17484 Federal Register / Vol. 72, No. 67 / Monday, April 9, 2007 / Notices 

and Notice of Final Determination of 

Sales at Less Than Fair Value, and 

Negative Determination of Critical 

Circumstances: Certain Lined Paper 

Products from India, 71 FR 45012 

(August 8, 2006). See also Factor 

Valuation Memo. 

In accordance with 19 CFR 

351.301(c)(3)(ii), for the preliminary 

results of this administrative review, 

interested parties may submit publicly 

available information to value the 

factors of production until 20 days 

following the date of publication of 

these preliminary results. 

Preliminary Results of Review 

We preliminarily determine that the 

following antidumping duty margins 

exist: 

Individually Reviewed Exporters 

Max Fortune Ltd. ........................ 0.15% 

Samsam Productions Ltd. .......... 115.24% 

PRC–Wide Rate 

PRC–Wide Rate (including 

China National, Hong Ye, 

Chengxiang, Kepsco, and 

Giftworld) ................................. 112.64% 

For details on the calculation of the 

antidumping duty weighted–average 

margin for each company, see the 

respective company’s analysis 

memorandum for the preliminary 

results of the first administrative review 

of the antidumping duty order on tissue 

paper from the PRC, dated April 2, 

2007. Public versions of these 

memoranda are on file in the CRU. 

Assessment Rates 

Pursuant to 19 CFR 351.212(b), the 

Department will determine, and CBP 

shall assess, antidumping duties on all 

appropriate entries. The Department 

intends to issue appropriate assessment 

instructions directly to CBP 15 days 

after publication of the final results of 

this review. For assessment purposes, 

where possible, we calculated importer–

specific assessment rates for tissue 

paper from the PRC via ad valorem duty 

assessment rates based on the ratio of 

the total amount of the dumping 

margins calculated for the examined 

sales to the total entered value of those 

same sales. We will instruct CBP to 

assess antidumping duties on all 

appropriate entries covered by this 

review if any assessment rate calculated 

in the final results of this review is 

above de minimis. The final results of 

this review shall be the basis for the 

assessment of antidumping duties on 

entries of merchandise covered by the 

final results of these reviews and for 

future deposits of estimated duties, 

where applicable. 

Cash Deposit Requirements 

The following cash deposit 

requirements will be effective upon 

publication of the final results of this 

administrative review for all shipments 

of the subject merchandise entered, or 

withdrawn from warehouse, for 

consumption on or after the publication 

date, as provided for by section 

751(a)(2)(C) of the Act: (1) for the 

exporters listed above, the cash deposit 

rate will be established in the final 

results of this review (except, if the rate 

is zero or de minimis, i.e., less than 0.5 

percent, no cash deposit will be 

required for that company); (2) for 

previously investigated or reviewed PRC 

and non–PRC exporters not listed above 

that have separate rates, the cash 

deposit rate will continue to be the 

exporter–specific rate published for the 

most recent period; (3) for all PRC 

exporters of subject merchandise which 

have not been found to be entitled to a 

separate rate, the cash deposit rate will 

be the PRC–wide rate of 112.64 percent; 

and (4) for all non–PRC exporters of 

subject merchandise which have not 

received their own rate, the cash deposit 

rate will be the rate applicable to the 

PRC exporters that supplied that non–

PRC exporter. These deposit 

requirements, when imposed, shall 

remain in effect until publication of the 

final results of the next administrative 

review. 

Schedule for Final Results of Review 

The Department will disclose 

calculations performed in connection 

with the preliminary results of this 

review within five days of the date of 

publication of this notice in accordance 

with 19 CFR 351.224(b). Any interested 

party may request a hearing within 30 

days of publication of this notice in 

accordance with 19 CFR 351.310(c). 

Any hearing will normally be held 37 

days after the publication of this notice, 

or the first workday thereafter, at the 

U.S. Department of Commerce, 14th

Street and Constitution Avenue, NW, 

Washington, DC 20230. Individuals who 

wish to request a hearing must submit 

a written request within 30 days of the 

publication of this notice in the Federal 

Register to the Assistant Secretary for 

Import Administration, U.S. Department 

of Commerce, Room 1870, 14th Street 

and Constitution Avenue, NW, 

Washington, DC 20230. Requests for a 

public hearing should contain: (1) the 

party’s name, address, and telephone 

number; (2) the number of participants; 

and (3) to the extent practicable, an 

identification of the arguments to be 

raised at the hearing. 

Unless otherwise notified by the 

Department, interested parties may 

submit case briefs within 30 days of the 

date of publication of this notice in 

accordance with 19 CFR 351.309(c)(ii). 

As part of the case brief, parties are 

encouraged to provide a summary of the 

arguments not to exceed five pages and 

a table of statutes, regulations, and cases 

cited in accordance with 19 CFR 

351.309(c)(2)(ii). Rebuttal briefs, which 

must be limited to issues raised in the 

case briefs, must be filed within five 

days after the case brief is filed in 

accordance with 19 CFR 351.309(d). The 

Department will issue the final results 

of this review, which will include the 

results of its analysis of issues raised in 

the briefs, not later than 120 days after 

the date of publication of this notice in 

accordance with section 751(a)(2)(B)(iv) 

of the Act and 19 CFR 351.213(h)(1). 

Notification to Importers 

This notice also serves as a 

preliminary reminder to importers of 

their responsibility under 19 CFR 

351.402(f) to file a certificate regarding 

the reimbursement of antidumping 

duties prior to liquidation of the 

relevant entries during these review 

periods. Failure to comply with this 

requirement could result in the 

Secretary’s presumption that 

reimbursement of antidumping duties 

occurred and the subsequent assessment 

of double antidumping duties. 

This administrative review and this 

notice are published in accordance with 

sections 751(a)(1) and 777(i)(1) of the 

Act. 

Dated: April 2, 2007. 

Stephen J. Claeys, 

Deputy Assistant Secretary for Import 

Administration. 

[FR Doc. E7–6635 Filed 4–6–07; 8:45 am] 

BILLING CODE 3510–DS–S 

DEPARTMENT OF COMMERCE 

International Trade Administration 

[C–570–907] 

Coated Free Sheet Paper From the 

People’s Republic of China: Amended 

Preliminary Affirmative Countervailing 

Duty Determination 

AGENCY: Import Administration, 

International Trade Administration, 

Department of Commerce. 

SUMMARY: The Department of Commerce 

preliminarily determines that 

countervailable subsidies are being 

provided to producers and exporters of 

coated free sheet paper from the 


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People’s Republic of China. For 

information on the estimated subsidy 

rates, see the ‘‘Suspension of 

Liquidation’’ section of this notice. The 

version released on Friday, March 30, 

2007, contained a ‘‘Benchmarks’’

section that was intended to be deleted 

from the final version because it was 

duplicative, so this amended 

preliminary determination corrects that 

error. This error was discovered prior to 

publication in the Federal Register, 

consequently, this amendment is being 

published in its place. 

EFFECTIVE DATE: April 9, 2007. 

FOR FURTHER INFORMATION CONTACT: 

David Layton or David Neubacher, AD/ 

CVD Operations, Office 1, Import 

Administration, International Trade 

Administration, U.S. Department of 

Commerce, 14th Street and Constitution 

Avenue, NW., Washington, DC 20230; 

telephone: (202) 482–0371 or (202) 482–

5823, respectively. 

SUPPLEMENTARY INFORMATION: 

Case History 

The following events have occurred 

since the publication of the Department 

of Commerce’s (the Department) notice 

of initiation in the Federal Register. See 

Notice of Initiation of Countervailing 

Duty Investigations: Coated Free Sheet 

Paper From the People’s Republic of 

China, Indonesia and the Republic of 

Korea, 71 FR 68546 (November 27, 

2006) (Initiation Notice). 

On December 1, 2006, the Department 

selected the two largest Chinese 

producers/exporters of coated free sheet 

paper, Gold East Paper (Jiangsu) Co., 

Ltd. (Gold East) and Shandong 

Chenming Paper Holdings Ltd. 

(Chenming) as mandatory respondents. 

See Memorandum to Stephen J. Claeys, 

Deputy Assistant Secretary for Import 

Administration, ‘‘Respondent 

Selection’’ (December 1, 2006). This 

memorandum is on file in the 

Department’s Central Records Unit in 

Room B–099 of the main Department 

building (CRU). On December 4, 2006, 

we issued the countervailing duty (CVD) 

questionnaire to the Government of the 

People’s Republic of China (GOC), Gold 

East and Chenming. 

On December 29, 2006, 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 coated free sheet paper (CFS) from 

China, Indonesia, and Korea. See Coated 

Free Sheet Paper China, Indonesia, and 

Korea, Investigation Nos. 701–TA–444–

446 (Preliminary) and 731–TA–1107–

1109 (Preliminary), 71 FR 78464 

(December 29, 2006). 

Also on December 29, 2006, we 

published a postponement of the 

preliminary determination of this 

investigation until March 30, 2007. See 

Coated Free Sheet Paper From 

Indonesia, the People’s Republic of 

China, and the Republic of Korea: 

Notice of Postponement of Preliminary 

Determinations in the Countervailing 

Duty Investigations, 71 FR 78403 

(December 29, 2006). 

We received responses from the GOC 

on December 11, 2006 and January 31, 

2007, Gold East on January 31, 2007, 

and Chenming on February 2, 2007. On 

February 9, 2007, the petitioner, New 

Page Corporation, and the United Steel, 

Paper and Forestry, Rubber, 

Manufacturing, Energy, Allied 

Industrial and Service Workers 

International Union, AFL–CIO–CLC 

(USW), a domestic interested party, 

submitted comments regarding these 

questionnaire responses. We issued 

supplemental questionnaires to Gold 

East and Chenming on February 15, 

2007, and to the GOC on February 21, 

2007. We received responses to these 

supplemental questionnaires from the 

GOC on March 15, 2007, Chenming on 

March 12, 2007, and Gold East on 

March 9 and 13, 2007. We issued a 

second supplemental questionnaire to 

the GOC, Gold East and Chenming on 

February 22, 2007, and received 

responses to these questionnaires from 

Chenming on March 12, 2007, and the 

GOC and Gold East on March 15, 2007. 

On February 20, 2007, the USW 

submitted two new subsidy allegations. 

These allegations were timely as they 

were filed 40 days prior to the 

scheduled date of the preliminary 

determination, in accordance with 19 

CFR 351.301(d)(4)(i)(A). We decided to 

include both of these newly alleged 

programs in our investigation. See 

Memorandum to Susan Kuhbach, Office 

Director, ‘‘New Subsidy Allegation’’

(March 5, 2007). On March 7, 2007, we 

issued a questionnaire to each of the 

respondents with respect to the new 

programs. We received responses to 

these questionnaires from Gold East on 

March 15, 2007, and from the GOC and 

Chenming on March 19, 2007. 

On March 8, 2007, the petitioner 

submitted comments for consideration 

in the preliminary determination. The 

USW filed comments on March 14, 

2007. We also received comments from 

Gold East on March 20, 2007, and 

March 22, 2007. 

On March 26, 2007, petitioner 

requested that the final determination of 

this countervailing duty investigation be 

aligned with the final determinations in 

the companion antidumping duty 

investigations in accordance with 

section 705(a)(1) of the Act. We will 

address this request in a separate 

Federal Register notice. 

Period of Investigation 

The period for which we are 

measuring subsidies, or the period of 

investigation (POI), is calendar year 

2005. 

Scope of the Investigation 

The merchandise covered by this 

investigation includes coated free sheet 

paper and paperboard of a kind used for 

writing, printing or other graphic 

purposes. Coated free sheet paper is 

produced from not more than 10 percent 

by weight mechanical or combined 

chemical/mechanical fibers. Coated free 

sheet paper is coated with kaolin (China 

clay) or other inorganic substances, with 

or without a binder, and with no other 

coating. Coated free sheet paper may be 

surface-colored, surface-decorated, 

printed (except as described below), 

embossed, or perforated. The subject 

merchandise includes single- and 

double-side-coated free sheet paper; 

coated free sheet paper in both sheet or 

roll form; and is inclusive of all weights, 

brightness levels, and finishes. The 

terms ‘‘wood free’’ or ‘‘art’’ paper may 

also be used to describe the imported 

product. 

Excluded from the scope are: (1) 

Coated free sheet paper that is imported 

printed with final content printed text 

or graphics; (2) base paper to be 

sensitized for use in photography; and 

(3) paper containing by weight 25 

percent or more cotton fiber. 

