Certain Tow-Behind Lawn Groomers and Certain Parts Thereof from the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination, 70971-70981 [E8-27891]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 73, Number 227 (Monday, November 24, 2008)]
[Notices]
[Pages 70971-70981]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27891]


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DEPARTMENT OF COMMERCE

International Trade Administration

(C-570-940)


Certain Tow-Behind Lawn Groomers and Certain Parts Thereof from 
the People's Republic of China: Preliminary Affirmative Countervailing 
Duty Determination 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 certain tow-behind lawn groomers (lawn 
groomers) and certain parts thereof from the People's Republic of China 
(PRC). For information on the estimated subsidy rates, see the 
``Suspension of Liquidation'' section of this notice. This notice also 
serves to align the final countervailing duty (CVD) determination in 
this investigation with the final determination in the companion 
antidumping duty investigation of lawn groomers from the PRC.

EFFECTIVE DATE: November 24, 2008.

FOR FURTHER INFORMATION CONTACT: Gene Calvert 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-
3586 and (202) 482-1396, respectively.

SUPPLEMENTARY INFORMATION:

[[Page 70972]]

Case History

    The following events have occurred since the publication of the 
Department's notice of initiation in the Federal Register. See Certain 
Tow-Behind Lawn Groomers and Certain Parts Thereof from the People's 
Republic of China: Initiation of Countervailing Duty Investigation, 73 
FR 42324 (July 21, 2008) (Initiation Notice).
    On August 14, 2008, the Department selected as mandatory 
respondents the two largest Chinese producers/exporters of lawn 
groomers that could reasonably be examined, Princeway Furniture (Dong 
Guan) Co., Ltd. and Princeway Limited (collectively, Princeway) and 
Jiashan Superpower Tools Co., Ltd. (Superpower). See Memorandum to 
Stephen J. Claeys, Deputy Assistant Secretary for Import 
Administration, ``Selection of Respondents for the Countervailing Duty 
Investigation of Certain Tow-Behind Lawn Groomers and Certain Parts 
Thereof from the People's Republic of China'' (August 14, 2008) 
(Respondent Selection Memorandum). A public version of this memorandum 
is on file in the Department's Central Records Unit (CRU) in Room 1117 
of the main Department building. On August 18, 2008, we issued the CVD 
questionnaire to the Government of the People's Republic of China 
(GOC), requesting that the GOC forward the company sections of the 
questionnaire to the mandatory respondent companies.
    On August 21, 2008, 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 lawn groomers from China. 
See Certain Tow-Behind Lawn Groomers and Parts Thereof From China 
Determinations, 73 FR 49489 (August 21, 2008); and Certain Tow-Behind 
Lawn Groomers and Parts Thereof from China (Preliminary), USITC Pub. 
4028, Inv. Nos. 701-TA-457 and 731-TA-1153 (August 2008).
    On August 26, 2008, we published a postponement of the preliminary 
determination of this investigation until November 17, 2008. See 
Certain Tow-Behind Lawn Groomers and Certain Parts Thereof from the 
People's Republic of China: Postponement of Preliminary Determination 
in the Countervailing Duty Investigation, 73 FR 50307 (August 26, 
2008). We received responses from the GOC and both mandatory respondent 
companies on October 8, 2008. We issued supplemental questionnaires to 
Princeway and Superpower on October 24, 2008, and to the GOC on October 
29, 2008. Complete responses to these questionnaires are due November 
18, 2008.
    On August 20, 2008, Agri-Fab, Inc. (Petitioner) submitted new 
subsidy allegations regarding eight programs. On September 11, 2008, 
the GOC submitted comments on these allegations. On October 8, 2008, 
the Department determined to investigate all of these newly alleged 
subsidy programs pursuant to section 775 of the Tariff Act of 1930, as 
amended (the Act). See Memorandum to Barbara E. Tillman, Director AD/
CVD Operations, Office 6, ``Countervailing Duty Investigation of 
Certain Tow-Behind Lawn Groomers and Certain Parts Thereof from the 
People's Republic of China (PRC): Initiation Analysis of New Subsidy 
Allegations'' (October 8, 2008). Questions regarding these newly 
alleged subsidies were sent to the GOC and the mandatory respondent 
companies on October 10, 2008. The GOC, Princeway, and Superpower 
submitted responses to the new subsidy allegations questionnaires on 
October 27, 2008.

Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

    On July 21, 2008, the Department initiated the CVD and antidumping 
duty investigations of lawn groomers from the PRC. See Initiation 
Notice and Certain Tow Behind Lawn Groomers and Certain Parts Thereof 
From the People's Republic of China: Initiation of Antidumping Duty 
Investigation, 73 FR 42315 (July 21, 2008). The CVD investigation and 
the antidumping duty investigation have the same scope with regard to 
the merchandise covered.
    On August 8, 2008, Petitioner submitted a letter, in accordance 
with section 705(a)(1) of the Act, requesting alignment of the final 
CVD determination with the final antidumping duty determination of lawn 
groomers 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 CVD 
determination with the final antidumping duty determination. 
Consequently, the final CVD determination will be issued on the same 
date as the final antidumping duty determination, which is currently 
scheduled to be issued no later than April 6, 2009,\1\ unless 
postponed.
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    \1\ The calculated signature date is April 5, 2009, a Saturday. 
The next business day is April 6, 2009.
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Scope Comments

    As explained in the preamble to the Department's regulations, we 
set aside a period of time in the Initiation Notice for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 21 calendar days of publication of that notice. 
See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 
27323 (May 19, 1997); and Initiation Notice, 73 FR at 42324. No such 
comments were filed on the record of either this investigation or the 
companion antidumping duty investigation.

Scope of the Investigation

    The scope of this investigation covers certain non-motorized tow 
behind lawn groomers, manufactured from any material, and certain parts 
thereof. Lawn groomers are defined as lawn sweepers, aerators, 
dethatchers, and spreaders. Unless specifically excluded, lawn groomers 
that are designed to perform at least one of the functions listed above 
are included in the scope of this investigation, even if the lawn 
groomer is designed to perform additional non-subject functions (e.g., 
mowing).
    All lawn groomers are designed to incorporate a hitch, of any 
configuration, which allows the product to be towed behind a vehicle. 
Lawn groomers that are designed to incorporate both a hitch and a push 
handle, of any type, are also covered by the scope of this 
investigation. The hitch and handle may be permanently attached or 
removable, and they may be attached on opposite sides or on the same 
side of the lawn groomer. Lawn groomers designed to incorporate a 
hitch, but where the hitch is not attached to the lawn groomer, are 
also included in the scope of the investigation.
    Lawn sweepers consist of a frame, as well as a series of brushes 
attached to an axle or shaft which allows the brushing component to 
rotate. Lawn sweepers also include a container (which is a receptacle 
into which debris swept from the lawn or turf is deposited) supported 
by the frame. Aerators consist of a frame, as well as an aerating 
component that is attached to an axle or shaft which allows the 
aerating component to rotate. The aerating component is made up of a 
set of knives fixed to a plate (known as a ``plug aerator''), a series 
of discs with protruding spikes (a ``spike aerator''), or any other 
configuration, that are designed to create holes or cavities in a lawn 
or turf surface. Dethatchers consist of a frame, as well as a series of 
tines designed to remove material (e.g., dead grass or leaves) or other 
debris from the lawn or turf. The dethatcher tines are attached to and 
suspended from the

