Laminated Woven Sacks From the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination; Preliminary Affirmative Determination of Critical Circumstances, In Part; and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination, 67893-67911 [E7-23459]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 72, Number 231 (Monday, December 3, 2007)]
[Notices]
[Pages 67893-67911]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23459]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-917]


Laminated Woven Sacks From the People's Republic of China: 
Preliminary Affirmative Countervailing Duty Determination; Preliminary 
Affirmative Determination of Critical Circumstances, In Part; and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are being provided to 
producers and exporters of laminated woven sacks (LWS) from the 
People's Republic of China (PRC). For information on the estimated 
subsidy rates, see the ``Suspension of Liquidation'' section of this 
notice. The Department further determines preliminarily that critical 
circumstances exist, in part, with respect to imports of the subject 
merchandise. This notice also serves to align the final countervailing 
duty determination in this investigation with the final determination 
in the companion antidumping duty investigation of LWS from the PRC.

DATES: Effective Date: December 3, 2007.

FOR FURTHER INFORMATION CONTACT: Mark Hoadley, Toni Page or Jun Jack 
Zhao, AD/CVD Operations, Office 6, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
3148, (202) 482-1398 and (202) 482-1396, respectively.

SUPPLEMENTARY INFORMATION: 

Case History

    The following events have occurred since the publication of the 
Department's notice of initiation in the Federal Register. See 
Laminated Woven Sacks from the People's Republic of China: Initiation 
of Countervailing Duty Investigation, 72 FR 40839 (July 25, 2007) 
(Initiation Notice).
    On July 31, 2007, the Department selected, as mandatory 
respondents, the four largest Chinese producers/exporters of LWS that 
could reasonably be examined, Han Shing Chemical Co., Ltd. (Han Shing 
Chemical), Ningbo Yong Feng Packaging Co., Ltd. (Ningbo), Shangdong 
Qilu Plastic Fabric Group, Ltd. (Qilu), and Shangdong Shouguang 
Jianyuan Chun Co., Ltd. (SSJ). See Memorandum to Stephen J. Claeys, 
Deputy Assistant Secretary for Import Administration, ``Respondent 
Selection'' (July 31, 2007). This memorandum is on file in the 
Department's Central Records Unit in Room B-099 of the main Department 
building (CRU).\1\ On August 3, 2007, we issued the countervailing duty 
(CVD) questionnaire to the Government of the People's Republic of China 
(GOC), requesting the GOC forward the company sections of the 
questionnaire to the mandatory respondent companies.
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    \1\ At the time of respondent selection, the Department had 
public information indicating that Han Shing Chemical's internet 
address was the same as that of a Han Shing Co. and a Han Shing Bulk 
Bag Co., Ltd. Moreover, the Department also had public information 
indicating that Han Shing Chemical's street address was similar to 
that of Han Shing Co. and Han Shing Bulk Bag Co., Ltd. See 
attachment 2 of our Respondent Selection Memo. Thus, in our 
questionnaire to the GOC, we instructed the GOC to forward the 
questionnaire to certain producers/exporters, including ``Han Shing 
Chemical, Ltd., aka Han Shing Bulk Bag Co., Ltd. and Han Shing Co.''
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    On August 14, 2007, the International Trade Commission (ITC) issued 
its affirmative preliminary determination that there is a reasonable 
indication that an industry in the United States is materially injured 
by reason of allegedly subsidized imports of LWS from China. See 
Laminated Woven Sacks from China, Investigation Nos. 701-TA-450 and 
731-TA-1122 (Preliminary), 72 FR 46246 (August 17, 2007).
    On September 10, 2007, we published a postponement of the 
preliminary determination of this investigation until November 26, 
2007. See Laminated Woven Sacks from the People's Republic of China: 
Postponement of Preliminary Determination in the Countervailing Duty 
Investigation, 72 FR 51641 (September 10, 2007). We received responses 
from the GOC on September 24, 2007, and SSJ and its affiliate Shandong 
Longxing Plastic Products Company Ltd. (SLP) on October 1, 2007. Han 
Shing Chemical, Ningbo, and Qilu did not submit responses to the 
Department's August 3, 2007 CVD questionnaire. However, the GOC 
provided a certification from Han Shing Bulk Bag Co. Ltd. (Han Shing 
Bag) stating that neither Han Shing Bag nor any company with which it 
is cross-owned, as defined in 19 CFR 351.525(6)(vi), produced or 
exported LWS to the United States during the period of investigation. 
In addition, the certification stated that Han Shing Bag was not 
``cross-owned'' or ``affiliated'' with Han Shing Chemical.
    On September 10, 2007, Zibo Aifudi Plastic Packaging Company 
Limited (Aifudi) submitted a voluntary response to the Department, 
pursuant to section 782(a) of the Tariff Act of 1930, as amended (the 
Act). On October 24, 2007, the Department selected Aifudi as a 
voluntary respondent for the investigation pursuant to 19 CFR 
351.204(d)(2). See Memorandum to Stephen J. Claeys, Deputy Assistant 
Secretary for Import Administration, ``Voluntary Respondent Selection'' 
(October 24, 2007). This memorandum is on file in the Department's CRU.
    On October 2, 2007, October 10, 2007, and November 5, 2007, the 
Laminated Woven Sacks Committee and its individual members, Bancroft 
Bag, Inc., Coating Excellence International, LLC, Hood Packaging 
Corporation, Mid-America Packaging, LLC, and Polytex Fibers Corporation 
(collectively, the petitioners), submitted comments regarding these 
questionnaire responses. We issued supplemental questionnaires to SSJ, 
Aifudi, and to the GOC on October 23, 2007. We received responses to 
these supplemental questionnaires from all parties on October 26, 2007 
and November 5, 2007.
    On October 17, 2007, the petitioners submitted new subsidy 
allegations regarding twelve programs. On November 2, 2007, the 
Department determined to investigate all of these newly alleged subsidy 
programs pursuant to section 775 of the Act. See Memorandum to Barbara 
E. Tillman, Office Director, ``New Subsidy Allegation'' (November 2, 
2007). Questions regarding these newly alleged subsidies were sent to 
the GOC and the respondent companies on November 2, 2007. The GOC 
submitted comments responding to the Department's initiation of new 
subsidy allegations on November 5, 2007. The GOC, SSJ, and

[[Page 67894]]

Aifudi submitted responses to the new subsidy allegations 
questionnaires on November 19, 2007. The Department does not have 
enough time to review and analyze these recently filed facts and 
arguments regarding the newly alleged subsidy allegations for purposes 
of this preliminary determination. We will therefore analyze the 
responses to these allegations and address all of the parties' 
arguments fully in a post-preliminary analysis memorandum.
    On November 5, 2007, the petitioners alleged that critical 
circumstances exist with respect to imports of LWS from the PRC. See 
section 703(e)(1) of the Act and 19 CFR 351.206(c)(2)(i). The 
Department issued questionnaires to all of the respondent companies 
regarding the critical circumstances allegation on November 9, 2007. 
Responses to these questionnaires were received from Han Shing Chemical 
on November 13, 2007 and from SSJ and Qilu on November 19, 2007. 
Commercial Packaging submitted comments regarding critical 
circumstances on November 20, 2007. We address the allegation of 
critical circumstances in the ``Critical Circumstances'' section of 
this notice.
    On November 13, 2007, the petitioners submitted pre-preliminary 
comments on the preliminary determination. On November 19, 2007, the 
GOC submitted comments in response to the petitioners' pre-preliminary 
comments.
    On November 20, 2007, the petitioners requested that the final 
determination of this countervailing duty investigation be aligned with 
the final determination in the companion antidumping duty investigation 
in accordance with section 705(a)(1) of the Act. We address this 
request below.

