondent has autonomy 
from the government in making decisions regarding the selection of 
management; (4) whether the respondent retains the proceeds of its 
export sales and makes independent decisions regarding the disposition 
of profits or financing of losses. See Silicon Carbide, 59 FR at 22586-
87 (May 2, 1994); see also Notice of Final Determination of Sales at 
Less Than Fair Value: Furfuryl Alcohol From the People's Republic of 
China, 60 FR 22544, 22545 (May 8, 1995).
    As stated in previous cases, there is some evidence that certain 
enactments of the PRC central government have not been implemented 
uniformly among different sectors and/or jurisdictions in the PRC. See 
Silicon Carbide, 56 FR at 22587 (May 2, 1994). Therefore, the 
Department has determined that an analysis of de facto control is 
critical in determining whether respondents are, in fact, subject to a 
degree of governmental control which would preclude the Department from 
assigning separate rates.
    Rongxin, CFP/Three Star, and SFTC reported that they determine 
prices for sales of the subject merchandise based on market principles, 
the cost of the merchandise, and profit. Moreover, Rongxin, CFP/Three 
Star, and SFTC stated that they negotiated their prices directly with 
their customers. Also, each company claimed that their prices are not 
subject to review or guidance from any governmental organization. In 
addition, the record indicates that Rongxin, CFP/Three Star, and SFTC 
have the authority to negotiate and sign contracts and other 
agreements. Further, these companies claimed that their negotiations 
are not subject to review or guidance from any governmental 
organization. Finally, there is no evidence on the record to suggest 
that there is any governmental involvement in the negotiation of their 
contracts.
    Furthermore, Rongxin, CFP/Three Star, and SFTC reported that they 
have autonomy in making decisions regarding the selection of 
management. All three companies indicated that their selection of 
management is not subject to review or guidance from any governmental 
organization.
    Finally, Rongxin, CFP/Three Star, and SFTC reported that there are 
no restrictions on the use of their export revenues. There is no 
evidence on the record with respect to any of these companies to 
suggest that there is any governmental involvement in decisions 
regarding disposition of profits or financing of losses.
    Therefore, the evidence on the record supports a preliminary 
finding of the absence of de facto governmental control based on record 
statements and supporting documentation showing the following: (1) 
Rongxin, CFP/Three Star, and SFTC set their own export prices 
independent of the government and without the approval of a 
governmental authority, (2) Rongxin, CFP/Three Star, and SFTC have the 
authority to negotiate and sign contracts and other agreements, (3) 
Rongxin, CFP/Three Star, and SFTC have adequate autonomy from the 
government regarding the selection of management, and (4) Rongxin, CFP/
Three Star, and SFTC retain the proceeds from their sales and make 
independent decisions regarding the disposition of profits or financing 
of losses.
    The evidence placed on the record of this review by Rongxin, CFP/
Three Star, and SFTC demonstrates an absence of governmental control, 
both in law and in fact, with respect to their exports of the 
merchandise under review in accordance with the criteria identified in 
Sparklers and Silicon Carbide. Therefore, for purposes of these 
preliminary results, we are granting separate rates to Rongxin, CFP/
Three Star, and SFTC .

Fair-Value Comparisons

    To determine whether the respondents' sales of subject merchandise 
were made at less than NV, we compared the export price (EP) to NV, as 
described in the ``Export Price'' and ``Normal Value'' sections of this 
notice, below.

Export Price

    In accordance with section 772(a) of the Act, the Department 
calculated EPs for sales by Rongxin, CFP/Three Star, and SFTC to the 
United States because the subject merchandise was sold directly to 
unaffiliated customers in the United States (or to unaffiliated 
resellers outside the United States with knowledge that the merchandise 
was destined for the United States) prior to importation and 
constructed export-price methodology was not otherwise indicated. We 
made deductions from the net sales price for foreign inland

[[Page 2118]]

freight and foreign brokerage and handling. Each of these services was 
provided by an NME vendor and, thus, as explained in the ``Normal 
Value'' section below, we based the deductions for these movement 
charges on values from a surrogate country.
    For the reasons stated in the ``Normal Value'' section below, we 
selected India as the primary surrogate country. We valued foreign 
brokerage and handling using Indian values that were reported in the 
public version of the questionnaire response placed on the record in 
Certain Stainless Steel Wire Rod from India; Preliminary Results of 
Antidumping Duty Administrative and New Shipper Review, 63 FR 48184 
(September 9, 1998). We identify the source used to value foreign 
inland freight in the ``Normal Value'' section of this notice, below. 
We adjusted these values, as appropriate, to account for inflation or 
deflation between the effective period and the POR. We calculated the 
inflation or deflation adjustments for these values using the wholesale 
price indices (WPI) for India as published in the International 
Monetary Fund's (IMF's) publication, International Financial 
Statistics.