[[Page 70973]]

frame. Lawn spreaders consist of a frame, as well as a hopper (i.e., a 
container of any size, shape, or material) that holds a media to be 
spread on the lawn or turf. The media can be distributed by means of a 
rotating spreader plate that broadcasts the media (``broadcast 
spreader''), a rotating agitator that allows the media to be released 
at a consistent rate (``drop spreader''), or any other configuration.
    Lawn dethatchers with a net fully-assembled weight (i.e., without 
packing, additional weights, or accessories) of 100 pounds or less are 
covered by the scope of the investigation. Other lawn groomers-
sweepers, aerators, and spreaders-with a net fully-assembled weight 
(i.e., without packing, additional weights, or accessories) of 200 
pounds or less are covered by the scope of the investigation.
    Also included in the scope of the investigation are modular units, 
consisting of a chassis that is designed to incorporate a hitch, where 
the hitch may or may not be included, which allows modules that perform 
sweeping, aerating, dethatching, or spreading operations to be 
interchanged. Modular units-when imported with one or more lawn 
grooming modules-with a fully assembled net weight (i.e., without 
packing, additional weights, or accessories) of 200 pounds or less when 
including a single module, are included in the scope of the 
investigation. Modular unit chasses, imported without a lawn grooming 
module and with a fully assembled net weight (i.e., without packing, 
additional weights, or accessories) of 125 pounds or less, are also 
covered by the scope of the order. When imported separately, modules 
that are designed to perform subject lawn grooming functions (i.e., 
sweeping, aerating, dethatching, or spreading), with a fully assembled 
net weight (i.e., without packing, additional weights, or accessories) 
of 75 pounds or less, and that are imported with or without a hitch, 
are also covered by the scope.
    Lawn groomers, assembled or unassembled, are covered by this 
investigation. For purposes of this investigation, ``unassembled lawn 
groomers'' consist of either 1) all parts necessary to make a fully 
assembled lawn groomer, or 2) any combination of parts, constituting a 
less than complete, unassembled lawn groomer, with a minimum of two of 
the following ``major components'':
    1) an assembled or unassembled brush housing designed to be used in 
a lawn sweeper, where a brush housing is defined as a component housing 
the brush assembly, and consisting of a wrapper which covers the brush 
assembly and two end plates attached to the wrapper;
    2) a sweeper brush;
    3) an aerator or dethatcher weight tray, or similar component 
designed to allow weights of any sort to be added to the unit;
    4) a spreader hopper;
    5) a rotating spreader plate or agitator, or other component 
designed for distributing media in a lawn spreader;
    6) dethatcher tines;
    7) aerator spikes, plugs, or other aerating component; or
    8) a hitch.
    The major components or parts of lawn groomers that are 
individually covered by this investigation under the term ``certain 
parts thereof'' are: (1) brush housings, where the wrapper and end 
plates incorporating the brush assembly may be individual pieces or a 
single piece; and (2) weight trays, or similar components designed to 
allow weights of any sort to be added to a dethatcher or an aerator 
unit.
    The products for which relief is sought specifically exclude the 
following: 1) agricultural implements designed to work (e.g., churn, 
burrow, till, etc.) soil, such as cultivators, harrows, and plows; 2) 
lawn or farm carts and wagons that do not groom lawns; 3) grooming 
products incorporating a motor or an engine for the purpose of 
operating and/or propelling the lawn groomer; 4) lawn groomers that are 
designed to be hand held or are designed to be attached directly to the 
frame of a vehicle, rather than towed; 5) ``push'' lawn grooming 
products that incorporate a push handle rather than a hitch, and which 
are designed solely to be manually operated; 6) dethatchers with a net 
assembled weight (i.e., without packing, additional weights, or 
accessories) of more than 100 pounds, or lawn groomers-sweepers, 
aerators, and spreaders-with a net fully-assembled weight (i.e., 
without packing, additional weights, or accessories) of more than 200 
pounds; and 7) lawn rollers designed to flatten grass and turf, 
including lawn rollers which incorporate an aerator component (e.g., 
``drum-style'' spike aerators).
    The lawn groomers that are the subject of this investigation are 
currently classifiable in the Harmonized Tariff Schedule of the United 
States (HTSUS) statistical reporting numbers 8432.40.0000, 
8432.80.0000, 8432.90.0030, 8432.90.0080, 8479.89.9897, 8479.90.9496, 
and 9603.50.0000. These HTSUS provisions are given for reference and 
customs purposes only, and the description of merchandise is 
dispositive for determining the scope of the product.

Period of Investigation

    The period for which we are measuring subsidies, i.e., the period 
of investigation (POI), is January 1, 2007 through December 31, 2007.

Application of the Countervailing Duty Law to Imports From the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) (CFS 
from the PRC), and the accompanying Issues and Decision Memorandum (CFS 
Decision Memorandum). In CFS from the PRC, the Department found that, 
``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 economies does 
not act as a bar to proceeding with a CVD investigation involving 
products from the {PRC{time} .'' See CFS Decision Memorandum, at 
Comments 1 and 6.
    The Department has subsequently affirmed its decision to apply the 
CVD law to the PRC in several final determinations, most recently in 
Lightweight Thermal Paper From the People's Republic of China: Final 
Affirmative Countervailing Duty Determination, 73 FR 57323 (October 2, 
2008) (LWTP from the PRC), and the accompanying Issues and Decision 
Memorandum (LWTP Decision Memorandum).
    Additionally, for the reasons stated in the LWTP Decision 
Memorandum, we are using the date of December 11, 2001, the date on 
which the PRC became a member of the World Trade Organization, as the 
date from which the Department will identify and measure subsidies in 
the PRC for purposes of this preliminary determination. See LWTP 
Decision Memorandum, at Comment 2.

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 lawn groomers. No party in this 
proceeding has disputed this allocation period.