Scope of the Investigation

    The merchandise covered by this investigation is laminated woven 
sacks. Laminated woven sacks are bags or sacks consisting of one or 
more plies of fabric consisting of woven polypropylene strip and/or 
woven polyethylene strip; with or without an extrusion coating of 
polypropylene and/or polyethylene on one or both sides of the fabric; 
laminated by any method either to an exterior ply of plastic film such 
as biaxially-oriented polypropylene (``BOPP'') or to an exterior ply of 
paper that is suitable for high quality print graphics; \2\ printed 
with three colors or more in register; with or without lining; whether 
or not closed on one end; whether or not in roll form; with or without 
handles; with or without special closing features; not exceeding one 
kilogram in weight. Laminated woven bags are typically used for retail 
packaging of consumer goods such as pet foods and bird seed.
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    \2\ ``Paper suitable for high quality print graphics,'' as used 
herein, means paper having an ISO brightness of 82 or higher and a 
Sheffield Smoothness of 250 or less. Coated free sheet is an example 
of a paper suitable for high quality print graphics.
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    Effective July 1, 2007, laminated woven sacks are classifiable 
under Harmonized Tariff Schedule of the United States (HTSUS) 
subheadings 6305.33.0050 and 6305.33.0080. Laminated woven sacks were 
previously classifiable under HTSUS subheading 6305.33.0020. If entered 
with plastic coating on both sides of the fabric consisting of woven 
polyethylene strip and/or woven polypropylene strip, laminated woven 
sacks may be classifiable under HTSUS subheadings 3923.21.0080, 
3923.21.0095, and 3923.29.0000. If entered not closed on one end or in 
roll form, laminated woven sacks may be classifiable under HTSUS 
subheading 5903.90.2500 and 3921.19.0000. Although HTSUS subheadings 
are provided for convenience and customs purposes, the written 
description of the scope of this investigation is dispositive.

Scope Comments

    In accordance with the preamble to the Department's regulations, in 
our Initiation Notice we set aside a period of time for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of the 
Initiation Notice. See Antidumping Duties; Countervailing Duties, 62 FR 
27296, 27323 (May 19, 1997) (Preamble) and Initiation Notice, 72 FR at 
40839. The petitioners submitted scope comments on August 7, 2007 on 
the record of both this proceeding and on the record of the companion 
antidumping duty investigation. The scope of the products covered by 
both investigations is identical. The Department will address the 
issues raised by the petitioners with regard to both investigations in 
the preliminary determination of the companion antidumping duty 
investigation.

Use of Facts Otherwise Available

    Sections 776(a)(1) and (2) of the Act provide that the Department 
shall apply ``facts otherwise available'' if 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.
    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 will so inform the party submitting the 
response and will, to the extent practicable, provide that party the 
opportunity to remedy or explain the deficiency. If the party fails to 
remedy the deficiency within the applicable time limits and subject to 
section 782(e) of the Act, the Department may disregard all or part of 
the original and subsequent responses, as appropriate. 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 applicable requirements 
established by the administering authority'' if the information is 
timely, can be verified, is not so incomplete that it cannot be used, 
and if the interested party acted to the best of its ability in 
providing the information. Where all of these conditions are met, the 
Act requires the Department to use the information if it can do so 
without undue difficulties.

Use of Adverse Inferences

    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 
information derived from the petition, the final determination, a 
previous administrative review, or other information placed on the 
record.
    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 Statement of Administrative Action (SAA) 
accompanying the Uruguay Round Agreements Act, H. Doc. No. 316, 103d

[[Page 67895]]

Cong., 2d Session (1994) at 870. The Department considers information 
to be corroborated if it 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, however, that the Department need not 
prove that the selected facts available are the best alternative 
information. See SAA at 869.
    In deciding which facts to use as adverse facts available, section 
776(b) of the Act and 19 CFR 351.308(c)(1) authorize the Department to 
rely on information derived from (1) the petition, (2) a final 
determination in the investigation, (3) any previous review or 
determination, or (4) any information placed on the record. It is the 
Department's practice to select, as adverse facts available, the 
highest calculated rate in any segment of the proceeding. See, e.g., 
Certain In-shell Roasted Pistachios from the Islamic Republic of Iran: 
Final Results of Countervailing Duty Administrative Review, 71 FR 66165 
(November 13, 2006), and accompanying Issues and Decision Memorandum at 
2.
    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the rate is 
sufficiently adverse ``as to effectuate the purpose of the facts 
available role to induce respondents to provide the Department with 
complete and accurate information in a timely manner.'' See Notice of 
Final Determination of Sales at Less than Fair Value: Static Random 
Access Memory Semiconductors From Taiwan, 63 FR 8909, 8932 (February 
23, 1998). The Department's practice also ensures ``that the party does 
not obtain a more favorable result by failing to cooperate than if it 
had cooperated fully.'' See SAA at 870. In choosing the appropriate 
balance between providing a respondent with an incentive to respond 
accurately and imposing a rate that is reasonably related to the 
respondent's prior experience, selecting the highest prior rate 
``reflects a common sense inference that the highest prior margin is 
the most probative evidence of current margins, because, if it were not 
so, the importer, knowing of the rule, would have produced current 
information showing the margin to be less.'' See Rhone Poulenc, Inc. v. 
United States, 899 F. 2d 1185, 1190 (Fed. Cir. 1990).

