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[Federal Register Volume 73, Number 183 (Friday, September 19, 2008)]
[Notices]
[Pages 54367-54384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21949]

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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-938]

Citric Acid and Certain Citrate Salts From the People's Republic 
of China: Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are being provided to producers and exporters 
of citric acid and certain citrate salts from the People's Republic of 
China. For information on the estimated subsidy rates, see the 
``Suspension of Liquidation'' section of this notice.

DATES: Effective Date: September 19, 2008.

FOR FURTHER INFORMATION CONTACT: Damian Felton, David Neubacher, or 
Shelly Atkinson, 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) 482-0133, (202) 482-5823, or (202) 482-0116, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The following events have occurred since the publication of the 
Department of Commerce's (``Department'') notice of initiation in the 
Federal Register. See Notice of Initiation of Countervailing Duty 
Investigation: Citric Acid and Certain Citrate Salts From the People's 
Republic of China, 73 FR 26960 (May 12, 2008) (``Initiation Notice''), 
and the accompanying Initiation Checklist.
    On June 2, 2008, the Department selected three Chinese producers/
exporters of citric acid and certain citrate salts (``citric acid'') as 
mandatory respondents, BBCA Group Corp., Shandong TTCA Biochemical Co., 
Ltd.

[[Page 54368]]

(``TTCA''), and Yixing Union Biochemical Co., Ltd. (``Yixing Union''). 
See Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for 
Import Administration, ``Respondent Selection'' (June 2, 2008). This 
memorandum is on file in the Department's Central Records Unit in Room 
1117 of the main Department building (``CRU''). Subsequently, on June 
4, 2008, the Department issued a correction to the respondent selection 
memorandum, naming Anhui BBCA Biochemical Co., Ltd. (``Anhui BBCA'') as 
a mandatory respondent, and not BBCA Group Corp. See Memorandum to the 
File from Scott Holland, ``Correction to Respondent Selection 
Memorandum--Selection of Anhui BBCA Biochemical Co., Ltd.'' (June 4, 
2008). On June 9, 2008, we issued the countervailing duty (``CVD'') 
questionnaires (``CVD questionnaire'') to the Government of the 
People's Republic of China (``GOC''), Anhui BBCA, TTCA, and Yixing 
Union.
    On June 11, 2008, the International Trade Commission (``ITC'') 
issued its affirmative preliminary determination that there is a 
reasonable indication that an industry in the United States is 
threatened with material injury by reason of allegedly subsidized 
imports of citric acid from Canada and the People's Republic of China 
(``PRC''). See Citric Acid and Certain Citrate Salts from Canada and 
China; Determinations, Investigation Nos. 701-TA-456 and 731-TA-1151-
1152, 73 FR 33115 (June 11, 2008).
    On June 13, 2008, the Department postponed the preliminary 
determination of this investigation until September 12, 2008. See 
Citric Acid and Certain Citrate Salts from the People's Republic of 
China: Notice of Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 73 FR 33805 (June 13, 2008).
    On July 16, 2008, we were notified by counsel for Anhui BBCA that 
the company would not be participating in the investigation.
    We received responses to our questionnaire from the GOC, TTCA and 
Yixing Union on July 23, 2008. See the GOC's Original Questionnaire 
Response (July 23, 2008) (``GQR''); TTCA's Original Questionnaire 
Response (July 23, 2008) (``TQR''); and Yixing Union's Original 
Questionnaire Response (July 23, 2008) (``YQR''). We sent supplemental 
questionnaires on the following dates: August 1, 2008 (TTCA and Yixing 
Union); August 7, 2008 (TTCA); August 11, 2008 (Yixing Union); August 
13 and 18, 2008 (GOC); and September 4, 2008 (GOC). We received 
responses to these supplemental questionnaires as follows: TTCA's First 
Supplemental Response (August 6, 2008) (``T1SR''); TTCA's Second 
Supplemental Response (August 27, 2008) (``T2SR (8/27)''); TTCA's 
Second Supplemental Response (August 28, 2008); Yixing Union's First 
Supplemental Response (August 7, 2008); Yixing Union's Second 
Supplemental Response (September 2, 2008) (``Y2SR''); GOC's First 
Supplemental Response (August 27, 2007) (``G1SR (8/27)''); GOC's First 
Supplemental Response (September 2, 2008) (``G1SR (9/2)''); GOC's 
Second Supplemental Response (September 2, 2008) (``G2SR (9/2)''); 
GOC's Second Supplemental Response (September 5, 2008) (``G2SR (9/
5)''); GOC's Third Supplemental Response (September 9, 2008); and 
TTCA's Additional Translations of T1SR (8/27) (September 10, 2008).
    On August 1, 2008, Archer Daniels Midland Company, Cargill, 
Incorporated, and Tate & Lyle America, Inc. (collectively, 
``Petitioners'') requested that the Department extend the deadline for 
the submission of new subsidy allegations beyond the August 4, 2008, 
deadline established by the Department's regulations. See 19 CFR 
351.301(d)(4)(i)(A). The Department granted the request and Petitioners 
submitted new subsidy allegations on August 8, 2008. The GOC and Yixing 
Union submitted comments on Petitioners' new subsidy allegations on 
August 18, 2008. We met with the GOC and Petitioners regarding the new 
subsidy allegations on August 22, 2008, and August 28, 2008, 
respectively.
    On September 12, 2008, the Department determined to investigate 
certain of the newly alleged subsidies, specifically those relating to 
the Provision of TTCA's Plant and Equipment for Less Than Adequate 
Remuneration (``LTAR''); Provision of Land to SOEs for LTAR; Provision 
of Land in the YEDZ for LTAR; Provision of Land-use Fees in Jiangsu 
Province for LTAR; Provision of Land in the Anqiu City Economic 
Development Zone for LTAR; Administration Fee Exemption in Anqiu City; 
Exemption of Water and Sewage Fees in Anqiu City; Tax Grants, Rebates 
and Credits in the Yixing Economic Development Zone (``YEDZ''); 
Provision of Water in the YEDZ for LTAR; Provision of Electricity in 
the YEDZ for LTAR; Provision of Construction Services in the YEDZ for 
LTAR; Administration Fee Exemption in the YEDZ; and Grants to FIEs for 
Projects in the YEDZ. See Memorandum to Susan Kuhbach, Director, AD/CVD 
Operations, Office 1, ``New Subsidy Allegations'' (September 12, 2008). 
Questions regarding these newly alleged subsidies will be sent to the 
GOC and the respondent companies after this preliminary determination 
is issued.
    On September 2, 2008, Petitioners requested that the final 
determination of this CVD investigation be aligned with the final 
determination in the companion antidumping duty (``AD'') investigation 
in accordance with section 705(a)(1) of the Tariff Act of 1930, as 
amended (the ``Act'').
    The GOC filed comments in advance of the preliminary determination 
on September 3, 2008 (``GOC Pre-Prelim Comments''). Petitioners 
provided comments on September 10, 2008, regarding certain issues in 
the GOC Pre-Prelim Comments.
    On September 5, 2008, Petitioners submitted comments regarding the 
rate to be assigned to BBCA and the all-others rate (``Petitioners 
Comments on Anhui BBCA and the All-Others Rate''). The GOC responded to 
Petitioners' comments on September 9, 2008 (``GOC's Response to 
Petitioners'' Comments on Anhui BBCA and the All-Others Rate''). We 
address Petitioners' comments and the GOC's response below.

Scope Comments

    In accordance with the preamble to the Department's regulations, we 
set aside a period of time in our Initiation Notice for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of that notice. 
See Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May 
19, 1997), and Initiation Notice, 72 FR at 62210.
    Timely comments were filed concerning the scope of the AD and CVD 
investigations of citric acid from Canada and the PRC on May 23, 2008, 
by Chemrom Inc., and by L. Perrigo Company on June 3, 2008. Petitioners 
responded to these comments on June 16, 2008.
    On August 6, 2008, the Department issued a memorandum to the file 
regarding Petitioners' proposed amendments to the scope of the 
investigations. In response, on August 11, 2008, L. Perrigo Company and 
Petitioners' submitted comments to provide clarification of the term 
``unrefined'' calcium citrate. We have analyzed the comments of the 
interested parties regarding the scope of this investigation. See 
Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import 
Administration, re: Antidumping Duty Investigation of

[[Page 54369]]

Citric Acid and Certain Citrate Salts from Canada and the People's 
Republic of China (PRC), and CVD Investigation of Citric Acid and 
Certain Citrates Salts from the PRC, ``Whether to Amend the Scope of 
these Investigations to Exclude Monosodium Citrate and to Further 
Define the Product Referred to as 'Unrefined Calcium Citrate''' 
(September 10, 2008). Our position on these comments is reflected in 
the ``Scope of the Investigation'' section below.

Scope of the Investigation

    The scope of this investigation includes all grades and granulation 
sizes of citric acid, sodium citrate, and potassium citrate in their 
unblended forms, whether dry or in solution, and regardless of 
packaging type. The scope also includes blends of citric acid, sodium 
citrate, and potassium citrate; as well as blends with other 
ingredients, such as sugar, where the unblended form(s) of citric acid, 
sodium citrate, and potassium citrate constitute 40 percent or more, by 
weight, of the blend. The scope of this investigation also includes all 
forms of crude calcium citrate, including dicalcium citrate 
monohydrate, and tricalcium citrate tetrahydrate, which are 
intermediate products in the production of citric acid, sodium citrate, 
and potassium citrate. The scope of this investigation does not include 
calcium citrate that satisfies the standards set forth in the United 
States Pharmacopeia and has been mixed with a functional excipient, 
such as dextrose or starch, where the excipient constitutes at least 2 
percent, by weight, of the product. The scope of this investigation 
includes the hydrous and anhydrous forms of citric acid, the dihydrate 
and anhydrous forms of sodium citrate, otherwise known as citric acid 
sodium salt, and the monohydrate and monopotassium forms of potassium 
citrate. Sodium citrate also includes both trisodium citrate and 
monosodium citrate, which are also known as citric acid trisodium salt 
and citric acid monosodium salt, respectively. Citric acid and sodium 
citrate are classifiable under 2918.14.0000 and 2918.15.1000 of the 
Harmonized Tariff Schedule of the United States (HTSUS), respectively. 
Potassium citrate and crude calcium citrate are classifiable under 
2918.15.5000 and 3824.90.9290 of the HTSUS, respectively. Blends that 
include citric acid, sodium citrate, and potassium citrate are 
classifiable under 3824.90.9290 of the HTSUS. Although the HTSUS 
subheadings are provided for convenience and customs purposes, the 
written description of the merchandise is dispositive.

Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

    On May 12, 2008, the Department initiated the CVD and AD 
investigations of citric acid from Canada and the PRC. See Initiation 
Notice and Citric Acid and Certain Citrate Salts from Canada and the 
People's Republic of China: Initiation of Antidumping Duty 
Investigations, 73 FR 27492 (May 13, 2008). The CVD investigation and 
the AD investigations have the same scope with regard to the 
merchandise covered.
    On September 2, 2008, Petitioners submitted a letter, in accordance 
with section 705(a)(1) of the Act, requesting alignment of the final 
CVD determination with the final determination in the companion AD 
investigations of citric acid from Canada and the PRC. Therefore, in 
accordance with section 705(a)(1) of the Act and 19 CFR 351.210(b)(4), 
we are aligning the final CVD determination with the final 
determination in the companion AD investigations of citric acid from 
Canada and the PRC. Consequently, the final CVD determination will be 
issued on the same date as the final AD determinations, which are 
currently scheduled to be issued no later than January 26, 2009, unless 
postponed.

Period of Investigation

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

Application of the Countervailing Duty Law to Imports From the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) 
(``CFS from the PRC''), and the accompanying Issues and Decision 
Memorandum (``CFS Decision Memorandum''). In CFS from the PRC, the 
Department found that given the substantial differences between the 
Soviet-style economies and the PRC's economy in recent years, the 
Department's previous decision not to apply the CVD law to these 
Soviet-style economies does not act as a bar to proceeding with a CVD 
investigation involving products from the PRC.
    See CFS Decision Memorandum, at Comment 6. The Department has 
affirmed its decision to apply the CVD law to the PRC in subsequent 
final determinations. See, e.g., Circular Welded Carbon Quality Steel 
Pipe from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination and Final Affirmative Determination 
of Critical Circumstances, 73 FR 31966 (June 5, 2008) (``CWP from the 
PRC''), and the accompanying Issues and Decision Memorandum (``CWP 
Decision Memorandum'').
    Additionally, for the reasons stated in the CWP Decision 
Memorandum, we are using the date of December 11, 2001, the date on 
which the PRC became a member of the World Trade Organization, as the 
date from which the Department will identify and measure subsidies in 
the PRC for purposes of this preliminary determination. See CWP 
Decision Memorandum, at Comment 2.