[[Page 70974]]

Denominator and Attribution of Subsidies

    When selecting an appropriate denominator for use in calculating 
the ad valorem countervailable subsidy rate, the Department considered 
the bases for Princeway's and Superpower's approval of benefits under 
each program at issue. For export related subsidies, the Department 
attributed the subsidies only to products exported by the respondents 
and used export sales as the denominator. See 19 CFR 351.525(b)(2). For 
all other non-export related subsidies, the Department has attributed 
these subsidies to the total sales of all products of Princeway and 
Superpower and used total sales as the denominator in our calculations. 
See 19 CFR 351.525(b)(3).
    Princeway Furniture (Dong Guan) Co., Ltd. is owned by and sells 
through its affiliate Princeway Limited for tax and currency control 
purposes. Princeway's production facility is located in Guangdong 
Province; therefore, we are relying on the sales figures recorded in 
the income statements of Princeway Furniture (Dong Guan) Co., Ltd. as 
denominators. See 19 CFR 351.525(b)(6)(i). Moreover, Princeway has not 
provided a justification for using any other sales figures as 
denominators such as the Department examined in our investigation of 
coated free sheet paper from the PRC. See CFS Decision Memorandum, at 
Comment 23. Superpower reported that it had no cross-owned affiliates 
that received subsidies and no affiliates involved in its sales 
transactions; therefore, we are using Superpower's sales figures as 
denominators. Id.

Discount Rate for Allocation

    Consistent with 19 CFR 351.524(3)(i)(A), we used as our discount 
rate a long-term interest rate calculated according to the methodology 
that we used recently in our thermal paper investigation for the year 
in which the government agreed to provide the benefit. See LWTP 
Decision Memorandum, at Comments 8 and 9. The rates reported in 
International Financial Statistics represent short- and medium-term 
lending. However, there are no sufficient publicly-available long-term 
interest rate data upon which to base a robust benchmark for long-term 
loans. To address this problem, the Department developed an adjustment 
to medium-term rates to convert them to long-term rates using Bloomberg 
U.S. corporate BB-rated bond rates. See id., at Comment 9. Because the 
short-term benchmark covers loans up to two years, we have calculated 
the long-term adjustment based on the difference between (1) the two-
year BB-rated bond rate and (2) the 10-year BB-rated bond rate because 
10 years is the AUL in this case. See, also, Memorandum to the File, 
``Preliminary Calculation Memorandum for Princeway Furniture (Dong 
Guan) Co., Ltd. and Princeway Limited'' (November 17, 2008) for a more 
detailed discussion of the discount rate methodology.

Use of Facts Otherwise Available and Adverse Inferences

    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. 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.

Non-Cooperative Companies

    In the instant investigation, the following five companies provided 
no response to the Department's ``quantity and value'' questionnaire 
issued during the respondent selection process: Qingdao Hundai Tools 
Co., Ltd., Qingdao Taifa Group Co., Ltd., Maxchief Investments Ltd., 
Qingdao EA Huabang Instrument Co., Ltd., and World Factory Inc. 
(collectively, non-cooperative companies). We attempted twice to 
solicit quantity and value information from the first four of these 
companies, and confirmed delivery of our questionnaires through Federal 
Express. In our second attempt, we warned that ``{f{time} ailure to 
respond to this questionnaire may result in the Department determining 
that your company has decided not to participate in this proceeding and 
that your company has not cooperated to the best of its ability. As a 
consequence, the Department would consider applying facts available 
with an adverse inference in accordance with section 776(b) of the 
Tariff Act of 1930.'' See Letters to Hangzhou Geesun International Co., 
Ltd., et al., from Barbara E. Tillman, Director, AD/CVD Operations, 
Office 6, ``Quantity and Value Questionnaire for the Countervailing 
Duty Investigation of Certain Tow-Behind Lawn Groomers and Certain 
Parts Thereof from the People's Republic of China'' (August 4, 2008). 
World Factory Inc. refused delivery of our first questionnaire. See 
Respondent Selection Memorandum for the details of our attempts to 
solicit information from 12 producers and exporters identified in the 
petition.
    In the instant investigation, the non-cooperative companies 
withheld requested information and significantly impeded this 
proceeding. Specifically, by not responding to requests for information 
concerning the quantity and value of their sales, they impeded the 
Department's ability to select the most appropriate respondents in this 
investigation. Thus, in reaching our preliminary determination, 
pursuant to sections 776(a)(2)(A) and (C) of the Act, we have based the 
CVD rate for the non-cooperative companies on facts otherwise 
available.
    We also determine that an adverse inference is warranted, pursuant 
to section 776(b) of the Act. By failing to submit responses to the 
Department's quantity and value questionnaires, these companies did not 
cooperate to the best of their ability in this investigation. 
Accordingly, we find that an adverse inference is warranted to ensure 
that the non-cooperating companies will not obtain a more favorable 
result than had they fully complied with our request for information.
    In deciding which facts to use as adverse facts available (AFA), 
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 other information placed on the record. It is 
the Department's practice to select, as AFA, the highest calculated 
rate in any segment of the proceeding. See, e.g., Laminated Woven Sacks 
From the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Affirmative Determination, in Part, of 
Critical Circumstances, 73 FR 35639 (June 24, 2008) (LWS from the PRC) 
and the accompanying Issues and Decision Memorandum (LWS Decision 
Memorandum) at ``Selection of the Adverse Facts Available''.
    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the margin is 
sufficiently adverse ``as to effectuate the statutory purposes of the 
adverse facts available rule to induce respondents to provide the 
Department with complete and

[[Page 70975]]

accurate information in a timely manner.'' See, e.g., 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 Statement of Administrative Action (SAA) 
accompanying the Uruguay Round Agreements Act, H.R. Rep. No. 103-316, 
Vol. I, at 870 (1994). 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 
commercial activity, selecting the highest prior margin ``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).
    For the preliminary determination, consistent with the Department's 
recent practice, we are computing a total AFA rate for the non-
cooperating companies generally using program-specific rates determined 
for the cooperating respondents or past cases. Specifically, for 
programs other than those involving income tax exemptions and 
reductions, we will apply the highest calculated rate for the identical 
program in this investigation if a responding company used the 
identical program. If there is no identical program match within the 
investigation, we will use the highest non-de minimis rate calculated 
for the same or similar program in another PRC CVD investigation. 
Absent an above-de minimis subsidy rate calculated for the same or 
similar program, we will apply the highest calculated subsidy rate for 
any program otherwise listed that could conceivably be used by the non-
cooperating companies. See, e.g., LWTP Decision Memorandum, at Comment 
3.
    Also, as explained in the Initiation Notice, and accompanying 
Initiation Checklist, where the GOC can demonstrate through complete, 
verifiable, positive evidence that non-cooperative companies (including 
all their facilities and cross-owned affiliates) are not located in 
particular provinces whose subsidies are being investigated, the 
Department will not include those provincial programs in determining 
the countervailable subsidy rate for the non-cooperative companies. In 
this investigation, the GOC did not provide any such information. 
Therefore, the Department included all provincial programs in 
determining the countervailable subsidy rate for the non-cooperative 
companies.

