70 FR 67412, November 7, 2005

DEPARTMENT OF COMMERCE

International Trade Administration

A-570-899

 
Preliminary Determination of Sales at Less Than Fair Value: 
Certain Artist Canvas from the People's Republic of China

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

EFFECTIVE DATE: November 7, 2005.
SUMMARY: We preliminarily determine that artist canvas from the 
People's Republic of China (``PRC'') is being, or is likely to be, sold 
in the United States at less than fair value (``LTFV''), as provided in 
section 733 of the Tariff Act of 1930, as amended (``the Act''). The 
estimated margins of sales at LTFV are shown in the ``Preliminary 
Determination'' section of this notice.

FOR FURTHER INFORMATION CONTACT: Jon Freed or Michael Holton, AD/CVD 
Operations, Office 8, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC, 20230; telephone: (202) 482-
3818 or 482-1324, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On March 31, 2005, the Department of Commerce (``Department'') 
received a Petition on imports of certain artist canvas from the PRC 
(``Petition'') filed in proper form by Tara Materials Inc. (``Tara'' or 
``Petitioner'') on behalf of the domestic industry and workers 
producing certain artist canvas. On April 7, 2005, the Department 
clarified that the official filing date for the Petition was April 1, 
2005, and that the proper period of investigation (``POI'') is July 1, 
2004, through December 31, 2004. See Memorandum from Edward Yang to 
Barbara Tillman: Decision Memo Concerning Petition Filing Date and 
Period of Investigation, April 7, 2005. On April 7, 2005, and April 14, 
2005, the Department requested clarification of certain areas of the 
Petition and received responses to those requests on April 12, 2005, 
April 15, 2005, and April 18, 2005. This investigation was initiated on 
April 28, 2005. See Initiation of Antidumping Duty Investigation: 
Certain Artist Canvas from the People's Republic of China, 70 FR 21996 
(April 28, 2005) (``Notice of Initiation''). Additionally, in the 
Notice of Initiation, the Department applied the modified process by 
which exporters and producers may obtain separate-rate status in NME 
investigations. The new process requires exporters and producers to 
submit a separate-rate status application. See Policy Bulletin 05.1: 
Separate-Rates Practice and Application of Combination Rates in 
Antidumping Investigations involving Non-Market Economy Countries, 
(April 5, 2005), (``Policy Bulletin 05.1'') available at http://ia.ita.doc.gov/policy/bull05-1.pdf.
 However, the standard for 

eligibility for a separate rate (which is whether a firm can 
demonstrate an absence of both de jure and de facto governmental 
control over its export activities) has not changed.
    On April 28, 2005, the Department requested quantity and value 
(``Q&V'') information from a total of six producers of artist canvas in 
the PRC which were identified in the petition and for which the 
Department was able to locate contact information. On April 28, 2005, 
the Department also sent the Government of the PRC a letter requesting 
assistance in locating all known Chinese producers/exporters of artist 
canvas who exported artist canvas to the United States during the POI, 
July 1, 2004, through December 31, 2004. In addition, on May 11, 2005, 
in response to a request from ColArt Americas Inc. (``ColArt''), the 
Department requested Q&V information from ColArt.
    On May 16, 2005, the Department received Q&V responses from four 
Chinese producers/exporters of artist canvas: Hangzhou Haili Electronic 
Equipment Co., Ltd. (``Haili''); ColArt; Ningbo Conda Import & Export 
Co., Ltd. (``Ningbo Conda''); and Wuxi Phoenix Artist Materials Co., 
Ltd. (``Phoenix Materials''). On May 16, 2005, the Department also 
received a Q&V response from Textus Industries stating that it is a 
U.S. importer and it is not a producer or exporter of subject 
merchandise. The Government of the PRC did not respond to the 
Department's April 28, 2005, letter requesting assistance in 
identifying producers and exporters of the subject merchandise in the 
PRC. On June 2, 2005, the Department requested clarifying Q&V 
information from Haili, ColArt, Ningbo Conda and Phoenix Materials. On 
June 6, 2005, we received responses from Haili, ColArt, Ningbo Conda 
and Phoenix Materials clarifying their Q&V information.
    On May 13, 2005, the Department requested comments from all 
interested parties on proposed control numbers (``CONNUMs'') to be 
assigned the subject merchandise. On May 23, 2005, we received comments 
from: Michaels Stores, Inc., Aaron Brothers, Macpherson's ColArt 
Americas Inc., Crafts, Etc!, Ltd./Hobby Lobby Stores, Inc., and Jerry's 
Artarama, Inc. (collectively, ``Importers''); Petitioner; and Phoenix 
Materials.
    On May 24, 2005, the United States International Trade Commission 
(``ITC'') issued its affirmative preliminary determination that there 
is a reasonable indication that an industry in the United States is 
materially injured by reason of imports from the PRC of certain artist 
canvas. The ITC's determination was published in the Federal Register 
on May 24, 2005. See Investigation Nos. 731-TA-1091 (Preliminary), 
Artists' Canvas from China, 70 FR 29781 (May 24, 2005).
    On May 25, 2005, the Department determined that India, Indonesia, 
Sri Lanka, the Philippines, and Egypt are countries comparable to the 
PRC in terms of economic development. See Memorandum from Ron 
Lorentzen, Acting Director, Office of Policy to Robert Bolling, Program 
Manager, China/NME Group, Office 8: Antidumping Duty Investigation of 
Certain Artist Canvas from the People's Republic of China (PRC): 
Request for a List of Surrogate Countries, dated May 25, 2005 (``Office 
of Policy Surrogate Countries Memorandum'').
    On May 27, 2005, the Department requested that the parties submit 
comments on surrogate country selection. On June 24, 2005, we received 
comments regarding the selection of a surrogate country from the 
Petitioner and from the Importers. Both the Petitioner and Importers 
argued that India is the appropriate surrogate country.
    On May 27, 2005, we received separate rate applications from 
Hangzhou Foreign Relation & Trade Service Co. Ltd. (``HFERTS'') and 
Jiangsu Animal By-products Import & Export Group Corp. (``Jiangsu By-
products''). On June 16, 2005, we

