Certain Cased Pencils from the People's Republic of China; Preliminary Results of Antidumping Duty Administrative Review and Intent to Rescind in Part, 76755-76763 [E5-7881]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 70, Number 248 (Wednesday, December 28, 2005)]
[Notices]
[Pages 76755-76763]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-7881]


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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, 2003, through November 30, 2004, have been made at 
prices less than normal value (NV). In addition, we are preliminarily 
rescinding this review with respect to

[[Page 76756]]

Tianjin Custom Wood Processing Co., Ltd. (TCW), because TCW reported 
that it made no shipments of subject merchandise to the United States 
during the period of review (POR).\1\ 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.
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    \1\ We reviewed U.S. Customs and Border Protection (CBP) data 
and found no evidence that TCW made shipments of subject merchandise 
to the United States during the POR.

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EFFECTIVE DATE: December 28, 2005.

FOR FURTHER INFORMATION CONTACT: Paul Stolz or Cathy Feig, AD/CVD 
Operations, Office 8, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14\th\ Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-4474 
and (202) 482-3962, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On December 1, 2004, 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, 2003, through November 30, 2004. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity to Request Administrative Review, 69 FR 69889 (December 1, 
2004).
    On December 28, 2004, 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 30, 2004, CSR Industries, doing 
business as American Business Technology (CSR), requested that the 
Department conduct an administrative review of subject merchandise 
exported by Shanghai Weijun International Trading/Grand World Inc. 
(Weijun). Also on December 30, 2004, domestic interested parties, 
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 ten producers/
exporters.\2\ In addition, on January 3, 2005, China First Pencil 
Company, Ltd, SFTC, and Shanghai Three Star requested a review of their 
exports of subject merchandise to the United States.\3\
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    \2\ The ten producers/exporters covered by the domestic 
interested parties' request are Anhui Import/Export Group 
Corporation, Beijing Light Industrial Products Import/Export 
Corporation, Beijing Yixunda Technology and Trade Co., Ltd., China 
First Pencil Company, Ltd. (CFP), Guangdong Stationery & Sporting 
Goods Import & Export Corp. (GSSG), Orient International Holding 
Shanghai Foreign Trade Co., Ltd., (SFTC), Rongxin, Sichuan Light 
Industrial Products Import/Export Corporation, Shanghai Three Star 
Stationery Industry Corp. (Three Star), and TCW.
    \3\ The Department was closed on December 31, 2004, a legal 
holiday. January 3, 2005 was the next business day.
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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, 70 FR 4818 (January 31, 2005).\4\ On February 
1, 2005, we issued antidumping duty questionnaires to the exporters/
producers subject to this review.
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    \4\ 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 interested 
parties. 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. 
The Department continued to collapse CFP and Three Star in the final 
results of the 2002-2003 administrative review. See Certain Cased 
Pencils from the People's Republic of China; Final Results and 
Partial Rescission of Antidumping Duty Administrative Review, 70 FR 
42301 (July 22, 2005) and the accompanying Issues and Decision 
Memorandum at Comment 1 (Pencils 02/03). For this review, the 
Department continues to consider CFP and Three Star (hereinafter 
referred to as CFP/Three Star) to be a single entity.
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    In their respective February 22, 2004, responses to the 
Department's questionnaire, TCW and GSSG stated that they 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. On 
March 10, 2005, in accordance with 19 CFR 351.213(d)(1), CSR withdrew 
its request for review. The remaining exporters/producers did not 
submit questionnaire responses and did not request that we extend the 
applicable deadlines for doing so.\5\
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    \5\ On April 18, 2005, we sent letters by commercial courier to 
Anhui Import/Export Group Corp. (Anhui), Beijing Yixunda Technology 
and Trade Co., Ltd. (Yixunda), and Sichuan Light Industrial Products 
(Sichuan) 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 confirmed by the 
courier's shipment tracking that these companies received our 
questionnaire. We asked them to notify us in writing if they had no 
shipments, sales or entries of subject merchandise. We notified 
Anhui, Yixunda, and Sichuan 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 Bureau of Fair Trade for Imports & 
Exports, Ministry of Commerce (MOFCOM) informing it that Anhui, 
Yixunda, and Sichuan 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 MOFCOM that the questionnaires 
that we sent to Beijing Light Industrial Products Import Export 
Corporation (Beijing Light) and Guangdong Provincial Stationery & 
Sporting Goods Import & Export Corporation (Guangdong Provincial) 
had been returned as undeliverable and asked that MOFCOM forward 
copies of the questionnaire to Beijing Light and Guangdong 
Provincial. We confirmed using courier tracking that MOFCOM received 
this letter.
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    On July 22, 2005, 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 
16, 2005. See Certain Cased Pencils from the People's Republic of 
China: Extension of Time Limit for Preliminary Results of Antidumping 
Duty Administrative Review, 70 FR 42303 (July 22, 2005).
    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 currently classifiable 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:

[[Page 76757]]

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 reported that it made no shipments of subject merchandise to 
the United States during the POR. The Department reviewed CBP data 
which did not indicate that TCW exported subject merchandise to the 
United States during the POR.

Rescission of Review

    We are rescinding this review in accordance with 19 CFR 
351.213(d)(1) with respect to Weijun. CSR withdrew its request for 
review of Weijun on March 10, 2005. There was no other request for a 
review of Weijun and CSR's letter withdrawing its request for a review 
was timely filed.

Verification

    As provided in section 782(i) of the Act, during September 2005, 
the Department conducted verifications of SFTC and Rongxin. During the 
verification of SFTC and Rongxin, the Department followed standard 
procedures in order to test the information submitted by the 
respondents. These procedures include on-site inspection of the 
manufacturers' facilities, examination of relevant sales and financial 
records, and selection of relevant source documentation as exhibits. We 
adjusted reported data used in our preliminary results based on our 
findings at verification as applicable. See Memoranda from Charles 
Riggle, Program Manager, to the file, Margin Calculation Analysis: 
Orient Holding Shanghai Foreign Trade Co., Ltd. and Margin Calculation 
Analysis: Shandong Rongxin Import and Export Co., Ltd., both dated 
December 16, 2005 (Calculation Memoranda). Our verification findings 
are on file in the Department's Central Records Unit, room B099, of the 
main Commerce building (CRU-Public File). See Memoranda from Charles 
Riggle, Program Manager, to Wendy Frankel, Office Director, AD/CVD 
Operations, Office 8, Verification Reports: U.S. Sales and Factors-of-
production, dated December 13, 2005 (Verification Reports).

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 separate 
rates. 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 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) at Comment 1, 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, 22587 
(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 20588 (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. This 
legislation included the Company Law of the People's Republic of China, 
the Foreign Trade Law of the People's Republic of China, and other 
legislation. 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

    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.
    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

[[Page 76758]]

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; 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).
    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. Rongxin reported that it set prices 
``via direct competitive negotiation.'' Moreover, Rongxin, CFP/Three 
Star, and SFTC stated that they negotiated their prices directly with 
their customers. 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. In 
accordance with 19 CFR 351.401(c), we made deductions from the net 
sales price for foreign inland 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. To value brokerage and 
handling, the Department used an average of the publicly summarized 
data from the following two sources which we have placed on the record 
of this review: 1) data reported in the U.S. sales listing in the 
February 28, 2005, submission from Essar Steel Ltd. (Essar Steel) in 
the antidumping duty administrative review of Certain Hot-Rolled Carbon 
Steel Flat Products from India, A-533-820 (covering December 2003 - 
November 2004), and 2) data reported in Pidilite Industries' March 9, 
2004, public version response submitted in the AD investigation of 
Carbazole Violet Pigment 23 from India, A-533-838 (covering the period 
November 2002 - September 2003). 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 Financial Statistics Online Service maintained by the 
Statistics Department of the International Monetary Fund at the website 
https://www.imfstatistics.org on May 17, 2005 (IFS).
    For Rongxin we also made deductions to two invoices for billing 
adjustments discovered by the Department during verification. For a 
full discussion of these expenses see the Rongxin verification report.