Normal Value

    For exports from NME countries, section 773(c)(1) of the Act 
provides that the Department shall determine NV using a factors of 
production (FOP) methodology if the subject merchandise is exported 
from an NME country and 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. Section 351.408 of 
the Department's regulations sets forth the methodology the Department 
uses to calculate the NV of merchandise exported from NME countries. 
The Department has treated the PRC as an NME country in every 
proceeding involving the PRC. Because none of the parties to this 
proceeding contested such treatment, we calculated NV in accordance 
with sections 773(c)(3) and (4) of the Act and 19 CFR 351.408(c).
    In accordance with section 773(c)(3) of the Act, the factors of 
production (FOP) the parties used in producing pencils include but are 
not limited to the following inputs: (1) hours of labor required, (2) 
quantities of raw materials employed, (3) amounts of energy and other 
utilities consumed, and (4) representative capital costs, including 
depreciation. In accordance with section 773(c)(4) of the Act, the 
Department valued the FOPs, to the extent possible, using the costs of 
the FOP in one or more market-economy countries that are at a level of 
economic development comparable to that of the PRC and are significant 
producers of comparable merchandise. We determined that India is 
comparable to the PRC in terms of per capita gross national product and 
the national distribution of labor. Furthermore, India is a significant 
producer of comparable merchandise. In instances where we were unable 
to use Indian surrogate-value information, we relied on Indonesian, 
Filipino, and U.S. values as discussed below. Indonesia and the 
Philippines are also comparable to the PRC in terms of per capita gross 
national product and the national distribution of labor, and both are 
significant producers of comparable merchandise. See Memorandum From 
Ronald Lorentzen, Director, Office of Policy, to Thomas F. Futtner, 
Acting Office Director, AD/CVD Enforcement, dated February 11, 2004, 
and Memorandum from Paul Stolz to File, dated December 30, 2004, which 
are available in the public file located in the Department's Central 
Records Unit, room B099, of the main Commerce building (CRU).
    In accordance with section 773(c)(1) of the Act, for purposes of 
calculating NV, we attempted to value the FOPs using surrogate values 
that were in effect during the POR. If we were unable to obtain 
surrogate values that were in effect during the POR, we adjusted the 
values, as appropriate, to account for inflation or deflation between 
the effective period and the POR. We calculated the inflation or 
deflation adjustments for all factor values, as applicable, except 
labor using the WPI for the appropriate surrogate country as published 
in International Financial Statistics. We valued the FOPs as follows:
    1) For producers that purchased Chinese lindenwood pencil slats, we 
valued slats using publicly available, published U.S. prices for 
American basswood lumber because price information for Chinese 
lindenwood and American basswood is not available from any of the 
potential surrogate countries.\4\ The U.S. lumber prices for basswood 
are published in the 2004 Hardwood Market Report for the period 
December 2002 through November 2003.
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    \4\ In the antidumping investigation of certain cased pencils 
from the PRC, the Department found Chinese lindenwood and American 
basswood to be virtually indistinguishable and thus used U.S. prices 
for American basswood to value Chinese lindenwood. See Notice of 
Final Determination of Sales at Less Than Fair Value: Certain Cased 
Pencils from the People's Republic of China, 59 FR 55625, 55632 
(November 8, 1994). This methodology was upheld by the Court of 
International Trade. See Writing Instrument Manufacturers 
Association, Pencil Section, et al. v. United States, Slip Op. 97-
151 (Ct. Int'l. Trade, Nov. 13, 1997) at 16.
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    2) For producers that manufactured slats from Chinese lindenwood 
timber, we valued the timber using publicly available, published U.S. 
prices for American basswood timber because price information for 
Chinese lindenwood and American basswood is not available from any of 
the potential surrogate countries. The U.S. timber prices for basswood 
are published in the Sawlog Bulletin. Timber prices were published in 
the Sawlog Bulletin in the months of January, February, April, May, 
July, August, October, and November 2003.
    3) We valued the following material inputs using Indian import data 
from the World Trade Atlas (WTA) for December 2002 through November 
2003: acetone, alkyds resin, beeswax, butanes, butyl ester, calcium 
carbonate, cellulose, erasers, dibutyl ester, diluent, dyestuff, 
ethanol, ethyl ester, ferrules, foam grips, foil, formaldehyde, 
glitter, glue, graphite powder, hardening oil, heat transfer film, 
kaolin clay, key chains, lithopone, malice acid ester, methyl benzene, 
nitro-paint/lacquer, penetrating agent, pigment, plastic, printing ink, 
propylene, pyroxylin, sawdust/wood, soap, soft agent, stearic acid, 
sticker paper, talcum powder, titanium, toppers, velvet wrap, wax, and 
dye.
    4) We valued black and color cores using Indonesian import data 
from the WTA for January 2002 through December 2002. We were not able 
to calculate separate surrogate values for black versus color cores 
based on information on the record of this review.
    We also valued the following material inputs using Indonesian 
import data: erasers, graphite powder, tallow, castor oil, and syrup.
    5) In accordance with 19 CFR 351.408 (c)(1), we valued certain 
material inputs used by CFP/Three Star at acquisition cost because it 
purchased these inputs from a market- economy supplier and paid them 
for using a market-economy currency.
    6) We valued the following packing materials using Indian import 
data from the WTA for December 2002 through November 2003: cardboard 
cartons, master cartons, packing boxes, packing tape, pallets, paper 
labels, plastic boxes, plastic canisters, plastic shrink wrap,