Coated free sheet paper is classifiable 

under subheadings 4810.13.1900, 

4810.13.2010, 4810.13.2090, 

4810.13.5000, 4810.13.7040, 

4810.14.1900, 4810.14.2010, 

4810.14.2090, 4810.14.5000, 

4810.14.7040, 4810.19.1900, 

4810.19.2010, and 4810.19.2090 of the 

Harmonized Tariff Schedule of the 

United States (HTSUS). While HTSUS 

subheadings are provided for 

convenience and customs purposes, our 

written description of the scope of these 

investigations is dispositive. 

Scope Comments 

In accordance with the preamble to 

the Department’s regulations, in our 

Initiation Notice we set aside a period 

of time for parties to raise issues 

regarding product coverage, and 

encouraged all parties to submit 

comments within 20 calendar days of 

publication of the Initiation Notice. See 

Antidumping Duties; Countervailing 

Duties, 62 FR 27296, 27323, (May 19, 


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1See Notice of Preliminary Affirmative 

Countervailing Duty Determination and Alignment 

of Final Countervailing Duty Determination with 

Final Antidumping Duty Determination: Certain 

Cold-Rolled Carbon Steel Flat products From the 

Republic of Korea, 67 FR 9685, 9683 (March 4, 

2002) (Cold-Rolled Steel Flat Products from Korea). 

1997) (Preamble) and Initiation Notice, 

71 FR at 68546. 

On December 18, 2006, respondents 

in the antidumping duty investigation of 

CFS from Indonesia submitted timely 

scope comments. On January 12, 2007, 

the Department requested that the 

respondents file these comments on the 

administrative record of the CFS 

Investigations. See Memorandum from 

Alice Gibbons to The File (January 12, 

2007). On January 12, 2007, the 

respondents re-filed these comments on 

the administrative record of the CFS 

Investigations. On January 19, 2007, the 

petitioner filed a response to these 

comments. 

The respondents requested that the 

Department exclude from its 

investigations cast-coated free sheet 

paper. The Department analyzed this 

request, together with the comments 

from the petitioner, and determined that 

it is not appropriate to exclude castcoated free sheet paper from the scope 

of these investigations. See 

Memorandum to Stephen J. Claeys, 

Deputy Assistant Secretary for Import 

Administration, ‘‘Request to Exclude 

Cast-Coated Free Sheet Paper from the 

Antidumping Duty and Countervailing 

Duty Investigations on Coated Free 

Sheet Paper,’’ (March 22, 2007) 

(memorandum is on file in the 

Department’s CRU). 

Application of the Countervailing Duty 

Law to Imports from the PRC 

On December 15, 2006, the 

Department requested public comment 

on the applicability of the 

countervailing duty law to imports from 

the People’s Republic of China (PRC). 

See Application of the Countervailing 

Duty Law to Imports from the People’s 

Republic of China: Request for 

Comments, 71 FR 75507 (December 15, 

2006). The comments we received are 

on file in the Department’s CRU, and 

can be accessed on the Web at http:// 

ia.ita.doc.gov/ia-highlights-and-news. 

Informed by those comments and 

based on our assessment of the 

differences between the PRC’s economy 

today and the Soviet and Soviet-style 

economies that were the subject of 

Georgetown Steel Corp. v. United States, 

801 F.2d 1308 (Fed. Cir. 1986), we 

preliminarily determine that the 

countervailing duty law can be applied 

to imports from the PRC. Our analysis 

is presented in a separate memorandum, 

Memorandum to David M. Spooner, 

Assistant Secretary for Import 

Administration, ‘‘Countervailing Duty 

Investigation of Coated Free Sheet Paper 

from the People’s Republic of China: 

Whether the analytical elements of the 

Georgetown Steel holding are applicable 

to the PRC’s present-day economy,’’

(March 29, 2007) (‘‘Georgetown Memo’’) 

(memorandum is on file in the 

Department’s CRU). 

Subsidies Valuation Information 

Allocation Period 

The average useful life (‘‘AUL’’) 

period in this proceeding as described 

in 19 CFR 351.524(d)(2) is 13 years 

according to the U.S. Internal Revenue 

Service’s 1977 Class Life Asset 

Depreciation Range System. No party in 

this proceeding has disputed this 

allocation period. 

Attribution of Subsidies 

The Department’s regulations at 19 

CFR 351.525(b)(6)(i) state that the 

Department will normally attribute a 

subsidy to the products produced by the 

corporation that received the subsidy. 

However, 19 CFR 351.525(b)(6) directs 

that the Department will attribute 

subsidies received by certain other 

companies to the combined sales of 

those companies if (1) cross-ownership 

exists between the companies, and (2) 

the cross-owned companies produce the 

subject merchandise, are a holding or 

parent company of the subject company, 

produce an input that is primarily 

dedicated to the production of the 

downstream product, or transfer a 

subsidy to a cross-owned company. The 

Court of International Trade (CIT) has 

upheld the Department’s authority to 

attribute subsidies based on whether a 

company could use or direct the subsidy 

benefits of another company in 

essentially the same way it could use its 

own subsidy benefits. See Fabrique de 

Fer de Charleroi v. United States, 166 F. 

Supp. 2d. 593, 604 (CIT 2001). 

According to 19 CFR 

351.525(b)(6)(vi), cross-ownership exists 

between two or more corporations 

where one corporation can use or direct 

the individual assets of the other 

corporation(s) in essentially the same 

ways it can use its own assets. This 

section of the Department’s regulations 

states that this standard will normally 

be met where there is a majority voting 

interest between two corporations or 

through common ownership of two (or 

more) corporations. 

Chenming: Chenming reported that it 

is the only producer of CFS among the 

companies affiliated with Shandong 

Chenming Paper Holdings, Ltd. 

Chenming further reported that its pulp 

supplier did not receive subsidies from 

the GOC. Therefore, we are attributing 

the subsidies received by Chenming to 

its sales of CFS or total sales, as 

appropriate. 

Gold East: Gold East has responded to 

the Department’s original and 

supplemental questionnaires on behalf 

of itself, its parent company and Gold 

Huasheng Paper Co., Ltd. (GHS). Gold 

East reported that GHS produces CFS, 

but that GHS did not produce CFS that 

is subject to investigation during the 

POI. 

Gold East has also acknowledged that 

it and GHS are affiliated with a 

domestic pulp supplier that provides 

inputs to both companies. Gold East 

asserts, however, that the pulp supplied 

by this company cannot be considered 

an ‘‘input product’’ within the meaning 

of 19 CFR 351.525(b)(6)(iv) because the 

pulp provided by this supplier is not 

suitable for use in the CFS paper that is 

exported to the United States. Instead, 

this pulp was used exclusively in the 

production of lower-end paper products 

that were sold in the PRC and would not 

meet the specifications of its U.S. 

customers. Furthermore, Gold East 

states that it and GHS strictly segregate 

the pulp provided by the domestic 

supplier and the pulp used in export 

sales. Gold East claims that its situation 

is analogous to that in Cold-Rolled Steel 

Flat Products from Korea,1 where the 

Department did not find a subsidy 

because the input allegedly sold for less 

than adequate remuneration was not 

used to produce subject merchandise. 

Therefore, Gold East argues that the 

pulp provided by the domestic supplier 

is not an input product that is primarily 

dedicated to the production of the 

subject merchandise. 

Based on information currently on the 

record, we preliminarily determine that 

because of common ownership, crossownership exists between Gold East, 

GHS, the parent company, the affiliated 

pulp supplier and other affiliated 

companies, in accordance with 19 CFR 

351.525(b)(6)(vi). 

We further preliminarily determine 

that Gold East and GHS are cross-owned 

producers of the subject merchandise, as 

addressed in 19 CFR 351.525(b)(6)(ii). 

Although Gold East has claimed that 

GHS did not produce subject 

merchandise during the POI, there is no 

evidence indicating that GHS could not 

produce subject merchandise. 

Therefore, the subsidies received by 

Gold East and GHS have preliminarily 

been attributed to the combined sales of 

the two companies. Although we have 

combined Gold East and GHS in this 


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manner, we have continued to refer the 

respondent as ‘‘Gold East’’ in this 

notice. 

Additionally, we preliminarily 

determine that subsidies received by 

Gold East’s parent company should be 

attributed to the consolidated sales of 

the parent company and its subsidiaries. 

See 19 CFR 351.525(b)(6)(iii). 

Finally, we preliminarily determine 

that subsidies received by Gold East’s 

cross-owned pulp supplier should be 

attributed to the combined sales of the 

input and the downstream products 

produced from those inputs. This is 

consistent with the Department’s prior 

determination that pulp is ‘‘primarily 

dedicated’’ to the production of paper, 

as required by 19 CFR 351.525(b)(6)(iv). 

See Final Affirmative Countervailing 

Duty Determination and Final Negative 

Determination of Critical 

Circumstances: Certain Lined Paper 

Products from Indonesia, 71 FR 47174 

(August 16, 2006), and accompanying 

Issues and Decision Memorandum at 

Comment 3. Moreover, absent a showing 

that the domestic pulp cannot be used 

to produce CFS sold to the United 

States, there is no basis to tie subsidies 

bestowed on these input products 

exclusively to sales in the domestic 

Chinese market. 

Certain other of Gold East’s affiliated 

companies are discussed in a separate, 

proprietary memorandum, 

Memorandum to Susan Kuhbach, ‘‘Gold 

East: Cross-owned Companies’’ (March 

29, 2007) (memorandum is on file in 

Department’s CRU). 

Benchmarks 

Summary: The Department is 

investigating loans received by 

respondents from Chinese banks, 

including state-owned commercial 

banks (SOCBs), which are alleged to 

have been granted on a preferential, 

non-commercial basis. Section 

771(5)(E)(ii) of the Act explains that the 

benefit for loans is the ‘‘difference 

between the amount the recipient of the 

loan pays on the loan and the amount 

the recipient would pay on a 

comparable commercial loan that the 

recipient could actually obtain on the 

market.’’ Normally, the Department uses 

comparable commercial loans reported 

by the company for benchmarking 

purposes. See 19 CFR 351.505(a)(2)(i). 

However, the Department does not treat 

loans from government banks as 

commercial if they were provided 

pursuant to a government program. See 

19 CFR 351.505(a)(2)(ii). Because the 

loans provided to the respondents by 

SOCBs are under the ‘‘Government 

Policy Lending Program,’’ explained 

below, these loans are the very loans for 

which we require a suitable benchmark. 

Additionally, if respondents received 

any loans from foreign banks, these 

would be unsuitable for use as 

benchmarks because, as explained in 

greater detail below, the GOC’s 

intervention in the banking sector 

creates significant distortions, even 

restricting and influencing foreign banks 

within the PRC. 

If the firm did not have any 

comparable commercial loans during 

the period, the Department’s regulations 

provide that we ‘‘may use a national 

interest rate for comparable commercial 

loans.’’ See 19 CFR 351.505(a)(3)(ii). 

However, the Chinese national interest 

rates are not reliable as benchmarks for 

these loans because of the pervasiveness 

of the GOC’s intervention in the banking 

sector. Loans provided by Chinese 

banks reflect significant government 

intervention and do not reflect the rates 

that would be found in a functioning 

market. The statute directs that the 

benefit is normally measured by 

comparison to a ‘‘loan that the recipient 

could actually obtain on the market.’’

Section 771(5)(E)(ii) of the Act. Thus, 

the benchmark should be a marketbased benchmark, yet, there is not a 

functioning market for loans within the 

PRC. Therefore, because of the special 

difficulties inherent in using a Chinese 

benchmark for loans, the Department is 

selecting a market-based benchmark that 

is a simple average of the national 

lending rates for countries with 

comparable gross national income 

(GNI), as explained below. The use of an 

external benchmark is consistent with 

the Department’s practice. For example, 

in Softwood Lumber, the Department 

used U.S. timber prices to measure the 

benefit for government provided timber 

in Canada. See Final Results of the 

Countervailing Duty Investigation of 

Certain Softwood Lumber Products from 

Canada, 67 FR 15545 (April 2, 2002), 

and accompanying Issues and Decision 

Memorandum, at ‘‘Provincial Stumpage 

Programs’’ (‘‘Softwood Lumber’’). In the 

current proceeding, as described in 

detail, below, the GOC plays a 

predominant role in the banking sector 

resulting in significant distortions that 

render the lending rates in the PRC 

unsuitable as market benchmarks. 

Therefore, as in lumber, where domestic 

prices are not reliable, we have resorted 

to prices outside the PRC. 