Policy Loans to LWS Producers From Government-Owned Banks

    We preliminarily determine that the application of facts available 
is warranted with respect to policy loans to LWS producers from 
government-owned banks.\3\ We have identified certain instances in the 
GOC's responses in which the GOC has failed to provide information 
requested by the Department. For example, in our August 3, 2007 
questionnaire and October 23, 2007 supplemental questionnaire, we asked 
the GOC to provide the government's five-year plans for the textile 
industry. The GOC did not submit the requested five-year plans for the 
textile industry in its October 26, 2007 questionnaire response. 
Instead, the GOC stated that LWS is not part of the textile industry 
but is part of the plastics industry. In its November 5, 2007 
submission, the GOC again did not submit the requested five-year plans 
for the textile industry and stated that since ``LWS is not part of the 
textile industry, the five-year plans for the textile industry can have 
no relevance to this investigation.'' The failure to provide this 
information within the established deadlines has impeded our 
investigation. Since the GOC has withheld the information requested by 
the Department and the failure to provide this information within the 
established deadlines has impeded our investigation, we preliminarily 
find that the application of facts otherwise available is warranted 
under sections 776(a)(1)(A), (B), and (C) of the Act.
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    \3\ In the initiation checklist and the Initiation Notice, we 
referred to this program as ``Policy Loans to LWS Producers from 
Government-Owned Banks.''
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    The GOC did not provide information that the Department requested 
in two separate questionnaires. Therefore, we preliminarily determine 
that the GOC has failed to act to the best of its ability with regard 
to this matter. As such, we are using an adverse inference in applying 
facts otherwise available pursuant to section 776(b) of the Act. As an 
adverse inference, to address these omissions, we have preliminarily 
determined that the LWS industry is part of the textile industry for 
policy planning purposes and that the five-year plans for textiles 
direct preferential lending initiatives to the textiles industry. See 
Government Policy Lending program under the ``Programs Preliminarily 
Determined to be Countervailable'' section of this notice. The finding 
that certain five-year plans direct preferential loans to targeted 
industries is consistent with previous findings in other cases. See, 
e.g., the discussion of policy loans, the 10th Five Year Plan for the 
Paper Making Industry and the Integration Plan as discussed in Coated 
Free Sheet Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) and 
accompanying Issues and Decision Memorandum at 9 (Final CFS Paper from 
the PRC).
    Finally, as an adverse inference with respect to policy lending, we 
are preliminarily determining that certain loans reported by LWS 
producers were received pursuant to the GOC's textile industry policy. 
See Government Policy Lending program under the ``Programs 
Preliminarily Determined to be Countervailable'' section of this notice 
for further discussion.

Ningbo and Qilu

    We preliminarily determine that the application of facts available 
is warranted with respect to Ningbo and Qilu. We find that neither 
company provided information we requested that is necessary to 
determine a countervailing duty rate for this preliminary 
determination. Specifically, Ningbo and Qilu did not respond to the 
Department's questionnaires.\4\ Since Ningbo and Qilu have failed to 
provide information requested by the Department and the failure to 
provide this information within the established deadlines has impeded 
our investigation, we find that the application of facts otherwise 
available is warranted under sections 776(a)(1)(A), (B), and (C) of the 
Act. Thus, in reaching our preliminary determination, pursuant to 
section 776(a)(2)(A), (B), and (C) of the Act, we have based Ningbo's 
and Qilu's countervailing duty rates on facts otherwise available.
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    \4\ Qilu did provide its monthly shipment data on November 19, 
2007, to the Department's critical circumstance questionnaire. It 
did not provide any responses on the record, however, to all other 
requests for information. Therefore, pursuant to section 782(e) of 
the Act, we have determined that this shipment data can be used 
without undue difficulty and otherwise meets the remaining criteria 
of that provision with regard to solely our critical circumstance 
analysis.
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    We note that, in its initial questionnaire response, the GOC 
claimed that, to the best of its knowledge, none of the respondent 
companies,\5\ including Ningbo and Qilu, used or received benefits from 
the programs under investigation. The GOC provided no documentary 
information on the record with regard to this statement.\6\ Thus, on 
October 23, 2007,

[[Page 67896]]