Use of Facts Otherwise Available and Adverse Inferences

    Sections 776(a)(1) and (2) of the Act provide that the Department 
shall apply ``facts otherwise available'' if, inter alia, necessary 
information is not on the record or an interested party or any other 
person: (A) Withholds information that has been requested; (B) fails to 
provide information within the deadlines established, or in the form 
and manner requested by the Department, subject to subsections (c)(1) 
and (e) of section 782 of the Act; (C) significantly impedes a 
proceeding; or (D) provides information that cannot be verified as 
provided by section 782(i) of the Act.
    Section 776(b) of the Act further provides that the Department may 
use an adverse inference in applying the facts otherwise available when 
a party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information.

Anhui BBCA

    In the instant investigation, Anhui BBCA did not provide the 
requested information that is necessary to determine a CVD rate for 
this preliminary determination. Specifically, Anhui BBCA did not 
respond to the Department's June 9, 2008, CVD questionnaire. On July 
16, 2008, we were notified that Anhui BBCA would not participate in the 
investigation. Thus, in reaching our preliminary determination, 
pursuant to section 776(a)(2)(A) and (C) of the Act, we have based the 
CVD rate for Anhui BBCA on facts otherwise available.
    Petitioners argue that we should utilize reliable record evidence 
to compute a ``non-adverse facts available'' rate for Anhui BBCA, 
rather than follow the adverse facts available (``AFA'') methodology/
approach the Department

[[Page 54370]]

developed in recent cases. See Petitioners' Comments on Anhui BBCA and 
the All-Others Rate, at page 5. Petitioners use record evidence to 
compute rates for: Certain grants, preferential policy loans, long-term 
loans provided to uncreditworthy companies, over rebate of VAT and the 
provision of land for LTAR. See Petitioners' Comments on Anhui BBCA and 
the All-Others Rate, at pages 7-15.
    Alternatively, should the Department calculate a total AFA rate for 
Anhui BBCA, Petitioners argue that we should not limit the computation 
to the rates of programs used by the cooperating respondents or from 
past cases. Petitioners believe that for certain programs, the rates 
calculated using publicly available information form a better source 
for facts available than does the information submitted by the 
cooperating respondents. See Petitioners' Comments on Anhui BBCA and 
the All-Others Rate, at page 16.
    While the GOC agrees with Petitioners that the Department should 
use neutral (non-adverse) facts available whenever possible, the GOC 
notes that Petitioners' calculations for the aforementioned subsidy 
programs rely on highly adverse inferences to compute a supposed non-
adverse rate. See GOC's Response to Petitioners' Comments on Anhui BBCA 
and the All-Others Rate, at pages 5 and 6.
    For the preliminary determination, we are not computing a ``non-
adverse facts available'' rate for Anhui BBCA. Instead, we determine 
that an adverse inference is warranted, pursuant to section 776(b) of 
the Act. By failing to submit a response to the Department's initial 
questionnaire, Anhui BBCA did not cooperate to the best of its ability 
in this investigation. Accordingly, we find that an adverse inference 
is warranted to ensure that Anhui BBCA will not obtain a more favorable 
result than had it fully complied with our request for information.
    In deciding which facts to use as AFA, section 776(b) of the Act 
and 19 CFR 351.308(c)(1) authorize the Department to rely on 
information derived from: (1) The petition; (2) a final determination 
in the investigation; (3) any previous review or determination; or (4) 
any information placed on the record. It is the Department's practice 
to select, as AFA, the highest calculated rate in any segment of the 
proceeding. See, e.g., Certain In-shell Roasted Pistachios from the 
Islamic Republic of Iran: Final Results of Countervailing Duty 
Administrative Review, 71 FR 66165 (November 13, 2006), and the 
accompanying Issues and Decision Memorandum, at ``Analysis of 
Programs'' and Comment 1.
    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the margin is 
sufficiently adverse ``as to effectuate the statutory purposes of the 
adverse facts available rule to induce respondents to provide the 
Department with complete and accurate information in a timely manner.'' 
See Notice of Final Determination of Sales at Less than Fair Value: 
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909, 
8932 (February 23, 1998). The Department's practice also ensures ``that 
the party does not obtain a more favorable result by failing to 
cooperate than if it had cooperated fully.'' See Statement of 
Administrative Action (``SAA'') accompanying the Uruguay Round 
Agreements Act, H. Doc. No. 316, 103d Cong., 2d Session (1994), at page 
870. In choosing the appropriate balance between providing a respondent 
with an incentive to respond accurately and imposing a rate that is 
reasonably related to the respondent's prior commercial activity, 
selecting the highest prior margin ``reflects a common sense inference 
that the highest prior margin is the most probative evidence of current 
margins, because, if it were not so, the importer, knowing of the rule, 
would have produced current information showing the margin to be 
less.'' See Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1190 
(Fed. Cir. 1990).
    For the preliminary determination, consistent with the Department's 
recent practice, we are computing a total AFA rate for Anhui BBCA 
generally using program-specific rates determined for the cooperating 
respondents or past cases. Specifically, for programs other than those 
involving income tax exemptions and reductions, we will apply the 
highest calculated rate for the identical program in this investigation 
if the responding company used the identical program. If there is no 
identical program match within the investigation, we will use the 
highest non-de minimis rate calculated for the same or similar program 
in another China CVD investigation. Absent an above-de minimis subsidy 
rate calculated for the same or similar program, we are applying the 
highest calculated subsidy rate for any program otherwise listed, which 
could conceivably be used by Anhui BBCA. See Circular Welded Austenitic 
Stainless Pressure Pipe From the People's Republic of China: 
Preliminary Affirmative Countervailing Duty Determination and Alignment 
of Final Countervailing Duty Determination With Final Antidumping Duty 
Determination, 73 FR 39657, 39661 (July 10, 2008).
    Also, as explained in Lawn Groomers from the PRC, where the GOC can 
demonstrate through complete, verifiable, positive evidence that non-
cooperative companies (including all their facilities and cross-owned 
affiliates) are not located in particular provinces whose subsidies are 
being investigated, the Department does not intend to include those 
provincial programs in determining the countervailable subsidy rate for 
the non-cooperative companies. See Certain Tow-Behind Lawn Groomers and 
Certain Parts Thereof from the People's Republic of China: Initiation 
of Countervailing Duty Investigation, 73 FR 42324 (July 21, 2008) 
(``Lawn Groomers from the PRC''), and the accompanying Initiation 
Checklist. In this investigation, the GOC has provided the business 
licenses of Anhui BBCA and its parent company, which indicate that 
these companies are located only in Anhui Province. See G2SR (9/2), at 
Exhibit S2-36. Therefore, we are including the Anhui Province programs 
in the calculation of Anhui BBCA's rate, but not the other sub-national 
subsidy programs. In addition, information supplied by Petitioners 
indicates that all of Anhui BBCA's cross-owned affiliates are either 
located in Anhui Province or outside the PRC. See Petitioners' Comments 
on Anhui BBCA and the All-Others Rate, at Exhibit 2, page 26. 
Therefore, we do not reach the issue of attributing subsidies received 
by these cross-owned affiliates for sub-national subsidy programs, 
pursuant to 19 CFR 351.525(b)(6)(ii).
    For the following ten alleged income tax programs pertaining to 
either the reduction of the income tax rates or exemption from income 
tax, we have applied an adverse inference that Anhui BBCA paid no 
income tax during the POI: (1) ``Two Free, Three Half'' program, (2) 
Reduced income tax rates for foreign-investment enterprises based on 
location, (3) Income tax exemption program for export-oriented foreign-
investment enterprises, (4) Reduced income tax rate for high or new 
technology enterprises, (5) Reduced income tax rate for technology or 
knowledge intensive foreign-investment enterprises, (6) Preferential 
income tax rate for research and development at foreign-investment 
enterprises, (7) Preferential tax programs for encouraged industries, 
(8) Preferential tax policies for township enterprises, (9) Local 
income tax exemption and reduction program for productive foreign-
investment enterprises, and (10)

[[Page 54371]]

Reduced income tax rates for encouraged industries in Anhui Province. 
The standard income tax rate for corporations in the PRC is 30 percent, 
plus a 3 percent provincial income tax rate. Therefore, the highest 
possible benefit for these ten income tax rate programs is 33 percent 
and we are assigning that rate to these ten programs.
    This 33 percent AFA rate does not apply to income tax credit or 
refund programs. For the ``Income Tax Credits on Purchases of 
Domestically Produced Equipment,'' program, we have preliminarily 
determined to use Yixing Union's rate from this investigation, which is 
0.11 percent. Neither respondent used the ``Tax benefits to foreign-
investment enterprises for certain reinvestment of profits,'' program 
and the Department has not calculated a rate for this program in any 
prior investigation. Therefore, we have preliminarily determined to use 
the highest non-de minimis rate for any indirect tax program from a 
China CVD investigation because there were only de minimis rates for 
income tax credit or refund programs from prior investigations. The 
rate we selected is 1.51 percent, respondent GE's rate for the ``Value 
added tax on Tariff Exemptions on Imported Equipment,'' program. See 
CFS from the PRC and CFS Decision Memorandum, at pages 13-14.
    For indirect tax and import tariff programs, we have preliminarily 
determined to use TTCA's rate from this investigation for the ``Value 
Added Tax Rebate for Purchases by Foreign-Investment Enterprises of 
Domestically Produced Equipment,'' program (0.23 percent) and Yixing 
Union's rate for ``Value Added Tax and Duty Exemptions on Imported 
Equipment,'' program, (0.69 percent).
    For loan programs, we have preliminarily determined to use TTCA's 
rates from this investigation for the following programs: ``National-
Government Policy Loan Program,'' (0.01 percent); and ``Other Policy 
Bank Loans,'' (0.48 percent). Neither respondent used the following 
programs: ``Discounted Loans for Export-Oriented Industries,'' and 
``Funds Provided for the Rationalization of the Citric Acid Industry,'' 
and the Department has not calculated rates for any of these programs 
in prior investigations. Therefore, for these two programs, we have 
preliminarily determined to use the highest non-de minimis rate for any 
loan program from a China CVD investigation, which is 4.11 percent, 
respondent GE's rate for the ``Government Policy Lending'' program. See 
CFS from the PRC and CFS Decision Memorandum, at page 9-10.
    For grant programs, we have preliminarily determined to use Yixing 
Union's rate from this investigation for the ``Famous Brands'' program 
(0.03 percent ad valorem). Neither respondent used the following 
programs: ``State Key Technology Program Fund,'' ``National level 
grants to loss-making state-owned enterprises,'' and ``Provincial level 
grants to loss-making state-owned enterprises,'' and the Department has 
not calculated rates for any of these programs in prior investigations. 
Moreover, all previously calculated rates for grant programs have been 
de minimis. Therefore, for each of these programs, we have 
preliminarily determined to use the highest calculated subsidy rate for 
any program otherwise listed, which could conceivably have been used by 
Anhui BBCA. The rate was 13.36 percent for the ``Government Provision 
of Land for Less Than Adequate Remuneration,'' program from Laminated 
Woven Sacks from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination and Final Affirmative Determination, 
in Part, of Critical Circumstances, 73 FR 35639 (June 24, 2008) (``LWS 
from the PRC'') and the accompanying Issues and Decision Memorandum, at 
14-18.
    Finally, for the ``Provision of Land for Less than Adequate 
Remuneration in Anhui Province'' program, we have preliminarily 
determined to use the highest non-de minimis rate for the provision of 
land from prior determinations (13.36 percent from LWS from the PRC).
    For further explanation of the derivation of Anhui BBCA's AFA rate, 
see the Memorandum to the File, ``Adverse Facts Available Rate for 
Anhui BBCA Biochemical Co., Ltd'' (September 12, 2008) (``Anhui BBCA 
AFA Calc Memo'').
    Section 776(c) of the Act provides that, when the Department relies 
on secondary information rather than on information obtained in the 
course of an investigation or review, it shall, to the extent 
practicable, corroborate that information from independent sources that 
are reasonably at its disposal. Secondary information is ``information 
derived from the petition that gave rise to the investigation or 
review, the final determination concerning the subject merchandise, or 
any previous review under section 751 concerning the subject 
merchandise.'' See e.g., SAA, at page 870. The Department considers 
information to be corroborated if it has probative value. See id. To 
corroborate secondary information, the Department will, to the extent 
practicable, examine the reliability and relevance of the information 
to be used. The SAA emphasizes, however, that the Department need not 
prove that the selected facts available are the best alternative 
information. See SAA, at page 869.
    When the Department applies AFA, to the extent practicable, it will 
determine whether such information has probative value by evaluating 
the reliability and relevance of the information used. With regard to 
the reliability aspect of corroboration, we note that these rates were 
calculated in prior final CVD determinations. No information has been 
presented that calls into question the reliability of these calculated 
rates that we are applying as AFA. Unlike other types of information, 
such as publicly available data on the national inflation rate of a 
given country or national average interest rates, there typically are 
no independent sources for data on company-specific benefits resulting 
from countervailable subsidy programs.
    With respect to the relevance aspect of corroborating the rates 
selected, the Department will consider information reasonably at its 
disposal in considering the relevance of information used to calculate 
a countervailable subsidy benefit. Where circumstances indicate that 
the information is not appropriate as AFA, the Department will not use 
it. See Fresh Cut Flowers from Mexico; Final Results of Antidumping 
Duty Administrative Review, 61 FR 6812 (February 22, 1996).
    In the absence of record evidence concerning these programs due to 
Anhui BBCA's decision not to participate in the investigation, the 
Department has reviewed the information concerning PRC subsidy programs 
in this and other cases. For those programs for which the Department 
has found a program-type match, we find that programs of the same type 
are relevant to the programs of this case. For the programs for which 
there is no program-type match, the Department has selected the highest 
calculated subsidy rate for any PRC program from which Anhui BBCA could 
conceivably receive a benefit to use as AFA. The relevance of this rate 
is that it is an actual calculated CVD rate for a PRC program from 
which Anhui BBCA could actually receive a benefit. Due to the lack of 
participation by Anhui BBCA and the resulting lack of record 
information concerning these programs, the Department has corroborated 
the rates it selected to the extent practicable.