Discussion: In its analysis of the PRC 

as a non-market economy in the recent 

lined paper investigation, the 

Department found that the PRC’s 

banking sector does not operate on a 

commercial basis and is subject to 

significant distortions, primarily arising 

out of the continued dominant role of 

the government in the sector. See ‘‘the 

People’s Republic of China (PRC) Status 

as a Non-Market Economy,’’ May 15, 

2006 (‘‘May 15 Memorandum’’); and 

‘‘China’s Status as a Non-Market 

Economy,’’ August 30, 2006 (‘‘August 30 

Memorandum’’) (collectively, the 

‘‘memoranda’’). The PRC’s stated goal 

for banking sector reforms since 1994 

has been to develop banks that operate 

on a commercial basis. See May 15 

Memorandum at 4; and August 30 

Memorandum at 56–58. Despite ongoing 

efforts made by the GOC to move toward 

this goal, SOCBs in the PRC continue to 

be plagued by functional and 

operational problems that have 

necessitated repeated, large government 

capital injections and debt write-offs to 

stave off insolvency. In addition to a 

chronic problem of non-performing 

loans, the Department discussed in its 

memoranda the aspects of the PRC’s 

banking sector that led International 

Monetary Fund (IMF) economists to 

conclude in 2006 that, despite a decade 

of reform, ‘‘it is difficult to find solid 

empirical evidence of a strong shift to 

commercial orientation by the SOCBs.’’

See August 30 Memorandum at 58, 

citing ‘‘Progress in China’s Banking 

Sector Reforms: Has Bank Behaviour 

Changed?,’’ Washington, DC: 

International Monetary Fund Working 

Paper, at 4 (March 2006). For example, 

the Department found that funds 

continue to be allocated in a ‘‘manner 

consistent with the general policy to 

maintain the state-owned industrial 

sector’’ and loan pricing remains 

undifferentiated, despite liberalization 

of lending caps. See May 15 

Memorandum at 5; and August 30 

Memorandum at 58. 

As one commentator notes, the PRC’s 

banking sector has ‘‘fallen short in its 

task of allocating credit to the most 

productive players in the economy,’’

which is the hallmark of a banking 

system operating on a commercial basis. 

See August 30 Memorandum at 54, 

citing ‘‘Putting China’s Capital to Work: 

The Value of Financial System Reform,’’

McKinsey & Company, at 25 (May 

2006). The Department concluded that 

the PRC’s banks are ‘‘still in the process 

of developing the institutional 

underpinnings and human resources 

necessary to operate on a fully 

commercial basis.’’ See August 30 

Memorandum at 52. 

In addition, ‘‘the various levels of 

government in the PRC, collectively, 

have not withdrawn from the role of 

resource allocator in the financial 

sector, principally the banking sector.’’

See May 15 Memorandum at 3. The 

GOC’s continued ownership of virtually 

all of the banking sector assets is ‘‘the 


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fundamental gap in banking sector’s 

reform’’ inhibiting the sector from 

operating on a commercial basis. Id. at 

3–4. In fact, the PRC has the highest 

level of state ownership of banks of any 

major economy in the world. The four 

largest SOCBs, the Bank of China 

(‘‘BOC’’), the China Construction Bank 

(‘‘CCB’’), the Agricultural Bank of China 

(‘‘ABC’’) and the Industrial and 

Commercial Bank of China (‘‘ICBC’’), 

(collectively, the ‘‘Big Four’’), represent 

over 50 percent of the formal sector’s 

assets and deposits. Small state-owned 

institutions, such as rural credit 

cooperatives, which are characterized 

by extremely poor performance, account 

for 9–10 percent of banking assets. 

Foreign banks account for 

approximately 2 percent of total assets. 

Although limited ownership 

diversification has been introduced 

through minority foreign shareholdings 

in the BOC, CCB and the joint-stock 

commercial banks (with the latter 

category of banks accounting for 13 

percent of the sector’s assets), the GOC 

continues to control the vast majority of 

financial intermediation in the banking 

sector. A further portion of the PRC’s 

banking sector is accounted for by 

smaller entities, such as city banks and 

credit cooperatives, which are likewise 

government-owned, albeit on a subcentral level. See August 30 

Memorandum at 54–55, citing 

‘‘Economic Survey of China,’’ Paris: 

Organization for Economic Cooperation 

and Development, at 139 (2005). 

While foreign banks have recently 

been permitted to purchase minority 

stakes in a number of state-owned 

domestic Chinese banks, such 

investment does not signal a decisive 

shift towards putting the banks on a 

fully commercial footing. This is 

because foreign investment in PRC 

banks is tightly constrained, and the 

GOC has signaled its intentions to 

preserve its control over the banking 

sector indefinitely. See August 30 

Memorandum at 61, citing ‘‘Go Away, 

Crocodiles?,’’ the Economist Intelligence 

Unit, Business China (March 27, 2006). 

Continued GOC control of the Chinese 

banking sector is possible because, 

while foreign banks have recently been 

allowed to purchase minority stakes in 

certain banks in the PRC, total foreign 

purchases of shares in existing SOBCs 

have been limited to 25 percent. See 

August 30 Memo at 60, citing ‘‘It’s so 

Far, so Good for China’s Banking 

Sector,’’ the Economist Intelligence 

Unit, Business China (March 27, 2006). 

Similarly, some domestic banks in the 

PRC are now listed on foreign stock 

exchanges, but majority control remains 

with the GOC. Foreign interests have 

acquired approximately 10 percent of 

the CCB, ICBC and BOC, and are 

afforded just one place on the board at 

each bank. See August 30 Memo at 61, 

citing ‘‘What are the Prospects for 

Foreign Banks in China,’’ the Economist 

Intelligence Unit, Viewswire, China 

Finance (March 15, 2006). These 

investments bring market expertise to 

the management and board of the stateowned banks, but the foreign-owned 

shares remain small, thereby limiting 

the degree of influence over bank 

operations. See August 30 Memo at 61, 

citing Overmyer, Michael, ‘‘WTO: Year 

Five,’’ the US-China Business Council, 

The China Business Review, at 2 

(January—February 2006). Therefore, 

the constrained degree of foreign 

investment that the GOC has permitted 

in the domestic Chinese banking sector 

does not alter the Department’s 

preliminary conclusion that the 

domestic PRC banking sector does not 

operate on a commercial basis. 

Because the GOC still dominates the 

domestic Chinese banking sector and 

prevents banks from operating on a fully 

commercial basis, the Department 

preliminarily determines that the 

interest rates of the domestic Chinese 

banking sector do not provide a suitable 

basis for benchmarking the loans 

provided to respondents in this 

proceeding. Moreover, while foreignowned banks do operate in the PRC, 

they are subject to the same restrictions 

as the SOCBs, including a governmentimposed cap on deposit rates, which 

puts downward pressure on lending 

rates. In addition, foreign banks’ share 

of assets and lending is negligible 

compared with the SOCBs. SOCBs issue 

most of the credit in the PRC and lend 

at rates close to the Central Bank’s 

announced base lending rate. See 

‘‘Economic Survey of China,’’ Paris: 

Organization for Economic Cooperation 

and Development, at 153 (2005) 

(‘‘Economic Survey of China’’). 

Accordingly, foreign banks participating 

in this system are inevitably influenced 

by this broader environment in the rates 

at which they issue loans. Additionally, 

while foreign banks are slowly 

increasing their participation in the 

domestic PRC banking sector, the OECD 

has observed that foreign banks, in 

addition to providing only a tiny share 

of credit in the PRC, still operate mostly 

in niche markets, rather than compete 

directly with the state-owned 

commercial banks. See August 30 

Memorandum at 60, citing ‘‘Economic 

Survey of China,’’ at 150–151. 

Therefore, foreign bank lending does not 

provide a suitable benchmark. 

The Department’s conclusion that the 

lending rates offered by foreign banks 

do not offer a suitable benchmark 

because of the market-distorting 

behavior of the GOC is consistent with 

the Department’s determination in the 

countervailing duty investigation in 

Softwood Lumber. That case dealt with 

the provision of goods for less than 

adequate remuneration. The Department 

explained that, ‘‘if there is no market 

benchmark price available in the 

country of provision, it is obviously 

impossible to determine adequacy of 

remuneration except by reference to 

sources outside the country.’’ See 

Softwood Lumber at ‘‘Provincial 

Stumpage Programs.’’ Further, ‘‘a valid 

benchmark must be independent of the 

government price being tested; 

otherwise the benchmark may reflect 

the very market distortion the 

comparison is intended to detect.’’ Id. In 

that proceeding, the Department 

determined that the small private 

market for timber in Canada was not a 

suitable basis for comparison because of 

the dominant position of the 

government in the marketplace. Id. This 

is quite similar to the fact pattern in the 

current proceeding, where a small 

private (foreign) sector exists alongside 

a vastly larger state-owned sector where 

a considerable portion of lending is not 

conducted on terms and conditions 

consistent with commercial 

considerations. Just as the prices in the 

private market for timber were found to 

be distorted by the presence of a largely 

state-controlled sector, lending rates by 

foreign banks in the PRC would be 

affected by the non-commercial lending 

rates of the much larger and dominant 

state-owned banks. 

On March 22, 2007, Gold East cited to 

the PRC’s Accession Protocol and 

argued that before rejecting benchmarks 

within the PRC, the Department should 

‘‘adjust such prevailing terms and 

conditions before considering the use of 

terms and conditions prevailing outside 

China.’’ However, it is not practical to 

adjust internal PRC lending rates for 

benchmarking the loans made by 

respondents. The distortions in the 

Chinese banking sector cannot be 

attributed to a single factor or set of 

factors that the Department could 

account for by adjusting an internal 

lending figure. Rather, this distorted 

sector is due to the PRC’s history of 

government domination of the banking 

system and continuing ownership of the 

sector. Under these circumstances, for 

the purposes of this preliminary 

determination, it is necessary for the 

Department to disregard all internal 

benchmark data for loans. 


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We now turn to the issue of choosing 

an external benchmark. Selecting an 

appropriate external interest rate 

benchmark is particularly important in 

this case because, unlike prices for 

certain commodities and traded goods, 

lending rates vary significantly across 

the world. Nevertheless, there is a broad 

inverse relationship between income 

levels and lending rates. In other words, 

countries with lower per capita gross 

national income (GNI) tend to have 

higher interest rates than countries with 

higher per capita GNI, a fact 

demonstrated by the lending rates 

across countries reported in 

International Financial Statistics. There 

are several possible explanations for this 

phenomenon. High-income countries 

generally have stronger marketsupporting institutions, which reduce 

the risk and transaction costs associated 

with lending. High income countries 

may also be more stable, further 

reducing perceived risk, and have high 

levels of credit in the economy, which 

helps to achieve economies of scale. For 

these reasons, the Department has 

determined that it is appropriate to use 

income level as a criterion for choosing 

the external lending rate to use as a 

benchmark. 

Nevertheless, relying on a single 

country’s figure could introduce 

distortions in the benchmark calculation 

if, for example, the country’s central 

bank temporarily tightened monetary 

policy to reduce inflationary pressures. 

Because such factors, and their effect on 

interest rates vary across countries, the 

Department has preliminarily 

determined that a cross-country average 

lending rate is the most appropriate 

benchmark rate in this proceeding. A 

lending rate averaged across countries 

with similar income levels to the PRC 

captures the broad relationship between 

income and interest rates, as well as the 

institutional and macroeconomic factors 

that affect interest rates. Moreover, a 

large number of the world’s countries 

report comparable lending rates to 

International Financial Statistics, 

providing a suitable basis for calculating 

a cross-country average. 

The Department has used the country 

classifications of the World Bank to 

determine which countries to include in 

the benchmark average. The World Bank 

divides the world’s economies into four 

categories, based on per capita GNI: Low 

income, lower-middle income, uppermiddle income, and high income. The 

PRC, with its 2005 per capita GNI of 

$1740, falls into the lower-middle 

income category, a group that includes 

58 countries as of July 2006. The 

Department then calculated an average 

of the lending rates that these countries 

reported to International Financial 

Statistics in 2005. This calculation 

excludes those economies that the 

Department considered to be nonmarket economies for antidumping 

purposes in 2005: the PRC, Armenia, 

Azerbaijan, Belarus, Georgia, Moldova, 

Turkmenistan, and Ukraine. The 

average necessarily also excludes any 

economy that did not report lending 

data to International Financial Statistics 

in 2005. The Department also excluded 

two aberrational countries, Angola, with 

a rate of 67.72 percent, and Brazil, with 

a rate of 55.38 percent. The Department 

then computed a simple average of 

13.147 percent of the remaining 37 

lending rates and used this average to 

determine whether a benefit existed for 

the loans received by Chenming and 

Gold East on their short-term loans in 

2005. The resulting average provides an 

appropriate benchmark because the loan 

figures reported to International 

Financial Statistics represent base shortterm lending rates in each reporting 

country. 