Foreign-Invested Enterprise (FIE) Income Tax Rate Reduction and 
Exemption Programs

    For the 11 income tax rate reduction or exemption programs,\2\ we 
have applied an adverse inference that the non-cooperative companies 
paid no income taxes during the POI. Information from the petition 
indicates that during the POI, the standard income tax rate for 
corporations was 30 percent; there was an additional local income tax 
of 3 percent. See Petitioner's June 24, 2008 Submission, at Exhibit II-
21. Therefore, the highest possible benefit for all income tax 
reduction or exemption programs combined is 33 percent. Thus, we are 
applying a countervailable rate of 33 percent on an overall basis for 
these 11 income tax programs (i.e., these 11 income tax programs 
combined to provide a countervailable benefit of 33 percent). This 33 
percent AFA rate does not apply to tax credit or tax refund programs. 
See, e.g., CFS Decision Memorandum, at 3; see, also, LWTP Decision 
Memorandum, at Comment 3.
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    \2\ ``Two Free, Three Half'' Tax Exemption for FIEs; Income Tax 
Reductions for Export-Oriented Enterprises; Reduced Income Taxes 
Based on Geographic Location - Zhejiang and Shandong Provinces; 
Income Tax Programs for FIEs in Zhejiang Province; Income Tax 
Programs in the Huimin Industrial Park in Zhejiang Province; Income 
Tax Programs in the Hangzhou Export Processing Zone in Zhejiang 
Province; Income Tax Programs for FIEs Located in Qingdao 
Municipality; Income Tax Programs in the Lingang Processing 
Industrial Zone in Qingdao Municipality; Income Tax Programs for 
FIEs in Guangdong Province; Income Tax Programs for FIEs in Dongguan 
City, Guangdong Province; and Income Tax Programs for Export-
Oriented FIEs in Dongguan City, Guangdong Province.
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Income Tax Credit and Refund Programs

    For the ``Refund of Enterprise Income Taxes on FIE Profits 
Reinvested in an Export-Oriented Enterprise'' program, a tax refund 
program, we have preliminarily determined to apply the rate calculated 
for Superpower under the same program in this investigation, which is 
0.64 percent. Neither of the two mandatory respondents used the three 
remaining income tax credit and refund programs,\3\ and the Department 
has not calculated a non-de minimis rate for any of these programs in 
any prior investigation. Therefore, for each of these three tax credit 
and refund programs, we have preliminarily determined to apply the 
highest non-de minimis rate for any indirect tax program from a PRC CVD 
investigation because, after examining each PRC CVD final 
determination, there were only de minimis rates for income tax credit 
or refund programs from prior investigations. The rate we selected for 
these programs is 1.51 percent, the rate calculated for respondent Gold 
East Paper (Jiangsu) Co., Ltd. (GE) for the ``VAT and Tariff Exemptions 
on Imported Equipment'' program in CFS from the PRC. See CFS Decision 
Memorandum, at 13-14.
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    \3\ Income Tax Credits for FIEs Purchasing Domestically Produced 
Equipment; Income Tax Credits on Purchases of Domestically Produced 
Equipment by Domestically-Owned Companies; and Income Tax Offsets 
and/or Refunds for FIEs Purchasing Domestic Equipment in Qingdao 
Municipality.
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Value Added Tax (VAT) and Tariff Exemptions and Rebates for Equipment 
Programs

    For the ``VAT and Import Tariff Exemption for Imported Equipment'' 
program, we have preliminarily determined to apply the rate calculated 
for Princeway under this program in this investigation, which is 0.49 
percent.\4\ Neither of the two mandatory respondents used the ``VAT 
Exemption for Domestically Produced Equipment'' program. Therefore, for 
this program, we have preliminarily determined to apply the highest 
non-de minimis rate for the identical program from CFS from the PRC: 
1.51 percent, GE's calculated rate for the program ``VAT and Tariff 
Exemptions on Imported Equipment.'' See id.
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    \4\ As discussed below under ``Programs Preliminarily Determined 
To Be Not Used by Princeway and Superpower,'' the Department has 
preliminarily determined that there are only two VAT exemptions and 
rebates for equipment programs under investigation.
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Export Promotion Programs

    Neither of the mandatory respondents used the ``Export-Based 
Reward' Programs for Enterprises in Zhejiang Province'' program, the 
``Refunds of Legal Fees Paid in Antidumping and Countervailing Duty 
Investigation in Zhejiang Province and Jiashan County'' program, the 
``Export-Based Reward' Subsidies for Enterprises in Huimin Industrial 
Park'' program, or the ``Funds for Outward Expansion' of Industries in 
Guangdong Province'' program. The Department has not calculated a non-
de minimis rate for any similar program in any prior investigation. 
Therefore, for these four programs, we have preliminarily determined to 
apply the highest calculated subsidy rate for any program otherwise 
listed that could conceivably have been used by the non-cooperating 
companies: 44.91 percent,

[[Page 70976]]

the rate calculated for Kingland for the ``Provision of Hot-Rolled 
Steel at Less than Adequate Remuneration'' program in the investigation 
of circular welded carbon quality steel pipe. See Memorandum to Susan 
Kuhbach, Director, Office 1, AD/CVD Operations, ``Countervailing Duty 
Investigation: Circular Welded Carbon-Quality Steel Pipe from the 
People's Republic of China: Ministerial Error Allegation,'' (July 2, 
2008) at 7.
    In addition, neither of the two mandatory respondents used the 
program ``Preferential Loans and Development Funds' for Export-Oriented 
Enterprises in Guangdong Province,'' and the Department has not 
calculated a non-de minimis rate for this program in any other PRC CVD 
investigation. Therefore, we have preliminarily determined to apply the 
highest non-de minimis rate for a loan program from a PRC CVD 
investigation: 7.99 percent, the rate calculated for Guangdong Guanhao 
High-Tech Co., Ltd. for the program ``Government Policy Lending'' in 
LWTP from the PRC. See LWTP Decision Memorandum, at 11-12.

Provision of Land at Less Than Adequate Remuneration (LTAR) Programs

    Finally, neither of the mandatory respondents used the ``Provision 
of Land for LTAR for Export-Oriented FIEs Located in Shandong 
Province'' program, or the ``Provision of Land for LTAR for Export-
Oriented FIEs Located in Qingdao Municipality'' program. Therefore, for 
these two programs, we have preliminarily determined to apply the 
highest non-de minimis rate for a similar land at LTAR program from a 
PRC CVD investigation: 13.36 percent, the rate calculated for Zibo 
Aifudi Plastic Packaging Company Limited in LWS from the PRC. See LWS 
Decision Memorandum, at 14-18.