[[Page 67413]]

requested additional information from HFERTS regarding its separate 
rate application.
    On June 9, 2005, the Department issued its respondent-selection 
memorandum, selecting the following two companies as mandatory 
respondents in this investigation: Ningbo Conda and Phoenix Materials. 
See Memorandum from Wendy J. Frankel, Director, AD/CVD Enforcement, 
Office 8, to Edward Yang, Senior Enforcement Coordinator, China/NME 
Group, Selection of Respondents for the Antidumping Duty Investigation 
of Artist Canvas from the People's Republic of China (``Respondent 
Selection Memo''), dated June 9, 2005.
    On June 13, 2005, the Department issued its Sections A, C, D, and 
E, questionnaire to Ningbo Conda and Phoenix Materials. On June 13, 
2005, we also issued a Sections A, C, D, and E questionnaire to the 
Chinese Government (i.e., Ministry of Commerce).
    On June 27, 2005, Phoenix Materials requested that it be excused 
from submitting the factors of production spreadsheet contained in 
Appendix VI to the Department's original questionnaire. On July 14, 
2005, we informed Ningbo Conda and Phoenix Materials that we had 
revised the factors of production spreadsheet, and created a 
spreadsheet for this investigation that both respondents are required 
to complete.
    On July 1, 2005, we provided a one-week extension until July 11, 
2005, to Ningbo Conda for its response to our Section A questionnaire. 
Additionally, on July 5, 2005, we provided a two-business day extension 
until July 7, 2005, to Phoenix Materials for its response to our 
Section A questionnaire. Further, on July 13, 2005, we provided an 
extension until July 25, 2005, to all mandatory respondents to respond 
to Sections C, D, and E of the questionnaire. For a detailed discussion 
on specific mandatory respondent extensions, please see the company-
specific section for each mandatory respondent below.
    On July 29, 2005, the Department determined that India was the 
appropriate surrogate country to use in this investigation. See 
Memorandum to Wendy J. Frankel, Director, AD/CVD Enforecement, Office 
8, from Michael Holton, Case Analyst, through Robert Bolling, Program 
Manager: Antidumping Duty Investigation on Certain Artist Canvas from 
the People's Republic of China (``Surrogate-Country Memorandum''), 
dated July 29, 2005. We received comments from interested parties 
regarding our selection of India as the surrogate country. For a 
detailed discussion of the comments regarding the surrogate country, 
please see the ``Surrogate Country'' section below. Additionally, on 
July 13, 2005, we extended the time period for interested parties to 
provide surrogate values for the factors of production until August 1, 
2005. On July 29, 2005, we received a request from the Importers to 
further extend the deadline for supplying surrogate-value information. 
On August 1, 2005, we informed all interested parties that we were 
again extending the time period to provide surrogate-value information 
until August 5, 2005.
    On August 5, 2005, Petitioner, Ningbo Conda, and Phoenix Materials 
submitted surrogate-value information. On September 2, 2005, Petitioner 
submitted comments on respondents' surrogate-value information.
    On August 11, 2005, Petitioner made a timely request pursuant to 19 
CFR Sec. 351.205(e) for a twenty-nine day postponement of the 
preliminary determination, until October 7, 2005. On August 19, 2005, 
the Department published a postponement of the preliminary antidumping 
duty determination on artist canvas from the PRC. See Notice of 
Postponement of the Preliminary Determination of Certain Artist Canvas 
from the People's Republic of China Antidumping Duty Investigation, 70 
FR 48667 (August 19, 2005). Additionally, on September 29, 2005, 
Petitioner made another timely request pursuant to 19 CFR 
Sec. 351.205(e) for an additional twenty-one day postponement of the 
preliminary determination, until October 28, 2005. On October 13, 2005, 
the Department published a postponement of the preliminary antidumping 
duty determination on artist canvas from the PRC. See Notice of 
Postponement of the Preliminary Determination of Certain Artist Canvas 
from the People's Republic of China Antidumping Duty Investigation, 70 
FR 59718 (October 13, 2005).

Company-Specific Chronology

    As described above, the Department staggered its issuance of 
sections of the antidumping questionnaire to the mandatory respondents. 
Upon receipt of the various responses, the Petitioners provided 
comments and the Department issued supplemental questionnaires. The 
chronology of this stage of the investigation varies by respondent. 
Therefore, the Department has separated by company the following 
discussion of its information-gathering process after issuance of the 
questionnaire.

Ningbo Conda

    On May 27, 2005, Ningbo Conda submitted a separate rate 
application. On July 11, 2005, Ningbo Conda submitted its response to 
Section A of the questionnaire. On July 25, 2005, Ningbo Conda 
submitted its response to Sections C and D of the questionnaire. On 
August 3, 2005, the Department issued a Supplemental Section A 
questionnaire covering Ningbo Conda's July 11, 2005, Section A 
response. On July 28, 2005, Petitioners submitted deficiency comments 
on the Section A response of Ningbo Conda. On August 19, 2005, Ningbo 
Conda submitted its response to the Supplemental Section A 
questionnaire. On August 15, 2005, Petitioners submitted deficiency 
comments on the Sections C and D responses of Ningbo Conda. On August 
18, 2005, the Department issued a Supplemental Sections C and D 
questionnaire covering Ningbo Conda's July 25, 2005, Sections C and D 
response. On September 9, 2005, Ningbo Conda submitted its response to 
the Department's August 18, 2005, Supplemental Sections C and D 
questionnaire. On September 14, 2005, the Department issued a 
Supplemental Sections A and C questionnaire requesting financial 
information and a new U.S. sales database. On September 21, 2005, 
Ningbo Conda submitted its response to the Department's September 14, 
2005, Supplemental Sections A and C questionnaire. On September 21, 
2005, the Department issued a Supplemental Sections A, C, and D 
questionnaire covering Ningbo Conda's responses. On September 28, 2005, 
Ningbo Conda submitted its response to the Department's Supplemental 
Sections A, C, and D questionnaire. On October 3, 2005, Petitioners 
submitted comments regarding Ningbo Conda's September 28, 2005, 
response. On October 3, 2005, the Department issued a Supplemental 
Sections A, C, and D questionnaire covering Ningbo Conda's responses. 
On October 7, 2005, the Department issued a Supplemental Sections C 
questionnaire covering Ningbo Conda's responses. On October 4, 2005, 
Ningbo Conda's U.S. affiliate submitted a response to the Department's 
September 21, 2005, Supplemental Sections A, C, and D questionnaire. On 
October 19, 2005, Ningbo Conda submitted a response to the Department's 
October 3, 2005, Supplemental Sections A, C, and D questionnaire. On 
October 19, 2005, Ningbo Conda submitted a response to the Department's 
Supplemental Sections C questionnaire.