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 FOPs 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

[[Page 76759]]

merchandise. In instances where we were unable to use Indian surrogate-
value information, we relied on Indonesian or Filipino import data, 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 Ron Lorentzen, Acting 
Director, Office of Policy, to Wendy Frankel, Office Director, China/
NME Group, Office 8, dated March 15, 2005, regarding potential 
surrogate countries, and Memorandum from Paul Stolz to File, dated 
December 16, 2005, regarding significant producers of pencils, which 
are available in the CRU - Public File.
    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 the IFS. 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.\6\ The U.S. lumber prices for basswood 
are published in the 2005 Hardwood Market Report for the period 
December 2003 through November 2004.
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    \6\ 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, 984 F. Supp. 
629, 639 (CIT 1997), aff'd 178 F.3d 1311 (Fed. Cir. 1998).
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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 contemporaneous 
with the POR were not available for use in the preliminary results. We 
will attempt to obtain contemporaneous timber prices for use in the 
final results. For the preliminary results we inflated timber prices 
published in the Sawlog Bulletin in the months of January, February, 
April, May, July, August, October, and November 2003 using U.S. WPI 
data.
    3) We valued the following material inputs using Indian import data 
from the World Trade Atlas (WTA) for December 2003 through November 
2004: acetone, alkyds resin, butanes, butanol, butter, butyl ester, 
calcium carbonate, carbon black, erasers, eraser caps, ethanol, ethyl 
ester, foam grips, foil, formaldehyde, glitter, glue, graphite powder, 
gum arabic, hardening oil, heat transfer film, hooks, ink oil, lacquer, 
lithopone, malice acid ester, methanol, methyl benzene, oxalic acid, 
penetrating agent, petroleum jelly, plastic, plastic topper, printing 
ink, propylene, pyroxylin, sawdust/wood, sealing paper, sharpeners, 
soap, soft agent, stearic acid, syrup, talcum powder, tallow, thinner, 
titanium, velvet wrap and wooden boxes.
    4) We valued the following material inputs using inflated Indian 
import data from the WTA for December 2002 through November 2003 
because contemporaneous data were not available: beeswax, clear wax, 
dibutyl ester, diluent, dyestuff, ferrules, kaolin clay, key chains, 
nitro-paint/lacquer, pigment, sticker paper, wax, and yellow dye.
    5) We valued the castor oil using inflated Indian import data from 
the WTA for December 2001 through November 2002 because contemporaneous 
data were not available.
    6) We valued black and color cores using inflated Indonesian import 
data from the WTA for January 2002 through December 2002 because 
contemporaneous data were not reliable. We were not able to calculate 
separate surrogate values for black versus color cores based on 
information on the record of this review.
    7) In accordance with 19 CFR 351.408 (c)(1), we valued color cores, 
erasers, eraser material, foam grips, and lacquer used by CFP/Three 
Star at acquisition cost because it purchased these inputs from market-
economy suppliers and paid for them using a market-economy currency.
    8) We valued the following packing materials using inflated Indian 
import data from the WTA for December 2002 through November 2003 
because contemporaneous data were not available/reliable: cardboard 
cartons, master cartons, packing boxes, paper labels, plastic boxes, 
plastic canisters, polypropylene film.
    9) We valued the following packing materials using Indian import 
data from the WTA for December 2003 through November 2004: packing 
tape, plastic shrink wrap, plastic straps, and polybags.
    10) We valued electricity using rates from Energy Prices and Taxes: 
Second Quarter 2003 (Energy Prices), published by the International 
Energy Agency. We valued coal using the Teri Energy Data Directory & 
Yearbook (2004). We adjusted these values, as appropriate, to account 
for inflation or deflation between the effective period and the POR. We 
valued steam using the value for natural gas, as adjusted, based on the 
ratio of British thermal units (BTU) generated by natural gas to the 
BTUs generated by steam. We inflated the surrogate value for steam 
using the U.S. wholesale price index for the POR as published in the 
IFS.
    11) We valued labor, consistent with 19 CFR 351.408(c)(3), using 
the PRC regression-based wage rate as reported on Import 
Administration's home page, Import Library, Expected Wages of Selected 
NME Countries, revised in November 2005, and posted to Import 
Administration's website at https://ia.ita.doc.gov/wages. The source of 
this wage rate data on Import Administration's website is the Yearbook 
of Labour Statistics 2003, International Labor Office, (Geneva: 2003), 
Chapter 5B: Wages in Manufacturing (https://laborsta.ilo.org). The years 
of the reported wage rates range from 1998 to 2003. Because this 
regression-based wage rate does not separate the labor rates into 
different skill levels or types of labor, we have applied the same wage 
rate to all skill levels and types of labor reported by the respondent.
    12) We derived ratios for factory overhead, selling, general and