[[Page 2119]]

plastic straps, and polybags.
    7) We valued electricity using the 2002 Indian industry rate for 
electricity (U.S. dollars/kWh) from the publicly available Key World 
Energy Statistics (2002) (Energy Statistics), published by the 
International Energy Agency. We also valued diesel fuel and coal using 
the Indian value reported in Energy Statistics. We adjusted these 
values, as appropriate, to account for inflation or deflation between 
the effective period and the POR. We have declined to value one energy 
input, steam, for these preliminary results as we are unable to find an 
appropriate surrogate value.
    8) In accordance with 19 CFR 351.408(c)(3), we valued labor using a 
regression-based wage rate for the PRC listed in the Import 
Administration web site under ``Expected Wages of Selected NME 
Countries.'' See https://ia.ita.doc.gov/wages.
    9) We derived ratios for factory overhead, selling, general and 
administrative (SG&A) expenses, and profit using the financial 
statements of Asia Wood International Corporation (Asia Wood), a wood-
products producer in the Philippines. As stated above, the Philippines 
is a significant producer of comparable merchandise. Asia Wood's 
financial statements represent the best available record information 
with which to derive financial ratios because Asia Wood employs a 
number of the same production processes as those used by the 
respondents, including, for example, cutting wood, sanding wood, 
glueing wood, and painting wood. From this information, we were able to 
calculate factory overhead as a percentage of direct materials, labor, 
and energy expenses, SG&A expenses as a percentage of the total cost of 
manufacturing, and profit as a percentage of the sum of the total cost 
of manufacturing and SG&A expenses.
    We used the following sources to value truck and rail freight 
services provided to transport the finished product to the port and 
direct materials, packing materials, and coal from the suppliers of the 
inputs to the producers. To value truck freight, we used the freight 
rates published in the Great Indian Bazaar at https://www.infobanc.com/
logtruck.htm. We obtained distances between cities from the following 
website: https://www.mapsofindia.com. The value reflects freight rates 
in effect on September 25, 2004. We valued rail-freight services using 
the April 1995 rates published by the Indian Railway Conference 
Association. We adjusted these values, as appropriate, to account for 
inflation or deflation between the effective period and the POR using 
the WPI published by the Reserve Bank of India.
    For further discussion of the surrogate values we used for these 
preliminary results of review, see the Memorandum From Paul Stolz 
Regarding Factors-of-Production Valuation for Preliminary Results 
(December 30, 2004), which is on file in the CRU.