[[Page 67414]]

Phoenix Materials

    On July 7, 2005, Phoenix Materials submitted its response to 
Section A of the questionnaire. On July 25, 2005, Phoenix Materials 
submitted its response to Sections C and D of the questionnaire. On 
July 25, 2005, the Department issued a Supplemental Section A 
questionnaire covering Phoenix Materials' July 7, 2005, Section A 
response. On July 28, 2005, Petitioners submitted deficiency comments 
on the Section A responses of Phoenix Materials. On August 10, 2005, 
Phoenix Materials submitted its response to the Supplemental Section A 
questionnaire. On August 15, 2005, Petitioners submitted deficiency 
comments on the Sections C and D responses of Phoenix Materials. On 
August 19, 2005, the Department issued a Supplemental Section A-D 
questionnaire covering Phoenix Materials' July 28, 2005, Sections C and 
D response and its August 10, 2005, response to the Supplemental 
Section A questionnaire. On September 9, 2005, Phoenix Materials 
submitted its response to the Supplemental Sections A-D questionnaire 
issued on August 19, 2005. On September 20, 2005, the Department issued 
a Second Supplemental A-D questionnaire to Phoenix Materials. On 
September 30, 2005, Phoenix Materials submitted its response to the 
Second Supplemental A-D questionnaire.

Postponement of Final Determination

    Section 735(a) of the Act provides that a final determination may 
be postponed until no later than 135 days after the date of the 
publication of the preliminary determination if, in the event of an 
affirmative preliminary determination, a request for such postponement 
is made by exporters who account for a significant proportion of 
exports of the subject merchandise or, in the event of a negative 
preliminary determination, a request for such postponement is made by 
the Petitioners. The Department's regulations at 19 CFR 351.210(e)(2) 
require that requests by respondents for postponement of a final 
determination be accompanied by a request for an extension of the 
provisional measures from a four-month period to not more than six 
months.
    On October 5, 2005, Ningbo Conda requested that, in the event of an 
affirmative preliminary determination in this investigation, the 
Department postpone its final determination by 60 days until 135 days 
after the publication of the preliminary determination. As well, on 
October 26, 2005, Phoenix Materials requested that, in the event of an 
affirmative preliminary determination, the Department postpone its 
final determination by 60 days until 135 days after the publication of 
the preliminary determination. Additionally, Ningbo Conda and Phoenix 
Materials requested that the Department extend the provisional measures 
under Section 733(d) of the Act. Accordingly, because we have made an 
affirmative preliminary determination and the requesting parties 
account for a significant proportion of the exports of the subject 
merchandise, pursuant to 735(a)(2) of the Act, we have postponed the 
final determination until no later than 135 days after the date of 
publication of the preliminary determination and are extending the 
provisional measures accordingly.

Period of Investigation

    The POI is July 1, 2004 through December 31, 2004. This period 
corresponds to the two most recent fiscal quarters prior to the month 
of the filing of the petition (March 31, 2005). See 19 CFR 
351.204(b)(1).

Scope of Investigation

    The products covered by this investigation are artist canvases 
regardless of dimension and/or size, whether assembled or unassembled, 
that have been primed/coated, whether or not made from cotton, whether 
or not archival, whether bleached or unbleached, and whether or not 
containing an ink receptive top coat. Priming/coating includes the 
application of a solution, designed to promote the adherence of artist 
materials, such as paint or ink, to the fabric. Artist canvases (i.e., 
pre-stretched canvases, canvas panels, canvas pads, canvas rolls 
(including bulk rolls that have been primed), printable canvases, floor 
cloths, and placemats) are tightly woven prepared painting and/or 
printing surfaces. Artist canvas and stretcher strips (whether or not 
made of wood and whether or not assembled) included within a kit or set 
are covered by this proceeding.
    Artist canvases subject to this investigation are currently 
classifiable under subheadings 5901.90.20.00 and 5901.90.40.00 of the 
Harmonized Tariff Schedule of the United States (HTSUS). Specifically 
excluded from the scope of this investigation are tracing cloths, 
``paint-by-number'' or ``paint-it-yourself'' artist canvases with a 
copyrighted preprinted outline, pattern, or design, whether or not 
included in a painting set or kit.\1\ Also excluded are stretcher 
strips, whether or not made from wood, so long as they are not 
incorporated into artist canvases or sold as part of an artist canvas 
kit or set. While HTSUS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding is dispositive.
---------------------------------------------------------------------------

    \1\ Artist canvases with a non-copyrighted preprinted outline, 
pattern, or design are included in the scope, whether or not 
included in a painting set or kit.
---------------------------------------------------------------------------

