66 FR 14545, March 13, 2001
                                                         A-570-504
                                                         ARP: 8/1/98 - 7/31/99
                                                         Public Document
                                                         G3O7: AE/MR

MEMORANDUM TO: Bernard T. Carreau, fulfilling the duties of
               Assistant Secretary for Import Administration

FROM:          Joseph A. Spetrini 
               Deputy Assistant Secretary
               AD/CVD Enforcement Group III


SUBJECT: Issues and Decision Memo for the Final Results of the Antidumping 
         Duty Administrative Review of Petroleum Wax Candles from the People's 
         Republic of China 8/01/98 through 7/31/99

Summary

We have analyzed the case and rebuttal briefs of interested parties in the
1998-1999 administrative review of the antidumping duty order covering
petroleum wax candles from the People's Republic of China (PRC). As a result of
our analysis, we have made no changes from the preliminary determination. We
recommend that you approve the positions we have developed in the Discussion of
the Issues section of this memorandum. Below is the complete list of the issues
in this administrative review for which we received comments and rebuttals by
parties:

for all parties:

1. Use of Adverse Facts Available 
2. Separate Rates
3. Cost Allocation Methodology/Adequacy of Information
4. Request for Issuance of Additional Supplemental Questionnaires
5. Options for Dumping Margin
6. Inappropriate Dumping Margin


Background

On September 7, 2000, the Department of Commerce (the Department) published
the preliminary results of the administrative review of the antidumping duty
order on petroleum wax candles from the PRC (65 FR 54224) (Preliminary
Results). The merchandise covered by these orders consists of petroleum wax
candles from the PRC, as described in the "Scope of the Antidumping Duty Order"
section of the Federal Register notice. The period of review (POR) is August 1,
1998 through July 31, 1999. We invited parties to comment on our Preliminary
Results and received the comments which are addressed in the Interested Party
Comments section below. At the request of certain interested parties, we held a
public hearing on November 1, 2000.


Discussion of the Issues


Application of Facts Available

Based on our analysis of the facts on the record of this review, and having
considered the arguments made by the interested parties in their case and
rebuttal briefs and the public hearing, we continue to find, as we did in our
Preliminary Results, that all 21 respondents in this review failed to act to
the best of their ability and should therefore be assigned a dumping margin
based upon facts otherwise available. Section 776(a)(2) of the Act provides
that "if an interested party or any other person (A) withholds information that
has been requested by [the Department]; (B) fails to provide such information
by the deadlines for the submission of the information or in the form and
manner requested, subject to subsections (c)(1) and (e) of section 782; (C)
significantly impedes a proceeding under this title; or (D) provides such
information but the information cannot be verified as provided in section
782(i), [the Department] shall, subject to section 782(d), use the facts
otherwise available in reaching the applicable determination under this title."
The Department has determined that the use of facts available is appropriate
for the eighteen respondents that failed wholly to respond to our
questionnaires since they withheld information necessary to complete this
review and did not act to the best of their ability. See, e.g., Sulfanilic Acid
From the People's Republic of China, 65 FR 13366, 13367 (March 13, 2000).
Similarly, based on the facts in this review, as described below, the
Department has determined that the use of facts available is warranted for the
three respondents who did respond to our questionnaires, Universal Candle
Company, Ltd. (Universal), Liaoning Native Product Import and Export
Corporation and Tianjin Native Produce Imp. & Exp. Group Corp., Ltd. (Liaoning
and Tianjin, respectively), because their responses were wholly inadequate,
unreliable and unverifiable. 

These three companies were given numerous opportunities to provide the
Department with all the information necessary for a margin calculation by the
deadlines and in the form and manner requested. Liaoning and Tianjin submitted
responses to section A on November 29, 1999. Universal submitted its response
on December 20, 1999. Liaoning and Tianjin responded to sections C and D of the
questionnaire on March 23 and 22, 2000, respectively. Tianjin submitted a
corrected version of these documents on April 24, 2000. Universal submitted its
section C and D responses on March 23, 2000. The Department issued supplemental
section A questionnaires to Liaoning, Tianjin, and Universal on March 21, 2000.
We received responses from Universal on April 13, 2000, and from Liaoning and
Tianjin on April 20 and 19, 2000, respectively. Subsequently, the Department
issued supplemental questionnaires for sections C and D and a second
supplemental section A questionnaire to the respondents in May, 2000. Universal
submitted responses to these supplemental questionnaires on June 1, 2000, and
Liaoning and Tianjin submitted their responses to supplemental sections C and D
on June 9, 2000, and to second supplemental section A on June 19, 2000.
Extensions, sometimes multiple ones which amounted to several weeks, were
granted to each party when responding to the original and supplemental
questionnaires. On April 18, 2000, the Department extended the deadline for the
Preliminary Results until August 30, 2000. 

As detailed above, the Department granted numerous extensions to the deadlines
for questionnaire responses, and fully extended the deadline for the
Preliminary Results of this review in order to give respondents every possible
opportunity to adequately satisfy the Department's requests for information.
Furthermore, the contents of the Department's questionnaires are publicly
available on its website, providing respondents contemplating requesting an
administrative review, as in the case of Liaoning and Tianjin, with the nature
of the information the Department needs to complete an administrative review.
In sum, the three respondents involved in the final segment of this review
(Liaoning, Tianjin and Universal) had a period of approximately eight months
(October, 1999 to June, 2000) in which to fulfill their responsibilities and
comply with the requirements of this administrative review, and they still
failed to do so.