[[Page 54372]]

    On this basis, we preliminarily determine that the AFA 
countervailable subsidy rate for Anhui BBCA is 97.72 percent ad 
valorem. See Anhui BBCA AFA Calc Memo.

Subsidies Valuation Information

Allocation Period

    The average useful life (``AUL'') period in this proceeding as 
described in 19 CFR 351.524(d)(2) is 9.5 years according to the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System for assets used to manufacture the subject merchandise. 
Consistent with the Department's practice, we have rounded the 9.5 
years up to 10 years for purposes of setting the AUL. See Polyethylene 
Terephthalate Film, Sheet, and Strip From India: Preliminary Results 
and Rescission, in Part, of Countervailing Duty Administrative Review, 
72 FR 43607 (August 6, 2007) (unchanged in final). 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)(ii) 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 regulation 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.

TTCA

    TTCA provided a questionnaire response on behalf of itself and one 
affiliate (``affiliate A''). See TQR. The names and details of TTCA's 
exact relationship with its affiliates are proprietary and, hence, 
addressed separately. See Preliminary Determination Calculation 
Memorandum for TTCA Co., Ltd., at page 2 (September 12, 2008) (``TTCA 
Preliminary Calc Memo''). TTCA reported that none of its affiliates 
produces subject merchandise, supplies any inputs to TTCA, or received 
and transferred subsidies to TTCA. See TQR, at page 4. Based on the 
questionnaire response for affiliate A, we preliminarily determine that 
this company has not received any subsidies. Thus, we are preliminarily 
excluding affiliate A from the subsidy calculation.
    After reviewing TTCA's relationship with its reported affiliates 
(i.e., comparing the list of common shareholders for the reported 
affiliates), we requested that TTCA provide a complete questionnaire 
response for an additional affiliate (``affiliate B''). We received 
affiliate B's questionnaire response shortly before the deadline for 
this preliminary determination, and have not been able to fully analyze 
the response or affiliate B's relationship with TTCA. See T2SR (8/27), 
at Exhibit 8. Consequently, for this preliminary determination, we are 
limiting our investigation to subsidies received by TTCA, but will 
continue to examine this issue for the final determination.

Yixing Union

    Yixing Union responded to the Department's questionnaire by 
providing information on the subsidies it received. In its response, 
Yixing Union identified Yixing Union Cogeneration Co., Ltd. 
(``Cogeneration'') as its parent and a supplier of energy. Based on 
this information, we requested, and Yixing Union provided, a 
questionnaire response on behalf of Cogeneration.
    We preliminarily determine that Yixing Union and Cogeneration are 
cross-owned within the meaning of 19 CFR 351.525(b)(6)(vi). We further 
preliminarily determine that the energy supplied by Cogeneration to 
Yixing Union is not primarily dedicated to the downstream product and, 
consequently, that any subsidies received by Cogeneration should not be 
attributed to Yixing Union under 19 CFR 351.525(b)(6)(iv). Instead, 
because Cogeneration is the parent of Yixing Union, we are attributing 
the subsidies received by Cogeneration to Yixing Union pursuant to 19 
CFR 351.525(b)(6)(iii).
    To calculate the benefit to Yixing Union from subsidies given to 
Cogeneration, we would normally use the consolidated sales of 
Cogeneration and its subsidiaries, pursuant to 19 CFR 
351.525(b)(6)(iii). However, we do not have consolidated sales 
information for Cogeneration on the record. Consequently, for the 
purposes of the preliminary determination, we generally used the total 
sales of Yixing Union and the total sales of Cogeneration less sales 
between the two companies. For 2005, we did not have the amount of 
sales between Yixing Union and Cogeneration. Therefore, we subtracted 
the 2006 amount for sales between these two companies to arrive at the 
2005 ``consolidated'' sales. See Preliminary Determination Calculation 
Memorandum for Yixing Union Biochemical Co., Ltd. (September 12, 2008) 
(``Yixing Union Preliminary Calc Memo''). We intend to seek 
consolidated sales information for Cogeneration for the final 
determination.
    Yixing Union also identified several other affiliated companies. 
However, Yixing Union reported that these affiliates do not produce the 
subject merchandise and do not provide inputs to Yixing Union. 
Therefore, because these companies do not produce subject merchandise 
or otherwise fall within the situations described in 19 CFR 
351.525(b)(6)(iii)-(v), we do not reach the issue of whether these 
companies and Yixing Union are cross-owned within the meaning of 19 CFR 
351.525(b)(6)(iii)-(vi), and we are not including these companies in 
our subsidy calculations.

Benchmarks and Discount Rates

Benchmarks for Short-Term RMB Denominated Loans

    The Department is investigating loans received by respondents from 
policy banks and 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

[[Page 54373]]

purposes. See 19 CFR 351.505(a)(3)(i). 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).
    The Department has previously determined that loan benchmarks must 
be market-based and that Chinese interest rates are not reliable as 
benchmarks because of the pervasiveness of the GOC's intervention in 
the banking sector. Specifically, the Department found that the GOC's 
predominant role in the banking sector results in significant 
distortions that render lending rates in the PRC unsuitable as 
benchmarks. This determination led us to rely on an external benchmark. 
See e.g., Certain New Pneumatic Off-the-Road Tires from the People's 
Republic of China; Final Affirmative Countervailing Duty Determination 
and Final Negative Determination of Critical Circumstances, 73 FR 40480 
(July 15, 2008) (``Tires from the PRC''), and the accompanying Issues 
and Decision Memorandum, at page 7 (``Tires Decision Memorandum'').
    The GOC disputes the Department's prior findings and, in this 
investigation, has argued that the Department should rely on the 
Shanghai Inter-bank Offered Rate (``SHIBOR'') as its benchmark. This 
rate was officially introduced in January 2007. According to the GOC, 
it is an average of quotations submitted by 16 commercial banks and, 
according to the GOC, these rates reflect the demand for and supply of 
funds on the money market for maturities of up to one year. See GQR, at 
pages 23-27. The GOC contends that this rate is more suitable than the 
external benchmark the Department has relied upon to-date because: (i) 
It is an in-country benchmark; (ii) the rate is unrelated to the 
allocation of credit and preferential rates to specific borrowers; 
(iii) the rate is a truly market-determined rate for unsecured funds 
among banks operating in the Shanghai wholesale money market; and (iv) 
the rate is determined in part by foreign-owned banks.
    We have not adopted the SHIBOR as the benchmark for this 
preliminary determination. We disagree that it is a market-determined 
rate because the banks whose rates form the SHIBOR are subject to a 
deposit rate cap and lending rate floor. These aspects of the banking 
system, inter alia, led us to conclude in CFS from the PRC that ``the 
way interest rate formation is regulated in China both distorts lending 
rates and provides explicit recognition that banks in China are not yet 
fully able to set interest rates on a market basis.'' See CFS Decision 
Memorandum, at Comment 10. We also found in CFS from the PRC that 
foreign banks account for a very small share of credit in the PRC, 
operating mainly in niche markets, and, therefore, did not offer a 
suitable benchmark. See id.
    Therefore, we are calculating an external benchmark using the 
regression-based methodology first developed in CFS from the PRC and 
more recently updated in Tires from the PRC. This benchmark interest 
rate is based on the inflation-adjusted interest rates of countries 
with per capita gross national incomes (``GNIs'') similar to that of 
the PRC, and takes into account a key factor involved in interest rate 
formation, that of the quality of a country's institutions, that is not 
directly tied to state-imposed distortions in the banking sector 
discussed above.
    As explained in the CFS Decision Memorandum, at Comment 10, to 
derive this rate we determine which countries are similar to the PRC in 
terms of GNI, based on the World Bank's classification of countries as: 
low income; lower-middle income; upper-middle income; and high income. 
The PRC falls in the lower-middle income category, a group that 
includes 55 countries as of July 2007. See TTCA Preliminary Calc Memo, 
at page 3.
    Many of these countries reported lending and inflation rates to the 
International Monetary Fund and they are included in that agency's 
International Financial Statistics (``IFS''). The GOC contends that 
although the Department has characterized them as such, many of the 
reported lending rates are not short-term rates. See GOC Pre-Prelim 
Comments, at pages 26-28. We have reviewed the information submitted by 
the GOC and agree that certain of the interest rates used in our 
regression analysis may reflect maturities of longer than one-year. 
Indeed, as the GOC points out, the head notes to the IFS state that 
these rates apply to loans that meet short- and medium-term financing 
needs. GOC's Pre-Preliminary Comments, at Exhibit B (International 
Monetary Fund, International Financial Statistics Yearbook 2007, at 
xix). Therefore, we believe that these rates should not be treated as 
exclusively short-term in nature. See 19 CFR 351.102 (where ``short-
term loan'' is defined as having repayment terms of one-year or less).
    To address this concern, we will continue to use the same interest 
rate data and regression-based benchmark rate (after deleting deposit 
rate data reported by Jordan and U.S. dollar-denominated interest rates 
reported by Timor L'este), but will apply it to loans with terms of two 
years or less. We invite interested parties to comment on what might be 
a more appropriate cut-off for short- and medium-term loans, in view of 
several factors. First, there are no data available on the term 
structure of the loans underlying the IMF interest rate data. Second, 
we could not find a definition of ``medium-term'' to which countries 
reporting interest rate data to the IMF must adhere. And third, from a 
review of the 2008 IFS country notes and EIU Country Finance country 
reports, it appears that a majority of the countries in the basket 
either report loans with terms of one year or less or have loan markets 
where short-term lending predominates. See GOC Pre-Prelim Comments, at 
Attachment B; see also, Memorandum to the File, ``Additional Lending 
Benchmark Memo'' (September 12, 2008) (``Additional Lending Benchmark 
Memo'').
    With the exceptions noted below, we have used the interest and 
inflation rates reported in the IFS for the countries identified as 
``low middle income'' by the World Bank. See TTCA Preliminary Calc 
Memo, at page 3. We did not include those economies that the Department 
considered to be non-market economies for AD purposes for any part of 
the years in question: the PRC, Armenia, Azerbaijan, Belarus, Georgia, 
Moldova, Turkmenistan, and Ukraine (for Ukraine only, prior to 2007). 
The benchmark necessarily also excludes any country that did not report 
both lending and inflation rates to IFS for those years. Third, the 
rate reported to the IMF by Jordan is based on deposit borrowings, 
rather than lending rates and the rate reported by Timore L'este is 
based on the U.S. dollar. See GOC Pre-Prelim Comments, at Attachment B; 
see also, Additional Lending Benchmark Memo. Therefore, both countries' 
rates have been excluded. Finally, for each year the Department 
calculated an inflation-adjusted short-term benchmark rate, we have 
excluded any aberrational country for the year in question. See TTCA 
Preliminary Calc Memo, at page 4; see also, Yixing Union Preliminary 
Calc Memo, at page 4.
    The resulting inflation-adjusted benchmark lending rates are 
provided in Yixing Union's and TTCA's preliminary calculation 
memoranda. See TTCA Preliminary Calc Memo, at 4; see also, Yixing Union 
Preliminary Calc Memo, at page 5. Because these are inflation-adjusted 
benchmarks, it is necessary to adjust respondents' interest payments 
and discount rates for inflation. This was done using the PRC inflation 
figure as reported in IFS. See TTCA Preliminary Calc Memo, at 4; see 
also,

[[Page 54374]]

Yixing Union Preliminary Calc Memo, at page 4.
    In the GOC Pre-Preliminary Comments, the GOC argues that the 
regression used by the Department to compute this benchmark is flawed 
because there is no correlation between governance indicators and 
interest rates. We addressed these concerns in the LWRP Decision 
Memorandum, at Comment 12, which we hereby incorporate by reference. 
See Light-walled Rectangular Tube and Pipe from the PRC: Final 
Affirmative Countervailing Duty Determination, 73 FR 35642 (June 24, 
2008) (``LWRP from the PRC''), and the accompanying Issues and Decision 
Memorandum (``LWRP Decision Memorandum'').