Use of Total Adverse Facts Available

    Three producers/exporters named in the notice of initiation did not 
respond to the Department's questionnaire. The PRC- wide rate applies 
to all entries of subject merchandise except for entries from PRC 
producers/exporters that have their own calculated rate. Companies that 
have not demonstrated their entitlement to a separate rate are 
appropriately considered to be part of the PRC-wide entity. Therefore, 
we determine it is necessary to review the PRC-wide entity because it 
did not provide information necessary to the instant proceeding. In 
doing so, we note that section 776(a)(1) of the Act mandates that the 
Department use the facts available if necessary information is not 
available on the record of an antidumping proceeding. In addition, 
section 776(a)(2) of the Act provides that if an interested party or 
any other person: (A) Withholds information that has been requested by 
the administering authority; (B) fails to provide such information by 
the deadlines for the submission of the information or in the form and 
manner requested, subject to subsections (c)(1) and (e) of section 782; 
(C) significantly impedes a proceeding under this title; or (D) 
provides such information but the information cannot be verified as 
provided in section 782(i), the Department shall, subject to section 
782(d) of the Act, use the facts otherwise available in reaching the 
applicable determination under this title.
    Where the Department determines that a response to a request for 
information does not comply with the request, section 782(d) of the Act 
provides that the Department shall promptly inform the party submitting 
the response of the nature of the deficiency and shall, to the extent 
practicable, provide that party with an opportunity to remedy or 
explain the deficiency. Section 782(e) of the Act provides that the 
Department shall not decline to consider information that is submitted 
by an interested party and is necessary to the determination but does 
not meet all the applicable requirements established by the 
administering authority. Because the PRC-wide entity provided no 
information, we determine that sections 782(d) and (e) of the Act are 
not relevant to our analysis. According to section 776(b) of the Act, 
if the Department finds that an interested party ``has failed to 
cooperate by not acting to the best of its ability to comply with a 
request for information,'' the Department may use information that is 
adverse to the interests of the party as facts otherwise available. 
Adverse inferences are appropriate ``to ensure that the party does not 
obtain a more favorable result by failing to cooperate than if it had 
cooperated fully.'' See Statement of Administrative Action (SAA) 
accompanying the URAA, H. Doc. No. 316, 103d Cong., 2d Session at 870 
(1994). Furthermore, ``an affirmative finding of bad faith on the part 
of the respondent is not required before the Department may make an 
adverse inference.'' Antidumping Duties; Countervailing Duties: Final 
Rule, 62 FR 27296, 27340 (May 19, 1997).
    As above stated, the PRC-wide entity did not respond to our 
requests for information. Because the PRC-wide entity did not respond 
to our request for information in the form or manner requested, we find 
it necessary, under section 776(a)(2) of the Act, to use facts 
otherwise available as the basis for the preliminary results of review 
for the PRC-wide entity. In addition, pursuant to section 776(b) of the 
Act, we find that the PRC-wide entity failed to cooperate by not acting 
to the best of its ability to comply with a request for information. As 
noted above, the PRC-wide entity failed to respond in the proper format 
or in a timely manner to the Department's questionnaire, despite 
repeated requests that it do so. Thus, because the PRC-wide entity 
refused to participate fully in this proceeding, we find it appropriate 
to use an inference that is adverse to the interests of the PRC-wide 
entity in selecting from among the facts otherwise available. By doing 
so, we ensure that the companies that are part of the PRC-wide entity 
will not obtain a more favorable result by failing to cooperate than 
had they cooperated fully in this review. An adverse inference may 
include reliance on information derived from the petition, the final 
determination in the investigation, any previous review, or any other 
information placed on the

[[Page 2120]]

record. See section 776(b) of the Act. It is the Department's practice 
to assign the highest rate from any segment of the proceeding as total 
adverse facts available when a respondent fails to cooperate to the 
best of its ability. Specifically, as adverse facts available, we have 
assigned to the PRC-entity 114.90 percent, which is the current PRC-
wide rate.

Corroboration

    Section 776(c) of the Act provides that, when the Department relies 
on secondary information rather than on information obtained in the 
course of an investigation or review, it shall, to the extent 
practicable, corroborate that information from independent sources that 
are reasonably at its disposal. Secondary information is defined as 
``[i]nformation derived from the petition that gave rise to the 
investigation or review, the final determination concerning the subject 
merchandise, or any previous review under section 751 concerning the 
subject merchandise.'' See the Statement of Administrative Action 
(SAA), H.R. Doc. 103-316 at 870 (1994). Corroborate means that the 
Department will satisfy itself that the secondary information to be 
used has probative value. See SAA at 870. To corroborate secondary 
information, the Department will, to the extent practicable, examine 
the reliability and relevance of the information to be used. The SAA 
emphasizes at 869, however, that the Department need not prove that the 
selected facts available are the best alternative information.
    In this review, we are using as adverse facts available the highest 
dumping margin from this or any prior segment of the proceeding, the 
current PRC-wide rate of 114.90 percent. This rate was calculated in 
the 1999 - 2000 administrative review of the order on certain cased 
pencils from the PRC. See Notice of Amended Final Results and Partial 
Rescission of Antidumping Duty Administrative Review: Certain Cased 
Pencils from the People's Republic of China, 67 FR 59049 (September 19, 
2002). Therefore, the PRC-wide rate of 114.90 percent constitutes 
secondary information within the meaning of the SAA. See SAA at 870. 
Unlike other types of information such as input costs or selling 
expenses, however, there are no independent sources for calculated 
dumping margins. Thus, in an administrative review, if the Department 
chooses as facts available a calculated dumping margin from a prior 
segment of the proceeding, it is not necessary to question the 
reliability of the margin if it was calculated from verified sales and 
cost data. The 114.90 percent PRC-wide rate is based on verified 
information provided by Kaiyuan Group Corporation in the 1999 - 2000 
administrative review of the order on certain cased pencils from the 
PRC. This rate has not been invalidated judicially. Therefore, we 
consider this rate to be reliable.
    With respect to the relevance aspect of corroboration, the 
Department will consider information reasonably at its disposal to 
determine whether a margin continues to have relevance. Nothing in the 
record of this review calls into question the relevance of the margin 
we have selected as adverse facts available. Moreover, the selected 
margin is the current PRC-wide rate and is currently applicable to 
exporters who do not have a separate rate. Thus, it is appropriate to 
use the selected rate as adverse facts available in the instant review.