The questionnaire responses submitted by Liaoning, Tianjin, and Universal are
deficient and contain unreliable and unverifiable data which cannot be used as
the basis for a calculated dumping margin. As stated in our Preliminary
Results, these three respondents did not respond adequately to the original and
supplemental questionnaires which instructed the respondents to explain and
provide sample calculations of the methodologies they used to construct their
responses to section D of the questionnaire. Where such information was
submitted, it was often either incomplete or contradictory to the point that
serious concerns remain regarding the basic reliability of these respondents'
data.

As Liaoning acknowledged, it failed to submit factors of production for two of
the three factories from which it purchased the subject candles. See Case Brief
of Liaoning and Tianjin (October 13, 2000) (Case Brief) at 9. We noted in our
May 3, 2000, supplemental section C questionnaire that the Department may rely
on facts otherwise available as a substitute for the missing information. In
addition, in response to many basic supplemental questions, Liaoning, Tianjin
and Universal failed to provide the information requested, stating that such
factors of production information was unknown or was not available at the time.
Specifically, in response to numerous fundamental questions from the
Department, they responded either "unknown", "not available at this time", or
"as soon as it becomes available, the information will be submitted." 


Liaoning failed to respond to numerous questions and to provide information
necessary for a margin calculation as requested by the Department, such as the
following: 1) the description and list of merchandise similar to subject
merchandise; 2) product codes for all candles produced; 3) product code and
description of non-subject merchandise; 4) confirmation on whether Liaoning
made any other sales of subject merchandise; 5) the first and last numbers of
the invoice for the reported sales; 6) the number of candles obtained from the
two non-responding producers; 7) a map of the plant and port; 8) complete
copies of freight invoices; 9) freight factory contact information; 10) Marine
insurance contact information; 11) details of other candles produced at the
only responding factory (FCC); 12) a diagram of the factory; 13) an explanation
of and worksheets showing how they calculated the amount of labor per unit; 14)
how many workers are involved at each stage of the production; 15) the
destination of candles sold by the factory; 16) a description of the
methodology used to calculate the raw material amount; 17) the total amount of
raw material used for production, and inventory statistics; 18) raw material
type and grade; 19) the mode of transportation for raw materials, distances and
a map; 20) how energy usages were calculated; 21) a description of how the
product is packed; 22) a description of how labels are applied, and the related
per unit cost; and 23) copies of loan agreements. 

Similarly, Tianjin failed to provide necessary information requested by the
Department, such as the following: 1) a list of non-subject candles sold to the
U.S. during the POR; 2) the first and last invoice numbers for all POR sales;
3) a diagram of the factory; 4) a description of the methodology used to
calculate the reported amounts of raw material; 5) the distance from the wax
supplier to the factory; 6) the type and grade of all raw materials used; 7) a
map showing supplier location relative to factory; 8) a description and
worksheets used for the calculation of energy usages; 9) a description and
worksheets used for the calculation of the amount of labor per unit; 10) a
description of packing; and 11) detailed legal and operational information
regarding the companies mentioned as affiliates in the company's pamphlet.
Finally, Tianjin also acknowledged that some of the factors it reported were
wrong. See Case Brief at 14 and 17.

Lastly, throughout the majority of this administrative review leading up to
our Preliminary Results, Universal insisted that all of its POR shipments were
not subject to the antidumping duty order, and stated that all in-scope candles
were produced in and shipped from Hong Kong, as opposed to mainland China.
During the period that it maintained this position, Universal did not submit
any sales data pertaining to sales of subject merchandise from mainland China.
Furthermore, although the Department requested information relating to
Universal's worldwide legal and operational affiliations, Universal's initial
responses were minimal. Finally, after the Department repeatedly requested such
information, Universal began submitting basic information pertaining to
affiliations and sales of what it referred to as "potentially subject
merchandise." Universal's supplemental responses included numerous new and
often contradictory sales data and information on affiliations which did not
reconcile with previous submissions (e.g. local subcontracting, overseas
business relationships). The contradictory information on the record suggests
that Universal may have had sales of subject merchandise from mainland China
during the POR. However, the wholly incomplete and contradictory information
submitted by Universal provides the Department with no basis for determining an
accurate margin, and as such, is unverifiable.

With respect to reported costs of production, Universal initially stated that
it keeps production records for its facilities in mainland China. However,
contrary to its earlier statements, Universal subsequently claimed that it does
not maintain PRC production records, since the maintenance of such records is
not required by law in the PRC. Accordingly, Universal's reported raw material
input and labor amounts are based upon estimates, using samples of those
candles still available to the company, rather than based upon actual company 

records. See April 13, 2000 supplemental section A response at 10; June 14,
2000, second supplemental section A response at 2 and 19; and May 31, 2000
supplemental section D response at 10. In many instances, the estimated
quantity of the primary raw material input, paraffin wax, was inconsistent with
the net weight of the product as reported in Universal's response to section C
of the questionnaire. Thus, Universal failed to provide verifiable factors of
production data, and the information it did submit was often contradictory.

As listed above, the type of information the Department requested was standard
business information typically maintained by most businesses, and
representative of the type of information the Department has requested from
Chinese companies in other administrative reviews (e.g. methodologies used to
allocate the reported factors data). In addition, some of information requested
consisted merely of worksheets and explanations for information that the
companies themselves had reported as their factors of production and other such
data. Therefore, these companies have not adequately explained how they could
calculate and report the information they submitted, but then later state that
they do not have any explanations or worksheets for these same calculations.