The lending rates reported in 

International Financial Statistics 

represent short-term lending, and there 

is no publicly available long-term 

interest rate data. To identify and 

measure any benefit from long-term 

loans, the Department developed a ratio 

of short-term and long-term lending for 

2005. The Department then applied this 

ratio to the benchmark short-term 

lending figure (using the methodology 

explained above) to impute a long-term 

lending rate. For example, for loans 

issued in 2000, the Department 

calculated an average of the 37 lowermiddle income countries’ short-term 

lending rates in 2000. To convert the 

resulting short-term interest rate into a 

long-term rate, the Department 

calculated a ratio between short-term 

lending drawn from London Interbank 

Offered Rate (LIBOR) data and long-term 

interest rates from in the interest rate 

swap market. The ratio of the two 

figures provides an indication of the 

varying cost of money over different 

time periods. In this case, the 

Department computed a ratio of the 

average short-term LIBOR rate in 2005 

and the prevailing interest rates on longterm (five-year) interest rate swaps 

reported by the Federal Reserve for the 

year in question. That is, if the longterm swap rate were 25 percent higher 

than the short-term LIBOR rate, the 

Department would inflate the average 

short-term lending rate by 25 percent to 

arrive at a long-term interest rate 

benchmark. This methodology is 

appropriate because the interest rate 

swap rates are based on short-term 

LIBOR rates, and the ratio between them 

offers an estimate of the market 

consensus premium that borrowers 

would pay on a long-term loan over a 

short-term loan. 

Creditworthiness 

The examination of creditworthiness 

is an attempt to determine if the 

company in question could obtain longterm financing from conventional 

commercial sources. See 19 CFR 

351.505(a)(4). According to 19 CFR 

351.505(a)(4)(i), the Department will 

generally consider a firm to be 

uncreditworthy if, based on information 

available at the time of the governmentprovided loan, the firm could not have 

obtained long-term loans from 

conventional commercial sources. In 

making this determination, according to 

19 CFR 351.505(a)(4)(i)(A)–(D), the 

Department normally examines the 

following four types of information: (1) 

Receipt by the firm of comparable 

commercial long-term loans; (2) present 

and past indicators of the firm’s 

financial health; (3) present and past 

indicators of the firm’s ability to meet 

its costs and fixed financial obligations 

with its cash flow; and (4) evidence of 

the firm’s future financial position. If a 

firm has taken out long-term loans from 

commercial sources, this will normally 

be dispositive of the firm’s 

creditworthiness. However, if the firm is 

government-owned, the existence of 

commercial borrowings is not 

dispositive of the firm’s 

creditworthiness. This is because, in the 

Department’s view, in the case of a 

government-owned firm, a bank is likely 

to consider that the government will 

repay the loan in the event of a default. 

See Countervailing Duties; Final Rule, 

63 FR 65348, 65367 (November 28, 

1998). For government-owned firms, we 

will make our creditworthiness 

determination by examining this factor 

and the other factors listed in 19 CFR 

351.505 (a)(4)(i). 

Chenming: The Shouguang StateOwned Asset Administration owned 

31.24 percent of Chenming during the 

POI. Therefore, for purposes of the 

creditworthiness determination, we are 

preliminarily treating Chenming as 

government-owned and are not 

considering the existence of commercial 

borrowing to be dispositive of the 

company’s creditworthiness. 

Chenming’s consolidated financial 

statements show that the Group had 

negative working capital in 2003 

through 2005, and its cash flow was 

negative in 2005. In addition, the 

current and quick ratios were less than 

1 during the same time period and have 


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2See Memorandum to File, ‘‘Creditworthiness 

Determination for Chenming,’’ (March 29, 2007) 

(‘‘Chenming Creditworthy Memo’’) (providing the 

calculation of the financial ratios for 2001 through 

2005). It is the Department’s standard practice to 

examine ratios for the years in which a 

creditworthiness determination is to be made and 

the three preceding years. 

3See Chenming Creditworthy Memo. 4See Chenming Creditworthiness Memo. 

consistently declined since 2001.2

Chenming’s 2005 financial statements 

indicate that the Group has a large 

amount of short-term debt, and that 

working capital was applied in the 

expansion and construction of 

production facilities in the Group. 

Indeed, its annual reports show that the 

Group completed several large projects 

in 2004 and 2005 (fixed assets increased 

by 83% from the end of 2003 to the end 

of 2005), including new facilities. While 

the net profit margin, times interest 

earned, return on assets, and return on 

equity have decreased since 2003, they 

are comparable to or greater than the 

Group’s 2001 ratios. The ‘‘times interest 

earned’’ ratio calculates the extent to 

which pre-tax income covers interest 

expense and creditors monitor it to 

gauge the risk of default. Cash flow to 

liabilities, which indicates bankruptcy 

risk, has been very variable since 2001. 

Debt-to-equity and debt-to-assets, two 

solvency ratios, have increased since 

2001, and demonstrate that the Group 

has become more leveraged. Turnover, 

however, has increased by at least 20 

percent each year since 2001. In 

addition, despite the negative working 

capital and negative net cash flow, the 

company continued to pay dividends in 

2004 and 2005. 

In Chenming’s consolidated 2005 

financial statements, the auditors 

explained that the Group is exposed to 

liquidity risk because a significant 

percentage of the Group’s capital 

funding requirements are financed 

through short-term bank borrowing. The 

company acknowledged this risk and 

intended to convert a significant portion 

of such short-term debt to long-term 

debt in the near future. A December 2, 

2005 article in Euroweek, indicated that 

Sumitomo Mitsui Banking Corporation 

(a foreign bank) was arranging an $80 

million three-year term-loan for 

Chenming. The article explains that the 

deal is the company’s debut 

international loan, although the 

company was in the market in 2005 as 

a sponsor of an affiliated company 

project.3 The group also had a five-year 

convertible bond issue in September 

2004. 

We note that the financial statements, 

upon which the above ratios have been 

calculated, are for the consolidated 

Chenming Group. In its response, 

Chenming submitted financial ratios 

based on the unconsolidated parent 

company, which is the responding 

company and, according to its response, 

the sole producer within the 

consolidated group of the merchandise 

under investigation. These ratios show 

that the parent company’s current ratios 

for 2004 and 2005 are more than 1 and 

its quick ratios are nearly 1, which 

indicate that the parent company is in 

a more liquid position. In addition, the 

time interest earned ratios for these 

years are stronger for the parent than for 

the Group. While Chenming has not 

submitted the unconsolidated financial 

statements upon which these ratios are 

based, the Department has found 

publicly available financial statements 

for Chenming for the first half 2005, 

which show the financial information 

for the parent and the Group. These 

statements confirm that the current ratio 

for the parent company is greater than 

1 and the quick ratio is substantially 

better for the parent than the Group. In 

addition, the parent had positive 

working capital, although its cash flow 

in the first half 2005 was negative. 

We find the ratios for the Chenming 

Group provide varying indications of 

the firm’s financial creditworthiness. 

While working capital is negative, 

working capital is only a rough 

indication of changes in liquidity and 

supplemental analysis with other ratios 

is required. Working capital in this case 

is negative due in large part to the large 

amount of short-term liabilities. The 

liabilities in this case were used to 

finance Group expansion, which should 

provide for future sales increases. While 

a company with excellent long-term 

prospects could fail to realize them if 

forced into bankruptcy because it could 

not pay its short-term liabilities, there is 

no indication that this is the case for the 

Chenming Group. 

Indeed, Chenming acknowledges this 

risk and states its intention to mitigate 

it through the acquisition of long-term 

debt. The December 2005 article cited 

above demonstrates that the company 

was likely to be successful in carrying 

out this intention. Moreover, there is no 

information on the record that 

Chenming has defaulted on any of its 

debt or failed to meet any of its financial 

obligations. To the contrary, it has even 

continued to pay dividends. Also, the 

record shows that Chenming has 

continued to borrow from private 

parties, as evidenced by the 2004 

convertible bond issue. We note that 

while we have performed this analysis 

for the Chenming Group, the 

unconsolidated financial situation for 

the parent company, the respondent in 

this case, appears to be even better.4

In summary, while certain financial 

ratios indicate some degree of financial 

distress, there are several factors that 

weigh against finding Chenming 

uncreditworthy, such as: Continuing 

annual sales growth, its positive net 

income in 2005, and its ability to meet 

its interest expenses and issue 

convertible bonds. Therefore, we 

preliminarily determine Chenming to be 

creditworthy in 2004 and 2005. 

Gold East: On March 8, 2007, the 

petitioner alleged that the APP 

companies, including Gold East, should 

be considered uncreditworthy beginning 

in 2001. 

On March 20, 2007, Gold East 

objected to petitioner’s allegation on the 

grounds that it was untimely filed. 

Specifically, Gold East argues that any 

new subsidy allegation, including an 

allegation of uncreditworthiness, is due 

no later than 40 days before the 

scheduled date of the preliminary 

determination, citing 19 CFR 

351.301(d)(4)(i)(A). 

We disagree with Gold East that 

uncreditworthiness allegations must be 

filed within the same timeframe 

established for new subsidy allegations 

in 19 CFR 351.301(d)(4)(i)(A). 

Uncreditworthiness in and of itself is 

not a countervailable subsidy. Instead, it 

is a valuation issue that is properly 

addressed in the course of an 

investigation as long as parties have 

ample time to submit information and 

argument on the point. In this case, 

adequate time exists. Therefore, we have 

analyzed petitioner’s allegation. 

According to 19 CFR 351.505(a)(6), 

the Department ‘‘will not consider the 

uncreditworthiness of a firm absent a 

specific allegation by petitioner that is 

supported by information establishing a 

reasonable basis to believe or suspect 

that the firm is uncreditworthy.’’ The 

petitioner has submitted financial ratios 

for the companies and has pointed to 

other evidence on the record. (Because 

this allegation is based almost 

exclusively on proprietary information, 

it is described in a separate 

memorandum, Memorandum to Susan 

Kuhbach, ‘‘Uncreditworthiness 

Allegation for APP Companies’’ (March 

29, 2007) (‘‘APP Creditworthiness 

Allegation Memo’’) (memorandum is on 

file in the Department’s CRU). 

Based on our review of the allegation, 

we find that the petitioner has provided 

a reasonable basis to believe or suspect 

that the APP companies were 

uncreditworthy in 2001–2005. See APP 

Creditworthiness Allegation Memo. 


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Therefore, we intend to investigate the 

creditworthiness of the APP companies 

for those years between 2001 and 2005 

in which the companies received 

subsidies under investigation in this 

case. We intend to make a preliminary 

finding on the companies’

creditworthiness prior to our final 

determination and will provide the 

parties with an opportunity to comment 

on that finding. 

Denominator 

In its March 20, 2007 filing, Gold East 

asks the Department to adjust its 

subsidy rate to reflect the fact that the 

company’s exports to the United States 

are invoiced by an affiliate. Gold East 

claims that the Department previously 

made such an adjustment in Ball 

Bearings and Parts Thereof from 

Thailand; Final Results of 

Countervailing Duty Administrative 

Review, 57 FR 26646 (June 15, 1992) 

(‘‘Ball Bearings from Thailand’’). 

Based upon our review of Ball 

Bearings from Thailand and the 

information submitted by Gold East in 

support of its claim, it appears that the 

pattern of transactions differ in the two 

situations, and it is not clear that the 

adjustment is appropriate for Gold 

East’s situation. However, we intend to 

seek further information and analyze 

this claim further for our final 

determination. 

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. Grant Programs 

The petitioner alleged that the GOC, 

including local and provincial 

authorities, provide grants to CFS 

producers and their cross-owned 

companies, pursuant to five-year plans 

for the pulp and paper industry. 

The GOC has identified two grant 

programs that relate to this allegation: 

The State Key Technology Renovation 

Fund, and the Clean Production 

Technology Fund. The former is 

discussed below, and the latter is 

addressed under ‘‘Programs 

Preliminarily Determined to be Not 

Used.’’