Scope Comments

    In accordance with the preamble to our regulations (see Antidumping 
Duties; Countervailing Duties, 62 FR 27296, 27323 (May 19, 1997)), we 
set aside a period of time for parties to raise issues regarding 
product coverage and encouraged all parties to submit comments within 
20 calendar days of publication of the Notice of Initiation (see 70 FR 
at 21996).
    The Department received numerous scope comments from a variety of 
interested parties. On May 18, 2005, the Importers provided scope 
comments concerning three product categories that they believe should 
be excluded from the scope of the investigation: (1) kits; (2) bleached 
canvas; and (3) splined canvas. Additionally, on May 18, 2005, Phoenix 
Materials requested confirmation that two products were outside the 
scope of the investigation: (1) artist canvas panels that are pre-
printed with copyrighted ``paint-by-number'' outlines; and (2) artist 
canvas panels that are pre-printed with copyrighted ``paint-by-number'' 
outlines that are sold within a boxed ``painting set.''
    On May 26, 2005, Petitioner responded to the above-mentioned 
comments stating that the Department should reject the exclusion 
requests of the Importers and Phoenix Materials. Additionally, on May 
18, 2005, Design Ideas, Ltd. (``Design Ideas'') (a U.S. Importer) 
provided scope comments arguing that the artist canvas it imports from 
the PRC produced by Hangzhou Haili is outside the scope of the 
investigation because India, not the PRC is the country of origin of 
the product. On June 2, 2005, Petitioner provided a rebuttal to Design 
Ideas' May 18th submission wherein Petitioner stated that the 
Department should deny Design Ideas' exclusion request for artist 
canvas produced by Hangzhou Haili. On July 1, 2005, Design Ideas 
responded to Petitioners' June 2nd submission, stating that it is clear 
from the record that India is the country of origin of its imported 
artist canvas. On July 25,

[[Page 67415]]

2005, Petitioner responded to Design Ideas' July 1st submission stating 
that this submission provided no support or citation for granting 
Design Ideas' exclusion request and Petitioner stated that the 
Department should deny Hangzhou Haili's exclusion request. On August 
10, 2005, Design Ideas responded to Petitioners' July 25th submission, 
stating that it is clear from the record that the artist canvases 
produced by Hangzhou Haili in the PRC using gesso primed canvas from 
India and imported into the United States are not within the scope of 
the investigation. On August 17, 2005, the Importers responded to both 
Design Ideas and Petitioner comments stating that it supports Design 
Ideas' request that artist canvases produced by Hangzhou Haili from 
gesso primed canvas produced in India should be excluded from the scope 
of the investigation. On September 2, 2005, Petitioner responded to 
both the August 10th and 17th submissions, wherein Petitioner stated 
that it continues to believe there is no basis to grant Design Ideas' 
request.
    Further, as part of this process, the Department has fully 
summarized and addresses all of the comments received to date in a 
memorandum to the file. See Memorandum to the File from Michael Holton, 
Case Analyst, to Wendy Frankel, Office Director, Antidumping Duty 
Investigation of Certain Artist Canvas from the People's Republic of 
China: Summary on Comments to the Scope, dated October 28, 2005 
(``Scope Memorandum'').
    For this preliminary determination, the Department has made 
determinations with respect to artist canvas kits, paint-by-number 
artist canvas, bleached canvas, and splined canvas in the Scope 
Memorandum. However, the Department has not yet determined whether 
artist canvas primed in India but processed and exported from the PRC 
is within the scope of this investigation. Nonetheless, the Department 
intends to issue a preliminary finding on whether artist canvas primed 
in India but processed and exported from the PRC is within the scope of 
this investigation. We will afford interested parties an opportunity to 
provide comments on our preliminary finding on this issue in their pre-
hearing briefs.

Selection of Respondents

    Section 777A(c)(1) of the Act directs the Department to calculate 
individual weighted-average dumping margins for each known exporter and 
producer of the subject merchandise. Section 777A(c)(2) of the Act 
gives the Department discretion, when faced with a large number of 
exporters/producers, to limit its examination to a reasonable number of 
such companies if it is not practicable to examine all companies. Where 
it is not practicable to examine all known producers/exporters of 
subject merchandise, this provision permits the Department to 
investigate either (1) a sample of exporters, producers, or types of 
products that is statistically valid based on the information available 
to the Department at the time of selection or (2) exporters/producers 
accounting for the largest volume of the merchandise under 
investigation that can reasonably be examined. After consideration of 
the complexities expected to arise in this proceeding and the resources 
available to it, the Department determined that it was not practicable 
in this investigation to examine all known producers/exporters of 
subject merchandise. Instead, we limited our examination to the two 
exporters and producers accounting for the largest volume of the 
subject merchandise pursuant to section 777A(c)(2)(B) of the Act. 
Ningbo Conda and Phoenix Materials, the exporters accounting for the 
largest volume of exports to the United States, account for a 
significant percentage of all exports of the subject merchandise from 
the PRC during the POI and were selected as mandatory respondents. See 
Respondent Selection Memo at 4.

Non-Market-Economy Country

    For purposes of initiation, the Petitioners submitted LTFV analyses 
for the PRC as a non-market economy. See Notice of Initiation 70 FR at 
21997. In every case conducted by the Department involving the PRC, the 
PRC has been treated as an Non-Market Economy (``NME'') country. In 
accordance with section 771(18)(C)(i) of the Act, any determination 
that a foreign country is an NME country shall remain in effect until 
revoked by the administering authority. See also Tapered Roller 
Bearings and Parts Thereof, Finished and Unfinished, (``TRBs'') From 
the People's Republic of China: Preliminary Results 2001-2002 
Administrative Review and Partial Rescission of Review, 68 FR 7500 
(February 14, 2003), unchanged in Final Results of 2001-2002 
Administrative Review: TRBs from the People's Republic of China, 68 FR 
70488 (December 18, 2003). Therefore, we have treated the PRC as an NME 
country for purposes of this preliminary determination.