Preliminary Results of Review

    As a result of our review, we preliminarily determine that the 
following margins exist for the period December 1, 2002, through 
November 30, 2003:

------------------------------------------------------------------------
                                                                Margin
                    Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
Shandong Rongxin Import and Export Co., Ltd.................       17.19
China First Pencil Company, Ltd./Shanghai Three Star                6.48
 Stationery Industry Corp...................................
Orient International Holding Shanghai Foreign Trade Co.,           24.66
 Ltd........................................................
PRC-Wide Rate...............................................      114.90
------------------------------------------------------------------------

    In accordance with 19 CFR 351.224(b), the Department will disclose 
to interested parties within five days of the date of publication of 
this notice the calculations it performed for the preliminary results. 
An interested party may request a hearing within 30 days of publication 
of the preliminary results. See 19 CFR 351.310(c). Interested parties 
may submit written comments (case briefs) within 30 days of publication 
of the preliminary results and rebuttal comments (rebuttal briefs), 
which must be limited to issues raised in the case briefs, within five 
days after the time limit for filing case briefs. See 19 CFR 
351.309(c)(1)(ii) and 19 CFR 351.309(d). Parties who submit arguments 
are requested to submit with the argument (1) a statement of the issue, 
(2) a brief summary of the argument, and (3) a table of authorities. 
Further, the Department requests that parties submitting written 
comments provide the Department with a diskette containing the public 
version of those comments. We will issue a memorandum identifying the 
date of a hearing, if one is requested. Unless the deadline is extended 
pursuant to section 751(a)(3)(A) of the Act, the Department will issue 
the final results of this administrative review, including the results 
of our analysis of the issues raised by the parties in their comments, 
within 120 days of publication of the preliminary results.

Assessment Rates

    Upon completion of this administrative review, the Department will 
determine, and CBP shall assess, antidumping duties on all appropriate 
entries. We have calculated customer-specific antidumping duty 
assessment amounts for subject merchandise based on the ratio of the 
total amount of antidumping duties calculated for the examined sales to 
the total quantity of sales examined. We calculated these assessment 
amounts because there is no information on the record which identifies 
entered values or the importers of record. The Department will issue 
appropriate assessment instructions directly to CBP within 15 days of 
publication of the final results of review. If these preliminary 
results are adopted in the final results of review, we will direct CBP 
to assess the resulting assessment amounts, calculated as described 
above, on each of the applicable entries during the review period.

Cash Deposit Requirements

    The following deposit requirements will apply to all shipments of 
pencils from the PRC entered, or withdrawn from warehouse, for 
consumption on or after the publication date of the final results of 
this administrative review, as provided by section 751(a)(1) of the 
Act: (1) the cash deposit rates for the reviewed companies named above 
will be the rates for those firms established in the final results of 
this administrative review; (2) for any previously reviewed or 
investigated PRC or non-PRC exporter, not covered in this review, with 
a separate rate, the cash deposit rate will be the company-specific 
rate established in the most recent segment of this proceeding; (3) for 
all other PRC exporters, the cash deposit rate will be the PRC-wide 
rate established in the final results of this review; and (4) the cash 
deposit rate for any non-PRC exporter of subject merchandise from the 
PRC will be the rate applicable to the PRC exporter that supplied that 
exporter. These deposit requirements, when imposed, shall remain in 
effect until publication of the final results of the next 
administrative review.

[[Page 2121]]

Notification to Interested Parties

    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f)(2) 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.
    We are issuing and publishing this determination in accordance with 
sections section 751(a)(1) and 777(i)(1) of the Act.

    Dated: December 30, 2004.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 05-604 Filed 1-11-05; 8:45 am]
BILLING CODE 3510-DS-S