The State Key Technology Renovation 

Project Fund 

The State Key Technology Renovation 

Project Fund program (‘‘Key Technology 

Program’’) was created pursuant to state 

circular GUOJINGMAOTOUZI (1999) 

No. 886 (Circular No. 886), and operates 

under the regulatory guidelines 

provided in Circular No. 886, including 

‘‘Measures for the Administration of 

National Debt Special Fund for National 

Key Technological Renovation Project’’

(‘‘Special Fund Measures’’), 

GUOJINGMAOTOUZI (1999) No. 122, 

GUOJINGMAOTOUZI (1999) No. 1038 

and state circular GUOJINGMAOTOUZI 

(2000) No. 822. The purpose of this 

program is to promote: (1) 

Technological renovation in key 

industries, key enterprises, and key 

products; (2) facilitation of technology 

upgrade; (3) improvement of product 

structure; (4) improvement of quality; 

(5) increase of supply; (6) expansion of 

domestic demand; and (7) continuous 

and healthy development of the state 

economy. 

Under the Key Technology Program, 

companies can apply for funds to cover 

the cost of financing specific 

technological renovation projects. 

Under Article 9 of the Special Fund 

Measures, Key Technology Program 

grants are disbursed in the form of 

‘‘project investment facility’’ grants 

covering two years’ worth of interest 

payable on loans to fund the project, or 

up to three years for enterprises located 

in certain regions. Under Article 11 of 

the Special Fund Measures, Key 

Technology Program funds may also be 

disbursed as ‘‘loan interest grants,’’

which are calculated with reference to 

the amount of the project loans and 

prevailing interest rates during a period 

of one to two years. 

Pursuant to Article 4 of Circular No. 

886, the recipients of these funds will 

mainly be selected from large-sized 

state-owned enterprises and large-sized 

state holding enterprises among the 512 

key enterprises, 120 pilot enterprise 

groups and the leading enterprises in 

industries. To be considered for 

funding, the enterprise files an 

application that is reviewed at various 

levels of government, with final 

approval given by the State Council. 

Once approved, the local finance 

bureaus appropriate the funds into the 

enterprise’s account. 

The GOC has reported that Chenming 

was among the 512 key enterprises or 

120 pilot enterprise groups, and that 

Gold East was not included in these 

groups. Also, the GOC reported 

approving funding for Chenming under 

the Key Technology Program in 2000, 

and that the funds were disbursed in 

2001. 

The GOC has further reported that the 

Key Technology Program has not 

operated since 2003, although the 

implementing regulations remain in 

effect. This is due to institutional reform 

in the government—the implementing 

agency, the State Economic and Trade 

Commission, was dissolved and the 

program was not taken over by another 

agency. 

We preliminarily determine that the 

Key Technology Program provides 

countervailable subsidies to Chenming 

within the meaning of section 771(5) of 

the Act. We find that these grants are a 

direct transfer of funds within the 

meaning of section 771(5)(D)(i) of the 

Act, providing a benefit in the amount 

of the grant. See 19 CFR 351.504(a). We 

further preliminarily determine that the 

grants provided under this program are 

limited as a matter of law to certain 

enterprises, i.e., large-sized state-owned 

enterprises and large-sized state holding 

enterprises among the 512 key 

enterprises, 120 pilot enterprise groups 

and the leading enterprises in 

industries, and, hence, are specific 

under section 771(5A)(D)(i) of the Act. 

According to the GOC, the program is 

intended to provide one-time assistance 

and each project funded by the a grant 

requires a separate application and 

approval. Therefore, consistent with 19 

CFR 351.524(c)(1), we are treating the 

grant received under this program as 

‘‘non-recurring.’’ We do not have the 

information needed to perform the 

‘‘expensing’’ test described in 19 CFR 

351.524(b)(2), and for purposes of this 

preliminary determination have 

allocated the benefit over the AUL. 

To calculate the countervailable 

subsidy, we used our standard grant 

methodology. Because the approved 

project was for CFS, we divided the 

benefits attributable to the POI by the 

total value of Chenming’s sales of CFS 

during that period. On this basis, we 

preliminarily determine the 

countervailable subsidy to be 1.28 

percent ad valorem for Chenming. 

As noted above, the grants provided 

under this program are to cover interest 

owed on loans. Our regulations provide 

differing allocation methodologies for 

interest assumptions, depending on 

whether the recipient knew of the 

assumption before taking out the loan. 

See 19 CFR 351.508(c)(2). We intend to 

seek further information on this issue 

for our final determination. 

B. Government Policy Lending Program 

Petitioner has alleged a GOC lending 

program to provide loans at a discount 

to the forestry and paper industry in 

accordance with the GOC’s industrial 

policy, as set out, inter alia, in ‘‘The 

PRC Civilian Economy and Social 

Development 10th Five-Year Plan 

Outline’’ and ‘‘The Tenth Five-Year and 

2010 Special Plan for the Construction 

of National Forestry and Papermaking 

Integration Project.’’ Petitioner further 


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alleges that discounted loans, interest 

subsidies, and debt forgiveness are 

provided through policy banks and 

state-owned banks providing policy 

loans. 

Chenming and Gold East have stated 

that they did not receive any 

preferential policy loans. In its 

response, the GOC states that the FiveYear plans are a ‘‘projection of the 

{state-council’s} economic work in the 

forthcoming years’’ and are ‘‘not 

necessarily translated into any specific 

action.’’ As such, the GOC asserts that 

it does not normally provide loans to 

industries; rather, banks provide loans 

and operate as independent commercial 

entities, typically basing their decision 

to provide a loan on commercial and 

risk assessment factors. 

To determine whether the program 

alleged by petitioner confers 

countervailable subsidies on the 

producers and exporters of the subject 

merchandise, the Department must first 

ascertain whether the GOC has a 

program in place to support the 

development of the paper industry. 

Specifically, the Department must 

determine whether record evidence 

supports the conclusion that the GOC 

carries out industrial policies that 

encourage and support the growth of the 

paper sector through the provision of 

preferential loans. 

Petitioner has claimed that the GOC 

has an explicit policy of supporting the 

paper industry with preferential loans. 

To support this assertion, petitioner 

cites to the ‘‘The PRC Civilian Economy 

and Social Development 10th Five-Year 

Plan Outline’’ (10th Five-Year Plan) and 

‘‘The Tenth Five-Year and 2010 Special 

Plan for the Construction of National 

Forestry and Papermaking Integration 

Project’’ (10th Five-Year Plan for the 

Forestry and Paper Industry), among 

other administrative measures. 

One of the goals of the 10th Five-Year 

Plan is to ‘‘accelerate reform and 

renovation’’ of certain industries, 

including the ‘‘wood pulp, high quality 

paper and paperboard’’ industry. 

Subsequent Five-Year Plans have 

reaffirmed this goal. Taking into 

consideration the broad goals set out in 

the 10th Five-Year Plan, in March 2001 

the GOC released the 10th Five-Year 

Plan for the Forestry and Paper 

Industry. This plan was developed ‘‘in 

order to ensure the smooth construction 

of our national forestry and 

papermaking integration project, to 

make comprehensive plans, to take 

actions according to local 

circumstances, to make decisions on 

scientific bases, and for the government 

to play the role of macroeconomic 

readjustment and control’’ (emphasis 

added). In addition, the government has 

established specific production capacity 

targets in this Plan, stating that ‘‘{w}e 

plan to construct pulp producing 

capacity of 1.13 million ton’’ and after 

2010 ‘‘we can build a pulp producing 

capacity of more than 2.15 million ton 

* * * and a matching paper making 

capacity of about 2.3 million ton.’’

Further, the GOC estimates that the 

amount of investment required during 

the period of the 10th and 11th FiveYear Plans will be RMB 244.3 billion, 

stating that, ‘‘{t}herefore, investment 

has to be strengthened vigorously and 

financing channels are to be widened 

***’’ As such, this Plan specifically 

contemplates policy measures that are 

necessary to achieve these goals, 

including the provision of ‘‘appropriate 

financial support to the construction of 

forestry and papermaking integration in 

its early phase by way of infusing 

capital in cash or loans with discount.’’

In addition to the 10th Five-Year Plan 

and the 10th Five-Year Plan for the 

Forestry and Paper Industry, in August 

2001, the State Economic and Trade 

Commission released the ‘‘10th FiveYear Plan in the Paper Production 

Industry.’’ The purpose of this Plan is to 

outline goals of the paper production 

industry over the next 5 years. A key 

policy recommendation addressed in 

the plan is increased access to financial 

resources, including: (1) Opening 

essential financing channels for 

adjustment and development of the 

industry; (2) encouraging the opening of 

multilateral investment and financing 

channels to increase technological 

restructuring and rapid growth; and (3) 

providing discounted loans with special 

terms for environmental conservation 

projects. 

Beyond the various Five-Year Plans 

mentioned above, several additional 

administrative measures released by the 

GOC demonstrate a clear governmental 

policy or program of support to the 

forestry and paper industry. For 

example, in June 2000, The PRC’s 

National Key Economy and Trade 

Committee released the National Key 

Technology Renovation ‘‘Shuang Gao Yi 

You’’ Project. The purpose of this 

measure was to outline key areas of 

economic structural adjustment needed 

by enterprises to increase technology 

renovation, technical and industrial 

advancement. One of the stated goals 

was to ‘‘emphatically select key paper 

enterprises which produce high quality 

newspaper, high class culture paper 

product (LWC), high class packaging 

paperboard (carton paperboard), and 

enterprises that produce paper making 

machine and other supporting networks; 

eliminate backward equipment and 

products which are not market 

suitable.’’

On the basis of the record information 

cited above, we preliminarily determine 

that the GOC has a specific and detailed 

policy to encourage and support the 

development of the domestic forestry 

and paper industry. The GOC itself has 

stated that Five-Year Plans are a 

‘‘projection of the [state-council’s] 

economic work in the forthcoming 

years.’’ In order to implement the 

policies enumerated in the Five-Year 

Plan, the GOC’s policy specifically calls 

for the provision of discounted loans 

and other financing in order to support 

the growth and development of this 

industry. 

The GOC has further stated in its 

March 15 questionnaire response that 

‘‘the administrative system ensures that 

provincial and local policy goals and 

objectives are in conformity with the 

central policy goals and objectives.’’

According to the 1979 Law of Local 

People’s Congresses at Various Levels 

and Local People’s Government at 

Various Levels of the PRC, as amended, 

local governments must follow the laws 

and regulations made by the central 

government. See Chinese Law and Legal 

Research, Wei Luo, at 31 (2005). 

Further, 

the State Council guides the local 

administration in terms of policies and 

assigns tasks to local governments in terms 

of plans. In doing so, the central government 

confers on the local governments the 

necessary authorities to carry out the policies 

of the central government. The central 

government also evaluates the local 

governments’ application of policies, laws 

and plans made by the central government. 

See id. (emphasis added.) 

In other words, local governments must 

align their industrial policies with 

stated central government policies and 

carry out those polices to the extent that 

such measures affect their locality. As 

such, based on record statements, FiveYear Plans should be considered a 

central government policy or program 

that local governments adopt and 

implement through SOCBs. 

Having determined that the record 

evidence establishes a government 

policy or program to support the 

forestry and paper industry, the 

Department next turns to whether these 

policies were carried out by the central 

and local governments through the 

provision of loans extended by GOC 

policy banks and SOCBs. Under the 

Department’s practice, loans provided 

by government policy banks, such as the 

China Development Bank, are 

considered government loans and, thus, 

constitute direct financial contributions 

under the Act. See, e.g., Dynamic 


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Random Access Memory 

Semiconductors from the Republic of 

Korea: Final Results of Countervailing 

Duty Administrative Review, 72 FR 

7015, February 14, 2007, and 

accompanying Issues and Decision 

Memorandum, at 6. Loans by SOCBs, 

however, are not necessarily treated as 

government loans because these banks 

often operate on a commercial basis in 

many countries. See Preamble, 63 FR at 

65363. However, as discussed below, 

the PRC’s banking system presents a 

significantly different fact pattern than 

those in market economy countries that 

the Department has previously 

encountered and that were 

contemplated in the Preamble. 

Information on the record indicates that 

the PRC’s banking system suffers from a 

legacy of complete state control, the 

vestiges of which allow for continued 

government control, especially at the 

local level, resulting in the allocation of 

credit in accordance with government 

policies. 

As discussed in the Georgetown 

Memo and the Department’s memoranda 

from the investigation on Certain Lined 

Paper Products from the PRC regarding 

the PRC’s status as a non-market 

economy, the PRC’s banking system is 

more flexible than the Soviet-style 

banking sectors, where central banks 

directly allocated all credit in 

accordance with the wishes of the party 

and the central planners. The GOC 

abolished the mandatory credit plan in 

1997, under which the People’s Bank of 

China (PBOC) directly allocated credit 

to specific sectors, often supporting the 

operations of loss-making state-owned 

enterprises (SOEs). The credit plan was 

replaced with non-binding targets, 

which were to serve as guidance for 

credit allocation. See August 30 

Memorandum, at 51. SOCBs were 

afforded legal autonomy from the state 

in most matters, which allowed them to 

lend, at least in theory, on terms and 

conditions consistent with commercial 

considerations. Current law, however, 

remains contradictory with regard to the 

SOCB’s independence from the state. 