[[Page 76760]]

administrative (SG&A) expenses, and profit using the 2003 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.
    13) 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 at https://www.infreight.com. 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 16, 2005), which is on file in the CRU - Public File.

Use of Partial Adverse Facts Available

    Section 776(a)(1) and (2) of the Act provides that the Department 
shall apply ``facts otherwise available'' if, inter alia, necessary 
information is not on the record or an interested party or any other 
person: (A) withholds information that has been requested; (B) fails to 
provide information within the deadlines established, or in the form 
and manner requested by the Department, subject to subsections (c)(1) 
and (e) of section 782 of the Act; (C) significantly impedes a 
proceeding; or (D) provides information that cannot be verified as 
provided by section 782(i) of the Act. Section 776(b) of the Act 
further provides that the Department may use an adverse inference in 
applying the facts otherwise available when a party has failed to 
cooperate by not acting to the best of its ability to comply with a 
request for information. Section 776(b) of the Act also authorizes the 
Department to use as adverse facts available (AFA) information derived 
from the petition, the final determination, a previous administrative 
review, or other information placed on the record.
    For the reasons explained below, and pursuant to sections 
776(a)(2)(A) and 776(b) of the Act, the Department has determined to 
apply partial AFA for certain U.S. sales that SFTC failed to report. On 
February 1, 2005, the Department requested that SFTC report all 
shipments of subject merchandise to the United States during the POR. 
In section A(4)(a) of the February 1, 2005, questionnaire, the 
Department requested that SFTC describe the date selected as the date 
of sale to be used in the POR. In section C of the questionnaire, the 
Department also requested that SFTC report the date of sale as defined 
in the Glossary of Terms at Appendix I, which states the Department 
will normally use the date of invoice, as recorded in the exporter's or 
producer's records kept in the ordinary course of business. On March 8, 
2005, and April 7, 2005, SFTC submitted questionnaire responses to 
sections A and C, respectively, and responded that its date of sale is 
the date of invoice. On July 29, 2005, in a supplemental questionnaire 
response, SFTC stated that it compiled its reported U.S. sales list 
through a manual inspection of invoices. On April 7, 2005, SFTC 
submitted to the Department what it reported to be all sales of subject 
merchandise sold to the United States during the POR, based upon 
invoice date.
    Prior to the start of verification, SFTC provided the Department 
with its submission of clerical errors and minor corrections.\7\ 
However, during verification, the Department discovered several sales 
of subject merchandise to the United States during the POR which were 
not reported to the Department by SFTC. SFTC explained that it did not 
report these sales, which it deemed outside the POR, because SFTC did 
not believe the merchandise associated with these sales would have 
entered the United States until after the end of the POR. Nevertheless, 
the sales invoices were clearly dated within the POR. Therefore, 
because SFTC withheld information the Department requested, that is the 
sales in question, pursuant to section 776(a)(2)(A) of the Act, the 
Department is applying facts available to those transactions.
---------------------------------------------------------------------------