we sent supplemental questionnaires to Qilu and Ningbo explaining the 
possibility that the Department may use adverse facts available if the 
GOC's claims of non-use were determined to be insufficient.\7\ At the 
same time, we issued a supplemental questionnaire to the GOC stating 
that it needed to make more definite statements regarding non-use 
(instead of stating to the ``best of our knowledge'') and that it 
needed to contact local authorities when necessary in determining 
whether programs had been used. The GOC responded on November 5, 2007, 
stating that ``{t{time} he PRC has searched the relevant government 
records, including where applicable the records of the county offices 
of the State Tax Administration in each of the localities in which the 
respondents, including {SLP and Aifudi{time} , are located, and has 
found no record of any benefits to any of those companies other than 
those reported in the PRC's response to the initial questionnaire, and 
that {SLP{time}  received tax credits during the POI from the `Two Free 
Three Half' program.'' For other programs, the GOC referred us to the 
responses of respondent enterprises. Ningbo and Qilu did not respond to 
our October 23, 2007 questionnaires.
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    \5\ At the time of its September 24, 2007 questionnaire 
response, no mandatory respondent had submitted a questionnaire 
response. Aifudi submitted its voluntary questionnaire response on 
September 10, 2007. Aifudi was selected as a voluntary respondent on 
October 24, 2007.
    \6\ The GOC did provide information supporting some of its 
claims that a few of the alleged programs did not exist or had been 
terminated (in some cases, after the POI). It did not support its 
non-use claims, however.
    \7\ In our October 23, 2007 questionnaires to Ningbo and Qilu, 
we stated the following: ``While the Department received some 
information from the GOC regarding possible non-use of these 
programs by your company, this information may not be sufficient for 
the Department to determine that your company did not receive 
countervailable subsidies. If the Department finds the information 
provided by the GOC to be insufficient for such a determination, we 
may use the facts otherwise available on the administrative record 
in determining a countervailing duty rate to apply to exports from 
your company to the United States, in accordance with section 
776(a)(2) of the Act. Moreover, in applying facts otherwise 
available, the Department may use an inference adverse to the 
interests of your company if we determine your company has failed to 
cooperate by not complying with the Department's requests for 
information, in accordance with section 776(b) of the Act.''
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    We have determined that, for this preliminary determination, the 
GOC's statements regarding the possible non-use of these programs by 
the respondent companies, including Ningbo and Qilu, are not sufficient 
for the Department to determine that these companies did not receive 
countervailable subsidies, absent information provided by the 
respondents themselves. As discussed below, in the ``Programs 
Preliminarily Determined to be Countervailable'' section, SSJ/SLP and 
Aifudi/Golden Moon, the only two companies that submitted responses to 
the Department, have reported that they each received possible benefits 
from certain programs under investigation, partially contradicting the 
statements of the GOC. For example, the GOC apparently did not discover 
during its search of local records that SLP had received VAT benefits 
in 2005. Moreover, it appears the GOC did not attempt such searches for 
possible benefits under programs it considers non-existent; thus 
respondents received several loans from government-owned banks, but 
these were not identified in the GOC response, for example. The GOC 
also did not indicate whether it had performed searches for benefits 
received by possibly cross-owned affiliates of the respondents (other 
than SLP), and did not provide support for its statements regarding the 
eligibility of companies for benefits (e.g., no documentation 
demonstrating that Qilu and Ningbo were not SOEs, or that Qilu was not 
a foreign invested enterprise (FIE)). Thus, not only are the GOC's 
assertions unsupported by substantive evidence on the record, but there 
is affirmative evidence with respect to SSJ/SLP's and Aifudi/Golden 
Moon's responses that the GOC's claims of non-use are incorrect as a 
matter of fact. Accordingly, for this preliminary determination, we 
have determined that the GOC's statements regarding the non-use of 
programs by the selected respondents, including Ningbo and Qilu, are 
unreliable and are contradicted by other facts on the record.
    In selecting from among the facts available, the Department has 
determined that an adverse inference is warranted, pursuant to section 
776(b) of the Act, because Ningbo and Qilu did not respond to our 
requests for information. Thus, Ningbo and Qilu failed to cooperate by 
not acting to the best of their abilities, and our preliminary 
determination for these companies is based on the application of 
adverse facts available.
    Because Ningbo and Qilu failed to act to the best of their 
abilities, for each program examined, we made the adverse inference 
that Ningbo and Qilu benefitted from the program unless the record 
evidence made it clear that the companies could not have received 
benefits from the program because, for example, we have preliminarily 
found the program to be not countervailable. See, e.g., Certain Cold-
Rolled Carbon Steel Flat Products From Korea: Final Affirmative CVD 
Determination, 67 FR 62102 (October 3, 2002) and accompanying Issues 
and Decision Memorandum at 3. As such, we have not used adverse 
inferences with respect to the ``Provision of Electricity for Less than 
Adequate Remuneration'' program and the ``Exemption from Payment of 
Staff and Worker Benefit Taxes for Export-Oriented Enterprises'' 
program. To calculate the program rates, we have generally relied upon 
the highest program rate calculated for any responding company in this 
investigation as adverse facts available. See Certain In-shell Roasted 
Pistachios from the Islamic Republic of Iran: Final Results of 
Countervailing Duty Administrative Review, 71 FR 66165 (November 13, 
2006) and accompanying Issues and Decision Memorandum at 3.
    Thus, for the three value added tax (VAT) programs,\8\ and the 
Provision of Land for Less than Adequate Remuneration, we are using 
SSJ's rate for Provision of Land for Less than Adequate Remuneration. 
For the loan program,\9\ we are using SSJ's rate for Government Policy 
Loans. For the nine income tax programs,\10\ we have applied an adverse 
inference that Ningbo and Qilu paid no income tax during the period of 
investigation (POI) (i.e., calendar year 2006). The standard income tax 
rate for corporations in the PRC is 30 percent, plus a 3 percent 
provincial income tax rate. Therefore, the highest possible benefit for 
the income tax rate programs is 33 percent. We are applying the 33 
percent adverse facts available rate on a combined basis (i.e., the 
nine listed programs combined provided a 33 percent benefit). See 
Circular Welded Carbon Quality Steel Pipe from the People's Republic of 
China: Preliminary Affirmative Countervailing Duty Determination; 
Preliminary Affirmative Determination of Critical Circumstances; and 
Alignment of Final Countervailing Duty Determination with Final 
Antidumping Duty Determination, 72 FR 63875, 63879 (November 13, 2007) 
(CWP from the PRC).
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    \8\ VAT Rebate for FIE Purchases of Domestically Produced 
Equipment, VAT and Tariff Exemptions for FIEs Using Imported 
Technology and Equipment in Encouraged Industries, and VAT and 
Tariff Exemptions on Imported Equipment (Domestic Enterprises).
    \9\ Policy Loans to LWS Producers from Government-Owned Banks.
    \10\ Preferential Tax Policies for Enterprises with Foreign 
Investment (Two Free, Three Half Program), Preferential Tax Policies 
for Export-Oriented FIEs, Corporate Income Tax Refund Program for 
Reinvestment of FIE Profits in Export-Oriented Enterprises, Tax 
Benefits for FIEs in Encouraged Industries that Purchase Domestic 
Origin Machinery, Tax Program for FIEs Recognized as High or New 
Technology Enterprises, Preferential Tax Policies for Research and 
Development, Tax Subsidies to FIEs in Specially Designated 
Geographic Areas, Preferential Tax Policies for Township Enterprises 
by FIEs and Local Income Tax Exemption and Reduction Programs for 
``Productive'' FIEs.
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    We are unable to utilize company-specific rates from this 
proceeding for the grant programs since the

[[Page 67897]]

participating mandatory respondent did not receive any countervailable 
subsidies from these programs. Therefore, for the seven grant 
programs,\11\ we are applying the highest subsidy rate for any program 
otherwise listed, which in this instance is SSJ's Provision of Land for 
Less than Adequate Remuneration rate of 2.17 percent. See Memorandum to 
the File, titled ``Selection of the Adverse Facts Available Rate for 
Ningbo, Qilu, and Han Shing Chemical, Ltd. (i.e., Hanshing Bulk Bag 
Co., Ltd. and Hanshing Co.)'' (November 26, 2007) for further 
discussion of the Department's calculated adverse facts available rates 
for the preliminary determination on file in the Department's CRU.
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    \11\ The State Key Technologies Renovation Project Refund, 
Grants and Other Funding for High Technology Equipment for the 
Textile Industry, Grants to Loss-Making State-Owned Enterprises, 
Export Interest Subsidy Funds for Enterprises Located in Zhejiang 
and Gaungdong Provinces, Technology Innovation Funds Provided by 
Zhejiang Province, Programs to Rebate Antidumping Legal Fees, and 
Loan Forgiveness for LWS Producers by the GOC.
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    With regard to the requirements of section 776(c) of the Act, the 
calculated subsidy rates we are using as adverse facts available are 
not considered secondary information as they are based on information 
obtained in the course of this investigation. See section 776(c) of the 
Act; see, also, the SAA at 870. Accordingly, no corroborative excercise 
is necessary for purposes of the application of adverse facts available 
to Ningbo and Qilu. Further, Ningbo did not respond to the Department's 
critical circumstances questionnaire. Accordingly, we are applying 
adverse facts available with regard to Ningbo for critical 
circumstances purposes as well. See the ``Critical Circumstances'' 
section below for more detail.