Benchmarks for Long-Term Loans

    The lending rates reported in IFS represent short- and medium-term 
lending, and there are no sufficient publicly available long-term 
interest rate data upon which to base a robust benchmark for long-term 
loans. To address this problem, the Department has developed an 
adjustment to the short- and medium-term rates to convert them to long-
term rates using Bloomberg U.S. corporate BB-rated bond rates. See 
e.g., LWRP Decision Memorandum, at page 8.
    In its pre-preliminary comments, the GOC argues that the Department 
should not base its adjustment on BB-grade bonds because doing so is 
inconsistent with the Department's own regulations, which identify 
creditworthy companies as those having ratings of Aaa to Baa. If the 
Department were to use data on U.S. borrowers rated Aaa to Baa, the 
adjustment to convert to long-term rates would be downward, according 
to the GOC.
    We have not adopted the GOC's position with respect to this issue. 
The regulations at 19 CFR 351.505(a)(3)(iii) specify a formula for the 
interest rate benchmark, ib, for uncreditworthy companies. 
The regulations essentially direct the Department to derive 
ib by equating returns on loans to companies in the Aaa to 
Baa and Caa to C ranges on a risk-adjusted basis. The fact that 19 CFR 
351.505(a)(3)(iii) relies on interest rates and default rates for 
companies in the Aaa to Baa range to calculate ib does not 
in any way imply that the long-term interest rate benchmark under 
351.505(a)(3)(i) or (ii) must be based on interest rates charged to 
companies in the Aaa to Baa range. In fact, in cases where the 
Department must rely on a national average long-term interest rate for 
benchmarking purposes, there is no statutory or regulatory requirement 
that the rate reflect only lending to companies in the Aaa to Baa 
range. In addition, such a rate would likely reflect lending to 
companies in a ratings range broader than Aaa to Baa.
    In the instant investigation, given that the Department has decided 
to reject all internal PRC interest rates for benchmarking purposes, 
the question before the Department is what long-term mark-up to use to 
construct the long-term RMB interest rate benchmark. In view of the 
transitional nature of financial accounting and reporting standards and 
practices in the PRC, as well as the PRC's underdeveloped credit rating 
capacity, the Department has determined that company-specific mark-ups 
(to account for investment risk) should not be the general rule. 
Instead, the Department will rely on a single mark-up for all companies 
not found to be uncreditworthy. That mark-up should therefore reflect 
the average investment risk associated with companies in the PRC not 
found uncreditworthy by the Department. Since the Department has (1) no 
objective basis to determine this average investment risk and (2) no 
basis to presume it is for companies with an investment-grade rating 
only, we have preliminarily used rates for BB-rated bonds, the highest 
non-investment grade, to calculate the mark-up. Alternatively, the 
Department may consider using a mark-up derived from the average of 
bonds rated from AAA to B minus and invite parties to comment for our 
final determination.
    In the GOC Pre-Prelim Comments, the GOC further argues that the 
adjustment factor should be added to the short-term interest rate 
rather than multiplied. We addressed these concerns in the LWRP 
Decision Memorandum, at Comment 12, which we hereby incorporate by 
reference.
    However, we have made one change to the long-term adjustment to 
correspond to the change described above regarding our regression-based 
benchmark. Specifically, because the benchmark now covers loans up to 
two years, we have calculated the long-term adjustment based on the 
difference in the BB rates for bonds that match the maturity of the 
loan in question and two-year bonds.

Discount Rates

    Consistent with 19 CFR 351.524(d)(3)(i)(A), we have used as our 
discount rate, the long-term interest rate calculated according to the 
methodology described above for the year in which the government agreed 
to provide the subsidy.

Creditworthiness

    In their petition, Petitioners alleged that Anhui BBCA was 
uncreditworthy for the years 2005 to 2006. On July 25, 2008, we 
determined that Petitioners did not provide a reasonable basis to 
believe or suspect that Anhui BBCA was uncreditworthy. See Memorandum 
to Susan H. Kuhbach, Office Director, AD/CVD Operations, Office 1, 
``Uncreditworthy Allegation for Anhui BBCA Biochemical Co., Ltd.'' 
(July 25, 2008).
    On September 5, 2008, Petitioners submitted additional information 
to support their allegation. See Petitioners' Comments on Anhui BBCA 
and the All-Others Rate. Because the Department did not receive 
Petitioners' allegation until September 5, 2008, one week prior to our 
preliminary determination, we are still reviewing the allegation and 
will decide whether to investigate Anhui BBCA's creditworthiness after 
this preliminary 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. Government Policy Lending

    The Department is examining whether preferential loans were 
provided to citric acid producers based on government plans promoting 
modernization loans for encouraged projects. The GOC has asserted that 
there must be evidence that the policy caused the loan to be provided 
in order for the Department to find such a program countervailable. The 
GOC has further claimed that: (1) None of the cooperating respondents' 
loans or supporting documentation mentions any government policy or 
plan; (2) no plan or policy for the chemical industry on the record 
mentions targeted loans, or directs SOCBs to provide targeted project 
loans; and (3) none of these plans mentions the citric acid industry or 
citric acid producers, much less encourages modernization loans for the 
chemical industry.
    Based on our review of the information and responses provided by 
the GOC, we preliminary determine that certain of the loans received by 
TTCA from SOCBs were made pursuant to government policy directives.
National-Government Policy Lending Program
    Record evidence demonstrates that certain GOC policy documents 
outline

[[Page 54375]]

the government's goals regarding energy saving and pollution reduction, 
and the manner in which these goals would be implemented. For example, 
the PRC's Eleventh Five-Year Plan sets out as one of its policy goals 
to ``{o{time} ptimally develop of fundamental chemical raw material, 
actively develop fine chemical and eliminate high polluting chemical 
enterprise.'' See GQR, at page 31. The GOC has stated that this is a 
``non-binding'' goal and that the only binding goal in regard to 
environment or pollution reduction is that ``energy consumption of unit 
GDP would be lowered down about 20% and emission volume of main 
pollutants would be decreased by 10% * * *'' See G2SR (9/2), at page 
10. Further, according to the State Council Circular on Realizing the 
Major Targets in the ``Outline of the Eleventh Five-Year Plan for 
National Economic and Social Development of the People's Republic of 
China and Division of Tasks'', the reduction of energy consumption was 
to be the responsibility of the National Development and Reform 
Commission (``NDRC'') while the State Environmental Protection 
Administration (``SEPA'') was tasked with reducing major pollution 
discharges.
    Also in connection with these energy saving and pollution goals, 
the NDRC formulated and the State Council approved the Notice of State 
Council on Circulation of Comprehensive Work Plan on Energy Saving and 
Emission Reduction (Guo Fa 2007) No. 15) (``State Council Circular''). 
The GOC has described the purpose of this document as ``enabling 
government departments at each level to understand the concrete tasks 
of energy saving and emission reduction, and proposing detailed work 
plans.'' See GQR, at page 41. In this document, there are a number of 
recommendations that specifically address the government's energy 
savings and emission goals, in particular with respect to financing:

    Consummate financial policies promoting energy-saving and 
emission reduction. The people's government at each level shall 
allocate certain funds within the financial budget, by way of 
subsidy and reward, to support major projects of energy-saving and 
emission-reduction, promotion of high effective energy-saving and 
new mechanism for energy-saving, construction of management ability 
of energy-saving as well as construction of supervision system for 
emission-reduction. We shall further promote financial basic 
construction investment to incline to energy-saving and environment-
protection projects.

See GQR at Exhibit I-A-36, page 16. The State Council also recommends:

    Enhance financial service for energy-saving and environment-
protection. We shall encourage and guide financial institutions to 
enhance credit support to circular economy, environment-protection, 
and reform projects for energy-saving and emission-reduction 
technologies, first provide direct financing service for qualified 
energy-saving and emission-reduction projects and circular economy 
projects.

See id. at page 17. The GOC has explained in its responses that the 
purpose of the cited passages was ``to enlarge the funding source for 
energy-saving and environment-protection projects, to assist and 
support the construction and promotion of energy-saving and emission 
reduction projects.'' See G2SR (9/2), at page 12. In terms of specific 
actions taken, the GOC explained that the first statement referred to a 
special fund established by the Ministry of Finance for basic 
infrastructure energy-saving and environmental-protection projects, 
while the second statement involved the Ministry of Environmental 
Protection (``MPE'') and the establishment of an information sharing 
system which would provide technical advice to enable banks to better 
assess the feasibility of and returns on pollution control projects. 
See id. Although the GOC has related these particular actions to the 
statements in the State Council Circular, it is unclear whether other 
actions or policies may also be included. For example, the relationship 
between the MPE sharing system and the provision of ``direct financing 
service for qualified energy-saving and emission-reduction projects'' 
is unclear, and we intend to seek clarification of these statements 
during the course of this investigation. For purposes of our 
preliminary determination, however, we conclude that the record 
evidence indicates that the purpose of the State Council Circular was 
to provide details on achieving the energy-saving and pollution-
reducing goals and the means by which the goals would be fulfilled.
    Additional record evidence indicates that specific guidance has 
been issued to PRC banks regarding the government's energy-saving and 
pollution-reduction goals. In particular, following the approval of the 
State Council Circular, the People's Bank of China (``PBOC'') issued 
the Guidelines on Improvement and Strengthening of Financial Services 
in Energy Saving and Environmental Protection Areas (Yin Fa 2007 No. 
215) (``PBOC Guidelines''). In its response, the GOC stated that the 
document contains guidelines to banks and does not set concrete goals 
and objectives. The PBOC Guidelines were created in accordance with the 
State Council Circular and ``opinions in video conferences call 
regarding national wide work on emission reduction, in order to further 
improve industrial restructuring, evolution of economic growth mode as 
well as enhancement of good and fast economic development.'' The key 
sections of PBOC Guidelines state:

    {a{time} ll banking institutions and branches of the People's 
Bank of China shall fully recognize the importance of financial 
services in energy saving and emission reduction, enhance the sense 
of responsibility and mission, improve and strengthen the financial 
services in energy saving and emission reduction areas, reasonably 
control the increase of lending, pay attention to improvement of 
credit structure, strengthen the credit risk management, and enhance 
the coordinated and sustainable development of the economy and 
finance.

See Petitioner's April 24, 2008, response (``PSR'') at Exhibit 111. In 
regard to projects and lending, the PBOC Guidelines state:

    {a{time} ll banking financial institutions shall follow the 
national industry structure adjustment policy, and follow 
differentiation principles in allocating the loan resources. For 
investment projects encouraged by the government, a banking 
institution shall simplify the lending procedures and proactively 
provide lending supports; as to investment subject to restrictions * 
* * For any other projects, the banking financial institutions shall 
take into consideration of resource saving and environmental 
protection factors and shall follow general credit principles when 
providing lending supports.