As previously described above, the Department granted these three respondents'
numerous requests for extensions of time to provide them with ample opportunity
to supply the Department with the information necessary for the calculation of
a reliable antidumping margin. Despite these extensions, the responses from
Liaoning, Tianjin, and Universal were wholly inadequate and contained much
unsubstantiated and unverifiable information. This information is too
incomplete to serve as a reliable basis for reaching a determination in this
review within the meaning of section 782(e) of the Act. Therefore, pursuant to
section 776(a)(2)(A) of the Act we find that all three companies withheld
information requested by the Department. The companies, pursuant to section
776(a)(2)(B) of the Act, also failed to provide such information by the
deadlines and in the manner requested by the Department. Finally, we also
determine that these three respondents, pursuant to section 776(a)(2)(D) of the
Act, provided unverifiable information. As previously noted, we similarly find
that the eighteen uncooperative respondents failed to act to the best of their
ability. Under section 782(c) of the Act, a respondent has a responsibility not
only to notify the Department if it is unable to provide requested information,
but also to provide a "full explanation and suggested alternative forms." The
uncooperative respondents that failed to respond to our requests for
information did not comply with this provision of the statute. Therefore, we
determine that all twenty-one respondents, both those which initially responded
to our questionnaires, and those which did not, failed to cooperate by not
acting to the best of their ability.

Section 776(b) of the Act provides that, if the Department finds an interested
party "has failed to cooperate by not acting to the best of its ability to
comply with a request for information," the Department may use information that
is adverse to the interests of the party as facts otherwise available. Adverse
inferences are appropriate "to ensure that the party does not obtain a more
favorable result by failing to cooperate than if it had cooperated fully." See
Statement of Administrative Action ("SAA") accompanying the URAA, H.R. Doc. No.
103-316, at 870 (1994). It is reasonable to assume that if the eighteen
respondents that did not respond at all could have demonstrated that their
actual dumping margins were lower than the PRC-wide rate established in the
less-than-fair value (LTFV) investigation, they would have participated in this
review or would have attempted to do so. Furthermore, "an affirmative finding
of bad faith on the part of the respondent is not required before the
Department may make an adverse inference." See Antidumping Duties;
Countervailing Duties: Final Rule, 62 FR 27296, 27340 (May 19, 1997) (Final
Rule).

Section 776(b) of the Act authorizes the Department to use as adverse facts
available "secondary information," including information derived from the
petition, the final determination from the LTFV investigation, a previous
administrative review, or any other information placed on the record. Section
776(b) of the Act requires the Department to corroborate such information, to
the extent practicable. Our use of facts otherwise available in this review has
not changed from the Preliminary Results, in which we assigned a PRC-wide rate
of 54.21 percent. For a detailed discussion of our corroboration of the margin
from the petition and application of facts otherwise available, see our
Preliminary Results.


Interested Party Comments

Comment 1: Use of Adverse Facts Available


Universal argues that the Department may not use adverse facts available (AFA)
to determine a dumping margin for it, asserting that any deficiencies in its
questionnaire responses were the result of the company's inability, rather than
its unwillingness, to fully comply with the Department's review process.
Therefore, to resort to AFA would be inappropriate under the provisions of 19
U.S.C.  1677e(a)(b). Universal notes that the Court of International Trade
(CIT) has examined the requirements for applying adverse facts available and
has stated that, "The Department may not simply repeat the language of that
statute in finding that a party has failed to comply. . .Instead, it must
specifically determine that a party's failure to provide all requested
information resulted from an unwillingness, rather than simply an inability to
fully cooperate in order to use adverse inferences." See Ferro Union, Inc. v.
United States, 44 F.Supp.2d 1310, 1331 (CIT 1999); Borden, Inc. v. United
States, 4 F.Supp.2d 1221, 1247 (CIT 1998); American Silicon Technologies v.
United States, 110 F.Supp.2d 992, 1002-03(CIT 2000); and Borden, Inc., 4
F.Supp.2d at 1246-47 (CIT 1998). Universal states that it repeatedly invited
the Department to visit its facilities for verification and continued to
provide more data throughout the review as it became available, thus making
every effort to comply with the Department's requests for information.
Universal states that any deficiencies are primarily the result of one of four
factors: 1) Universal's misunderstanding of what information the Department was
requesting since this was the first administrative review in which it had
participated; 2) Universal's computer problems relating to the sorting of sales
data; 3) many products ordered by Universal's customers were not standard
items, so the company had difficulty providing the Department the orders of
subject merchandise; and 4) Universal's record keeping methods made it
extremely difficult to make many of the calculations regarding its factors of
production. 

Tianjin argues that it has continually submitted additional information with
each supplemental questionnaire response, demonstrating its cooperation with
the Department in this review. As such, the use of AFA is unwarranted; in fact,
Tianjin asserts it has provided adequate information to calculate a dumping
margin. Tianjin cites section 776(a)(2) of the Act, which states that the
Department may use facts available if the information submitted is inadequate,
not filed in a timely manner, or if the party significantly impedes a
proceeding; additionally, the Department can make adverse inferences if it
finds that the interested party failed to cooperate or act to the best of its
ability to comply with the proceedings. See 10 C.F.R.  351.308. However,
Tianjin contends the Department must also comply with section 782(e) of the
Act, which states that the Department should not decline to consider necessary
information submitted by an interested party even where it does not meet all of
the applicable requirements, if 1) the information is submitted by the
established deadline, 2) the information can be verified, 3) the information is
not so incomplete that it cannot serve as a reliable basis for reaching the
applicable determination, 4) the interested party has demonstrated that it has
acted to the best of its ability, and 5) the information can be used without
undue difficulty. See 19. U.S.C. 1677m(e) and Certain Preserved Mushrooms from
Chile, 63 FR 56613 (October 22, 1998). Tianjin submits that its information
meets these five benchmarks. 