    \7\ SFTC placed this submission on the record on September 21, 
2005.
---------------------------------------------------------------------------

    The U.S. Court of Appeals for the Federal Circuit has held that the 
``best of its ability'' standard ``requires the respondent to do the 
maximum it is able to do.'' See Nippon Steel Corp. v. United States, 
337 F.3d 1373, 1382 (Fed Cir. 2003) (Nippon Steel). The Department has 
determined that SFTC did not act to the best of its ability because it 
neither included nor notified the Department in a timely manner that it 
was not including these sales in its filing. This information was 
within SFTC's control. The company itself explained that the U.S. sales 
date should be based on invoice date. Under these circumstances, it is 
fully reasonable for the Department to expect that SFTC would be 
forthcoming with this information, and that its failure to do so 
demonstrates that SFTC failed to put forth the maximum effort. Nippon 
Steel, 337 F.3d at 1382; see also Neuberg Fertigung GmbH v. United 
States, 797 F. Supp. 1020, 1024 (CIT 1992) (``{u{time} ltimately it is 
the respondent's responsibility to make sure that {Commerce{time}  
understands, and correctly uses, any information provided by the 
respondent.'')
    Section 776(b) of the Act states that AFA may include information 
derived from the petition, the final determination, a previous 
administrative review, or other information placed on the record. As 
AFA for the preliminary results, and in accordance with section 776(b), 
the Department is applying the highest transaction margin for SFTC from 
the current administrative review to SFTC's unreported sales.

Use of Total Adverse Facts Available

The PRC Entity

    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

[[Page 76761]]

established by the administering authority.
    Four 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 
of the Act; (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) of the Act, the Department shall, subject to 
section 782(d) of the Act, use the facts otherwise available in 
reaching the applicable determination under this title.
    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 Sess., Vol. 1 (1994) at 870. 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 requests 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 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 AFA when a respondent fails to cooperate to 
the best of its ability. See Honey from the People's Republic of China; 
Final Results and Final Rescission In Part of Antidumping Duty 
Administrative Review, 70 FR 38873 (July 6, 2005). Specifically, as 
AFA, we have assigned to the PRC-entity 114.90 percent, which is the 
current PRC-wide rate.

GSSG

    Application of AFA to GSSG is appropriate in this review because 
GSSG withheld or failed to provide information specifically requested 
by the Department. In our original questionnaire (at C-1) we asked GSSG 
to ``Report for each U.S. sale of merchandise entered for consumption 
during the POR, except: (1) for EP sales, if you do not know the entry 
dates, report each transaction involving merchandise shipped during the 
POR. . . .'' See the antidumping questionnaire issued to GSSG on 
February 1, 2005. On February 22, 2005, GSSG submitted a letter 
requesting an extension of the due date to file its Section A response. 
GSSG further stated that no extension for Sections C and D was required 
because
'' . . . it had no exports to the United States during the period 
December 1, 2003 to November 30, 2004, and for at least several months 
prior to that time.'' On March 4, 2005, GSSG certified that it ``had no 
exports to the United States during 2003 and 2004.''
    We reviewed CBP data and found information indicating that subject 
merchandise exported by GSSG entered the U.S. during the POR. On 
November 16, 2005, we issued a supplemental questionnaire (GSSG 
supplemental) to GSSG which included the CBP entry number, entry date, 
export date, and the quantity and value of the entry in question. The 
CBP data indicated that the entry date and export date are clearly 
within the POR. We specifically asked GSSG to ``Please review GSSG's 
sales, exports, and shipments made during the POR (and prior to the POR 
as applicable) and clarify whether GSSG had any exports, sales or 
entries of subject merchandise to the United States during the POR.'' 
On November 23, 2005, GSSG responded to our supplemental questionnaire 
stating that ``Because the date of the invoice is prior to the POR, the 
transaction is not a 'sale' that need have been reported.'' However, 
the invoice GSSG submitted as support was undated and did not cover 
subject merchandise. Moreover, GSSG did not dispute that the subject 
merchandise was exported during the POR and entered the United States 
during the POR. Neither did GSSG claim that it was unaware that the 
merchandise was destined for the United States.
    On November 18, 2005, we requested from CBP entry documents 
covering the transaction in question. We received these documents on 
December 5, 2005. The entry documents show that the merchandise was 
destined for the United States and originated in the PRC. The CBP entry 
documents confirm that GSSG exported subject merchandise during the 
POR. Although given ample opportunity to provide the requested 
information which any producer/exporter would be expected to keep in 
the ordinary course of business, GSSG failed to provide this 
information. Accordingly, because GSSG failed to cooperate by not 
acting to the best of its ability to comply with a request for 
information, the Department is using information adverse to GSSG's 
interests as facts otherwise available. In its supplemental 
questionnaire response GSSG stated that ``The reference in GSSG's 
earlier submission to the fact that it had 'no sales, exports or 
entries' of subject merchandise was . . . slightly