Under the 1995 Commercial Banking 

Law of the People’s Republic of China, 

commercial banks are responsible for 

their own profits and losses, must 

protect the interests of their depositors, 

and are protected from government 

influence. However, Article 34 of the 

Commercial Bank Law paradoxically 

states that banks are required to adhere 

to the PRC’s ‘‘national industrial 

policies.’’ See August 30 Memorandum, 

at 53. 

Notwithstanding certain dictates that 

the SOCBs act independently of the 

government, as discussed in the 

‘‘Benchmark’’ section of this notice, the 

near-complete state ownership over 

these banks enables the GOC to utilize 

SOCBs as policy instruments and, thus, 

to allocate credit in accordance with its 

policies, as enumerated in the Five-Year 

Plans. Specifically, the Department 

found that ‘‘{w}hile the Big Four (along 

with smaller regional banks and 

cooperatives) now have greater 

autonomy than in the past, government 

interests at both the central and local 

levels still exercise a great deal of 

control over banking operations and 

lending decisions.’’ See May 15 

Memorandum, at 5. As noted by the 

IMF, ‘‘{r}ooting out the legacy of 

government directed lending, and 

training banks to make lending 

decisions based on purely commercial 

considerations, with adequate regard to 

viability and riskiness of projects 

remains a major reform challenge.’’ See 

August 30 Memorandum, at 52, n. 248, 

citing Finance and Development, Next 

Steps for China, Washington, DC: 

International Monetary Fund, 

(September 2005). 

State-direction of credit as well as 

protracted lending on a non-commercial 

basis has been evidenced by repeated 

cycles of the accumulation of a large 

number of non-performing loans and 

government bailouts of the banking 

sector. See ‘‘Benchmark’’ section above. 

For example, wholly- and partiallyowned SOEs continue to receive a 

disproportionate share of credit, in line 

with industrial policy objectives to 

maintain a central role for the stateowned sector of the economy. See May 

15 Memorandum, at 5; and August 30 

Memorandum, at 59. 

Some of the misallocation of 

resources may be attributed to lack of 

experience or inertia. However, as 

discussed above in the ‘‘Benchmarks’’

section, the continued government 

intervention in bank operations, 

especially by local governments, acts as 

a significant impediment to true 

commercialization of the banks. Prior to 

reforms, local governments utilized 

SOCB branch offices as the main source 

of capital to fund policy-driven 

investment projects and support local 

SOEs, which in turn provided local 

employment and government revenue. 

Although SOCBs are no longer the sole 

instrument by which to allocate funds, 

local governments continue to guide 

and direct the allocation of credit 

through their local bank branches. See 

August 30 Memorandum, at 60. 

Third-party commentators have 

arrived at similar conclusions regarding 

the state’s continued influence, 

especially at the local level, on SOCB 

operations. For example, a 2005 

Organization for Economic Cooperation 

and Development (OECD) report found 

that, 

The chief executives of the head offices of 

the SOCBs are government appointed and the 

party retains significant influence in their 

choice. Moreover, the traditionally close ties 

between government and bank officials at the 

local level have created a culture that has 

given local government officials substantial 

influence over bank lending decisions. See 

August 30 Memorandum, at 60, n. 294 and 

301, citing to Economic Survey of China, 

Paris: Organization for Economic 

Cooperation and Development, at 140–141 

(2005). 

A 2005 IMF Staff Report concurred, 

stating that, {t}he staff acknowledged 

the progress made in reducing 

government involvement in 

management and business operations of 

banks. However, more needs to be done, 

particularly with regard to local 

governments, to remove this serious 

impediment to fully commercializing 

banks.’’ See the August 30 

Memorandum at 60, citing People’s 

Republic of China: 2005 Article IV 

Consultation—Staff Report; Staff 

Supplement; and Public Information 

Notice on the Executive Board 

Discussion, Washington, DC, 

International Monetary Fund, at 

November 2005), p. 19. 

As the Department found in its May 

15 Memorandum, ‘‘the continued 

significant government involvement in 

the PRC’s banking sector reflects an 

assumption that the state, not markets, 

should determine the growth sectors or 

individual companies that deserve 

access to credit.’’ See May 15 

Memorandum, at 8. On the basis of the 

evidence cited above, the Department 

determines for the purposes of this 

preliminary determination that the GOC 

continues to use its ownership of and 

influence over SOCBs to guide and 

direct the allocation of credit in 

accordance with its stated policy 

objectives, including those contained in 

the 10th Five-Year Plan for the Forestry 

and Paper Industry. In addition, 

evidence on the record also indicates 

that the above-mentioned Five-Year 

Plans are in fact implemented by paper 

companies. For example, Chenming’s 

2005 Annual Report states that, ‘‘{a}ll of 

the projects the Company had launched 

were those which satisfying the national 

industrial policy and to be replacing the 

imported products and high in value 

adding.’’ In addition, this report states 

that, ‘‘the Company will keep studying 

and following with the national policies 

to grasp the trend of overall planning, to 

make sure the Company’s development 

is complying with the national policy 

on the industry.’’ As such, the 


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Department preliminarily finds that the 

PRC’s SOCBs should be considered 

extensions of the government and are 

the instruments by which the 

government implemented the 

preferential lending component of the 

program described above. 

For the reasons stated above, the 

Department preliminarily determines 

that loans provided by Policy Banks and 

SOCBs in the PRC constitute 

government-provided loans pursuant to 

section 771(5)(D)(i) of the Act. We 

further preliminarily determine that this 

loan program is specific in law because 

the GOC has a policy in place to 

encourage and support the growth and 

development of the forestry and paper 

industry. See section 771(5A)(D)(i) of 

the Act. Finally, this program provides 

a benefit to the recipients, equal to the 

difference between what the recipient 

paid on the loan and the amount the 

recipient would have paid on a 

comparable commercial loan. See 

section 771(5)(E)(ii) of the Act. 

Chenming, Gold East, and certain of 

Gold East’s cross-owned companies had 

outstanding loans under this program 

during the POI. 

To calculate the benefit, we used the 

interest rates described in the 

‘‘Benchmark’’ section above and the 

methodology described in 19 CFR 

351.505(c)(1) and (2). On this basis, we 

preliminarily determine that a 

countervailable benefit of 3.15 percent 

ad valorem exists for Chenming and a 

countervailable benefit of 14.02 percent 

ad valorem exists for Gold East for this 

program. 

C. Income Tax Programs 

The ‘‘Two Free, Three Half’’ Program 

The Foreign Invested Enterprise and 

Foreign Enterprise Income Tax Law (FIE 

Tax Law), enacted in 1991, established 

the tax guidelines and regulations for 

FIEs in the PRC. The intent of this law 

is to attract foreign businesses to the 

PRC. 

According to Article 8 of the FIE Tax 

Law, FIEs that are ‘‘productive’’ and 

scheduled to operate not less than 10 

years are exempt from income tax in 

their first two profitable years and pay 

half of their applicable tax rate for the 

following three years. FIEs are deemed 

‘‘productive’’ if they qualify under 

Article 72 of the Detailed 

Implementation Rules of the Income 

Tax Law of the People’s Republic of 

China of Foreign Investment Enterprises 

and Foreign Enterprises. This provision 

specifies a list of industries in which 

FIEs must operate in order to qualify for 

benefits under this program. The 

activities listed in the law are: (1) 

Machine manufacturing and electronics 

industries; (2) energy resource 

industries (not including exploitation of 

oil and natural gas); (3) metallurgical, 

chemical and building material 

industries; (4) light industries, and 

textiles and packaging industries; (5) 

medical equipment and pharmaceutical 

industries; (6) agriculture, forestry, 

animal husbandry, fisheries and water 

conservation; (7) construction 

industries; (8) communications and 

transportation industries (not including 

passenger transport); (9) development of 

science and technology, geological 

survey and industrial information 

consultancy directly for services in 

respect of production and services in 

respect of repair and maintenance of 

production equipment and precision 

instruments; (10) other industries as 

specified by the tax authorities under 

the State Council. The GOC, in its 

response, has stated that if a FIE meets 

the above conditions, eligibility is 

automatic and the amount exempted 

appears on the enterprise’s tax return. 

Gold East reported that, during the 

POI, Gold East and certain of its crossowned companies filed tax statements 

for a ‘‘free’’ year under this program. 

Chenming reported that its eligibility for 

participation in this program ended in 

2001 and that the company did not 

receive any benefits under this program 

during the POI. 

We preliminarily determine that the 

exemption or reduction in the income 

tax paid by ‘‘productive’’ FIEs under 

this program confers a countervailable 

subsidy. The exemption/reduction 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/reduction afforded by this 

program is limited as a matter of law to 

certain enterprises, ‘‘productive’’ FIEs, 

and, hence, is specific under section 

771(5A)(D)(i) of the Act. 

The GOC claims that FIEs are a 

separate type of business operation 

under Chinese law, similar to 

partnerships, proprietorships, domestic 

corporations, for example, and that 

differences in tax liabilities for these 

different types of businesses do not 

make the income tax rate applicable to 

FIEs specific. The GOC further claims 

that the large number of FIEs and the 

vast number of industries they 

participate in further indicate that this 

program is not specific. However, we 

have preliminarily determined that 

limiting a program to ‘‘productive’’ FIEs 

is a sufficient basis to find specificity 

and, having found specificity as a matter 

of law, it is not necessary to reach the 

issue of whether the subsidy is specific 

in fact. See Statement of Administrative 

Action accompanying the Uruguay 

Round Agreements Act, H.R. Doc. No. 

103–316, at 930 (1994) (‘‘SAA’’). 

To calculate the benefit from this 

program, we treated the income tax 

exemption enjoyed by Gold East its 

cross-owned companies as a recurring 

benefit, consistent with 19 CFR 

351.524(c)(1). To compute the amount 

of tax savings, we compared the rate 

paid by the Gold East companies (zero 

percent) to the rate that would be paid 

by a domestic corporation in the PRC 

(30 percent). We attributed the tax 

savings received by Gold East and GHS 

to the combined sales of the two 

companies. Additional information on 

this calculation is provided in the 

Calculation Analysis memorandum for 

Gold East. On this basis, we 

preliminarily determine that a 

countervailable benefit of 2.88 percent 

ad valorem exists for Gold East for this 

program. 

Reduced Income Tax Rates for FIEs 

Based on Location 

FIEs are encouraged to locate in 

designated coastal economic 

development zones, special economic 

zones, and economic and technical 

development zones in the PRC through 

preferential income tax rates. This 

program was originally created in 1988 

under the Provisional Rules on 

Exemption and Reduction of Corporate 

Income Tax and Business Tax of FIE in 

Coastal Economic Zone of the Ministry 

of Finance and is currently 

administered under the FIE Tax Law, 

and Decree 85 of the State Council of 

1991 (Decree 85). Under Article 7 of the 

FIE Tax Law and Article 71 of Decree 

85, ‘‘productive’’ FIEs located in the 

designated economic zones pay 

corporate income tax at a reduced rate 

of either 15 or 24 percent, depending on 

the zone. 

For the income tax return filed during 

the POI, Chenming paid income tax at 

a reduced rate of 24 percent, based on 

its location in a Economic and 

Technical Development Zone. Because 

Gold East and GHS did not pay income 

taxes during the POI (due to their 

participation in the Two Free, Three 

Half program), we are treating this 

program as not used by Gold East during 

the POI. 

We preliminarily determine that the 

reduced income tax rate paid by 

‘‘productive’’ FIEs located in certain 

zones confers a countervailable subsidy. 

The reduced rate is a financial 

contribution in the form of revenue 


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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/reduction 

afforded by this program is limited to 

enterprises located in designated 

geographical 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 

Chenming as a recurring benefit, 

consistent with 19 CFR 351.524(c)(1), 

and divided the company’s tax savings 

received during the POI by Chenming’s 

total sales during that period. To 

compute the amount of tax savings, we 

compared the rate paid by Chenming 

(24 percent) to the rate that would be 

paid by a domestic corporation in the 

PRC (30 percent). On this basis, we 

preliminarily determine that a 

countervailable benefit of 0.34 percent 

ad valorem exists for Chenming for this 

program. 