Furthermore, Tianjin states that it is further prepared to provide additional
information should the Department so request and that a verification is
warranted due to the sufficiency of the information that it has placed on the
record. Tianjin argues that it is the Department's practice to use total AFA
when respondents refuse to participate or do not submit questionnaire
responses. See Elemental Sulfur from Canada, 65 FR 54488, 54490 (September 8,
2000). In contrast, Tianjin argues that it has cooperated to the best of its
ability throughout the review, and thus should not be subject to AFA.

Petitioner agrees with the Department's reliance on facts available in the
preliminary results, noting that respondents failed to cooperate by not acting
to the best of their ability in regard to the submission of information
requested by the Department. Petitioner argues that Universal has been
uncooperative and non-responsive to the Department, adding that information
Universal provided to the Department was erroneous and self-contradictory.
Petitioner further notes that Universal failed to provide complete data
regarding the quantity and value of U.S. sales of subject merchandise during
the POR.

Petitioner notes that Universal has conceded that the Department should
continue to apply the 54.21 percent duty calculated in the original
investigation, which is also the rate found in the Preliminary Results of the
current review. Petitioner also asserts that contrary to Universal's claim, it
has not cooperated to the best of its ability. Petitioner argues that only
after months of denying that it sold subject merchandise during the POR did
Universal concede, and only in the face of conclusive evidence, that it had
done so. Petitioner disputes Universal's citing of Borden, Inc. v. United
States, 4 F.Supp.2d 1221 (CIT 1998) (Borden), wherein the Court said that the
Department could not apply AFA to a respondent whose submissions were
incomplete as a result of its inability, rather than its unwillingness, to
respond, as analogous to its own situation. Petitioner notes that, in this
case, the CIT determined a verification was unwarranted due to the Department's
concerns about the completeness of the company's data. However, according to
petitioner, the Court found in Borden that the Department did not make the
required additional finding that the company involved had failed to act to the
best of its ability. With regard to the instant case, petitioner argues that
Universal's submission was wholly incomplete and included contradictory
information and long denials of any sales of subject merchandise, all of which
are grounds for the Department to determine that Universal failed to fully
comply and cooperate by not acting to the best of its ability. Furthermore,
petitioner argues that if Universal is prepared to provide complete responses
in an acceptable methodology, as it now states, then why did the company not
request a new review? 

With respect to Tianjin and Liaoning, petitioner argues that the use of AFA is
justified, since their responses were both inadequate, and the data could not
be used as the basis for a calculated dumping margin. According to the
petitioner, Tianjin withheld information necessary to complete the review, and
the information submitted was incomplete and did not fulfill the Department's
requirements. Liaoning and Tianjin requested the review, yet petitioner states
that both companies were unable or unwilling to provide a wide range of
standard business information typically maintained by most businesses and
representative of the type of information the Department has asked of Chinese
companies in the many administrative reviews that it has done. Petitioner notes
that section 776(b) of the Act provides that if the Department, "finds that an
interested party has failed to cooperate by not acting to the best of its
ability to comply with a request for information...[the Department] may use an
inference that is adverse to the interests of the party in selecting from among
the facts otherwise available." Petitioner maintains that respondents' behavior
justifies the Department's continued use of adverse inferences for the final
determination of this administrative review, and that section 776(b)(2) of the
Act permits the Department to utilize information derived from the original
investigation as AFA. 


Department's Position: As we did in our Preliminary Results, we continue to
rely on total AFA for this final determination for Universal, Liaoning and
Tianjin. (See Application of Facts Available section above.) We disagree with
Tianjin and Universal that they acted to the best of their ability. Although we
repeatedly gave all companies the opportunity to submit all the necessary
information and explanations pertaining to the factors of production and sales,
they did not. (See Application of Facts Available section above.) Instead, both
companies waited until after the Preliminary Results, and after the Department
had found that they were not cooperating to the best to their ability, to ask
that the Department issue a new set of supplemental questionnaires and verify
the incomplete information on the record. Section 351.301(b)(2) of the
Department's regulations provides that in an administrative review, the time
limit for the submission of new factual information is 140 days after the last
day of the anniversary month, in this case February 17, 2000. Universal and
Tianjin waited seven months after the above deadline to request that the
Department issue new supplemental questionnaires, this after having received
numerous extensions for the original and supplemental questionnaire responses.
Moreover, section 776 of the Act and section 351.301(c)(2)(ii) of the
Department's regulations provide that failure to submit requested information
in the requested form and manner by the date specified for questionnaire
responses may result in the use of facts available. 

In this case, all three companies, as described above, failed to submit the
information on the record in a timely manner and in the requested form. (See
Application of Facts Available section above.) Nevertheless, Tianjin argues
that we should use its information. However, Tianjin did not meet any of the
requirements set by section 782(e) of the Act. Instead, as described in the
Application of Facts Available section above, Tianjin's information is so
incomplete and deficient that it was unusable and unverifiable. Even Tianjin
recognized that fact in its case brief. Furthermore, Borden does not support
Universal's contention. Although in Borden the court noted that the Department
must consider submitted information if that information meets the requirements
of section 782(e) of the Act, as described above, Universal's information does
not meet those requirements. In addition, in Certain Preserved Mushrooms from
Chile, the Department found that the respondent met all requirements under
section 782(e) of the Act, and the responses were complete enough that the
Department actually verified and the company passed verification. As described
above, Tianjin did not meet the requirements set forth in section 782(e) of the
Act; thus Tianjin's argument and reliance on this case is misplaced. Also,
Tianjin is correct in stating that it is the Department's practice to use total
AFA when respondents refuse to participate or do not submit questionnaire
responses. However, these are not the only instances when the Department can
rely on AFA. When there is substantial evidence on the record that respondents
failed to cooperate to the best of their ability, when necessary information is
not on the record, and when a respondent withholds information requested by the
Department, AFA can be applied. See Final Rule, 27340 (May 19, 1997); section
351.308 of the Department's regulations; see also Cut-To-Length Carbon-Quality
Steel Plate Products From India: Notice of Final Determination of Sales Less
than Fair Value, 64 FR 73126 (December 28, 1999) (the Department found that
respondent failed to act to the best of its ability, submitted deficient data,
and was granted numerous extensions to correct these problems); and Stainless
Steel Sheet and Strip in Coils from Italy: Notice of Final Determination of
Sales at Less Than Fair Value, 64 FR 30750 (June 8, 1999) (the Department found
that respondent did not cooperate to the best of its ability because it omitted
necessary information in its responses and withheld information requested by
the Department).