See id.
    Finally, the GOC has placed on the record several industrial 
catalogues which list industries and/or activities considered 
encouraged by the GOC. These catalogues include the Catalogue for the 
Guidance of Industrial Structure Adjustment (2005 version), Catalogue 
for the Guidance of Foreign-Invested Industries (amended in 2007), 
Catalogue for the Guidance of Foreign-Invested Industries (amended in 
2004), and Catalogue for Industries, Products, and Technologies 
Currently Particularly Encouraged by the State for Development. The GOC 
claims that citric producers are not identified in any of the 
catalogues as an encouraged industry. See GQR at I-10--I-15 and G2SR 
(9/2) at S2A2-S2A4.
    TTCA reported a loan used to construct the Project on Electricity 
Generator with Recycling Methane. See T2SR (8/27) at 18. TTCA and the 
GOC provided supporting documentation regarding this loan. See T2SR, at 
Exhibit S37; see also, G1SR (9/2), at Exhibit S1-7-a-2 and Exhibit S1-
8-b. This documentation is business proprietary

[[Page 54376]]

and, therefore, is discussed separately. See Memorandum to the File 
regarding, ``BPI Memo for Government Policy Lending'' (``BPI Lending 
Memo''). However, the documentation in relation to this loan received 
by TTCA demonstrates that the TTCA project that is funded by the loan 
was encouraged by the state and that, as shown above, there is a clear 
link between the TTCA project and the binding goals contained in the 
Eleventh Five-Year Plan and the subsequent documents issued by the 
State Council and the PBOC. In the BPI Lending Memo, we explain the 
relationship between the Eleventh Five-Year Plan and its implementing 
documents and the TTCA loan documents in further detail.
    Based on this information, we preliminarily determine that the GOC 
has a policy in place to encourage and support preferential lending to 
certain encouraged projects, as expressly reflected in the documents 
described above. Consistent with our prior determinations, we also find 
that the loan received by TTCA from a SOCB constitutes a direct 
financial contribution from the government, pursuant to sections 
771(5)(B) and 771(5)(D)(i) of the Act. See CFS from the PRC, at Comment 
8. Furthermore, the loan provides a benefit equal to the difference 
between what TTCA paid on its loan and the amount it would have paid on 
comparable commercials loans. As the basis for specificity relies on 
information designated business proprietary, we are unable to disclose 
our analysis in the Federal Register Notice and, therefore, it is 
discussed in the BPI Lending Memo.
    To calculate the benefit under the national-government policy 
lending program, we used the benchmarks described in the Benchmarks and 
Discount Rates section above and the methodology described in 19 CFR 
351.505(c)(1) and (2). On this basis, we preliminarily determine that 
TTCA received a countervailable subsidy of 0.01 ad valorem under this 
program.
Shandong Province Policy Loans Program
    Policy lending by Shandong Province was not separately alleged by 
the petitioners in the original petition. Record evidence, however, 
indicates that the Shandong Province's industrial policy promoted: (1) 
Financing and guarantees for key construction projects; (2) the 
development of more key projects and programs to include in the 
nation's plans; and (3) the active use of discount government loans to 
support policy financing. See The Shandong Province Outline of the 
Tenth Five-Year Plan for National Economic and Social Development 
(``Shandong Province Tenth Five-Year Plan'') provided at G1SR (9/2), at 
Exhibit S1-2-d. The GOC has stated in a supplemental questionnaire 
response that the Shandong Provincial government will, ``under the 
premise of considering the state industrial policies, * * * guide the 
activity of local enterprises and promote the industrial upgrade.'' See 
G2SR, at page 13. Thus, through the Shandong Province Tenth Five-Year 
Plan, the Shandong Provincial government has developed a policy to 
support the development of key projects to be included in national 
industrial policy, and this policy is effectuated by promoting 
financing and guarantees for these key construction projects.
    The GOC has repeatedly stated that citric acid is not an industry 
encouraged by the state. However, the GOC also concedes that there is 
no uniform product classification used by all government agencies in 
the PRC. Instead, different government agencies may classify citric 
acid differently. See G2SR (9/2), at page 2.
    Further, the Law of the People's Republic of China on Commercial 
Banks (December 27, 2003) (``Commercial Banking Law''), at Article 34, 
states that banks shall ``carry out their loan business upon the needs 
of the national economy and the social development and under the 
guidance of the state industrial policies.'' See Petition, at Exhibit 
IV-32. We note that the Commercial Banking Law prescribes that lending 
practices shall be based, at least in some measure, on the guidance of 
government industrial policy. Further, as noted above, the Shandong 
Province Tenth Five-Year Plan specifically directs bank financing to 
key construction projects. Consequently, for purposes of this 
preliminary determination, we conclude that record evidence 
demonstrates that there is a link between national-government 
industrial policies and the Shandong Province directives regarding 
banking lending.
    TTCA reported that a loan was used to construct a citric acid and 
sodium citrate project. See T2SR, at page 18. The GOC and TTCA provided 
supporting documentation for this loan, which was used to construct the 
aforementioned project. See T2SR, at Exhibit S38; see also, G1SR (9/2), 
at Exhibit S1-7-b and Exhibit S1-8-d. As the information contained in 
the loan and project documentation is business proprietary, see BPI 
Lending Memo for additional details. However, this document 
demonstrates the link between the Shandong Provincial government's 
policy to support the development of key projects through financing and 
the company's loan documents.
    On the basis of the above-cited record evidence, we preliminarily 
determine that the GOC has a policy in place to encourage and support 
preferential lending to key projects, as expressly reflected in the 
Shandong Province Tenth Five-Year Plan. The Department further finds 
that Shandong Province has a policy in place to provide lending in 
accordance with the GOC's policies. We find that a loan from a SOCB 
constitutes a direct financial contribution from the government, 
pursuant to sections 771(5)(B) and 771(5)(D)(i) of the Act. 
Furthermore, the loan provides a benefit equal to the difference 
between what the recipients paid on their loans and the amount they 
would have paid on comparable commercial loans. As our basis for 
specificity relies on information designated business proprietary, we 
are unable to disclose our analysis in the Federal Register Notice and, 
therefore, it is discussed in the BPI Lending Memo.
    To calculate the benefit under the provincial policy lending 
program, we used the benchmarks described in the Benchmarks and 
Discount Rates section above, as well as the methodology described in 
19 CFR 351.505(c)(1) and (2). On this basis, we preliminarily determine 
that TTCA received a countervailable subsidy of 0.41 ad valorem under 
this program.
Other Policy Bank Loans
    Certain loans reported by TTCA were received from a Chinese policy 
bank, and the evidence indicates these loans were made under a 
particular lending program operated by that bank. The information 
regarding these loans is business proprietary and, therefore, is 
discussed separately in the BPI Lending Memo.
    The Department typically treats policy banks, i.e., special 
purpose, government-owned banks, as ``authorities'' within the meaning 
of section 771(5)(B) of the Act. See Final Affirmative Countervailing 
Duty Determination: Dynamic Random Access Memory Semiconductors from 
the Republic of Korea, 68 FR 37122 (June 23, 2003), and the 
accompanying Issues and Decision Memorandum, at page16. Thus, we 
preliminarily determine that these loans were provided by the GOC and 
that they constitute financial contributions under section 771(5)(D)(i) 
of the Act. We further determine preliminarily that these loans confer 
a benefit because the

[[Page 54377]]

recipient is paying less than it would for a comparable commercial 
loan. See section 771(5)(E)(ii) of the Act. As our basis for 
specificity relies on information designated business proprietary, we 
are unable to disclose our analysis in the Federal Register Notice and, 
therefore, it is discussed in the BPI Lending Memo.
    To calculate the benefit conferred by these loans, we used the 
benchmarks described in the Benchmarks and Discount Rates section above 
and the methodology described in 19 CFR 351.505(c)(1) and (2). We 
divided the benefit by certain sales reported by TTCA during the POI. 
On this basis, we preliminarily determine that TTCA received a 
countervailable subsidy of 0.48 percent ad valorem under this program.

B. ``Famous Brands'' Program--Yixing City

    According to the Implementing Opinions of City Government on 
Further Advancing the Brand Construction of Enterprise, the Government 
of Yixing City provides a lump sum award to enterprises that receive a 
``famous brands'' certificate from either the Famous Brand Promotion 
Committee of China or the Famous Brand Promotion Committee of Jiangsu. 
To receive an award, the enterprise must present its ``famous brands'' 
certificate from either promotion committee to the Quality and 
Technology Supervision Bureau of Yixing and the Finance Bureau of 
Yixing. The Bureaus will then review the submitted certificate and 
approve the award.
    Yixing Union received a ``famous brands'' certificate from the 
Jiangsu Famous Brand Promotion Committee and was granted the lump sum 
award from the Government of Yixing City during the POI. See G1SR (9/
2), at page 8; see also, YQR, at pages 14-15.
    We preliminarily determine that the grant under this program 
constitutes a financial contribution under section 771(5)(D)(i) of the 
Act and also provides a benefit in the amount of the grant (see 19 CFR 
351.504(a)).
    Regarding specificity, information submitted by the GOC shows that 
grants provided under the program are available to any enterprise that 
it certified as a certificate of Famous Product of China or a Famous 
Product of Jiangsu Province. See G1SR (9/2), at Exhibit S1B-8. Further, 
the GOC reported that eligibility is not limited by law to any 
enterprise or group of enterprises, or to any industry or group of 
industries. Therefore, we preliminarily determine that there is no 
basis to find this program de jure specific under section 771(5A)(D)(i) 
of the Act.
    In determining whether this program is de facto specific, we must 
examine the factors identified in section 771(5A)(D)(iii) of the Act. 
The GOC provided program usage data for 2005 through 2007 showing the 
industries that received the award and the number of companies per 
industry that received the award. See G1SR (9/2), at Exhibit S1B-11-12. 
Although the grants have been provided to a variety of industries, we 
preliminarily determine that the number is limited in accordance with 
section 771(5A)(D)(iii)(I) of the Act because only 34 companies 
received this award from 2005 through 2007. Therefore, we find the 
program to be de facto specific because the number of companies which 
received the award is limited, within the meaning of section 
771(5A)(D)(iii)(I) of the Act. We preliminarily find the ``Famous 
Brands'' program provides a countervailable benefit to Yixing Union.
    To calculate the benefit, we divided the amount of the grant by 
Yixing Union's total sales in the year the benefit was approved and 
found that the amount was less than 0.5 percent. Therefore, in 
accordance with 19 CFR 351.524(b)(2), we are allocating the total 
amount of the subsidy to the year of receipt. On this basis, we 
preliminarily determine that a countervailable subsidy of 0.03 percent 
ad valorem exists for Yixing Union.

C. Reduced Income Tax Rates to FIEs Based on Location

    To promote economic development and attract foreign investment, 
``productive'' FIEs located in coastal economic zones, special economic 
zones or economic and technical development zones in the PRC receive 
preferential tax rates of 15 percent or 24 percent, depending on the 
zone, under Article 7 of the FIE Tax Law. See GQR, at Exhibit I-A-39. 
This program was created June 15, 1988, pursuant to the Provisional 
Rules on Exemption and Reduction of Corporate Income Tax and Business 
Tax of FIEs in Coastal Economic Development Zone issued by the Ministry 
of Finance. The March 18, 1988, Circular of State Council on 
Enlargement of Economic Areas enlarged the scope of the coastal 
economic areas and the July 1, 1991, FIE Tax Law continued this policy. 
The Department has previously found this program to be countervailable. 
See CFS from the PRC, LWRP from the PRC, and Tires from the PRC.
    Yixing Union is located in a coastal economic development zone and 
was subject to the reduced income tax rate of 24 percent during the 
POI.
    We preliminarily determine that the reduced income tax rate paid by 
productive FIEs under this program confers a countervailable subsidy. 
The reduced rate is a financial contribution in the form of revenue 
forgone by the GOC and it provides a benefit to the recipient 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 determine preliminarily that the 
reduction afforded by this program is limited to enterprises located in 
designated geographic regions and, hence, is specific under section 
771(5A)(D)(iv) of the Act.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Yixing Union as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the company's tax savings received during 
the POI by the company's total sales during that period. To compute the 
amount of the tax savings, we compared the income tax rate Yixing Union 
would have paid in the absence of the program (30 percent) with the 
rate it paid (24 percent).
    On this basis, we preliminarily determine that Yixing Union 
received a countervailable subsidy of 0.17 percent ad valorem under 
this program.
    TTCA is also a productive FIE and is located in a coastal economic 
development zone where the income tax rate is 24 percent. Based on 
TTCA's response, we preliminary determine that TTCA did not use this 
program during the POI. See TTCA Preliminary Calc Memo, at page 7.