Allegations Not Affecting the AFA Rate

    As discussed below, we have preliminarily determined that we 
require more information regarding the ``Provision of Hot-Rolled Steel 
at Less Than Adequate Remuneration'' program and the ``VAT Export 
Rebate'' program.\5\ Also as discussed below, we have preliminarily 
determined that producers and exporters of lawn groomers are ineligible 
for benefits under programs related to consumption taxes. Therefore, 
these programs are not reflected in the calculation of our AFA rate.
---------------------------------------------------------------------------

    \5\ As discussed below under ``Programs Preliminarily Determined 
To Be Not Used by Princeway and Superpower,'' the Department has 
preliminarily determined that there is only one VAT export rebates 
program under investigation.
---------------------------------------------------------------------------

    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 ``information 
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, e.g., SAA, at 870. It is the Department's practice 
to consider information to be corroborated if it has probative value. 
Id. Further, it is also the Department's practice to corroborate 
secondary information, the Department will, to the extent practicable, 
by examining the reliability and relevance of the information to be 
used. See, e.g., SAA, at 869. However, it is also our practice that we 
need not prove that the selected facts available are the best 
alternative information.
    When the Department applies AFA, to the extent practicable, it will 
determine whether such information has probative value by evaluating 
the reliability and relevance of the information used. With regard to 
the reliability aspect of corroboration, we note that these rates were 
calculated in prior final CVD determinations. No information has been 
presented that calls into question the reliability of these calculated 
rates that we are applying as AFA. Unlike other types of information, 
such as publicly available data on the national inflation rate of a 
given country or national average interest rates, there typically are 
no independent sources for data on company-specific benefits resulting 
from countervailable subsidy programs.
    With respect to the relevance aspect of corroborating the rates 
selected, the Department will consider information reasonably at its 
disposal in considering the relevance of information used to calculate 
a countervailable subsidy benefit. Where circumstances indicate that 
the information is not appropriate as AFA, the Department will not use 
it. See, e.g., Fresh Cut Flowers From Mexico; Final Results of 
Antidumping Duty Administrative Review, 61 FR 6812, 6814 (February 22, 
1996).
    The Department has reviewed the information concerning PRC subsidy 
programs in this and other cases. For those programs for which the 
Department has found a program-type match, we find that programs of the 
same type are relevant to the programs of this case. For the programs 
for which there is no program-type match, the Department has selected 
the highest calculated subsidy rate for any PRC program from which the 
non-cooperating companies could conceivably receive a benefit to use as 
AFA. The relevance of this rate is that it is an actual calculated CVD 
rate for a PRC program from which the non-cooperating companies could 
actually receive a benefit. The Department has corroborated the rates 
it selected to the extent practicable.
    On this basis, we preliminarily determine that the AFA 
countervailable subsidy rate for the five non-cooperating companies is 
254.52 percent ad valorem.

Application of ``All Others'' Rate to Companies Not Selected as 
Mandatory Respondents

    In addition to Princeway and Superpower, the Department received 
responses to its quantity and value questionnaire from the following 
four companies: Hangzhou Geesun International Co., Ltd., Nantong D&B 
Machinery Co., Ltd., Qingdao Huatian Hand Truck Co., Ltd., and T.N. 
International, Inc. See Respondent Selection Memorandum. However, the 
Department was unable to deliver the quantity and value questionnaire 
to Sidepin Ltd., another of the twelve producers and exporters listed 
in the petition, because of an address error. Id. While these five 
companies were not chosen as mandatory respondents, because they 
cooperated fully with the Department's request for quantity and value 
information regarding their sales, or, in the case of Sidepin Ltd., 
were not uncooperative, we are applying the all others rate to these 
five companies.

Analysis of Programs

    Based upon our analysis of the petition and the responses to our 
questionnaires, we determine the following:

I. Programs Preliminarily Determined to Be Countervailable

A. Preferential Tax Policies for Enterprises with Foreign Investment 
(Two Free, Three Half Program)

    Petitioner alleges that under Article 8 of the Income Tax Law of 
the People's Republic of China for Enterprises with Foreign Investment 
and Foreign Enterprises (FIE Tax Law), FIEs of a ``productive nature'' 
that are scheduled to operate for not less than 10 years may be exempt 
from income taxes during the first two years of profitability, and may 
pay half of the applicable tax for the next three years.

[[Page 70977]]

    Princeway states it received benefits under this program during the 
POI. Specifically, it paid no tax in 2006 pursuant to Article 8 of the 
FIE Tax Law as reflected in the tax return it filed during the POI, 
which it submitted as an attachment to its questionnaire response.
    According to Superpower's response, it also qualified for benefits 
under this program during the POI. Specifically, Superpower qualified 
for ``three half'' benefits during tax year 2006, reflected in the tax 
return it filed during the POI. Therefore, during tax year 2006, 
Superpower's central government income tax rate was reduced from 24 
percent to 12 percent, and its local income tax rate was reduced from 
2.4 percent to 1.2 percent.\6\
---------------------------------------------------------------------------

    \6\ Superpower's eligibility for a 24 percent central rate, 
instead of the standard 30 percent rate, and a 2.4 percent local 
rate, instead of the standard 3 percent rate, is discussed below 
under the ``Reduced Income Taxes Based on Geographic Location 
(Zhejiang and Shandong Provinces)'' section.
---------------------------------------------------------------------------