Moreover, both the frequency of the errors and the absence on the record of
information necessary to correct certain of these errors serve to undermine the
overall credibility of the responses as a whole, thus compelling the Department
to rely upon total facts available. Reliance upon total facts available is
required because the submitted information does not permit the Department to
calculate a margin. We also find that the use of an adverse inference is
appropriate in this case because the record established that Universal and
Tianjin failed to cooperate with the Department by not acting to the best of
their ability in responding to our requests for information. The manifest and
numerous errors in their responses are evidence that both companies failed to
conduct even rudimentary checks for the accuracy of the reported information
and data. Indeed, a reasonable check by company officials could have originally
shown that Universal had sales of subject merchandise to the United States. For
Tianjin, a similar check would have allowed company officials to report such
simple information as the distances from their supplier or to find the numerous
errors in its factors calculations.

While the Department may correct reported costs or adjust incorrect data with
facts otherwise available in order to complete a review, it does so only when
it is able to and it is reasonable to do so, using information on the record,
and when its knowledge of the company's records and the reasonableness and
accuracy of the reporting method serve to establish the integrity of the
underlying data. In this case, the Department's correction of the specific
flawed data is not a viable option because of the high percentage of errors
found in our analysis as recognized by the companies themselves. In addition,
some of these errors cannot be corrected using information on the record. More
importantly, the fundamental nature of these errors raises concerns as to the
validity of the remainder of the responses as well.

Additionally, Universal's and Tianjin's pattern of responding to the
Department's requests in this review suggests that they want to select the data
they will supply or exclude, and when they will supply it. Liaoning, as
described above and in the Application of Facts Available section, did not
respond to the Department's requests for information in a satisfactory manner.
Finding that all companies did not cooperate to the best of their ability and
applying total facts available in this case should create an incentive for all
respondents to come forward in the future and supply the factors of production
and other information in the manner and within the time limits requested by the
Department. For all the foregoing reasons, we will continue to apply, as we did
in our Preliminary Results, total AFA to all respondents, including Universal,
Tianjin and Liaoning. 

Comment 2: Separate Rates

Tianjin and Liaoning argue that they satisfied each prong of the de jure and
de facto absence of government control tests through the affidavits and
documentation provided in their Section A, Supplemental A, and Second
Supplemental A questionnaire responses. Liaoning admits that its responses
could be considered less than complete, primarily due to the non-participation
of two of its suppliers, but maintains that it provided sufficient information
to justify a separate rate. Respondents also argue that just as in Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's
Republic of China; Final Results of Antidumping Duty Administrative Reviews, 61
FR 65527 (December 13, 1996), the Department must evaluate each company on an
individual basis, and should not penalize Tianjin by denying it a separate rate
for the lack of cooperation of Liaoning's suppliers. 

Tianjin provides the following three reasons in support of its claim of de
jure absence of government control: 1) an export license is not required for
the export of subject merchandise, and Tianjin submitted a copy of its business
license, which was obtained independently and without restrictions; 2) 11
significant aspects of export activities for which legislative enactments
address decentralized control; and 3) Tianjin has no relationship with the
national, provincial, or local governments. Its parent company, Tianjin Group,
is owned by the "whole people," and thus, so is Tianjin. Finally, Tianjin
argues that the Department has previously stated that ownership "by all the
people" could not by itself be the determining factor for denying separate
rates; instead it should be viewed as evidence of decentralization. See Silicon
Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994). For
these three reasons, Tianjin argues that it satisfies the de jure absence of
government control requirements. 

In regards to the de facto absence of government control test, Tianjin offers
the four following reasons why it fulfills the requirements: 1) Tianjin
provides sufficient evidence that there are no price controls or quotas set by
the PRC government, as shown in its questionnaire responses; 2) through its
responses, Tianjin demonstrated that it has autonomy in negotiating contracts;
3) Tianjin Group has complete autonomy in selecting the management for Tianjin,
and once the Foreign Economy and Trade Commission of Tianjin City selects the
Committee of Management for Tianjin Group, the Committee of Management can
independently make all hiring and firing decisions related to Tianjin; and 4)
through its questionnaire responses, Tianjin demonstrates that it deposits
export revenues in its own bank account, and that it handles profits and losses
at the direction of its holding company, Tianjin Group. Tianjin thus argues
that it meets all requirements of the de jure and de facto government control
tests and should be granted a separate rate.