D. ``Two Free, Three Half'' Program

    Under Article 8 of the FIE Tax Law, an FIE that is ``productive'' 
and is scheduled to operate for more than ten years may be exempted 
from income tax in the first two years of profitability and pay income 
taxes at half the standard rate for the next three years.
    The GOC reported that Yixing Union was in the last year of the 
``three half'' period under this program during the POI. TTCA did not 
use this program during the POI.
    We preliminarily determine that the exemption or reduction of 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 recipient in the amount of the tax savings. See 
section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also 
preliminarily determine that the exemption/reduction

[[Page 54378]]

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. See CFS Decision Memorandum, at Comment 14.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Yixing Union as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the company's tax savings received during 
the POI by the company's total sales during that period. To compute the 
amount of the tax savings, we compared the income tax rate Yixing Union 
would have paid in the absence of the program (24 percent, as described 
above under ``Reduced Income Tax Rates for FIEs Based on Location'') 
with the income tax rate the company actually paid (12 percent). On 
this basis, we preliminarily determine that Yixing Union received a 
countervailable subsidy of 0.35 percent ad valorem under this program.

E. Reduced Income Tax Rate for Technology or Knowledge Intensive FIEs

    Article 73 of the Implementing Rules of the Foreign Investment 
Enterprise and Foreign Enterprise Income Tax Law authorizes a reduced 
income tax rate of 15 percent for ``productive'' FIEs located in 
coastal economic zones, special economic zones, or economic and 
technical development zones if they undertake: (1) Technology-intensive 
or knowledge-intensive projects; (2) projects with foreign investment 
of $30 million or more and a long payback period; or (3) energy, 
transportation and port construction projects. Additionally, FIEs that 
have been established in other zones specified by the State Council and 
are engaged in projects encouraged by the State may qualify for the 
reduced income tax rate of 15 percent upon approval by the State 
Taxation Bureau.
    Cogeneration paid the reduced income tax rate of 15 percent under 
this program during the POI. TTCA did not use this program during the 
POI.
    We preliminarily determine that the 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 government and it 
provides a benefit to the recipient in the amount of the tax savings. 
See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also 
preliminarily determine that the 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.
    To calculate the benefit for Yixing Union, we treated the income 
tax savings enjoyed by Cogeneration as a recurring benefit, consistent 
with 19 CFR 351.524(c)(1), and divided the company's tax savings 
received during the POI by the combined total sales of Yixing Union and 
Cogeneration (less any sales between the two companies) during that 
period. To compute the amount of the tax savings, we compared the rate 
Cogeneration would have paid in the absence of the program (30 percent) 
with the rate the company paid (15 percent). On this basis, we 
preliminarily determine the countervailable subsidy attributable to 
Yixing Union to be 2.07 percent ad valorem under this program.

F. Income Tax Credits on Purchases of Domestically Produced Equipment

    The Circular of the Ministry of Finance and the State 
Administration of Taxation of the People's Republic of China on 
Distribution of Interim Measures Concerning the Reduction and Exemption 
of Enterprise Income Tax for Investment in Chinese-made Equipment for 
Technological Renovation, 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, permits 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 can 
be taken for domestically produced equipment so long as the equipment 
is not listed in the Catalog of Non-Duty-Exemptible Articles of 
Importation. See GQR, at page 70.
    Cogeneration claimed credits under this program on the tax return 
filed in 2007. See Memorandum to the File, ``Correction to Appendix 1 
of the Second Supplemental Questionnaire for Yixing Union Cogeneration, 
Co., Ltd.'' (September 4, 2008). TTCA and Yixing did not use this 
program during the POI.
    We preliminarily determine that income tax credits for the purchase 
of domestically produced equipment are countervailable subsidies. The 
tax credits are a financial contribution in the form of revenue forgone 
by the government and 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 Cogeneration as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the company's tax savings by the combined 
total sales of Yixing Union and Cogeneration (less any sales between 
the two companies) during that period. On this basis, we preliminarily 
determine that a countervailable subsidy of 0.11 percent ad valorem 
exists for Yixing Union under this program.

G. VAT Rebate on Purchases by FIEs of Domestically Produced Equipment

    As outlined in GUOSHUIFA (1999) No. 171, Notice of the State 
Administration of Taxation Concerning the Trial Administrative Measures 
on Purchase of Domestically Produced Equipment by FIEs, the GOC refunds 
FIEs with the VAT on purchases of certain domestic equipment produced 
if the purchases are within the enterprise's investment amount and if 
the equipment falls under a tax-free category. Article 3 specifies that 
this program is limited to FIEs with completed tax registrations and 
with foreign investment in excess of 25 percent of the total investment 
in the enterprise. Article 4 defines the type of equipment eligible for 
the VAT exemption, which includes equipment falling under the 
Encouraged and 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. To receive the rebate, an FIE must meet 
the requirements above and, prior to the equipment purchase, bring its 
``Registration Handbook for Purchase of Domestically Produced Equipment 
by FIEs'' as well as additional registration documents to the taxation 
administration for registration. After purchasing the equipment, FIEs 
must complete a Declaration Form for Tax Refund (or Exemption) of 
Exported Goods, and submit it with the registration documents to the 
tax administration. The Department has previously found this program to 
be countervailable. See CFS from the PRC.
    TTCA reported receiving VAT rebates on its purchases of 
domestically produced equipment under this program. Yixing Union and

[[Page 54379]]

Cogeneration did not use this program 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.
    Normally, we treat exemptions from indirect taxes and import 
charges, such as VAT rebates, as recurring benefits, consistent with 19 
CFR 351.524(c)(1), and allocate these benefits only in the year that 
they were received. However, when an indirect tax or import charge 
exemption is provided for, or tied to, the capital structure or capital 
assets of a firm, the Department may treat it as a non-recurring 
benefit and allocate the benefit to the firm over the AUL. See 19 CFR 
351.524(c)(2)(iii) and 19 CFR 351.524(d)(2).
    We requested that TTCA identify the category/kind of equipment for 
which it received VAT rebates from 2001 through the end of the POI. For 
one year, the total amount of the VAT rebates approved was less than 
0.5 percent of TTCA's total sales for that year. For that year, 
therefore, we do not reach the issue of whether the VAT rebates were 
tied to the capital structure or capital assets of the firm. Instead, 
we expense the benefit to the year in which it is received, consistent 
with 19 CFR 351.524(a).
    In another year, however, the total amount of VAT rebates exceeded 
0.5 percent of TTCA's total sales for that year. Based on TTCA's 
reported information, the VAT rebates were for capital equipment. See 
TQR, at Exhibit 39. Accordingly, the Department is treating the VAT 
rebates for this year as a non-recurring benefit consistent with 19 CFR 
351.524(c)(2)(iii).
    To calculate the countervailable subsidy for TTCA, we used our 
standard methodology for non-recurring benefits. See 19 CFR 351.524(b) 
and the Allocation Period section of this notice. Specifically, we used 
the discount rate described above in the Benchmarks and Discount Rates 
section to calculate the amount of the benefit for the POI. On this 
basis, we preliminarily determine that a countervailable subsidy of 
0.23 percent ad valorem exists for TTCA.

H. VAT and Duty 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 so long as the 
equipment does not fall into prescribed lists of non-eligible items. 
Qualified enterprises receive a certificate either from the NDRC or its 
provincial branch. The objective of the program is to encourage foreign 
investment and to introduce foreign advanced technology equipment and 
industry technology upgrades. To receive the exemptions, qualified 
enterprises must adequately document both the product eligibility and 
the eligibility of the imported article to the local Customs authority. 
The Department has previously found this program to be countervailable. 
See CFS from the PRC and Tires from the PRC.
    TTCA, Yixing Union and Cogeneration reported receiving VAT and duty 
exemptions under this program.
    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). We further determine the VAT and tariff exemptions under 
this program are specific under section 771(5A)(D)(iii)(I) because the 
program is limited to certain enterprises. See CFS Decision Memorandum, 
at Comment 16.
    Normally, we treat exemptions from indirect taxes and import 
charges, such as the VAT and tariff exemptions, as recurring benefits, 
consistent with 19 CFR 351.524(c)(1), and allocate these benefits only 
in the year that they were received. However, when an indirect tax or 
import charge exemption is provided for, or tied to, the capital 
structure or capital assets of a firm, the Department may treat it as a 
non-recurring benefit and allocate the benefit to the firm over the 
AUL. See 19 CFR 351.524(c)(2)(iii) and 19 CFR 351.524(d)(2).
    For TTCA, the total amount of the VAT and tariff exemptions for 
each year approved was less than 0.5 percent of TTCA's total sales for 
the respective year. Therefore, we do not reach the issue of whether 
TTCA's VAT and tariff exemptions were tied to the capital structure or 
capital assets of the firm. Instead, we expense the benefit to the year 
in which the benefit is received, consistent with 19 CFR 351.524(a). On 
this basis, we preliminarily determine that a countervailable subsidy 
of 0.08 percent ad valorem exists for TTCA.
    For Yixing Union, the total amount of the VAT and tariff exemptions 
approved for some years was less than 0.5 percent of Yixing Union's 
total sales. Therefore, we have expensed those amounts in the year in 
which they were received, consistent with 19 CFR 351.524(a). For those 
years in which the approved VAT and tariff exemptions were greater than 
0.5 percent of Yixing Union's total sales for that year, we are 
treating the exemptions as non-recurring benefits, consistent with 19 
CFR 351.524(c)(2)(iii), and allocating the benefits over the AUL.
    For Cogeneration, the total amount of the VAT and tariff exemptions 
approved for some years was less than 0.5 percent of the combined total 
sales of Yixing Union and Cogeneration (less any sales between the two 
companies) in those years. Therefore, we have expensed those amounts in 
the year in which they are received, consistent with 19 CFR 351.524(a). 
In other years, the VAT and tariff exemptions approved for Cogeneration 
were greater than 0.5 percent of the combined sales of Yixing Union and 
Cogeneration (less any sales between the two companies) sales for that 
year. Accordingly, we are treating the exemptions as non-recurring 
benefits, consistent with 19 CFR 351.524(c)(2)(iii), and allocating the 
benefit(s) over the AUL.
    To calculate the benefit for Yixing Union, we used our standard 
methodology for non-recurring benefits. See 19 CFR 351.524(b). 
Specifically, we used the discount rate described above in the 
``Benchmarks and Discount Rates'' section to calculate the amount of 
the benefit for the POI. First, we divided Yixing Union's VAT and 
tariff exemptions by Yixing Union's total sales during that period. 
Next, we divided Cogeneration's VAT and tariff exemptions by the 
combined total sales of Yixing Union and Cogeneration (less any sales 
between the two companies) during that period. Finally, we summed these 
two rates. On this basis, we preliminarily determine that Yixing Union 
received a countervailable subsidy of 0.69 percent ad valorem under 
this program.

I. Local Income Tax Exemption and Reduction Program for ``Productive'' 
FIEs

    Under Article 9 of the FIE Tax Law, the provincial governments have 
the authority to exempt the local income tax of three percent to FIEs. 
According to

[[Page 54380]]

the Regulations on Exemption and Reduction of Local Income Tax of FIEs 
in Jiangsu Province, (see GOC CVD Questionnaire Response at Exhibit I-
V-3) a ``productive'' FIE may be exempted from the 3 percent local 
income tax during the ``Two Free, Three Half'' period. Additionally, 
according to Article 6, FIEs eligible for the reduced income tax rate 
of 15 percent can also be exempted from paying local income tax. The 
Department has previously found this program to be countervailable. See 
CFS from the PRC and Tires from the PRC.
    Yixing Union and Cogeneration reported receiving an exemption from 
local income tax during the POI. TTCA, however, did not use this 
program during the POI.
    We preliminarily determine that the exemption from the local income 
tax received by ``productive'' FIEs under this program confers a 
countervailable subsidy. The exemption is a financial contribution in 
the form of revenue forgone by the government and it provides a benefit 
to the recipient in the amount of the tax savings. See section 
771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also 
preliminarily determine that the exemption 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.
    To calculate the benefit for Yixing Union, we treated the income 
tax savings enjoyed by Yixing Union and Cogeneration as a recurring 
benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of 
the tax savings, we compared the local income tax rate Yixing Union and 
Cogeneration would have paid in the absence of the program (i.e., three 
percent) with the income tax rate the companies actually paid. First, 
we divided Yixing Union's tax savings received during the POI by Yixing 
Union's total sales during that period. Second, we divided 
Cogeneration's tax savings received during the POI by the combined 
total sales of Yixing Union and Cogeneration (less any sales between 
the two companies) during that period. Finally, we summed these two 
rates. On this basis, we preliminarily determine that Yixing Union 
received a countervailable subsidy of 0.50 percent ad valorem under 
this program.