    We preliminarily determine that the income tax exemptions received 
by Princeway and Superpower under this program confer a countervailable 
subsidy. The exemptions are a financial contribution in the form of 
revenue forgone by the GOC and they provide a benefit to the recipients 
in the amount of the tax savings. See Section 771(5)(D)(ii) of the Act 
and 19 CFR 351.509(a)(1). We also preliminarily determine that the 
exemptions afforded by this program are limited as a matter of law to 
certain enterprises, ``productive'' FIEs, and, hence, are specific 
under section 771(5A)(D)(i) of the Act.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Princeway and Superpower as a recurring benefit, consistent with 19 
CFR 351.524(c)(1), and divided each company's tax savings received 
during the POI by its total sales during that period. To compute the 
amount of the tax savings, we compared the income tax rate Princeway 
and Superpower would have paid in the absence of the program with the 
income tax rate the companies actually paid. On this basis, we 
preliminarily determine that Princeway received a countervailable 
subsidy of 0.46 percent ad valorem under this program and Superpower 
received a countervailable subsidy of 1.32 percent.
    Finally, we address Superpower's arguments that any tax benefits it 
received pursuant to activities taking place before the POI (2007) are 
not germane to this investigation. Primarily, in its discussion of this 
program and others, Superpower argues that it submits quarterly tax 
returns to local authorities. Three of the quarterly ``returns'' for 
tax year 2007 activity were filed in 2007, with the fourth filed in 
2008. According to Superpower, these quarterly documents are a more 
accurate measure of benefits received in the POI than the Department's 
practice of calculating benefits using the annual tax return filed in 
the POI, which reflects activity for the prior year. Superpower also 
argues that exemptions and rebates (discussed below) it has received 
should be attributable to the year in which it accrued the right to 
these exemptions and rebates.
    The Department, however, is maintaining its practice of calculating 
benefits for the POI using the tax return filed in the POI. See 19 CFR 
351.509(b)(1). According to the GOC, ``income taxes are paid in 
quarterly installments,'' but ``{w{time} ithin four months of the end 
of the year, an annual tax return form and final accounting statements 
must be submitted and tax accounts are finally settled within five 
months of the end of the year.'' See GOC's October 8, 2008 
Questionnaire Response, at I-12. Thus, while benefits reflected on 
Superpower's 2007 tax return are attributable to activity in 2006, 
these benefits do not become final until 2007 (the POI). Likewise, as 
discussed below, rebates received by Superpower, which are not 
reflected in any of its tax returns, while attributable to activity 
before 2007, were applied for, approved, and paid in 2007.

B. Income Tax Reductions for Export-Oriented Enterprises (EOEs)

    Petitioner alleges Article 75 of the Detailed Implementation Rules 
of the Income Tax Law of the People's Republic of China of Foreign 
Investment Enterprises an Foreign Enterprises (FIE Tax Rules) provides 
that FIEs that export 70 percent or more of the total value of their 
products may benefit from reduced tax rates. According to Petitioner, 
income tax rates for enterprises participating in this program may be 
reduced by 50 percent.
    Superpower states that it received benefits under this program for 
tax year 2006. Specifically, according to Superpower, it qualified for 
a 50 percent reduction in its central tax rate and a 100 percent 
reduction in its local tax rate. Because it had already received a 50 
percent reduction in its central tax rate pursuant to the ``Two Free, 
Three Half'' program, only the 100 percent reduction of the local tax 
rate provided additional benefits. These benefits were provided in the 
form of a rebate of the remaining 1.2 percent local income tax, which 
Superpower applied for and received in the POI.
    We preliminarily determine that the income tax rebate received by 
Superpower under this program confers a countervailable subsidy. The 
rebate is a financial contribution in the form of revenue forgone by 
the GOC and it provides a benefit to the recipients in the amount of 
the tax savings. See Section 771(5)(D)(ii) of the Act and 19 CFR 
351.509(a)(1).
    Superpower states that in order to receive this rebate it had to 
obtain ``the Certification of Export-oriented FIE.'' See Superpower's 
October 8, 2008 Questionnaire Response, at 19. Likewise, the GOC 
explains how benefits under this program are contingent on a 
demonstration by an FIE that its export sales amount to 70 percent of 
its total sales. See GOC's October 8, 2008 Questionnaire Response, at 
I-19. Therefore, we preliminarily determine that the rebate afforded by 
this program is contingent on Superpower's export performance and, 
hence, is specific under section 771(5A)(B) of the Act.
    To calculate the benefit, we treated the income tax rebate enjoyed 
by Superpower as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the rebate received during the POI by the 
company's total export sales during that period. On this basis, we 
preliminarily determine that Superpower received a countervailable 
subsidy of 0.15 percent ad valorem under this program.

C. Refund of Enterprise Income Taxes on FIE Profits Reinvested in an 
EOE

    Petitioner alleges that export-oriented FIEs are eligible for tax 
refunds on profits that are reinvested in the FIE, or into a new high-
technology enterprise or EOE.
    According to Superpower's response, it received two payments under 
this program in 2007. While the payments arise from profits made during 
tax years 2005 and 2006, Superpower applied for the rebates in 2007. 
Moreover, the rebates were approved and the rebate funds were paid to 
Superpower in 2007. According to Superpower, ``the amount of assistance 
provided was determined by the amount of the reinvested profit and the 
amount of income tax already paid for this amount of reinvested 
profit.'' See Superpower's October 8, 2008 Questionnaire Response, at 
22. Likewise, according to the GOC, the refund amount depends on the 
``original applicable enterprise income tax rate,'' which, according to 
the FIE Tax Rules, would appear to be the effective rate (i.e., the 
standard 30 percent rate minus

[[Page 70978]]

FIE reductions, etc.) applied to the enterprise in question in the year 
the profit was made (in this case, 2005 and 2006). See GOC's October 8, 
2008 Questionnaire Response, at I-24.
    Moreover, according to the GOC, while ``the program is available to 
all qualifying FIEs,'' the amount of the refund is larger for 
reinvestments in EOEs. Id. Specifically, a standard FIE receives 40 
percent of the refund received by an EOE. Id. The documents provided by 
Superpower (applications, approvals, etc.) are consistent with the 
formulas stated by the GOC and included in the FIE Tax Rules. It also 
notes that ``{t{time} he FIE, not the investor, applies for and 
receives the refund, of income taxes paid by the FIE, which it may pay 
to the investor.'' Id. at I-28.
    We preliminarily determine that the rebates received by Superpower 
under this program confer a countervailable subsidy. The rebates are a 
financial contribution in the form of revenue forgone by the GOC and 
they provide a benefit to the recipients in the amount of the tax 
savings. See Section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1).
    As noted above, the GOC's response explains that larger rebates are 
provided to EOEs than to other FIEs. Based on our examination of the 
application and approval documents submitted by Superpower, we have 
determined that one of the two rebates received by Superpower during 
the POI was pursuant to the EOE formula and one was pursuant to the 
standard FIE formula. Therefore, we preliminarily determine that one of 
the rebates afforded by this program is contingent on Superpower's 
export performance and, hence, is specific under section 771(5A)(B) of 
the Act. The other rebate is limited as a matter of law to certain 
enterprises (FIEs) and, hence, is specific under section 771(5A)(D)(i) 
of the Act.
    To calculate the benefit, we treated the income tax rebates enjoyed 
by Superpower as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided one rebate by total export sales and the 
other by total sales during the POI. On this basis, we preliminarily 
determine that Superpower received a countervailable subsidy of 0.64 
percent ad valorem under this program.