Petitioner argues that the Department's single-rate determination flows
directly from the need to base the margin on total adverse facts available.
Petitioner asserts that state ownership and control of Liaoning is both de jure
and de facto, noting that one of the exporters named in the original petition
was the Liaoning Branch of the China National Native Products & Animal By-
Products Import and Export Corporation, undisputedly a state-owned enterprise.
While Liaoning has since been granted a business license, petitioner argues
that this does not signify that it is now an independent company, pointing out
that the only evident investments in documentation submitted by Liaoning are
those provided by the state. Petitioner notes that on page four of the Second
Supplemental Section A response, Liaoning states that its top management is
appointed by the Foreign Economy and Trade Commission of Liaoning Province, a
state entity; thus, the state exerts managerial control over Liaoning,
influencing such factors as pricing, negotiations, the execution of contracts,
and the disposal of profits and losses. Lastly, petitioner argues that
information on the record demonstrates that the state exerts financial control
over Liaoning. Given these facts, petitioner concludes that Liaoning is a state-
owned company, ineligible for a separate rate. 


Petitioner asserts that the Chinese government exerts complete financial and
managerial control over Tianjin, and that Tianjin does not meet the de jure and
de facto requirements to be eligible for a separate rate. According to
petitioner, Tianjin's own responses lead to no other conclusion than that
Tianjin is a state-controlled enterprise. Attachments 3 and 4 from the
company's first Supplemental Section A response, as noted by petitioner,
describe Tianjin Group as a "socialist enterprises' entity," and Tianjin as a
"state single-owned limited company," respectively. Petitioner states that no
record of private ownership exists, noting that the only reference to equity is
to paid-in capital identified in the business license, which is described in
the second Supplemental Section A response as simply state funds transferred
from the previous state-owned Tianjin Branch to Tianjin. (One of the exporters
named in the original petition was the Tianjin Branch of the China National
Native Products & Animal By-Products Import and Export Corporation.)

With regards to Tianjin's managerial independence, petitioner observes that on
page 3 of the second Supplemental Section A response, Tianjin declares that the
management of Tianjin Group is selected by the Foreign Economy and Trade
Commission of Tianjin City, which is a state entity. Additionally, the
"Committee of Management" of Tianjin Group also serves as the top management
for Tianjin. As such, petitioner asserts that the state exerts considerable
influence over the full line of business dealings in which Tianjin engages.
Petitioner also asserts that the information on the record shows that the state
has complete financial control over Tianjin. Given these facts, petitioner
concludes that Tianjin, as a state-controlled enterprise, is ineligible for a
separate rate.

Department's Position: As described in the Application of Facts Available
section above, our use of facts otherwise available in this review has not
changed from the Preliminary Results, in which we assigned the China-wide rate
of 54.21 percent to all named respondents. We did so because the respondents'
submissions were so unreliable that we could not use them to calculate their
dumping margins. Therefore, these respondents are not entitled to separate
rates.


Comment 3: Cost Allocation Methodology/Adequacy of Information

In its preliminary determination, Tianjin and Liaoning point out that the
Department refers to the inadequacy of the cost allocation methodology used for
reported factors of production. Respondents argue that any cost allocation
methodology used is of a simplistic nature, was described by text, and could
easily be examined at verification. Respondents contend that the Department
uses petitioner's comments on respondents' responses to the supplemental C and
D questionnaires to substantiate its conclusion that there were deficiencies on
the record for both Tianjin and Liaoning. In the case of Liaoning, according to
respondents, this was primarily due to the lack of participation by two of the
three factories from which Liaoning purchased the subject merchandise. Tianjin
refutes each comment by the petitioner, maintaining that it has submitted
sufficient information on the record not only to warrant verification but to
induce the Department to issue a second set of supplemental questionnaires for
sections C and D. Furthermore, respondent notes that the Department has on more
than one occasion learned of and examined any cost allocations during
verification. See Polyethylene Terephthalate Film, Sheet, and Strip from the
Republic of Korea, 56 FR 16305 (April 22, 1991) (Polyethylene Terephthalate
from Korea) and Certain Polyester Staple Fiber from Taiwan, 65 FR 16877 (March
30, 2000) (Certain Polyester from Taiwan).

Petitioner maintains that the bulk of Tianjin's Section D response was wholly
inadequate, and without reliable information from this section, the Department
cannot attempt to verify the data or calculate a margin. Petitioner states that
with respect to all materials, Tianjin refused to provide any of the
specifically requested worksheets showing the methodology for calculating
reported amounts for any material inputs. Additionally, for all materials
except wax, petitioner points out that there were no worksheets provided
showing input quantities used, purchased, and in inventory during the POR.
Petitioner states that this lack of information would render fruitless any
attempt at verification or the calculation of a margin.

Department's Position: As explained in the Application of Facts Available and
Comment 1 sections above, both Liaoning and Tianjin failed to respond fully to
the Department's questionnaires. Moreover, both the frequency of the errors and
the absence on the record of information necessary to correct certain of these
errors serve to undermine the overall credibility of the responses as a whole,
thus compelling the Department to rely upon total adverse facts available.
Finally, we disagree with Liaoning's and Tianjin's reliance on Polyethylene
Terephthalate from Taiwan and Certain Polyester from Taiwan. In those cases,
the respondents had already put enough information on the record for the
Department to calculate a dumping margin. In this case, Liaoning and Tianjin
did not. In addition, the Department, in that proceeding, did not gather new
information during verification; instead, verification provided an opportunity
for the Department to further investigate certain issues. This would have been
impossible in the present case, because the respondents did not adequately
respond to a significant portion of the information requested by the
Department. Finally, as explained above, and pursuant to section 351.301 of the
Department's regulations, the deadline for the submission of new information in
an administrative review is 140 days after the last day of the anniversary
month, and not during verification. Since the request came after this deadline
passed, it is untimely.