Han Shing Chemical

    We preliminarily determine that the application of facts available 
is also warranted with respect to Han Shing Chemical. We find that Han 
Shing Chemical withheld information we requested that is necessary to 
determine a countervailing duty rate for this preliminary 
determination. Specifically, Han Shing Chemical did not respond to the 
Department's questionnaires.\12\ Since Han Shing Chemical withheld 
information requested by the Department and since the failure to 
provide this information within the established deadlines has impeded 
our investigation, we find that the application of facts otherwise 
available is warranted under sections 776(a)(1)(A), (B), and (C) of the 
Act. Thus, in reaching our preliminary determination, pursuant to 
section 776(a)(2)(A), (B), and (C) of the Act, we have based Han Shing 
Chemical's countervailing duty rates on facts otherwise available.
---------------------------------------------------------------------------

    \12\ Han Shing Chemical did provide its monthly shipment data on 
November 19, 2007, in response to the Department's critical 
circumstances questionnaire. It did not provide any responses on the 
record, however, to all other requests for information. Therefore, 
pursuant to section 782(e) of the Act, we have determined that this 
information can be used without undue difficulty and otherwise meets 
the remaining criteria of that provision solely with regard to our 
critical circumstance analysis.
---------------------------------------------------------------------------

    As noted above, Han Shing Bag provided a certification stating that 
neither it nor any company with which it is cross-owned or affiliated, 
as defined by 19 CFR 351.525(b)(6)(vi), produced LWS or exported LWS to 
the United States during the POI. In addition, Han Shing Bag stated 
that it is not associated with Han Shing Chemical. See certification 
attached to the GOC's September 24, 2007 questionnaire response. In our 
October 23, 2007 supplemental questionnaire to the GOC, we asked the 
GOC to confirm the accuracy of Han Shing Bag's statement that it does 
not produce or export LWS to the United States and its statement that 
it was not affiliated with Han Shing Chemical. In its November 5, 2007 
response, the GOC stated that Han Shing Bag had confirmed that it does 
not produce or export LWS and that it was not affiliated with Han Shing 
Chemical. However, evidence filed on the record by the petitioners on 
November 13, 2007, demonstrates that Han Shing Bag is cross-owned by 
Han Shing Chemical. See Exhibit 1 of the petitioners' November 13, 2007 
submission. Moreover, information on the record indicates that Han 
Shing Chemical exported LWS to the United States during the POI. Based 
on this information, we determine that Han Shing Chemical and Han Shing 
Bag are cross-owned as defined by 19 CFR 351.525(b)(6)(vi) and that Han 
Shing Chemical/Han Shing Bag exported LWS to the United States during 
the POI. Some of the details of this evidence are business proprietary. 
As such, those details are discussed in a separate memorandum to 
Barbara E. Tillman, Director, Office 6 from Toni Page, Analyst, 
Regarding Shangdong Shouguang Jianyuan Chun Company Limited, Han Shing 
Chemical Limited, and Zibo Aifudi Plastic Packaging Company Limited: 
Cross-Ownership (Cross-Ownership Memo).
    We preliminarily find the information contained in the petitioners' 
November 13, 2007 submission to be reliable. This information, which 
was placed on the record 13 days prior to the issuance of this 
preliminary determination, directly contradicts Han Shing Bag's 
certification provided in the GOC's September 24, 2007 questionnaire 
response. While the Department preliminarily determines that there is 
cross-ownership between Han Shing Chemical and Han Shing Bag, the 
Department will consider further arguments with regard to this 
information from all interested parties for the purposes of the final 
determination.
    In selecting from among the facts available, the Department has 
determined that an adverse inference is warranted, pursuant to section 
776(b) of the Act, because Han Shing Chemical/Han Shing Bag did not 
respond to our requests for information. Thus, Han Shing Chemical/Han 
Shing Bag failed to cooperate by not acting to the best of its ability. 
We are calculating Han Shing Chemical/Han Shing Bag's rate by applying 
the same adverse facts available methodology as for Ningbo and Qilu. 
See Ningbo and Qilu section above; see, also, Memorandum to the File, 
titled ``Selection of the Adverse Facts Available Rate for Ningbo, 
Qilu, and Han Shing Chemical, Ltd. (i.e., Hanshing Bulk Bag Co., Ltd. 
and Hanshing Co.)'' (November 26, 2007) for further discussion of the 
Department's calculated adverse facts available rates for the 
preliminary determination on file in the Department's CRU.

Critical Circumstances

    On November 5, 2007, the petitioners requested that the Department 
make a finding that critical circumstances exist with respect to 
imports of LWS from the PRC. Section 703(e)(1) of the Act states that 
if the petitioner alleges critical circumstances, the Department will 
determine, on the basis of information available to it at the time, if 
there is a reason to believe or suspect the alleged countervailable 
subsidies are inconsistent with the WTO Agreement on Subsidies and 
Countervailing Measures (the SCM Agreement) and whether there have been 
massive imports of the subject merchandise over a relatively short 
period.
    In accordance with 19 CFR 351.206(c)(2)(i), because the petitioners 
submitted a critical circumstances allegation more than 20 days before 
the scheduled date of the preliminary determination, the Department 
must issue a preliminary critical circumstances determination not later 
than the date of the preliminary determination. See, e.g., Policy 
Bulletin 98/4 Regarding Timing of Issuance of Critical Circumstances 
Determinations, 63 FR 55364 (October 15, 1998). As

[[Page 67898]]

discussed in the ``Analysis of Programs'' section below, the Department 
has preliminarily determined that SSJ has received a countervailable 
import substitution subsidy.\13\ This import substitution subsidy is 
inconsistent with the SCM Agreement. Although the countervailable 
subsidy rate for this import substitution subsidy is de minimis, use of 
an import substitution subsidy program is sufficient to make an 
affirmative preliminary determination of critical circumstances under 
section 703(e)(1)(A) of the Act. See Notice of Preliminary Affirmative 
Countervailing Duty Determination, Preliminary Affirmative Critical 
Circumstances Determination, and Alignment of Final Countervailing Duty 
Determination With Final Antidumping Duty Determination: Certain 
Softwood Lumber Products From Canada, 66 FR 43186, 43189-90 (August 17, 
2001); and Notice of Amended Final Affirmative Countervailing Duty 
Determination and Notice of Countervailing Duty Order: Certain Softwood 
Lumber Products From Canada, 67 FR 36070 (May 22, 2002) (the unchanged 
final determination).
---------------------------------------------------------------------------

    \13\ See ``Value Added Tax (VAT) Rebate for FIE Purchases of 
Domestically Produced Equipment'' section below. We also note that, 
on November 2, 2007, the Department determined to investigate twelve 
newly alleged subsidy programs which include export subsidies. Since 
the responses for the Department's questionnaires on these programs 
were not received until November 16, 2007, there was not sufficient 
time before the statutory due date of this preliminary determination 
to address these programs.
---------------------------------------------------------------------------