J. Anqiu Finance Bureau Grant

    TTCA reported receiving three grants in 2007 related to technology 
achievements and energy saving projects. See TQR, at page 49. Two of 
the grants are discussed in the ``Programs Preliminarily Determined To 
Be Not Countervailable'' section below. Current information on the 
record does not indicate that these grants are tied to any of the other 
programs discussed in this notice. Further, it does not appear that the 
Department has previously investigated any of the programs.
    TTCA reported receiving a non-recurring grant in 2007 from the 
Anqiu Finance Bureau. See TQR, at page 49. The GOC reported that to 
receive this grant an enterprise submits a project feasibility study to 
the municipal government who then, in turn, recommends the project to 
the Administration of Finance of Shandong Province and the Economic and 
Trade Commission of Shandong Province for approval. See G1SR (8/27), at 
Exhibit S1-18-3. We find that this grant is 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).
    Regarding specificity, information submitted by the GOC shows that 
grants provided under the program are available to enterprises whose 
projects meet certain energy and water saving criteria and are deemed 
to have economic and social benefit. See G1SR (8/27), at pages 27 and 
29. The GOC reported that eligibility is not limited by law or in fact, 
to any enterprise or group of enterprises, or to any industry or group 
of industries. See G1SR (8/2), at page 28. Therefore, we preliminarily 
determine that there is no basis to find this program de jure specific 
under section 771(5A)(D)(i) of the Act.
    In determining whether this program is de facto specific, we 
examine the four de facto specificity factors under section 
771(5A)(D)(iii) of the Act. Section 771(5A)(D)(iii) of the Act also 
provides that we take into account the length of time during which a 
subsidy program has been in operation when evaluating the four de facto 
specificity factors. In the case of a new subsidy program, the first 
three de facto specificity factors (i.e., limited number of users, 
dominant users, or disproportionately large user) may provide little or 
misleading indications regarding whether a program is de facto 
specific. See Countervailing Duties; Final Rule, 63 FR 65348, 65356 
(November 25, 1998) (``CVD Preamble''); SAA, at page 931. The GOC 
provided partial program usage data for 2006 and 2007 (the GOC stated 
that it had information on the number of grants but not the amount of 
grants) because the program only began in 2006. See G1SR (9/2), at page 
14. Consequently, in accordance with the CVD Preamble, we next consider 
the fourth de facto specificity factor (i.e., discretion) because the 
manner in which the GOC has exercised its discretion in the early 
stages of this program (e.g., by excluding certain applicants and 
limiting the benefit to a particular industry) might impact our 
analysis of the first three de facto specificity factors. See CVD 
Preamble, 63 FR at 65356; SAA, at page 931.
    As noted above, in addition to meeting specified energy and water 
saving criteria, projects submitted by enterprises must be recommended 
by municipal levels of government and deemed to provide economic and 
social benefit to receive the grant. See G1SR (8/27), at page 29. It 
appears that the GOC has the ability to exercise discretion in the 
decision to provide grants under this program. Consequently, in 
contrast to the ``Investment Development Award'' program noted below, 
at the early stage of this program, we are able to rely on the first 
three de facto specify factors provided under 771(5A)(D)(iii) of the 
Act to preliminarily determine whether this program is specific as a 
matter of fact.
    The GOC usage data indicates six enterprises comprising two 
industries received grants in 2007. See G1SR (9/2), at page 14. 
Consequently, we find that the actual recipients of the subsidy are 
limited in number on both an enterprise and industry basis within the 
meaning of section 771(5A)(D)(iii)(I) of the Act. Further, in 
accordance with the Department's regulations, our de facto specificity 
analysis is sequential and we will find a domestic subsidy to be 
specific based on the presence of a single factor. See 19 CFR 
351.502(a). Therefore, we are not performing an analysis to determine 
whether the enterprise or industry is a dominant or disproportionately 
large user. In addition, as noted above, the GOC did not provide the 
amounts of benefits received by industry, which is required to 
determine dominant or disproportionately large usage.
    To calculate the benefit, we divided the amount received from the 
non-recurring grant by TTCA's total sales in 2007. On this basis, we 
preliminarily determine the countervailable subsidy to be 0.20 percent 
ad valorem for this program.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Excessive VAT Rebates on Export

    The GOC began refunding the VAT for exported products in 1984. See, 
GQR, at page 83. The current rules governing the program, Provisional 
VAT Rules of China (Decree 134 of the State Council) (``Provisional VAT 
Rules''), were

[[Page 54381]]

promulgated in 1993. See id., at Exhibit I-T-3. Article 25 of the 
Provisional VAT Rules permits VAT rebates for exports.
    The GOC argues that an excessive rebate of VAT upon exports is not 
possible given the manner in which the system is structured.
    The Department has consistently found that the GOC's program to 
rebate VAT on exports does not result in an excessive VAT remission. 
See CWP Decision Memorandum, at page 16; LWRP Decision Memorandum at 
page 11; and Tires Decision Memorandum, at page 24. In those cases, we 
found no subsidy because VAT was assessed on home market sales at a 
rate of 17 percent, while the rebate was set at 13 percent. The same is 
true with respect to citric acid. See GQR, at page 80. Therefore, 
consistent with 19 CFR 351.517(a) and the above-cited determinations, 
we preliminarily find the VAT remission upon export is not excessive 
and does not confer a countervailable subsidy on the subject 
merchandise.
    In their allegation, petitioners additionally noted that citric 
acid producers may not pay VAT on their agricultural inputs. The GOC 
and the responding companies have reported that the VAT rate on corn 
(the agricultural input used to produce citric acid) is 13 percent and 
that this amount is paid by the citric acid producers on their 
purchases. See id., at page 80; TQR, at page 30; and YQR, at page 21. 
The GOC has further responded that: (i) Sellers of goods are 
responsible for paying the VAT to the government (Article 1 of the 
Provisional VAT Rules) and (ii) agricultural products sold by the 
agricultural producers that produce them are exempt from VAT (Article 
16 of the Provisional VAT Rules). See G1SR (8/27), at page 13. Thus, 
citric acid producers pay a VAT on their corn purchases in the sense 
that the VAT appears on the purchase invoices for corn and they deduct 
this VAT in preparing their VAT reconciliations (to calculate the 
amount of VAT they must remit on their sales of citric acid), but no 
VAT is remitted to the government by the agricultural producers selling 
the corn.
    Because citric acid producers pay the VAT on their corn purchases 
and it is the agricultural producers who are exempted from paying the 
VAT on their sales, we preliminarily determine that any potential 
subsidy arising from this exemption is conferred on the agricultural 
producers and not on the purchasers (i.e., citric acid producers). 
Therefore, we preliminarily determine that the VAT exemption on 
agricultural products does not provide a countervailable subsidy on the 
subject merchandise.
    As noted above, the VAT rate set for corn is 13 percent. TTCA 
reported that it was exempted from paying that VAT on its sales of corn 
scrap during the POI. See TQR, at page 49. Because any potential 
subsidy from such an exemption would be tied to sales of corn scrap, in 
accordance with 19 CFR 351.525(b)(5)(i), we preliminarily determine 
that there is no countervailable subsidy conferred on subject 
merchandise from the VAT exemption on corn scrap sales.

B. Science and Technology Reward--Anqiu City

    TTCA reported receiving a grant in 2007 as the result of a science 
and technology award. See TQR, at page 49. To calculate the potential 
benefit, we divided the amount received by TTCA's total sales in 2007. 
On this basis, we preliminarily determine that a potential 
countervailable subsidy of less than .005 percent ad valorem exists for 
TTCA. See TTCA Preliminary Calc Memo, at page 9. Where the 
countervailable subsidy rate for a program is less than .005 percent, 
the program is not included in the total CVD 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)). Consequently, we are exercising our 
discretion to not investigate the benefit provided by this non-
recurring subsidy.

C. Investment Development Award--Government of Anqiu

    TTCA was awarded the first grant under the ``Investment Development 
Award'' program by the People's Government of Anqiu for TTCA's 
investment in a technology project. See G1SR (8/27), at Exhibit S1-18-
1, page 3. We find that this grant is 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).
    Regarding specificity, information submitted by the GOC shows that 
grants provided under the program are available to any enterprise that 
has productive fixed asset investment for a single project of more than 
RMB 10 million. See G1SR (8/27), at Exhibit S1-18-1. If the 
aforementioned criterion is met, any enterprise will receive a benefit 
and there is no discretion to approve or disapprove. See id. Further, 
the GOC reported that eligibility is not limited by law or in fact, to 
any enterprise or group of enterprises, or to any industry or group of 
industries. See G1SR (8/27), at page 17. Therefore, we preliminarily 
determine that there is no basis to find this program de jure specific 
under section 771(5A)(D)(i) of the Act.
    In determining whether this program is de facto specific, we must 
examine the four de facto specificity factors under section 
771(5A)(D)(iii) of the Act. Section 771(5A)(D)(iii) of the Act also 
provides that we take into account the length of time during which a 
subsidy program has been in operation when evaluating the four de facto 
specificity factors. In the case of a new subsidy program, the first 
three de facto specificity factors (i.e., limited number of users, 
dominant users, or disproportionately large user) may provide little or 
misleading indications regarding whether a program is de facto 
specific. See CVD Preamble at 65356; SAA, at page 931.
    The GOC provided program usage data for 2007 only because the 
``Investment Development Award'' program was created in 2006, with no 
awards bestowed until 2007. See G1SR (8/27), at pages 14 and 18. 
Although the number of users were not large during the period, in 
accordance with the CVD Preamble, we also consider the fourth de facto 
specificity factor (i.e., discretion) because the manner in which the 
GOC has exercised its discretion in the early stages of this program 
(e.g., by excluding certain applicants and limiting the benefit to a 
particular industry) might impact our analysis of the first three de 
facto specificity factors. See CVD Preamble, 63 FR at 65356; SAA, at 
page 931.
    As noted above, any enterprise will receive grants provided under 
the ``Investment Development Award'' program if the enterprise meets a 
specified project investment threshold. It appears that the GOC does 
not have the ability to exercise discretion in the decision to provide 
grants under this program. Therefore, due to the GOC's apparent lack of 
discretion, at the early stage of this program, we preliminarily 
determine that it is not appropriate to rely on an analysis of the 
first three de facto specify factors provided under 771(5A)(D)(iii) of 
the Act to determine whether this program is specific as a matter of 
fact. Consequently, we do not find any basis to determine that the 
program is specific.

[[Page 54382]]

III. Programs Preliminarily Determined To Be Not Used By TTCA and 
Yixing Union

A. Discounted Loans for Export-Oriented Industries
B. Funds Provided for the Rationalization of the Citric Acid 
Industry
C. Loans Provided to the Northeast Revitalization Program
D. State Key Technology Renovation Project Fund
E. National Level Grants to Loss-making SOEs
F. Reduced Income Tax Rate for High or New Technology Enterprises
G. Income Tax Exemption Program for Export-Oriented FIEs
H. Tax Benefits to FIEs for Certain Reinvestment of Profits
I. Preferential Income Tax Rate for Research and Development at FIEs
J. Preferential Tax Programs for Encouraged Industries
K. Preferential Tax Policies for Township Enterprises
L. Provincial Level Grants to Loss-making SOEs
M. Reduced Income Tax Rates for Encouraged Industries in Anhui 
Province
N. Provision of Land for Less Than Adequate Remuneration in Anhui 
Province
O. Funds for Outward Expansion of Industries in Guangdong Province
P. Income Tax Exemption for FIEs Located in Jiangsu Province

    In our initiation, we included the program ``Income Tax Exemption 
for FIEs located in Jiangsu Province.'' According to the GOC, the 
Regulations on Exemption and Reduction of Local Income Tax of FIEs in 
Jiangsu Province (Order of the People's Government of Jiangsu Province, 
June 17, 1992) includes a ``basket'' of benefits which can be enjoyed 
by FIEs located in Jiangsu province. See GQR, at Exhibit I-V-3.
    Certain benefits under this program are already addressed under the 
``Two Free, Three Half'' program and the ``Local Income Tax Exemption 
and Reduction Program for 'Productive' FIEs.'' Therefore, we are 
treating the ``Income Tax Exemption for FIEs located in Jiangsu 
Province'' as not used during the POI to avoid the double-counting of 
subsidies.