Comment 4: Request for Issuance of Additional Supplemental Questionnaires 

In its case brief, Tianjin stated that it would be able to submit additional
information, and it requested that a second supplemental section C and D
questionnaire be issued so that the Department can evaluate the entire record
in its final determination. Tianjin cites three instances in which the
Department issued additional questionnaires after the preliminary determination
(Certain Cold-Rolled Flat-Rolled Carbon Quality Steel Products from the
People's Republic of China, 65 FR 34660 (May 31, 2000) (Cold-Rolled from
China), Stainless Steel Wire Rod from Korea, 63 FR 40404 (July 29, 2998), and
Manganese Sulfate from the People's Republic of China, 60 FR 52155 (October 5,
1995). Tianjin maintains that it has continually acted in good faith during the
review and that it has been able to gather additional information in the
interim. 


Universal also states that it has finally arrived at a methodology that it
believes would fulfill the Department's requirements and would be willing to
submit additional information. After we gave notice that we were extending the
period of time for completion of the final results of this review, Tianjin
again requested that the Department issue additional supplemental
questionnaires to allow it to supplement the information we found insufficient
and unverifiable, thus trying to avoid application of AFA.


Department's Position: We disagree with Tianjin's and Universal's requests in
their case briefs for the Department to issue a new set of supplemental
questionnaires. As described in both the Application Facts Available section
and Comment 1 above, both companies had numerous chances to remedy their
responses before the Preliminary Results but chose not to do so. In addition,
respondents failed to respond to simple questions, such as the Department's
requests for spreadsheets that were the basis for their reported factors of
production, and explanations for certain calculations already on the record.
This brings into question the validity of the factors reported and how the
companies were able to calculate them. 

We also disagree with Tianjin's reliance on Cold Rolled from China, Stainless
Steel Wire Rod from Korea and Manganese Sulfate from the People's Republic of
China in support of its argument. All three examples are investigations, in
which the Department, in certain situations, will issue a supplemental
questionnaire after its preliminary determination. This is done because
verification in an investigation comes after the preliminary determination,
and, pursuant to section 351.301 of the Department's regulations, respondents
have up until seven days before verification starts to submit new factual
information. During an administrative review, as explained above, respondents
have 140 days from the last day of the anniversary month to submit factual
information and respond to the Department's questionnaires. Therefore,
respondents' requests for additional questionnaires after the Preliminary
Results and asserted attempts to provide adequate information for the
Department to determine accurate margins are rejected as untimely.

Comment 5: Options for Dumping Margin 

Petitioner disputes the Department's claim that the final rate in the
Preliminary Results is "the highest dumping margin determined in any segment of
this proceeding," asserting instead that the preliminary margin in the original
investigation, as amended on March 7, 1986 to 135.73 percent, is the highest
dumping margin determined in any segment of this proceeding. Petitioner adds
that the original amended preliminary investigation margin can and should be
used as the total facts available margin in the current review, noting that it
was subject to the same level of scrutiny as the final determination. The
information that was used to arrive at the margin in the preliminary results of
the investigation was verified by the Department after examining the
preliminary results. Thus, the Department changed the period of investigation
from six months to nine months. Therefore, petitioner asserts, the only
difference between the methodology used in the preliminary and final
determinations was the use of an unusual nine-month period of U.S. imports in
the final segment, rather than the standard six-month period that had been the
norm. As such, petitioner argues that the preliminary margin from the
investigation is a reliable rate for use as AFA for the respondents who
continue to dump subject merchandise in the U.S. despite nearly 15 years of
having to pay antidumping duties at the rate imposed in the final LTFV
determination. 

As another alternative, petitioner recommends that the

Department should base normal value on the average unit values (AUVs) of
candle imports from its list of potential surrogate countries found in its
submission of factual information dated September 27, 2000, and compare this
normal value to a U.S. price based on the average unit values of candle imports
from China. Petitioner further states it has provided the Department with three
options for the use of such average unit values, resulting in the following
dumping margins: 1) 101.33 percent using India as the surrogate country, 2)
119.02 percent using an average from all five surrogate countries (India,
Philippines, Indonesia, Sri Lanka, and Pakistan), and 3) 282.33 percent using
Sri Lanka as the surrogate country (because Sri Lanka represents a country
without generally-available subsidies). Petitioner emphasizes that this
approach relies on the best publicly available information and that price data
is available for candles sold during the same period as that of this
administrative review. Also, petitioner states that while this method includes
both subject and non-subject merchandise since it relies on the AUV of all
candle imports from China (the HTS category under which candles enter is a
basket category), this will tend to understate the actual margin, since the
majority of non-subject candles are higher-priced than subject candles. 


As an additional alternative, petitioner recommends that the Department use
constructed value for normal value, and base U.S. price on invoice prices
submitted by respondents. Incorporating respondents' data using the methodology
from their September 27, 2000 submission, petitioner calculates that this would
yield a dumping margin of 92.78 percent. Petitioner notes that in a previous
case the Department used a respondent's information placed on the record
instead of the margin in the Petition. See Certain Cold-Rolled Flat-Rolled
Carbon-Quality Steel Products from Slovakia, 65 FR 34657 (May 31, 2000) (Cold
Rolled from Slovakia).