D. Import Tariff and VAT Exemptions for Encouraged Industries Importing 
Equipment for Domestic Operations

    Petitioner alleges that the GOC administers a program that offers 
VAT and import tariff rebates on imported equipment. According to 
Petitioner, this program is available to both FIEs and domestic 
enterprises, and its purpose is to encourage foreign investment and 
introduce foreign advanced technology equipment and industry technology 
upgrades.
    According to Princeway, it received benefits under this program for 
imported equipment because it ``was established as an export-oriented 
enterprise to export all of its products to overseas markets. This 
status of the company falls within the category of encouragement under 
the Catalog of Industries Guidance for Foreign Business Investment . . 
. .'' Consequently, it received an exemption from customs duties and 
VAT on imported equipment.
    We preliminarily determine that the exemption received by Princeway 
under this program confers a countervailable subsidy. The exemption is 
a financial contribution in the form of revenue forgone by the GOC and 
it provides a benefit to the recipients in the amount of the VAT and 
tariff savings. See Section 771(5)(D)(ii) of the Act and 19 CFR 
351.510(a)(1).
    As noted above, Princeway qualified for this exemption because it 
``was established as an export-oriented enterprise to export all of its 
products to overseas markets.'' Therefore, we determine the VAT and 
tariff exemption under this program is contingent on Princeway's export 
performance and, hence, is specific under section 771(5A)(B) of the 
Act.
    Normally, we treat exemptions from indirect taxes and import 
charges, such as VAT and tariff exemptions, as recurring benefits, 
consistent with 19 CFR 351.524(c)(1), and allocate these benefits only 
in the year that they were received. However, when an indirect tax or 
import charge exemption is provided for, or tied to, the capital 
structure or capital assets of a firm, the Department may treat it as a 
non-recurring benefit and allocate the benefit to the firm over the 
AUL. See 19 CFR 351.524(c)(2)(iii) and 19 CFR 351.524(d)(2).
    We requested that Princeway identify the equipment for which it 
received a VAT and tariff exemption from 2001 through the end of the 
POI. In some of these years, the total amount of the VAT and tariff 
exemption approved was less than 0.5 percent of Princeway's export 
sales for those years. See 19 CFR 351.524(b)(2). For those years, 
therefore, we do not reach the issue of whether the VAT and tariff 
exemption was tied to the capital structure or capital assets of the 
firm. Instead, we expense the benefit to the year in which it is 
received, consistent with 19 CFR 351.524(a).
    In some other years, however, the total amount of VAT and tariff 
exemption exceeded 0.5 percent of Princeway's export sales for those 
years. Based on Princeway's reported information, the VAT and tariff 
exemption were for capital equipment. See Princeway's October 8, 2008 
Questionnaire Response, at Exhibit 14. Accordingly, the Department is 
treating the VAT and tariff exemption for those years as a non-
recurring benefit consistent with 19 CFR 351.524(c)(2)(iii).
    To calculate the benefit for Princeway, we used our standard 
methodology for non-recurring benefits (see 19 CFR 351.524(b)) and 
recurring benefits, as applicable (i.e., for the years for which we 
determined the benefits to be non-recurring, we first allocated the 
benefits to the POI). We then summed these allocated benefits from 
Princeway's VAT and tariff exemptions from years 2002 to 2007. On this 
basis, we preliminarily determine that Princeway received a 
countervailable subsidy of 0.49 percent ad valorem under this program.

E. Reduced Income Taxes Based on Geographic Location (Zhejiang and 
Shandong Provinces)

    Petitioner alleges that special economic zones (SEZs) exist in the 
PRC to encourage foreign investment and the development of industry. 
According to Petitioner, these SEZs may be designated as coastal 
economic development zones, SEZs, or as economic and technical 
development zones. Petitioner claims that benefits received by the 
industries operating in these SEZs include, inter alia, preferential 
income tax rates.
    Superpower states that it is eligible for reduced income tax rates 
as it is located in Jiashan, a coastal economic development zone. 
Specifically, under Article 7 of the FIE Tax Law, it is eligible for a 
central government tax rate of 24 percent and, apparently under the 
discretion afforded to provincial and municipal governments by Article 
9 of the FIE Tax Law, it is eligible for a local tax rate of 2.4 
percent, because of its location in a coastal economic development 
zone. These reduced tax rates are reflected in the tax return 
Superpower filed in 2007.
    We preliminarily determine that the income tax exemption received 
by Superpower under this program confers a countervailable subsidy. The 
exemption is a financial contribution in the form of revenue forgone by 
the GOC and it provides a benefit to the recipients in the amount of 
the tax savings. See Section 771(5)(D)(ii) of the Act and 19 CFR 
351.509(a)(1). We further preliminarily determine that the exemption 
afforded by this program is

[[Page 70979]]

limited to enterprises located in designated geographic regions and, 
hence, is specific under section 771(5A)(D)(iv) of the Act.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Superpower as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the company's tax savings received during 
the POI by its total sales during that period. To compute the amount of 
the tax savings, we compared the income tax rate Superpower would have 
paid in the absence of the program with the income tax rate the company 
actually paid. On this basis, we preliminarily determine that 
Superpower received a countervailable subsidy of 0.66 percent ad 
valorem under this program.

F. Income Tax Programs for FIEs in Dongguan City in Guangdong Province

    Petitioner alleges that the government of Guangdong province 
provides income tax incentives to FIEs operating within the province. 
According to Petitioner, productive FIEs operating for at least 10 
years may take advantage of a ``Two Free, Three Half'' program similar 
to that operated by the central government. Petitioner also claims that 
``export-oriented'' FIEs that export 70 percent or more of their 
produced goods may qualify for a reduced income tax rate once the ``Two 
Free, Three Half'' period has expired. Petitioner further claims that 
export-oriented FIEs operating in SEZs within Guangdong province may 
qualify for a further reduced income tax rate of 10 percent. Further, 
Petitioner states that an FIE may receive an income tax refund ranging 
from 40 to 100 percent when its profits are either reinvested into the 
enterprise, or reinvested in an export-oriented FIE.
    According to Princeway, it is entitled to a 24 percent central 
government tax rate, reduced from the standard central tax rate of 30 
percent, because it is located in Dongguan, a coastal economic 
development zone. We preliminarily determine that the income tax 
exemption received by Princeway under this program confers a 
countervailable subsidy. The exemption is a financial contribution in 
the form of revenue forgone by the GOC and it provides a benefit to the 
recipients in the amount of the tax savings. See Section 771(5)(D)(ii) 
of the Act and 19 CFR 351.509(a)(1). We further preliminarily determine 
that the exemption afforded by this program is limited to enterprises 
located in designated geographic regions and, hence, is specific under 
section 771(5A)(D)(iv) of the Act. However, as Princeway is already 
exempted from all taxes as part of the ``Two Free, Three Half'' program 
discussed above, no additional benefits are provided from Princeway's 
eligibility for a reduced rate under this program.