Q. Preferential Tax Programs for Enterprises Located in the Su Qian 
Economic Development Zone
R. Provision of Land for LTAR in the Su Qian Economic Development 
Zone
S. Provision of Electricity for LTAR in the Su Qian Economic 
Development Zone
T. Loans and Interest Subsidies Pursuant to the Liaoning Province's 
Five-Year Framework
U. Local Income Tax Exemptions and Reductions for Firms Located in 
Qilu Chemicals Industry Park
V. Preferential Tax Program for Enterprises Located in Shanxi 
Province
W. Funding for Enterprises under the Shanxi Province 10th Five-Year 
Plan
X. Export Interest Subsidy Funds for Enterprises Located in Shenzhen 
City
Y. Export Interest Subsidy Funds for Enterprises Located in Zhejiang 
Province
Z. Exemptions and Reductions in Taxes and Fees for Chemical Research 
and Development Institutions Located in Zhejiang Province
AA. Provision of Land for LTAR for Enterprises Located in Hangzhou 
Bay Chemical Park
BB. Provision of Electricity for LTAR for Enterprises Located in 
Hangzhou Bay Chemical Park

VI. Programs for Which More Information Is Required

    As mentioned under the Case History section of this notice, the 
Department recently determined to investigate several additional 
alleged subsides including: The Provision of TTCA's Plant and Equipment 
for LTAR; Provision of Land to SOEs for LTAR; Provision of Land in the 
YEDZ for LTAR; Provision of Land-use Fees in Jiangsu Province for LTAR; 
Provision of Land in the Anqiu City Economic Development Zone for LTAR; 
Administration Fee Exemption in Anqiu City; Exemption of Water and 
Sewage Fees in Anqiu City; Tax Grants, Rebates and Credits in the 
Yixing Economic Development Zone (``YEDZ''); Provision of Water in the 
YEDZ for LTAR; Provision of Electricity in the YEDZ for LTAR; Provision 
of Construction Services in the YEDZ for LTAR; Administration Fee 
Exemption in the YEDZ; and Grants to FIEs for Projects in the YEDZ. We 
intend to seek information on these programs from the GOC and the 
respondents, and issue an interim analysis describing our preliminary 
findings with respect to these programs before the final determination 
so that parties will have the opportunity to comment on our findings.

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 an individual rate for each producer/exporter of the subject 
merchandise. We preliminarily determine the total estimated net 
countervailable subsidy rates to be:

------------------------------------------------------------------------
                                                             Net subsidy
                   Exporter/manufacturer                         rate
------------------------------------------------------------------------
TTCA Co., Ltd..............................................         1.41
Yixing Union Biochemical Co., Ltd.; and Yixing Union                3.92
 Cogeneration Co., Ltd.....................................
Anhui BBCA Biochemical Co., Ltd............................        97.72
All-Others.................................................         2.67
------------------------------------------------------------------------

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for the companies under investigation, 
Anhui BBCA, TTCA and Yixing Union. Sections 703(d) and 705(c)(5)(A)(i) 
of the Act states that for companies not investigated, we will 
determine an all-others rate equal to the weighted average 
countervailable subsidy rates established for exporters and producers 
individually investigated, excluding any zero and de minimis 
countervailable subsidy rates, and any rates determined entirely under 
section 776 of the Act.
    Petitioners contend that because Anhui BBCA is owned by the 
government, the Department cannot treat the GOC as cooperative and 
Anhui BBCA as non-cooperative. See Petitioners' Comments on Anhui BBCA 
and the All-Others Rate, at page 4. Consequently, Petitioners argue 
that because the GOC is a fully cooperating respondent, Anhui BBCA's 
rate cannot be excluded from the all-others rate. See Petitioners' 
Comments on Anhui BBCA and the all-others Rate, at page 3. Finally, 
Petitioners believe that Anhui BBCA is not participating in this 
investigation in an attempt to avoid its inclusion in the calculation 
of the all-others rate. See Petitioners' Comments on Anhui BBCA and the 
All-Others Rate, at page 4. Petitions cite to Live Cattle From Canada, 
where the Department included a non-cooperating respondent in the 
calculation of the all-others rate to mitigate potential selective 
participation by respondents. See Petitioners' Comments on Anhui BBCA 
and the All-Others Rate, at pages 5 and 6, citing Notice of Final 
Determination of Sales at Less Than Fair Value: Live Cattle From 
Canada, 64 FR 56768, 56743 (October 21, 1999) (``Live Cattle From 
Canada'').
    The GOC notes that section 705(c)(5)(A)(i) of the Act explains that 
the all-others rate must exclude any rates determined entirely under 
section 776 of the Act (i.e., a rate determined using facts otherwise 
available) and the statute affords the Department no discretion to do 
otherwise. See GOC's Response to Petitioners' Comments on Anhui BBCA 
and the All-Others Rate, at page 2. Also, the GOC believes that 
Petitioners' reliance upon Live Cattle

[[Page 54383]]

From Canada is misplaced. See GOC's Response to Petitioners' Comments 
on Anhui BBCA and the All-Others Rate, at pages 3-5. Finally, the GOC 
argues that the Department has always treated the GOC and SOEs as 
distinct entities. Otherwise, it would be difficult to understand how 
the Department could evaluate a single entity providing a financial 
contribution or benefit to itself. See GOC's Response to Petitioners' 
Comments on Anhui BBCA and the All-Others Rate, at page 9.
    As noted in the Use of Facts Otherwise Available section above, 
because Anhui BBCA did not respond to the Department's questionnaire, 
pursuant to section 776(a)(2)(A) and (C) of the Act, we have based the 
CVD rate of Anhui BBCA entirely on facts otherwise available. The fact 
that Anhui BBCA is an SOE does not mean that the GOC's participation 
makes Anhui BBCA a cooperative respondent. Nor does it lead us to 
conclude that the rate we have calculated for Anhui BBCA is based on 
anything other than facts available.
    With respect to Live Cattle From Canada, the Department is clearly 
concerned when a company withdraws its response in order to manipulate 
an all-others rate. However, those are not the facts we have here. 
Anhui BBCA elected not to respond to the questionnaire. This occurs 
frequently in our investigations (and administrative reviews). Section 
776(b) establishes the means for addressing this, i.e., the application 
of AFA, which is what we have done in this case. Therefore, because 
Anhui BBCA's rate is based entirely on facts available, we are not 
including it in the all-others rate, pursuant to section 
705(c)(5)(A)(i) of the Act.
    To calculate the all-others rate, we have taken a simple average of 
the two responding firms' rates. We have not weight averaged the rates 
of TTCA and Yixing Union because doing so risks disclosure of 
proprietary information. Finally, because TTCA's rate includes export 
subsidies, the all-others rate also includes export subsidies.
    In accordance with sections 703(d)(1)(B) and (2) of the Act, we are 
directing U.S. Customs and Border Protection (``CBP'') to suspend 
liquidation of all entries of citric acid 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.

Program-Wide Change

    In the GOC Pre-Prelim Comments, the GOC argues that if the 
Department preliminarily finds countervailable certain programs related 
to the FIE Tax Law (e.g., ``Two Free, Three Half,'' ``Local Income Tax 
Exemption and Reduction Program for 'Productive' FIEs,'' and ``Income 
Tax Exemption for FIEs Located in Jiangsu Province''), it should 
exclude these rates from the companies' cash deposit rate pursuant to 
19 CFR 351.526, due to a program-wide change. Specifically, the law 
that established these programs, the FIE Tax Law, was repealed 
effective January 1, 2008. Thus, according to the GOC, the programs 
terminated before the preliminary determination. The GOC further 
contends that no respondent can receive residual benefits under the 
``Two Free, Three Half'' program and that no companies can receive 
residual benefits under the ``Local Income Tax Exemption and Reduction 
Program for `Productive' FIEs'' or the ``Income Tax Exemption for FIEs 
Located in Jiangsu Province.''
    Under 19 CFR 351.526(b), a program-wide change: ``(1) Is not 
limited to an individual firm or firms; and (2) is effectuated by an 
official act * * * '' Moreover, 19 CFR 351.526(a) states that the 
Department may take a program-wide change into account when 
establishing the estimated CVD cash deposit rate if (1) the program-
wide change occurred subsequent to the POI, but prior to the 
preliminary determination; and (2) the change in the amount of 
countervailable subsidies provided under the program is able to be 
measured. However, the Department will not adjust the cash deposit rate 
for a terminated program if we determine that residual benefits may 
continue to be bestowed pursuant to 19 CFR 351.526(d)(1).
    For the ``Two Free, Three Half'' program, we agree with the GOC 
that the FIE Tax Law was repealed prior to the date of the preliminary 
determination and may meet the criteria under 19 CFR 351.526(b)(2). 
However, in its responses to the Department's questions on the ``Two 
Free, Three Half'' program, the GOC stated that once the FIE Tax Law 
was repealed, the Corporate Income Tax Law became effective. See GQR at 
I-64. According to Article 57 of the Corporate Income Tax Law, and 
provisions of the State Council, enterprises established prior to the 
promulgation of the Corporate Income Tax Law may enjoy reduced tax 
rates and continue to enjoy preferential treatments within five years 
after the law is promulgated. Additionally, companies that have not 
been able to enjoy the preferential treatments of the FIE Tax Law, 
before the termination of the law because the enterprise was 
unprofitable, can still claim benefits under the new Corporate Income 
Tax Law.
    Although the GOC may be correct in its statement that no respondent 
will enjoy residual benefits from this program, the Corporate Income 
Tax Law allows FIEs within the PRC to continue to receive benefits from 
this program beyond the termination date. The GOC makes note of this 
fact in its response. See G1SR (8/27), at page 10. Thus, while benefits 
to the two cooperating respondents in this investigation would be 
terminated under the programs examined, the program's overall residual 
benefits have not been terminated. Therefore, we preliminarily 
determine that the criteria under 19 CFR 351.526(a) have not been met 
and we decline to adjust Yixing Union's rate to reflect termination of 
the program. See 19 CFR 351.526(d)(1).
    For the ``Local Income Tax Exemption and Reduction Programs for 
`Productive' FIEs,'' the GOC has stated in its response that there are 
no provisions continuing this program in the Corporate Income Tax Law. 
See GQR, at page 93. Based on our review of the Corporate Income Tax 
Law, we are not able to confirm the GOC's claim. Moreover, the Notice 
of the State Council on the Implementation of the Transitional 
Preferential Policies in respect of Enterprise Income Tax (No. 39 of 
the State Council) states that enterprises that previously benefited 
from the ``Two Free, Three Half'' program and other preferential 
treatment in the form of tax deductions and exemptions may continue to 
enjoy those benefits. Therefore, it is unclear whether local income tax 
reductions and exemptions will continue for some transition period. 
Thus, we preliminarily determine that the criteria under 19 CFR 
351.526(a) have not been met and decline to set Yixing Union's rate to 
reflect termination of the program.
    For the ``Income Tax Exemption for FIEs Located in Jiangsu 
Province,'' the benefits received under this program have already been 
captured under the ``Local Income Tax Exemption and Reduction Program 
for `Productive' FIEs'' program, and ``Two Free, Three Half'' program. 
Therefore, no rate has been set for this program.
ITC Notification
    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are

[[Page 54384]]

making available to the ITC all non-privileged 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.

Disclosure and Public Comment

    In accordance with 19 CFR 351.224(b), we will disclose to the 
parties the calculations for this preliminary determination within five 
days of its announcement. Case briefs for this investigation must be 
submitted no later than one week after the issuance of the last 
verification report. See 19 CFR 351.309(c) (for a further discussion of 
case briefs). 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, N.W., 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: September 12, 2008.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E8-21949 Filed 9-18-08; 8:45 am]
BILLING CODE 3510-DS-P
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