Local Income Tax Exemption and 

Reduction Program for ‘‘Productive’’

FIEs 

Under Article 9 of the FIE Tax Law, 

the governments of the provinces, the 

autonomous regions, and the centrally 

governed municipalities have been 

delegated the authority to provide 

exemptions and reductions of local 

income tax for industries and projects 

for which foreign investment is 

encouraged. As such, the local 

governments establish the eligibility 

criteria and administer the application 

process for any local tax reductions or 

exemptions. Therefore, the requirements 

and application procedures for this 

program may vary between 

jurisdictions. 

Chenming, Gold East, and GHS 

reported receiving local income tax 

exemptions under this program. 

Chenming’s local tax authority granted 

the company an exemption because 

Chenming was an FIE located in a 

coastal economic zone, specifically, in 

an Economic and Technical 

Development Zone. 

Gold East references Article 3 of the 

Regulations for the Local Income Tax 

Exemption and Reduction of Jiangsu 

Province for Enterprises with Foreign 

Investment as the basis for its local tax 

exemption. Under these provincial 

regulations, productive FIEs in the 

Jiangsu Province are exempt from local 

income taxes during the period in 

which they use the ‘‘Two Free, Three 

Half’’ program. Because Gold East and 

GHS participated in the ‘‘Two Free, 

Three Half’’ program during the POI, 

they were exempt from the local income 

tax. 

We preliminarily determine that the 

local tax exemption and reduction 

program confers a countervailable 

subsidy. The exemption/reduction is a 

financial contribution in the form of 

revenue forgone by the local 

governments 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 to Chenming by this 

program is limited to enterprises located 

in designated geographical regions and, 

hence, is specific under section 

771(5A)(D)(iv) of the Act. In the case of 

Gold East, we preliminarily determine 

that the program is limited as a matter 

of law to certain enterprises, i.e., 

productive FIEs, and is specific under 

section 771(5A)(D)(i) of the Act for the 

reasons explained above. 

To calculate the benefit, we treated 

the income tax savings enjoyed by the 

companies as a recurring benefit, 

consistent with 19 CFR 351.524(c)(1). 

To compute the amount of tax savings, 

we compared the zero percent rate paid 

by Chenming, Gold East and GHS to the 

rate that would otherwise be paid by a 

domestic corporation in the PRC (3 

percent). For Chenming, we divided the 

income tax savings during the POI by 

Chenming’s total sales. For Gold East, 

we attributed the tax savings received 

by Gold East and GHS to the combined 

sales of the two companies. On this 

basis, we preliminarily determine that a 

countervailable benefit of 0.17 percent 

ad valorem exists for Chenming and a 

countervailable benefit of 0.31 percent 

ad valorem exists for Gold East. 

Income Tax Credits on Purchases of 

Domestically Produced Equipment by 

FIEs 

Provisions in GUOSHUIFA (2000) No. 

90, Administrative Measures on 

Enterprise Income Tax Credits for 

Purchase of Domestic Equipment by 

FIEs and Foreign Enterprises, and 

CAISHUI (2000) No. 49, Circular of the 

Ministry of Finance and the State 

Administration of Taxation on 

Enterprise Income Tax Credits for 

Purchase of Domestic Equipment by 

Foreign Invested Enterprises and 

Foreign Enterprises, permit FIEs to 

obtain tax credits of up to 40 percent of 

the purchase value of domestically 

produced equipment. Specifically, the 

tax credit is available to FIEs and 

foreign-owned enterprises whose 

projects are classified in either the 

Encouraged or Restricted B categories of 

the Catalog of Industrial Guidance for 

Foreign Investment. The credit applies 

to any domestically produced 

equipment so long as the equipment is 

not listed in the Catalog of Non-DutyExemptible Articles of Importation. The 

program has been in effect since 1999 

and its purpose, according to the GOC, 

is to attract foreign investment. 

To receive a tax credit under this 

program, requesting enterprises must 

submit an application to the local tax 

authority within two months of 

purchasing the equipment. Once 

approved, the credit can be claimed on 

the enterprise’s income tax return. The 

amount of the credit is limited to the 

lesser of 40 percent of the purchase 

price of the domestically produced 

equipment or the incremental increase 

in income taxes owed over the previous 

year. 

Chenming reported receiving tax 

credits under this program during the 

POI; Gold East did not. 

We preliminarily determine that 

income tax credits on the purchase of 

domestically produced equipment by 

FIEs are countervailable subsidies. The 

tax credits are a financial contribution 

in the form of revenue forgone by the 

local governments 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 further preliminarily 

determine that these tax credits are 

contingent upon use of domestic over 

imported goods and, hence, are specific 

under section 771(5A)(C) of the Act. 

To calculate the benefit, we treated 

the income tax savings enjoyed by 

Chenming as a recurring benefit, 

consistent with 19 CFR 351.524(c)(1), 

and divided the benefit received during 

the POI by Chenming’s sales of CFS 

during that period. On this basis, we 

preliminarily determine that a 

countervailable benefit of 2.98 percent 

ad valorem exists for Chenming for this 

program. 

D. VAT and Duty Exemptions 

VAT Rebates on Purchases of 

Domestically Produced Equipment 

As outlined in GUOSHUIFA (1999) 

No. 171, Trial Administrative Measures 

on Purchase of Domestic Equipment by 

Projects with Foreign Investment (1999 

VAT Measures), the GOC refunds the 

VAT on purchases by FIEs of certain 

domestically produced equipment. 

Article 3 of the 1999 VAT Measures 

specifies that this program is limited to 

FIEs including exclusively foreignowned enterprises. Article 4 of the 1999 

VAT Measures defines the type of 

equipment eligible for the VAT 

exemption, which includes equipment 

falling under the Encouraged and 


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Restricted B categories listed in the 

Notice of the State Council Concerning 

the Adjustment of Taxation Policies for 

Imported Equipment (No. 37 (1997)) and 

equipment for projects listed in the 

Catalogue of Key Industries, Products 

and Technologies Encouraged for 

Development by the State. Based on the 

GOC’s and companies’ responses, the 

receipt of the VAT rebates on 

domestically produced equipment is 

granted to FIEs upon presentation of 

documents showing their FIE status. 

Chenming, Gold East, and certain of 

Gold East’s cross-owned companies 

reported receiving VAT rebates on their 

purchases of domestically produced 

equipment during the POI. 

We preliminarily determine that the 

rebate of the VAT paid on purchases of 

domestically produced equipment by 

FIEs confers 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 351.510(a)(1). We 

further preliminarily determine that the 

VAT rebates are contingent upon the 

use of domestic over imported goods 

and, hence, specific under section 

771(5A)(C) of the Act. 

To calculate the benefit, we treated 

the VAT rebates as a recurring benefit, 

consistent with 19 CFR 351.524(c)(1). 

For Chenming, we divided the VAT 

rebates received during the POI by 

Chenming’s sales of CFS in that period. 

For Gold East, we calculated the benefit 

in accordance with the attribution rules 

described in 19 CFR 351.525(b)(6). On 

this basis, we preliminarily determine 

that a countervailable benefit of 1.45 

percent ad valorem exists for Chenming 

and a countervailable benefit of 0.35 

percent ad valorem exists for Gold East 

for this program. 

The GOC has claimed that the goal of 

this program is to equalize the tax 

burden on the purchase of domestically 

produced and imported equipment by 

FIEs. (As explained below, FIEs are also 

exempt from paying the value added tax 

on imported equipment.) Thus, the GOC 

argues, the Department should not find 

the VAT rebates on domestically 

produced equipment to be an import 

substitution subsidy. 

Although the VAT rebates are 

available to FIEs on both domestically 

produced and imported equipment, the 

GOC has not demonstrated that both 

rebates are integrally linked. In 

accordance with 19 CFR 351.502(c), the 

Department will consider whether two 

programs are integrally linked for 

purposes of making its specificity 

determination, but the burden lies with 

the GOC to claim that the VAT 

exemptions/rebates are linked and to 

provide evidence in support of the 

claim. That burden has not been met. 

Moreover, as explained above, we are 

preliminarily determining that FIEs 

constitute a specific group of 

enterprises. Consequently, even if we 

were to treat the VAT rebate and 

exemption programs as integrally 

linked, we would still find the benefits 

to be specific. 

VAT and Tariff Exemptions on Imported 

Equipment 

Enacted in 1997, the Circular of the 

State Council on Adjusting Tax Policies 

on Imported Equipment (GUOFA No. 

37) (Circular No. 37) exempts both FIEs 

and certain domestic enterprises from 

the VAT and tariffs on imported 

equipment used in their production. 

The objective of the program is to 

encourage foreign investment and to 

introduce foreign advanced technology 

equipment and industry technology 

upgrades. 

Chenming, Gold East and certain of 

Gold East’s cross-owned companies 

received VAT and duty exemptions 

under this program due to their status 

as FIEs. Specifically, the companies are 

authorized to receive the exemptions 

based on their FIE status and the list of 

assets approved by the GOC at the time 

their FIE status was approved. Domestic 

enterprises eligible for the VAT and 

duty exemptions must have 

government-approved projects that are 

in line with the current ‘‘Catalog of Key 

Industries, Products, and Technologies 

the Development of Which is 

Encouraged by the State.’’ Whether an 

FIE or domestic enterprise, only 

equipment that is not listed in the 

Catalog on Non-Duty Exemptible Article 

for Importation is eligible for the VAT 

and duty exemptions. (Different 

Catalogs are prepared for FIEs and 

domestic enterprises.) To receive the 

exemptions, a qualified enterprise only 

has to show a certificate provided by the 

National Development and Reform 

Commission (‘‘NDRC’’), or its provincial 

branch, to the customs officials upon 

importation of the equipment. 

We preliminarily determine that VAT 

and tariff exemptions on imported 

equipment 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 VAT and tariff savings. See 

section 771(5)(D)(ii) of the Act and 19 

CFR 351.510(a)(1). 

With regard to specificity, certain 

domestic enterprises are eligible to 

receive VAT and tariff exemptions 

under this program as well as FIEs. 

Based on the information provided by 

the GOC, it does not appear that the 

addition of these domestic enterprises 

broadens the reach or variety of users 

sufficiently to render the program nonspecific. For example, to be eligible, the 

domestic enterprise must have been 

involved in an investment project that 

was ‘‘in line with’’ the Current Catalog 

of Key Industries, Products and 

Technologies the Development of 

Which is Encouraged by the State. 

While this Catalog was reportedly 

revoked in 2005, the projects still must 

apparently be approved by the State 

Council, the NDRC, or an agency to 

which authority has been delegated (see 

Certificates for State-Encouraged 

Foreign-or Domestically-Invested 

Projects for Domestically-Invested 

Enterprises FAGAIGUIHUA (2003) 900). 

Therefore, we preliminarily find the 

VAT and tariff exemptions to be specific 

under section 771(5A)(D)(iii)(I). To 

calculate the benefit, we treated the 

VAT and tariff exemptions as a 

recurring benefit, consistent with 19 

CFR 351.524(c)(1). For Chenming, we 

divided the amount of the VAT and 

tariff exemptions enjoyed by Chenming 

during the POI by the company’s sales 

in that period. For Gold East, we 

calculated the benefit in accordance 

with the attribution rules described in 

19 CFR 351.525(b)(6). On this basis, we 

preliminarily determine that a 

countervailable benefit of 0.10 percent 

ad valorem exists for Chenming and a 

countervailable benefit of 2.60 percent 

ad valorem exists for Gold East for this 

program. 

E. Domestic VAT Refunds for 

Companies Located in the Hainan 

Economic Development Zone 

According to Yangpu local tax 

regulations, enterprises located in the 

Economic Development Zone of Hainan 

may enjoy several tax preferences. 

These preferences are described in 

Preferential Policies of Taxation, which 

includes the eligibility criteria needed 

to qualify for the preferences. Under 

‘‘Preferential Policies Regarding 

Investment by Manufacturer,’’ high-tech 

or labor intensive enterprises with 

investment over RMB 3 billion and 

more than 1000 local employees may be 

refunded 25 percent of the VAT paid on 

domestic sales (the percentage of the tax 

received by the local government) 

starting in the first year the company 

has production and sales. The VAT 

refund can continue for five years. 

One of Gold East’s cross-owned 

companies was a qualifying 

manufacturing enterprise in the 

Economic Development Zone of Hainan 


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5For a discussion of these programs, please see 

the ‘‘Input Products’’ section above. 

and reported that it received the VAT 

refund in the POI. The cross-owned 

company further added that becaue the 

capital and number of employees are 

registered with the local government, 

the tax refund is automatically granted. 