    Regarding Qilu, Ningbo, and Han Shing Chemical, we have made an 
adverse inference that these companies benefitted from countervailable 
export and import substitution subsidies pursuant to our determination 
to apply facts available to these companies. For all other exporters, 
we are basing our finding on the experience of SSJ, and, therefore, 
find that all others have benefitted from countervailable import 
substitution subsidies.
    In determining whether there are ``massive imports'' over a 
``relatively short period,'' pursuant to section 703(e)(1)(B) of the 
Act, the Department normally compares the import volume of the subject 
merchandise for three months immediately preceding the filing of the 
petition (i.e., the base period) with the three months following the 
filing of the petition (i.e., the comparison period). Section 
351.206(h)(1) of our regulations provides that, in determining whether 
imports of the subject merchandise have been ``massive,'' the 
Department normally will examine: (i) The volume and value of the 
imports; (ii) seasonal trends; and (iii) the share of domestic 
consumption accounted for by the imports. In addition, 19 CFR 
351.206(h)(2) provides that an increase in imports of 15 percent during 
the ``relatively short period'' of time may be considered ``massive.'' 
Finally, 19 CFR 351.206(i) defines ``relatively short period'' as 
normally being the period beginning on the date the proceeding begins 
(i.e., the date the petition is filed) and ending at least three months 
later. For our analyses, we are using a three-month base and comparison 
period.
    In response to the Department's critical circumstances 
questionnaire, Han Shing Chemical, Qilu \14\ and SSJ filed their 
monthly shipment data for subject merchandise exported to the United 
States for calendar years 2005 and 2006, and for January through 
September 2007. Based upon our analysis of these data, we preliminarily 
find that SSJ's and Qilu's shipments did not increase by more than 15 
percent during the ``relatively short period'' (i.e., between April 
through June 2007 and July through September 2007). See Memorandum to 
the File ``Critical Circumstances Analysis for Han Shing Chemical's and 
SSJ's Import Shipments and All-Others'' (November 26, 2007) (Import 
Analysis Memorandum) on file in the Department's CRU. Therefore, we 
preliminarily determine that the requirements of section 703(e)(1)(B) 
of the Act have not been satisfied, and that critical circumstances do 
not exist for SSJ and Qilu.
---------------------------------------------------------------------------

    \14\ We have used Han Shing Chemical's and Qilu's shipment data 
solely for our critical circumstances analysis, pursuant to section 
782(e) as noted above.
---------------------------------------------------------------------------

    Based upon our analysis of Han Shing Chemical's data, however, we 
preliminarily find that Han Shing Chemical's shipments did increase by 
more than 15 percent during the ``relatively short period'' (i.e., 
between April through June 2007 and July through September 2007). See 
the Import Analysis Memorandum on file in the Department's CRU. 
Therefore, we preliminarily determine that the requirements of section 
703(e)(1)(B) of the Act have been satisfied, and that critical 
circumstances exist for Han Shing Chemical.
    Regarding Ningbo, as part of our adverse facts available 
determination we have made an adverse inference that there were massive 
imports from these companies over a relatively short period.\15\ See, 
e.g., Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Affirmative Preliminary Determination of Critical 
Circumstances: Wax and Wax/Resin Thermal Transfer Ribbons from Japan, 
68 FR 71072, 71076-77 (December 22, 2003) (unchanged in the final 
determination). Therefore, we preliminarily determine that the 
requirements of section 703(e)(1)(B) of the Act have been satisfied, 
and that critical circumstances exist for Ningbo.
---------------------------------------------------------------------------

    \15\ Ningbo declined to answer our request for monthly shipment 
data. See the Memorandum to the file from Thomas Gilgunn, Program 
Manager, (November 21, 2007) at attachment 2.
---------------------------------------------------------------------------

    For all-others, we preliminarily determine that there were not 
massive imports over a relatively short period based on Han Shing 
Chemical's, Qilu's, and SSJ's shipment data. See Import Analysis 
Memorandum. Therefore, we preliminarily determine that the requirements 
of section 703(e)(1)(B) of the Act have not been satisfied, and that 
critical circumstances do not exist for ``all-others.''

Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

    On July 18, 2007, the Department initiated the countervailing duty 
and antidumping duty investigations on LWS from the PRC. See Initiation 
Notice and Laminated Woven Sacks from the People's Republic of China: 
Initiation of Antidumping Duty Investigation, 72 FR 40833 (July 25, 
2007). The countervailing duty investigation and the antidumping duty 
investigation scope use identical language with regard to the 
merchandise covered.
    On November 20, 2007, the petitioners submitted a letter, in 
accordance with section 705(a)(1) of the Act, requesting alignment of 
the final countervailing duty determination with the final 
determination in the companion antidumping duty investigation of LWS 
from the PRC. Therefore, in accordance with section 705(a)(1) of the 
Act, and 19 CFR 351.210(b)(4), we are aligning the final countervailing 
duty determination with the final determination in the companion 
antidumping duty investigation of LWS from the PRC. The final 
countervailing duty determination will be issued on the same date as 
the final antidumping duty determination, which is currently scheduled 
to be issued on or about April 8, 2008.

Application of the Countervailing Duty Law to Imports From the PRC

    On October 25, 2007, the Department published the final 
determination of CFS Paper from the PRC. In that determination, the 
Department found, ``given the substantial differences between the 
Soviet-style economies and the PRC's economy in recent years, the 
Department's previous decision not to apply the CVD law to these 
Soviet-style

[[Page 67899]]

economies does not act as a bar to proceeding with a CVD investigation 
involving products from China.'' See Final CFS Paper from the PRC, 72 
FR 60645 at Comment 6; see, also, the November 26, 2007 Memorandum from 
Toni Page, Analyst, to the File ``Placing the Georgetown Steel 
Memorandum on the File of the Countervailing Duty Investigation of 
Laminated Woven Sacks from the People's Republic of China (Georgetown 
Steel Memorandum) attachment 1 at 2 on file in the Department's CRU. 
This decision was also affirmed in the preliminary determination of CWP 
from the PRC. See CWP from the PRC, 72 FR 63875 at 63880.
    Based on the preliminary determination in CWP from the PRC, we are 
using the date of December 11, 2001, the date on which the PRC became a 
member of the WTO, as the date from which the Department will identify 
and measure subsidies in the PRC for purposes of this preliminary 
determination. Id. Prior to this date, there were many changes in the 
PRC's economy. Many of the obligations undertaken by the PRC pursuant 
to its accession to the WTO were in line with the PRC's objective of 
economic reform. See Report of the Working Party on the Accession of 
China, WT/ACC/CHN/49 (October 1, 2001), for example, at paragraph 4 
(found at www.wto.org). Taken together, these changes permit the 
Department to determine whether the GOC has bestowed a countervailable 
subsidy on Chinese producers. See attachment 1 of the Georgetown Steel 
Memo at 7 and Final CFS Paper from the PRC, 72 FR 60645 at Comments 1 
and 6. Finally, the GOC acknowledged the changing nature of its economy 
in so far as its Accession Protocol contemplates the application of the 
CVD law to the PRC, even while it remains a non-market economy (NME). 
See an excerpt from the Protocol of Accession of the People's Republic 
of China, WT/L/432 (November 23, 2001) at section 15(b), from the June 
28, 2007 Petition at Exhibit 83; see, also, Final CFS Paper from the 
PRC, 72 FR 60645 at Comment 1. Therefore, for this preliminary 
determination, we have selected the date of December 11, 2001, as the 
date from which we will measure countervailable subsidies in the PRC.