II. Programs for Which We Preliminarily Determine More Information is 
Needed

A. Provision of Hot-Rolled Steel at Less Than Adequate Remuneration

    Petitioner alleges that hot-rolled steel is the primary input into 
the subject merchandise and many producers of subject merchandise 
purchase hot-rolled steel directly and handle both the processing and 
assembly operations to manufacture law grooming products thereof. 
Petitioner claims that Chinese producers have benefited by obtaining 
steel from GOC-owned or controlled steel producers at artificially low 
prices. Petitioner argues that the GOC's control over the steel 
industry allows it to distribute steel at favorable prices to 
industries producing higher-value-added products that drive its export-
focused economy, which, Petitioner continues, lowers the cost of 
production for Chinese producers of subject merchandise.
    Both Princeway and Superpower reported purchasing hot-rolled steel 
during the POI. According to Princeway, all of the hot-rolled steel it 
purchased during the POI was produced in Taiwan. The Department has 
requested documentation supporting this claim. According to Superpower, 
all of the hot-rolled steel it purchased during the POI was produced by 
privately held companies. The Department has requested additional 
documentation concerning this claim as well and will consider this 
issue further for the final determination.

B. Export Incentive Payments Characterized as ``VAT Rebates''

    Petitioner alleges that the GOC has a program in which producers 
and exporters of subject merchandise may receive rebates of VAT fees on 
exported goods. Petitioner claims that taxpayers pay no VAT on exported 
goods, and they are entitled to refunds on any VAT paid on inputs 
purchased and used to produce exported goods.
    Both Princeway and Superpower state they were entitled to export 
rebates. Moreover, Princeway also states it paid no VAT on imported 
inputs used in the production of exported goods. Depending on our 
analysis of responses to supplemental questionnaires due after the 
issuance of this notice, we may request additional information 
concerning whether the GOC's export rebate calculation takes into 
consideration the fact that VAT is often not paid on the inputs used in 
producing the exported goods. Likewise, we may have similar questions 
concerning whether the ``cap'' the GOC calculates to prevent excessive 
rebates takes into consideration the fact that VAT is often not paid on 
such inputs.

III. Program for Which We Preliminarily Determine Producers and 
Exporters of Lawn Groomers To Be Ineligible

Consumption Tax and VAT Exemptions for Processing and Assembling Goods 
for Export, and for Related Processing Costs

    Petitioner states that the consumption tax in the PRC is levied at 
the rate of three to 17 percent, depending on the good, and is applied 
to all products purchased in the production processing of goods for 
export. According to information submitted by Petitioner, companies 
located in the municipality of Dongguan that process and assemble goods 
for export, are exempt from paying the VAT and consumption tax on these 
goods.
    According to the GOC, as a general matter, the consumption tax is 
levied on goods that the state does not encourage the consumers to use, 
such as luxury goods, cigarettes, alcohol, etc. Furthermore, the GOC 
explained that payers of this tax are enterprises or individuals that 
produce or import these goods. The GOC also provided State Council 
regulations concerning the consumption tax, including a list of taxed 
products. The document confirms the GOC's statements concerning the 
types of goods subject to the consumption tax. Therefore, we 
preliminarily determine that producers and exporters of lawn groomers 
are not subject to a consumption tax as they are not producers of the 
taxed goods and, thus, that they are not eligible to benefit from any 
reduced rates for consumption taxes.

IV. Programs Preliminarily Determined To Be Not Used by Princeway and 
Superpower

    We preliminarily determine that Princeway and Superpower did not 
apply for or receive benefits during the POI under the programs listed 
below. We note that the GOC submitted information in its October 27, 
2008 supplemental questionnaire response supporting its claims that 
many local and provincial programs the Department is investigating are 
actually part of central programs being investigated. The GOC has made 
such claims regarding several income tax, VAT, and import tariff 
programs. We do not believe it is necessary to address these arguments

[[Page 70980]]

and supporting information regarding income tax programs. The 
Department's AFA methodology, as discussed above, relies on a flat 33 
percent figure for use as AFA for income tax programs. Thus, the number 
of income tax programs does not affect the AFA rate, and will have no 
other affect on the results of this investigation. Regarding the GOC's 
claims and supporting information addressing the number of VAT and 
import tariff programs, we preliminarily agree with the GOC. There are 
three such programs under investigation: 1) ``Import Tariff and VAT 
Exemptions for Encouraged Industries Importing Equipment for Domestic 
Operations,'' established by the Circular of the State Council on 
Adjusting Tax Policies on Imported Equipment (Guofa (1997) No. 37), and 
used by Princeway and addressed above; 2) ``VAT Refunds for FIEs 
Purchasing Domestically Produced Equipment,'' regulated by the Circular 
on Trial Administrative Measures on Purchase of Domestically Produced 
Equipment by Projects with Foreign Investment (Guoshuifa (2006) No. 
111), and not used by either Princeway or Superpower and listed below; 
and 3) ``Export Incentive Payments Characterized as VAT Rebates,''' 
sometimes referred to in previous investigations simply as ``VAT Export 
Rebates,'' regulated by the Provisional VAT Rules of China (Decree 134 
of the State Council, 1993), for which we are gathering more 
information as discussed above.
    We preliminarily determine that the GOC provided adequate 
information demonstrating that local and provincial governments do not 
have the authority to regulate the collection of VAT or import tariffs, 
beyond their involvement in local level administration. For example, 
according to the Notice of the State Council of Taxation on Adhering to 
Administering Tax by Law and Strictly Administering the Reduction and 
Exemption of Taxes, Exhibit N-A.2 of the GOC's October 27, 2008 
Questionnaire Response, ``The legislative powers in respect of national 
taxes, shared taxes and local taxes shall be centralized by the central 
authorities. Each locality . . . should not institute or interpret tax 
policies beyond their powers, neither they may exceed their terms of 
reference to grant tax reduction and exemption, nor allow deferment of 
tax payment, nor exempt somebody from taxes that have been overdue.'' 
In addition, the Implementation Opinion on Establishing Direct Tax 
Authorities at Local Level and Local Tax Bureau, Exhibit N-B.2 of the 
GOC's October 27, 2008 Questionnaire Response, states that the State 
Taxation Bureau system is responsible for the levy and management of 
VAT. Finally, the Customs Law of the People's Republic of China, 
Exhibit N-B.3 of the GOC's October 27, 2008 Questionnaire Response, 
states that ``Customs duties for import or export goods in special 
areas, for special enterprises and for special purposes may be reduced 
or exempted. The State Council shall formulate detailed regulations 
about the scope and method of the reduction or e