[[Page 76762]]

inaccurate.'' See GSSG's supplemental questionnaire response dated 
November 23, 2005. However, GSSG did not clarify or correct the 
inaccuracies. Notwithstanding this, evidence on the record clearly 
substantiates the fact that GSSG exported subject merchandise to the 
United States during the POR, and that the merchandise entered the 
United States during the POR. See the GSSG supplemental and the 
memorandum from Paul Stolz to the file dated December 13, 2005 
regarding customs entry documents. GSSG has not disputed these facts. 
In addition, GSSG stated in its supplemental response dated November 
23, 2005, that it is attempting to locate additional records related to 
this transaction and will attempt to provide them to the Department as 
they are located. To date, GSSG has not submitted any information in 
this regard. Moreover, the commercial invoice GSSG submitted in support 
of its supplemental questionnaire response did not cover the 
transaction in question and was undated. GSSG made no attempt to 
explain this or to link this invoice to the sale of subject 
merchandise. Therefore, because the evidence shows that GSSG had at 
least one export of subject merchandise to the United States during the 
POR, but GSSG did not submit any sales or factors of production data as 
requested in the questionnaire, it is appropriate to use AFA. 
Furthermore, we find that GSSG does not merit a separate rate and will 
be subject to the PRC-wide rate. As stated above, with respect to the 
PRC-wide entity (including GSSG) we are applying as AFA, the current 
PRC-wide rate, which is 114.90 percent.

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{time} 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 SAA at 870. Corroborate means that the 
Department will satisfy itself that the secondary information to be 
used has probative value. Id. To corroborate secondary information, the 
Department will, to the extent practicable, examine the reliability and 
relevance of the information to be used. However, the Department need 
not prove that the selected facts available are the best alternative 
information. Id. at 869.
    In this review, we are using as AFA 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 the current or 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 AFA. 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 
AFA 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, 2003, through 
November 30, 2004:

------------------------------------------------------------------------
                                                                Margin
                    Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
Shandong Rongxin Import and Export Co., Ltd.................        5.47
China First Pencil Company, Ltd./Shanghai Three Star                7.67
 Stationery Industry Corp...................................
Shanghai First Writing Instrument Co., Ltd..................   7.67[ast]
Shanghai Great Wall Pencil Co., Ltd.........................   7.67[ast]
China First Pencil Fang Zheng Co., Ltd......................   7.67[ast]
Orient International Holding Shanghai Foreign Trade Co., Ltd       27.43
PRC-Wide Rate...............................................      114.90
------------------------------------------------------------------------
[ast] We collapsed CFP with its subsidiaries Shanghai First Writing
  Instrument Co., Ltd., Shanghai Great Wall Pencil Co., Ltd., and China
  First Pencil Fang Zheng Co., Ltd. in the previous segment of this
  proceeding. For this review we consider these parties to constitute a
  single entity.

    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

[[Page 76763]]

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.

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 16, 2005.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
[FR Doc. E5-7881 Filed 12-27-05; 8:45 am]
BILLING CODE 3510-DS-S