Period of Investigation

    The period for which we are measuring subsidies, or the POI, is 
calendar year 2006.

Subsidies Valuation Information

Allocation Period

    The average useful life (AUL) period in this proceeding as 
described in 19 CFR 351.524(d)(2) is 10 years according to the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System for assets used to manufacture LWS. No party in this proceeding 
has disputed this allocation period.
    For subsidies provided under the granting of land-use rights, 
described below, the land transactions for each of the respondents 
specify the period of time for which the land-use rights have been 
granted. Therefore, in order to calculate the benefit for the 
``Provision of Land for Less than Adequate Remuneration'' program, the 
Department is allocating the benefit for this program over the terms of 
the lease for each transaction.

Denominator and Attribution of Subsidies

    When selecting an appropriate denominator for use in calculating 
the ad valorem countervailable subsidy rate, the Department considered 
the basis for SSJ's and Aifudi's approval of benefits under each 
program at issue. The bases for SSJ's and Aifudi's approval for 
benefits for the programs found countervailable was not tied to export 
performance or to the production of a particular product. As such, we 
are using total sales of all products of SSJ or Aifudi as the 
denominator in our calculations. See 19 CFR 351.525(a)(3). As discussed 
below, both SSJ and Aifudi have cross-owned suppliers that received 
benefits that were not tied to export performance or to the production 
of a particular product. For these programs, we are using total sales 
of all products of SSJ or Aifudi and their respective cross-owned 
suppliers (less any internal sales between these companies and their 
cross-owned suppliers) as the denominator in our calculations.\16\ The 
cross-ownership of the respondent companies is further discussed in the 
Cross-Ownership Memo.
---------------------------------------------------------------------------

    \16\ We will ask both SSJ and Aifudi for additional information 
regarding their respective internal sales.
---------------------------------------------------------------------------

    The Department's regulations at section 351.525(b)(6)(vi) state 
that cross-ownership exists between companies if one company can use or 
direct the company's assets in essentially the same way it uses its 
own. This section of the Department's regulations states that this 
standard will normally be met where there is a majority voting interest 
between two corporations or through common ownership of two (or more) 
corporations. In addition, 19 CFR 351.525(b)(iv) states that ``if there 
is cross-ownership between an input supplier and a downstream producer, 
and production of the input product is primarily dedicated to 
production of the downstream product, the Secretary will attribute 
subsidies received by the input producer to the combined sales of the 
input and downstream products produced by both corporations (excluding 
the sales between the two corporations).'' The Court of International 
Trade (CIT) has upheld the Department's authority to attribute 
subsidies based on whether a company could use or direct the subsidy 
benefits of another company in essentially the same way it could use 
its own subsidy benefits. See Fabrique de Fer de Charleroi v. United 
States, 166 F. Supp. 2d. 593, 604 (CIT 2001). According to 19 CFR 
351.525(b)(6)(vi), cross-ownership exists between two or more 
corporations where one corporation can use or direct the individual 
assets of the other corporation(s) in essentially the same ways it can 
use its own assets.
    Aifudi: Aifudi reported that it is an FIE owned by a U.S. company 
named FDD Associates Inc. and a private Chinese company named Zibo 
Golden Moon Plastic Packaging Co., Ltd. (Golden Moon). Golden Moon owns 
a significant portion of Aifudi and owns the land Aifudi uses. Also, 
Aifudi owns the buildings Golden Moon uses. In its November 6, 2007 
supplemental questionnaire response, Golden Moon stated that it 
contributed start-up capital to Aifudi and that it owns a significant 
portion of Aifudi. Therefore, pursuant to 19 CFR 351.525(b)(6)(vi), we 
preliminarily determine that Aifudi and Golden Moon are cross-owned 
and, pursuant to 19 CFR 351.525(b)(6)(iv), we are attributing the 
subsidies received by Golden Moon to the combined sales of Aifudi and 
Golden Moon.
    Han Shing Chemical: As noted above, Han Shing Bag provided a 
certificate stating that neither it nor any company with which it is 
cross-owned, as defined by 19 CFR 351.525(6)(vi), produced LWS nor 
exported LWS to the United States during the period of investigation. 
In addition, Han Shing Bag stated that it is not associated with Han 
Shing Chemical. See the certification attached to the GOC's September 
24, 2007 questionnaire response. Moreover, Han Shing Bag confirmed, 
through the GOC, that it does not produce or export LWS and that it was 
not affiliated with Han Shing Chemical. However, information on the 
record filed by the petitioners on

[[Page 67900]]

November 13, 2007, demonstrates that Han Shing Bag is cross-owned with 
Han Shing Chemical. Moreover, information on the record also indicates 
that Han Shing Chemical exported LWS to the United States during the 
POI. Based on this information, we determine that Han Shing Chemical 
and Han Shing Bag are cross-owned as defined by 19 CFR 351.525(6)(vi). 
The details of this evidence are business proprietary; as such, it is 
discussed in the Cross-Ownership Memo.
    SSJ: SSJ reported that it is affiliated with two companies, SLP, an 
FIE, and Shandong Xinglong Plastic Product Company Limited (Xinglong). 
SSJ owns a majority of Xinglong. Xinglong does not produce or export 
LWS nor does it supply inputs to SSJ used in the production of subject 
merchandise. SSJ and SLP responded to the Department's original and 
supplemental questionnaires. SLP is co-owned by Han Shing Chemical and 
SSJ. SLP produces inputs primarily dedicated to the production of 
subject merchandise and sells it to SSJ. SLP also appears to produce 
subject merchandise and sells it to external customers. SSJ also owns 
part of SLP and both companies share board members as well as 
management. Although there is limited information on the record 
regarding Han Shing Chemical Ltd., and its relationship with SLP and 
SSJ, for the purposes of this preliminary determination, we find that 
SSJ controls the operations of its supplier SLP. As such, pursuant to 
19 CFR 351.525(b)(6)(vi), we preliminarily determine that SSJ and SLP 
are cross-owned and, pursuant to 19 CFR 351.525(b)(6)(iv), we are 
attributing the subsidies received by SLP to the combined sales of SLP 
and SSJ. The details of this evidence are business proprietary; as 
such, it is discussed in the Cross-Ownership Memo.
    We have asked SSJ and SLP to fully explain their relationship with 
SLP's other co-owner, Han Shing Chemical Ltd. In particular, we have 
asked SSJ and SLP to fully explain how Han Shing Chemical Ltd. is 
involved in the production and/or sales of LWS as well as to provide 
copies of Han Shing Chemical Ltd.'s financial statements and the names 
of its affiliates. See the Department's October 23, 2007 questionnaire. 
In their responses, SSJ and SLP stated that Han Shing Chemical Ltd. is 
a trading company based in Hong Kong and it refused to provide any 
information concerning its ownership and other affiliates, its 
financial statements, or the scope of its involvement in the LWS 
business upon request by SLP. See SSJ's November 5, 2005 supplemental 
questionnaire response. If Han Shing Chemical Ltd. is the same company 
which the Department selected as a mandatory respondent in this case, 
and to which we have applied adverse facts available, this information 
would be relevant to our determination. In any case, the Department 
needs more information regarding this co-owner of SLP. As such, the 
Department intends, following this preliminary determination, to issue 
another questionnaire to provide SSJ and SLP an additional opportunity 
to provide that information.