Surrogate Country

    When the Department is investigating imports from an NME, section 
773(c)(1) of the Act directs it to base normal value, in most 
circumstances, on the NME producer's factors of production valued in a 
surrogate market-economy country or countries considered to be 
appropriate by the Department. In accordance with section 773(c)(4) of 
the Act, in valuing the factors of production, the Department shall 
utilize, to the extent possible, the prices or costs of factors of 
production in one or more market-economy countries that are at a level 
of economic development comparable to that of the NME country and are 
significant producers of comparable merchandise. The sources of the 
surrogate values we have used in this investigation are discussed under 
the normal value section below.
    The Department determined that India, Indonesia, Sri Lanka, the 
Philippines, and Egypt are countries comparable to the PRC in terms of 
economic development. See Office of Policy Surrogate Countries 
Memorandum. Once the countries that are economically comparable to the 
PRC have been identified, we select an appropriate surrogate country by 
determining whether an economically comparable country is a significant 
producer of subject merchandise and whether the data for valuing 
factors of production is both available and reliable.
    On June 24, 2005, the Department received arguments from interested 
parties on the surrogate country. Petitioner argues that India is the 
appropriate surrogate country for this investigation because India is 
at a comparable level of economic development with the PRC based on the 
Department's repeated use of India as a surrogate. Petitioner argues 
that India is a significant producer of identical and comparable 
merchandise. Additionally, Petitioner contends that India provides 
publicly available information on which to base surrogate values.
    Also, on June 24, 2005, the Importers argue that India is the only 
country that appears to meet the Department's criteria for a surrogate 
country based on economic comparability, significant production of 
comparable merchandise, and the availability of factor data. See the 
Selection of a Surrogate Country Memorandum dated August 3, 2004, for a 
complete description of the interested parties surrogate country 
arguments.
    Consequently, we have made the following determination about the 
use of India as a surrogate country: (1) it is a significant producer 
of comparable merchandise; (2) it is at a similar level of economic 
development pursuant to 733(c)(4) of the Act; and (3) we have reliable 
data from India that we can use

[[Page 67416]]

to value the factors of production. See Selection of a Surrogate 
Country Memorandum. Thus, we have calculated normal value using Indian 
prices when available and appropriate to value the factors of 
production of the artist canvas producers. We have obtained and relied 
upon publicly available information wherever possible. See Memorandum 
to the File from Jon Freed, Case Analyst, through Robert Bolling, 
Program Manager, and Wendy Frankel, Office Director: Certain Artist 
Canvas from the People's Republic of China: Factors Valuation 
Memorandum for the Preliminary Determination, dated October 7, 2005 
(``Factor-Valuation Memorandum'').
    In accordance with 19 CFR 351.301(c)(3)(i), for the final 
determination in an antidumping investigation, interested parties may 
submit publicly available information to value the factors of 
production within 40 days after the date of publication of the 
preliminary determination.

Affiliation

    Section 771(33) of the Act states that the Department considers the 
following entities to be affiliated: (A) Members of a family, including 
brothers and sisters (whether by whole or half blood), spouse, 
ancestors, and lineal descendants; (B) Any officer or director of an 
organization and such organization; (C) Partners; (D) Employer and 
employee; (E) Any person directly or indirectly owning, controlling, or 
holding with power to vote, 5 percent or more of the outstanding voting 
stock or shares of any organization and such organization; (F) Two or 
more persons directly or indirectly controlling, controlled by, or 
under common control with, any person; and (G) Any person who controls 
any other person and such other person.
    For purposes of affiliation, section 771(33) of the Act states that 
a person shall be considered to control another person if the person is 
legally or operationally in a position to exercise restraint or 
direction over the other person. In order to find affiliation between 
companies, the Department must find that at least one of the criteria 
listed above is applicable to the respondents.
    The Statement of Administrative Action accompanying the Uruguay 
Round Agreements Act (``SAA''), H.R. Doc. 103-316 (1994), indicates 
that stock ownership is not the only evidentiary factor that the 
Department may consider to determine whether a person is in a position 
to exercise restraint or direction over another person, e.g., control 
may be established through corporate or family groupings, or joint 
ventures and other means as well. See SAA at 838. See also Certain 
Fresh Cut Flowers from Colombia; Final Results of Antidumping Duty 
Administrative Review, 61 FR 42833, 42853 (August 19, 1996); and 
Certain Welded Carbon Steel Pipes and Tubes from Thailand: Final 
Results of Antidumping Duty Administrative Review, 62 FR 53808, 53810 
(October 16, 1997).
    To the extent that the affiliation provisions in section 771(33) of 
the Act do not conflict with the Department's application of separate 
rates and the statutory NME provisions in section 773(c) of the Act, 
the Department will determine that exporters and/or producers are 
affiliated if the facts of the case support such a finding. See Certain 
Preserved Mushrooms From the People's Republic of China: Preliminary 
Results of Sixth New Shipper Review and Preliminary Results and Partial 
Rescission of Fourth Antidumping Duty Administrative Review, 69 FR 
10410, 10413 (March 5, 2004) (``Mushrooms''), unchanged in Final 
Results and Final Rescission, in Part, of Antidumping Duty 
Administrative Review: Certain Preserved Mushrooms From the People's 
Republic of China, 70 FR 54361 (September 14, 2005).