Universal asserts that the Department should continue to apply the PRC-wide
rate of 54.21 percent from the less-than-fair-value (LTFV) investigation, and
should not use any of the facts offered by petitioner in its September 27,
2000, submission of factual information. Universal further argues that any
departure from the current 54.21 percent rate would be unwarranted. Universal
also contends that the surrogate values submitted by petitioner are not
reliable and do not necessarily represent comparable merchandise or factors of
production. Finally, Universal counters that petitioner's recommendations for a
higher rate are an attempt to file a new petition on candles from the PRC
without an investigation, and further points out that petitioner's
recommendation that the Department base a new dumping margin on the preliminary
results of the original investigation should be dismissed because a preliminary
determination has no legal force or effect. Universal disagrees with
petitioner's argument that the Department should use AUVs of imports from
surrogate countries for calculating adverse facts available since it would be
inappropriate for the Department to use information drawn from unverified
respondent factors of production. Universal also disagrees with petitioner's
proposed use of the highest value found from information supplied by
respondents for calculating adverse facts available, noting that the Department
has determined such information to be unusable. Universal notes that the
petitioner never requested an administrative review over the course of the last
13 years, yet now attempts during the first administrative review to have the
dumping margin increased. Universal adds that to suddenly increase the dumping
margin now would be unreasonably punitive, set a negative precedent contrary to
WTO principles, and have the unintended effect of discouraging future
cooperation by respondents in this and other administrative reviews.

Department's Position: The Department disagrees with petitioner. The
Department normally will not rely on a preliminary determination in an
investigation as AFA precisely because it is only a preliminary determination.
The petitioner's other option of using AUVs from a list of surrogate countries
also is not something the Department will consider because it is not consistent
with the statutory framework for the calculation of dumping margins in non-
market economies. See Section 773(c) of the Act. The petitioner's final option,
using respondent data as a basis for determining a margin based on constructed
value, is not viable because, as the petitioner notes itself, and as we
explained above, respondents' data is unreliable and unverifiable. In addition,
we disagree with petitioner's reliance on Cold Rolled from Slovakia. The
Department, in that case, was able to calculate an adverse margin using the
respondent's data after adjusting for unpaid sales. The facts here do not
parallel Cold Rolled from Slovakia. The deficient information supplied by
Tianjin could not provide a reliable or suitable basis for determining a rate,
except, perhaps, if there was no other source of a suitable AFA margin on the
record. In this case, we have other information, namely the margin from the
final determination of the LTFV investigation, which is a rate that has been
applied in the past.

Comment 6: Inappropriate Dumping Margin

Petitioner claims that the Department's preliminary dumping margin is far
below the actual amount of dumping occurring, stressing the serious
implications of this case should the margin found in the Preliminary Results
stand in the final determination. Petitioner further argues that the current
antidumping order had been in place for thirteen years without any request for
review by any party, illustrating that the duty deposit rate established in the
original investigation has been below the amount of dumping taking place.
Petitioner argues that the refusal of eighteen other companies included in this
review to provide information to the Department further illustrates the
inadequacy of the 54.21 percent margin, as these companies would benefit from a
margin lower than the actual dumping occurring, and that such a decision could
lead to continued dumping of subject merchandise. 

Petitioner adds that adverse facts otherwise available and adverse inferences
in the current administrative review require a higher antidumping duty than
determined by the Department in its preliminary results, and points to Smith-
Corona v. United States, 713 F.2nd 1568, 1571 (Fed. Cir. 1983), noting that the
Department has broad discretion in making determinations in antidumping
investigations and reviews. Petitioner further maintains that if the
preliminary determination in this review were to stand, it would permit
respondents to manipulate the process, allowing through non-participation a
beneficial margin result far below the actual degree of dumping. Citing section
776(b) of the Act, petitioner states that adverse inferences may include
information from: 1) the petition; 2) a final determination in the
investigation under this subtitle; 3) any previous review under 1675 of this
title, or determination under Section 1675b of this title; or, 4) any other
information placed on the record. Petitioner concludes that the purpose of an
adverse inference is to ensure full participation by the respondents, and that
the Department must consider the extent to which non-participation may
potentially benefit a party. See Static Random Access Memory Semiconductors
from Taiwan, 63 FR 8909, 8932 (February 23, 1998) and Rollerchain, Other Than
Bicycle, from Japan, 62 FR 60472, 60477 (December 24, 1997). 

Universal counters that the Department correctly calculated a dumping rate of
54.21 percent, the PRC-wide rate established in the LTFV investigation, adding
that this rate is "in accordance with Department practice" and "is the only
rate available for use as facts available." Universal further argues that any
departure from this practice is unwarranted, and asserts that the complete
absence of verified data in the current administrative record affords the
Department no alternative to what it has rightly chosen for the Preliminary
Results. Universal adds that petitioner's claim that dumping of candles from
China has increased or will increase are speculative, and stresses the
improvement in compliance of the antidumping order in this case mentioned by
petitioner. Universal also counters that petitioner has ignored several
opportunities to request administrative reviews since the issuance of the
antidumping order in 1986, and asserts that any decision by the Department to
increase the dumping margin beyond those based on total adverse facts available
would be punitive and establish a negative precedent contrary to the principles
of the World Trade Organization.

Department's Position: While we do not disagree with petitioner that an
adverse inference is warranted and that such an inference could include, "any
other information placed on the record," the proposals set forth by petitioner
for the use of "other information" on the record do not meet the criteria set
forth in the statute for selecting facts available. Accordingly, we have
applied the highest rate available on the record that meets the criteria set
forth in the statute. See Comment 5.


Recommendation

Based on our analysis of the comments received, we recommend adopting all of
the above positions. If these recommendations are accepted, we will publish the
final results of the review and the final dumping margin for all reviewed firms
in the Federal Register.

AGREE_______ DISAGREE_______

_________________________

Bernard T. Carreau, fulfilling the duties of
Assistant Secretary for Import Administration

_________________________

(Date)