We preliminarily determine that the 

domestic VAT refunds confer a 

countervailable subsidy. The refund is a 

financial contribution in the form of 

revenue forgone by the local 

government and it provides a benefit to 

the recipient in the amount of the 

refunded taxes. See section 771(5)(D)(ii) 

of the Act and 19 CFR 351.510(a). In 

addition to the investment and 

employee eligibility criteria described 

above, it appears that recipients must be 

located in the Economic Development 

Zone because these enterprises also pay 

income tax at a regionally-reduced rate. 

See ‘‘Reduced Income Tax Rates for FIEs 

Based on Location,’’ above. Therefore, 

we preliminarily determine that the 

program is limited to enterprises located 

in a designated geographical region and, 

hence, is specific under section 

771(5A)(D)(iv) of the Act. 

To calculate the benefit, we treated 

the VAT refund received by the crossowned company as a recurring benefit, 

consistent with 19 CFR 351.524(c)(1). 

We then attributed the benefit to sales 

of the input and the downstream 

products. On this basis, we 

preliminarily determine that a 

countervailable benefit of 0.19 percent 

ad valorem exists for Gold East. 

F. Other Subsidies (Chenming) 

Chenming reported four additional 

programs in which it participated. 

These programs may be connected to 

programs discussed above, but the 

information on the current record does 

not allow us to decide that. Chenming 

cited municipal government circulars 

relevant to these programs, but neither 

Chenming nor the GOC provided copies 

of these documents. However, based on 

the information submitted by 

Chenming, we preliminarily determine 

that these programs constitute 

countervailable subsidies within the 

meaning of section 771(5) of the Act. 

Due to Chenming’s request that the 

Department treat information about 

these four programs as business 

proprietary, we discuss these additional 

programs in more detail in the 

Proprietary Analysis Memorandum, at 

xx. As calculated in the Proprietary 

Analysis Memorandum, we determine 

the combined countervailable subsidy 

for these programs to be 1.45 percent ad 

valorem for Chenming. 

II. Programs Preliminarily Determined 

To Be Not Countervailable 

A. Debt-to-Equity Swap for APP China 

In 2001, Asia Pulp & Paper (APP) 

defaulted on nearly $14 billion of debt. 

A portion of the debt was owed by one 

of APP’s subsidiaries, APP China. 

According to petitioner, in 2003, APP 

China agreed to a debt-to-equity swap in 

which the Chinese creditors 

participated. The petitioner alleges that 

APP China was unequityworthy at the 

time of the equity infusion and that the 

transaction was at the discretion of the 

GOC state-owned banks, as well as 

being inconsistent with the usual 

investment practice of private 

investments. 

In response to our original and 

supplemental questionnaires, the GOC 

and Gold East have asserted that no 

GOC banks were involved in a debt-toequity swap with APP or any of its 

Chinese subsidiaries, including Gold 

East. Furthermore, Gold East has 

provided additional proprietary 

information regarding the above 

allegation. 

Based on record information, we 

preliminarily determine that GOC stateowned banks were not involved in a 

debt-to-equity swap with APP China or 

any of its subsidiaries. Therefore, we do 

not find this program countervailable. 

Our analysis is presented in a separate 

memorandum because of the proprietary 

nature of the issue. See Memorandum to 

Susan Kuhbach, ‘‘APP Debt-to-Equity 

Analysis’’ (March 29, 2007) 

(memorandum is on file in Department’s 

CRU). 

III. Programs Preliminarily Determined 

To Be Not Used 

Clean Production Technology Fund 

The purpose of this program is to 

provide incentives and rewards 

(monetary or non-monetary) to 

encourage enterprises to conduct clean 

production inspections, with the goal of 

protecting the environment. The 

program entered into force in October 

2004, and was authorized by Decree No. 

16 of the NDRC and the National 

Administration of Environmental 

Protection entitled Provisional Measures 

on Clean Production Inspection (Decree 

No. 16). 

Any payments under this program are 

made at the local level. Shouguang City, 

the relevant authority for Chenming, 

reported that it made no grants under 

this program during 2004 and 2005. 

Gold East reported that it received a 

grant under this program. 

Based on our analysis, any potential 

benefit to Gold East under this program 

is less than 0.005 percent. Where the 

countervailable subsidy rate for a 

program is less than 0.005 percent, the 

program is not included in the total 

countervailing duty rate. See, e.g., Final 

Results of Countervailing Duty 

Administrative Review: Low Enriched 

Uranium from France, 70 FR 39998 

(July 12, 2005), and the accompanying 

Issues and Decision Memorandum, at 

‘‘Purchases at Prices that Constitute 

‘More than Adequate Remuneration’ ’’

(citing Final Results of Administrative 

Review: Certain Softwood Lumber 

Products from Canada, 69 FR 75917 

(December 20, 2004), and the 

accompanying Issues and Decision 

Memorandum, at ‘‘Other Programs 

Determined to Confer Subsidies’’). 

Therefore, we do not plan to pursue this 

alleged subsidy further in this 

investigation. 

We preliminarily determine that the 

producers/exporters of CFS did not 

apply for or receive benefits during the 

POI under the programs listed below. 

A. Direction Adjustment Tax on Fixed 

Assets 

B. Income Tax Exemption Program for 

Export-oriented FIEs 

C. Corporate Income Tax Refund 

Program for Reinvestment of FIE Profits 

in Export-oriented Enterprises 

D. Discounted Loans for ExportOriented Enterprises 

E. Exemption from Payment of Staff 

and Worker Benefits for Export-oriented 

Enterprises 

F. Subsidies to Input Suppliers 5

1. Preferential tax policies for FIEs 

engaged in forestry and established in 

remote underdeveloped areas. 

2. Preferential tax policies for 

enterprises engaged in forestry 

3. Special fund for projects for the 

protection of natural forestry 

4. Compensation fund for forestry 

ecological benefits 

For purposes of this preliminary 

determination, we have relied on the 

GOC’s and respondent companies’

responses to preliminarily determine 

non-use of the programs listed above. 

During the course of verification, the 

Department will examine whether these 

programs were used by respondent 

companies during the POI. 

Verification 

In accordance with section 782(i)(1) of 

the Act, we will verify the information 

submitted by the respondents prior to 

making our final determination. 

Suspension of Liquidation 

In accordance with section 

703(d)(1)(A)(i) of the Act, we calculated 


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an individual rate for each exporter/ 

manufacturer of the subject 

merchandise. We preliminarily 

determine the total estimated net 

countervailable subsidy rates to be: 

Exporter/manufacturer 

Net subsidy 

rate 

(percent) 

Gold East Paper (Jiangsu) 

Co., Ltd. ............................ 20.35 

Shandong Chenming Paper 

Holdings Ltd. ..................... 10.90 

All Others .............................. 18.16 

In accordance with sections 703(d) 

and 705(c)(5)(A) of the Act, for 

companies not investigated, we have 

determined an ‘‘all others’’ rate by 

weighting the individual company 

subsidy rate of each of the companies 

investigated by each company’s exports 

of the subject merchandise to the United 

States, if available, or CFS exports to the 

United States. The all others rate does 

not include zero and de minimis rates 

or any rates based solely on the facts 

available. 

In accordance with sections 

703(d)(1)(B) and (2) of the Act, we are 

directing CBP to suspend liquidation of 

all entries of CFS from the PRC that are 

entered, or withdrawn from warehouse, 

for consumption on or after the date of 

the publication of this notice in the 

Federal Register, and to require a cash 

deposit or bond for such entries of 

merchandise in the amounts indicated 

above. 

ITC Notification 

In accordance with section 703(f) of 

the Act, we will notify the ITC of our 

determination. In addition, we are 

making available to the ITC all nonprivileged and non-proprietary 

information relating to this 

investigation. We will allow the ITC 

access to all privileged and business 

proprietary information in our files, 

provided the ITC confirms that it will 

not disclose such information, either 

publicly or under an administrative 

protective order, without the written 

consent of the Assistant Secretary for 

Import Administration. 

In accordance with section 705(b)(2) 

of the Act, if our final determination is 

affirmative, the ITC will make its final 

determination within 45 days after the 

Department makes its final 

determination. 

Public Comment 

Case briefs for this investigation must 

be submitted no later than one week 

after the issuance of the last verification 

report. Rebuttal briefs must be filed 

within five days after the deadline for 

submission of case briefs, pursuant to 19 

CFR 351.309(d)(1). A list of authorities 

relied upon, a table of contents, and an 

executive summary of issues should 

accompany any briefs submitted to the 

Department. Executive summaries 

should be limited to five pages total, 

including footnotes. 

Section 774 of the Act provides that 

the Department will hold a public 

hearing to afford interested parties an 

opportunity to comment on arguments 

raised in case or rebuttal briefs, 

provided that such a hearing is 

requested by an interested party. If a 

request for a hearing is made in this 

investigation, the hearing will 

tentatively be held two days after the 

deadline for submission of the rebuttal 

briefs, pursuant to 19 CFR 351.310(d), at 

the U.S. Department of Commerce, 14th 

Street and Constitution Avenue, NW., 

Washington, DC 20230. Parties should 

confirm by telephone the time, date, and 

place of the hearing 48 hours before the 

scheduled time. 

Interested parties who wish to request 

a hearing, or to participate if one is 

requested, must submit a written 

request to the Assistant Secretary for 

Import Administration, U.S. Department 

of Commerce, Room 1870, within 30 

days of the publication of this notice, 

pursuant to 19 CFR 351.310(c). Requests 

should contain: (1) The party’s name, 

address, and telephone; (2) the number 

of participants; and (3) a list of the 

issues to be discussed. Oral 

presentations will be limited to issues 

raised in the briefs. 

This determination is published 

pursuant to sections 703(f) and 777(i) of 

the Act. 

Dated: April 2, 2007. 

Stephen J. Claeys, 

Deputy Assistant Secretary for Import 

Administration. 

[FR Doc. E7–6498 Filed 4–6–07; 8:45 am] 

BILLING CODE 3510–DS–P 

DEPARTMENT OF COMMERCE 

International Trade Administration 

C–560–821 

Coated Free Sheet Paper from 

Indonesia: Notice of Preliminary 

Affirmative Countervailing 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 coated free 

sheet paper (CFS) in Indonesia. For 

information on the subsidy rates, see the 

‘‘Suspension of Liquidation’’ section of 

this notice. 

EFFECTIVE DATE: April 9, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Sean Carey, Jacqueline Arrowsmith, or 

Gene Calvert, AD/CVD Operations, 

Office 6, Import Administration, 

International Trade Administration, 

U.S. Department of Commerce, Room 

7866, 14th Street and Constitution 

Avenue, NW, Washington, DC 20230; 

telephone: (202) 482–3964, (202) 482–

5255, or (202) 482–3586, respectively. 

SUPPLEMENTARY INFORMATION: 

Background 

On November 20, 2006, the 

Department initiated a countervailing 

duty (CVD) investigation of CFS from 

Indonesia. See Notice of Initiation of 

Countervailing Duty Investigations: 

Coated Free Sheet Paper from the 

People’s Republic of China, Indonesia, 

and the Republic of Korea, 71 FR 68546 

(November 27, 2006) (Initiation Notice) 

(CFS Investigations). In the Initiation 

Notice, the Department set aside a 

period for all interested parties to raise 

issues regarding product coverage. The 

comments we received are discussed in 

the ‘‘Scope Comments’’ section below. 

On November 30, 2006, the Department 

issued a CVD questionnaire to the 

Government of Indonesia (GOI). The 

questionnaire informed the GOI that it 

was responsible for forwarding the 

questionnaire to producers/exporters of 

CFS. The Department also provided 

courtesy copies of the questionnaire to 

PT. Pabrik Kertas Tjiwi Kimia Tbk. (TK) 

and to PT. Pindo Deli Pulp and Paper 

Mills (PD), who the GOI identified as 

the sole producers/exporters of CFS 

from Indonesia. 

On December 29, 2006, the 

Department postponed the preliminary 

determination until March 30, 2007. See 

Coated Free Sheet Paper from 

Indonesia, the People’s Republic of 

China and the Republic of Korea: Notice 

of Postponement of Preliminary 

Determinations in the Countervailing 

Duty Investigations, 71 FR 78403 

(December 29, 2006). On January 25, 

2007, TK and PD (collectively, 

respondents), and the GOI submitted 

their questionnaire responses. On 

February 2 and February 12, 2007, the 

Department received comments from 

the petitioner regarding these 

questionnaire responses. On February 

16, 2007, the Department issued 

supplemental questionnaires to the GOI 

and to the respondents. The GOI and the 

respondents submitted their 


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