Ningbo Conda

    Following these guidelines, we preliminarily determine that members 
of the Ningbo Conda Group (i.e., Ningbo Conda and Conda (Ningbo) 
Painting Material Mfg. (``Conda Painting'')) are affiliated pursuant to 
Section 771(33) of the Act. We also preliminarily determine that the 
Ningbo Conda Group should be treated as a single entity for the 
purposes of the antidumping investigation of certain artist canvas from 
the PRC.
    Further, based on our examination of the evidence presented in 
Ningbo Conda's questionnaire responses, we preliminarily find that 
Jinhua Universal Canvas Manufacturing Co., Ltd. (``Jinhua Universal'') 
is affiliated with the Ningbo Conda Group pursuant to sections 
771(33)(B), (E), (F) and (G) of the Act and should be treated as a 
single entity with the Ningbo Conda Group for purposes of calculating a 
dumping margin in this investigation. See Mushrooms, 69 FR 10410, 10413 
(March 5, 2004), see also, Hontex Enterprises, Inc. v. United States, 
248 F. Supp. 2d 1323, 1339-1345 (CIT 2003). We made this determination 
based on record evidence from Ningbo Conda's questionnaire responses 
that stated that Ningbo Conda, Conda Painting, and Jinhua Universal 
share the same director and the same director directly or indirectly 
owns and controls more than five percent of outstanding stock of each 
of these companies.
    Further, evidence presented in Ningbo Conda's questionnaire 
responses indicates that during the POI the Ningbo Conda Group sold 
subject merchandise to a U.S. reseller. The Department preliminary 
determines that under sections (711)(33)(E), (F), and (G) of the Act, 
this reseller is affiliated with several other entities all owned and 
controlled by the parent corporation. These entities are referred to as 
Group A in the affiliation memorandum. For the purposes of this 
analysis, we have treated Group A as a single entity.
    Additionally, we have determined that Group A and Jinhua Universal 
are affiliated parties, consistent with record evidence, the 
Department's practice and sections 771(33)(E) and (F) of the Act. We 
made this determination based on record evidence from Ningbo Conda's 
questionnaire responses that stated that Group A's parent corporation 
directly or indirectly owns and controls more than five percent of 
outstanding stock of Jinhua Universal.
    Furthermore, we have determined that the Ningbo Conda Group and 
Group A are affiliated under sections 771(33)(F) of the Act. We made 
this determination based on record evidence from Ningbo Conda's 
questionnaire responses that stated that Ningbo Conda's and Group A's 
ownership of Jinhua Universal result in Ningbo Conda's and Group A's 
direct or indirect control of Jinhua Universal. Accordingly, we are 
using Group A's U.S. downstream sales to the first U.S. unaffiliated 
customer in our margin calculation. See Memorandum to Wendy Frankel, 
Director, Office 8, NME/China Group, through Robert Bolling, Program 
Manager, From Michael Holton, Case Analyst, Antidumping Duty 
Investigation of Certain Artist Canvas from the People's Republic of 
China: Affiliation of Ningbo Conda, dated October 28, 2005 
(``Affiliation Memorandum'').

Phoenix Materials

    Following these guidelines, we preliminarily determine that Phoenix 
Materials, Wuxi Phoenix Stationary Co. Ltd (``Phoenix Stationary''), 
and Shuyang Phoenix Artist Materials Co. Ltd. (``Shuyang Phoenix''), 
collectively, (``Phoenix Group'') are affiliated pursuant to sections 
771(33)(E) and (G) of the Act and that these companies should be 
treated as a single entity for the purposes of the antidumping 
investigation of artist canvas from the PRC. Based on our examination 
of the

[[Page 67417]]

evidence presented in Phoenix Materials' questionnaire responses, we 
have determined that: (1) Phoenix Materials controls a majority of 
Phoenix Stationary based on stock-ownership, and Phoenix Materials 
controls Shuyang Phoenix; (2) Phoenix Materials, Phoenix Stationary, 
and Shuyang Phoenix have overlapping managers and directors; and (3) 
Phoenix Materials and Phoenix Stationary share production facilities 
and production records. See Memorandum to Wendy Frankel, Director, 
Office 8, NME/China Group, through Robert Bolling, Program Manager, 
From Jon Freed, Case Analyst, Antidumping Duty Investigation of Certain 
Artist Canvas from the People's Republic of China: Phoenix Affiliation 
and Treatment as a Single Entity of Phoenix Materials and its Members, 
dated October 28, 2005 (``Affiliation/Single Entity Treatment 
Memorandum'').

Separate Rates

    In proceedings involving NME countries, the Department begins with 
a rebuttable presumption that all companies within the country are 
subject to government control and, thus, should be assigned a single 
antidumping duty deposit rate. It is the Department's policy to assign 
all exporters of merchandise subject to investigation in an NME country 
this single rate unless an exporter can demonstrate that it is 
sufficiently independent so as to be entitled to a separate rate. The 
two mandatory respondents and the two Separate Rate Applicants have 
provided company-specific information and each has stated that it meets 
the standards for the assignment of a separate rate.
    We have considered whether each of the four companies referenced 
above is eligible for a separate rate. The Department's separate-rate 
test to determine whether the exporters are independent from government 
control does not consider, in general, macroeconomic/border-type 
controls, e.g., export licenses, quotas, and minimum export prices, 
particularly if these controls are imposed to prevent dumping. The test 
focuses, rather, on controls over the investment, pricing, and output 
decision-making process at the individual firm level. See Certain Cut-
to-Length Carbon Steel Plate from Ukraine: Final Determination of Sales 
at Less than Fair Value, 62 FR 61754, 61758 (November 19, 1997); and 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
from the People's Republic of China: Final Results of Antidumping Duty 
Administrative Review, 62 FR 61276, 61279 (November 17, 1997).
    To establish whether a firm is sufficiently independent from 
government control of its export activities to be entitled to a 
separate rate, the Department analyzes each entity exporting the 
subject merchandise under a test arising from the Final Determination 
of Sales at Less Than Fair Value: Sparklers from the People's Republic 
of China, 56 FR 20588 (May 6, 1991) (``Sparklers''), as amplified by 
Final Determination of Sales at Less Than Fair Value: Silicon Carbide 
from the People's Republic of China, 59 FR 22585 (May 2,1994) 
(``Silicon Carbide''). In accordance with the separate-rates criteria, 
the Department assigns separate rates in NME cases only if respondents 
can demonstrate the absence of both de jure and de facto governmental 
control over export activities.
1. Absence of De Jure Control
    The Department considers the following de jure criteria in 
determining whether an individual company may be granted a separate 
rate: (1) an absence of restrictive stipulations associated with an 
individual exporter's business and export licenses; (2) any legislative 
enactments decentralizing control of companies; and (3) other formal 
measures by the government decentralizing control of companies. See 
Sparklers, 56 FR at 20589.
    Our analysis shows that the evidence on the record supports a 
preliminary finding of the absence of de jure governmental control for 
Ningbo Conda Group (Ningbo Conda and its affiliated exporters, Conda 
Painting and Jinhua Universal), Phoenix Materials (and its affiliated 
exporter Phoenix Stationary), HFERTS, and Jiangsu By-products based on 
the criteria listed above. See Memorandum to Wendy Frankel, Office 
Director, China/NME Group, through Robert Bolling, Program Manager, 
from Jon Freed and Michael Holton, Case Analysts, Certain Artist Canvas 
from the People's Republic of China: Separate Rates Memorandum 
(``Separate-Rates Memorandum''), dated October 7, 2005.
2. Absence of De Facto Control
    Typically the Department considers the following four factors in 
evaluating whether each respondent is subject to de facto governmental 
control of its export functions: (1) whether the export prices are set 
by or are subject to the approval of a governmental agency; (2) whether 
the respondent has authority to negotiate and sign contracts and other 
agreements; (3) whether the respondent has autonomy from the government 
in making decisions regarding the selection of management; and (4) 
whether the respondent retains the proceeds of its export sales and 
makes independent decisions regarding disposition of profits or 
financing of losses. See Silicon Carbide, 59 FR at 22586-87; see also 
Final Determination of Sales at Less Than Fair Value: Furfuryl Alcohol 
From the People's Republic of China, 60 FR 22544, 22545 (May 8, 1995). 
The Department has determined that an analysis of de facto control is 
critical in determining whether respondents are, in fact, subject to a 
degree of governmental control which would preclude the Department from 
assigning separate rates.
    We preliminarily determine that, for Ningbo Conda (and its 
affiliated exporters, Conda Painting and Jinhua Univeral), Phoenix 
Materials (and its affiliated exporter Phoenix Stationary), HFERTS, and 
Jiangsu By-products, the evidence on the record supports a preliminary 
finding of de facto absence of governmental control based on record 
statements and supporting documentation showing the following: (1) each 
exporter sets its own export prices independent of the government and 
without the approval of a government authority; (2) each exporter 
retains the proceeds from its sales and makes independent decisions 
regarding disposition of profits or financing of losses; (3) each 
exporter has the authority to negotiate and sign contracts and other 
agreements; and (4) each exporter has autonomy from the government 
regarding the selection of management.
    Therefore, the evidence placed on the record of this investigation 
by Ningbo Conda (and its affiliated exporters, Conda Painting and 
Jinhua Univeral), Phoenix Materials (and its affiliated exporter 
Phoenix Stationary), HFERTS, and Jiangsu By-products demonstrates an 
absence of government control, both in law and in fact, with respect to 
each of the exporter's exports of the merchandise under investigation 
in accordance with the criteria identified in Sparklers and Silicon 
Carbide. However, although HFERTS has demonstrated an absence of 
government control, both in law and in fact, with respect to its 
exports of artist canvas, the Department has not determined the country 
of origin of the merchandise exported by HFERTS. Until the Department 
determines that HFERTS had exports of subject merchandise, HFERTS is 
not entitled to a separate rate. As a result, for the purposes of this 
preliminary determination, we have granted separate, company-specific 
rates to the mandatory respondents and their affiliates and to one of 
the separate rate applicants (Jiangsu By-products)