Loan Benchmarks

    Summary: The Department is investigating loans received by 
respondents from Chinese banks, including state-owned commercial banks 
(SOCBs), which are alleged to have been granted on a preferential, non-
commercial basis. Section 771(5)(E)(ii) of the Act explains that the 
benefit for loans is the ``difference between the amount the recipient 
of the loan pays on the loan and the amount the recipient would pay on 
a comparable commercial loan that the recipient could actually obtain 
on the market.'' Normally, the Department uses comparable commercial 
loans reported by the company for benchmarking purposes. See 19 CFR 
351.505(a)(2)(i). However, the Department does not treat loans from 
government banks as commercial if they were provided pursuant to a 
government program. See 19 CFR 351.505(a)(2)(ii). Because the loans 
provided to the respondents by SOCBs were made under the ``Government 
Policy Lending Program,'' as explained below, these loans are the very 
loans for which we require a suitable benchmark. Additionally, if 
respondents received any loans from foreign banks, these would be 
unsuitable for use as benchmarks because, as explained in detail in the 
final determination of CFS Paper from the PRC, the GOC's intervention 
in the banking sector creates significant distortions, restricting and 
influencing even foreign banks within the PRC. See Final CFS Paper from 
the PRC, 72 FR 60645 and accompanying Issues and Decision Memorandum at 
Comments 8 and 10.
    If the firm did not have any comparable commercial loans during the 
period, the Department's regulations provide that we ``may use a 
national interest rate for comparable commercial loans.'' See 19 CFR 
351.505(a)(3)(ii). However, the Chinese national interest rates are not 
reliable as benchmarks for these loans because of the pervasiveness of 
the GOC's intervention in the banking sector. Loans provided by Chinese 
banks reflect significant government intervention and do not reflect 
the rates that would be found in a functioning market. See Final CFS 
Paper from the PRC, 72 FR 60645 and accompanying Issues and Decision 
Memorandum at Comment 10.
    The statute directs that the benefit is normally measured by 
comparison to a ``loan that the recipient could actually obtain on the 
market.'' See section 771(5)(E)(ii) of the Act. Thus, the benchmark 
should be a market-based benchmark, yet, there is not a functioning 
market for loans within the PRC. Therefore, because of the special 
difficulties inherent in using a Chinese benchmark for loans, the 
Department is selecting a market-based benchmark interest rate based on 
the inflation-adjusted interest rates of countries with similar per 
capita gross income (GNI) to the PRC, using the same regression-based 
methodology that we employed in CFS Paper from the PRC. See Final CFS 
Paper from the PRC, 72 FR 60645 and accompanying Issues and Decision 
Memorandum at Comment 10.
    The use of an external benchmark is consistent with the 
Department's practice. For example, in Softwood Lumber, the Department 
used U.S. timber prices to measure the benefit for government provided 
timber in Canada. See Final Results of the Countervailing Duty 
Investigation of Certain Softwood Lumber Products from Canada, 67 FR 
15545 (April 2, 2002), and accompanying Issues and Decision Memorandum, 
at 34 (Softwood Lumber). In the current proceeding, the Department 
preliminarily finds that the GOC's predominant role in the banking 
sector results in significant distortions that render the lending rates 
in the PRC unsuitable as market benchmarks. Therefore, as in Softwood 
Lumber, where domestic prices are not reliable, we have resorted to 
prices (i.e., benchmarks) outside the PRC.
    Discussion: In our analysis of the PRC as a non-market economy in 
the antidumping duty investigation of Certain Lined Paper Products from 
the PRC, the Department found that the PRC's banking sector does not 
operate on a commercial basis and is subject to significant 
distortions, primarily arising out of the continued dominant role of 
the government in the sector. See ``the People's Republic of China 
(PRC) Status as a Non-Market Economy,'' May 15, 2006 (May 15 
Memorandum); and ``China's Status as a Non-Market Economy,'' August 30, 
2006 (August 30 Memorandum), both of which are referenced in the Notice 
of Final Determination of Sales at Less Than Fair Value, and 
Affirmative Critical

[[Page 67901]]

Circumstances, In Part: Certain Lined Paper Products From the People's 
Republic of China, 71 FR 53079 (September 8, 2006), and as placed on 
the file of this investigation in a memorandum from Toni Page to the 
File titled ``Loan Benchmark Information'' (November 26, 2007) (Loan 
Benchmark Memo) on file in the Department's CRU. This finding was 
further elaborated in CFS Paper from the PRC. See Final CFS Paper from 
the PRC, 72 FR 60645 and accompanying Issues and Decision Memorandum at 
Comment 10. In that case, the Department found that the GOC still 
dominates the domestic Chinese banking sector and prevents banks from 
operating on a fully commercial basis. We continue to find that these 
distortions are present in the PRC banking sector and, therefore, 
preliminarily determine that the interest rates of the domestic Chinese 
banking sector do not provide a suitable basis for benchmarking the 
loans provided to respondents in this proceeding.
    Moreover, while foreign-owned banks do operate in the PRC, they are 
subject to the same restrictions as the SOCBs. Further, their share of 
assets and lending is negligible compared with the SOCBs. Therefore, as 
discussed in greater detail in Final CFS Paper from the PRC, because of 
the market-distorting effects of the GOC in the PRC banking sector, 
foreign bank lending does not provide a suitable benchmark. See Final 
CFS Paper from the PRC, 72 FR 60645 and accompanying Issues and 
Decision Memorandum at Comment 10.
    We now turn to the issue of choosing an external benchmark. 
Selecting an appropriate external interest rate benchmark is 
particularly important in this case because, unlike prices for certain 
commodities and traded goods, lending rates vary significantly across 
the world. Nevertheless, as discussed in Final CFS Paper from the PRC, 
there is a broad inverse relationship between income levels and lending 
rates. In other words, countries with lower per capita gross national 
income (GNI) tend to have higher interest rates than countries with 
higher per capita GNI, a fact demonstrated by the lending rates across 
countries reported in International Financial Statistics (IFS). See 
https://www.imfstatistics.org, at attachment 3 of the Loan Benchmark 
Memo. The Department has therefore preliminarily determined that it is 
appropriate to compute a benchmark interest rate based on the 
inflation-adjusted interest rates of countries with similar per capita 
GNIs to the PRC, using the same regression-bas