[[Page 67418]]

which shipped subject artist canvas to the United States during the 
POI. For a full discussion of this issue, please see the Separate-Rates 
Memorandum. If the Department determines that the merchandise exported 
by HFERTS is artist canvas from the PRC, the Department intends to 
assign HFERTS a separate rate.

PRC-Wide Rate

    The Department has data that indicate there were more exporters of 
artist canvas from the PRC during the POI than those which responded to 
the Q&V questionnaire. See Respondent Selection Memorandum at 1. 
Although we issued the Q&V questionnaire to six known Chinese exporters 
of the subject merchandise, from these six we received four Q&V 
questionnaire responses, and one unsolicited Q&V questionnaire. Also, 
on June 13, 2005, we issued our complete questionnaire to the Chinese 
Government (i.e., Ministry of Commerce). Although all exporters were 
given an opportunity to provide information showing they qualify for 
separate rates, not all of these other exporters provided a response to 
either the Department's Q&V questionnaire or its separate rate 
application. Therefore, the Department determines preliminarily that 
there were exports of the merchandise under investigation from PRC 
producers/exporters that did not respond to the Department's 
questionnaire. We treated these PRC producers/exporters as part of the 
countrywide entity. Further, the Government of the PRC did not respond 
to the Department's questionnaire.
    Section 776(a)(2) of the Act provides that, if an interested party 
(A) withholds information that has been requested by the Department, 
(B) fails to provide such information in a timely manner or in the form 
or manner requested, subject to subsections 782(c)(1) and (e) of the 
Act, (C) significantly impedes a proceeding under the antidumping 
statute, or (D) provides such information but the information cannot be 
verified, the Department shall, subject to subsection 782(d) of the 
Act, use facts otherwise available in reaching the applicable 
determination.
    Pursuant to section 782(e) of the Act, the Department shall not 
decline to consider submitted information if all of the following 
requirements are met: (1) the information is submitted by the 
established deadline; (2) the information can be verified; (3) the 
information is not so incomplete that it cannot serve as a reliable 
basis for reaching the applicable determination; (4) the interested 
party has demonstrated that it acted to the best of its ability; and 
(5) the information can be used without undue difficulties.
    Information on the record of this investigation indicates that 
there are numerous producers/exporters of artist canvas in the PRC. As 
described above, all exporters were given the opportunity to respond to 
the Department's questionnaire. Based upon our knowledge of the volume 
of imports of subject merchandise from the PRC and the fact that 
information indicates that the responding companies did not account for 
all imports into the United States from the PRC, we preliminarily 
determine that certain PRC exporters of artist canvas failed to respond 
to our questionnaires. Additionally, in this case, the Government of 
the PRC did not respond to the Department's questionnaire. As a result, 
use of facts available pursuant to section 776(a)(2)(A) of the Act is 
appropriate. See Preliminary Determination of Sales at Less Than Fair 
Value, Affirmative Preliminary Determination of Critical Circumstances 
and Postponement of Final Determination: Certain Frozen Fish Fillets 
from the Socialist Republic of Vietnam, 68 FR 4986 (January 31, 2003), 
unchanged in Final Determination of Sales at Less Than Fair Value and 
Affirmative Critical Circumstances: Certain Frozen Fish Fillets from 
the Socialist Republic of Vietnam, 68 FR 37116 (June 23, 2003).
    Section 776(b) of the Act provides that if an interested party 
fails to cooperate by not acting to the best of its ability to comply 
with requests for information, the Department may employ adverse 
inferences. See Final Determination of Sales at Less Than Fair Value: 
Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products from the 
Russian Federation, 65 FR 5510, 5518 (February 4, 2000). See also SAA 
at 870. We find that, because the PRC-wide entity did not respond to 
our request for information, it has failed to cooperate to the best of 
its ability. Therefore, the Department preliminarily finds that, in 
selecting from among the facts available, an adverse inference is 
appropriate.
    In selecting from among the facts available, Section 776(b) of the 
Act authorizes the Department to use adverse-facts-available (``AFA'') 
information derived from the petition, the final determination from the 
LTFV investigation, a previous administrative review, or any other 
information placed on the record. As AFA, we have assigned to the PRC-
wide entity a margin based on information in the petition, because the 
margins derived from the petition are higher than the calculated 
margins for the selected respondents. In this case, we have applied a 
rate of 264.09 percent.
    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 as facts available, it must, to the extent 
practicable, corroborate that information from independent sources 
reasonably at its disposal. Secondary information is described in the 
SAA as ``information derived from the petition that gave rise to the 
investigation or review, the final determination concerning subject 
merchandise, or any previous review under section 751 concerning the 
subject merchandise.'' See SAA at 870. The SAA provides that to 
``corroborate'' means simply that the Department will satisfy itself 
that the secondary information to be used has probative value. See id. 
The SAA also states that independent sources used to corroborate may 
include, for example, published price lists, official import statistics 
and customs data, and information obtained from interested parties 
during the particular investigation. See id. As explained in Tapered 
Roller Bearings and Parts Thereof, Finished and Unfinished, from Japan, 
and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, 
and Components Thereof, from Japan; Preliminary Results of Antidumping 
Duty Administrative Reviews and Partial Termination of Administrative 
Reviews, 61 FR 57391, 57392 (November 6, 1996), unchanged in Final 
Results of Antidumping Duty Administrative Reviews and Termination in 
Part: Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or 
Less in Outside Diameter, and Components Thereof, From Japan, 62 
FR11825 (March 13, 2005), to corroborate secondary information, the 
Department will, to the extent practicable, examine the reliability and 
relevance of the information used.
    The Petitioners' methodology for calculating the export price and 
normal value in the petition is discussed in the initiation notice. See 
Notice of Initiation, 70 FR at 21996-21997. To corroborate the AFA 
margin we have selected, we compared that margin to the margins we 
found for the respondents.
    As discussed in the Memorandum to the File regarding the 
corroboration of the AFA rate, dated October 28, 2005, we found that 
the margin of 264.09 percent has probative value. See Memorandum to The 
File Through Robert Bolling, Program Manager,

[[Page 67419]]

China/NME Group, Corroboration for the Preliminary Determination of 
Certain Artist Canvas from the People's Republic of China, dated 
October 28, 2005, (``Corroboration Memo''). Accordingly, we find that 
the rate of 264.09 percent is corroborated within the meaning of 
section 776(c) of the Act.
    Consequently, we are applying a single antidumping rate the PRC-
wide rate to producers/exporters that failed to respond to the Q&V 
questionnaire or the separate rate application. This rate will also 
apply to exporters which did not demonstrate entitlement to a separate 
rate. See, e.g., Final Determination of Sales at Less Than Fair Value: 
Synthetic Indigo from the People's Republic of China, 65 FR 25706, 
25707 (May 3, 2000). The PRC-wide rate applies to all entries of the 
merchandise under investigation except for entries from the two 
mandatory respondents and one of the separate rate applicants. In 
addition, for the preliminary determination, the PRC-wide rate does not 
apply to artist canvas that is produced from bulk roll canvas coated in 
a third country and exported from the PRC.
    The Department will consider all margins on the record at the time 
of the final determination for the purpose of determining the most 
appropriate AFA rate for the PRC-wide entity. See Preliminary 
Determination of Sales at Less Than Fair Value: Saccharin from the 
People's Republic of China, 67 FR 79049, 79054 (December 27, 2002), 
unchanged in Final Determination of Sales at Less Than Fair Value: 
Saccharin From the People's Republic of China, 68 FR 27530 (May 20, 
2003).

Margin for the Separate Rate Applicants

    HFERTS and Jiangsu By-products, both exporters of artist canvas 
from the PRC, were not selected as mandatory respondents in this 
investigation but have applied for a separate rate and provided 
information to the Department for this purpose. However, as stated 
above, the Department has not yet determined whether HFERTS had exports 
of subject merchandise and, therefore, we are not assigning HFERTS a 
separate rate. We have established a weighted-average margin for 
Jiangsu By-products based on the rates we calculated for the two 
mandatory respondents, excluding any rates that are zero, de minimis, 
or based entirely on adverse facts available. That rate is 70.28 
percent. Jiangsu By-products is identified by name in the ``Preliminary 
Determination'' section of this notice.

Date of Sale

    Section 351.401(i) of the Department's regulations state that, ``in 
identifying the date of sale of the subject merchandise or foreign like 
product, the Secretary normally will use the date of invoice, as 
recorded in the exporter or producer's records kept in the normal 
course of business.'' However, the Secretary may use a date other than 
the date of invoice if the Secretary is satisfied that a different date 
better reflects the date on which the exporter or producer establishes 
the material terms of sale.'' 19 CFR 351.401(i); See also Allied Tube 
and Conduit Corp. v. United States, 132 F. Supp. 2d 1087, 1090-1093 
(CIT 2001).
    After examining the questionnaire responses and the sales 
documentation that Ningbo Conda and the Phoenix Group placed on the 
record, we preliminarily determine that invoice date is the most 
appropriate date of sale for Ningbo Conda and the Phoenix Group. We 
made this determination based on record evidence which demonstrates 
that Ningbo Conda and the Phoenix Group invoices establish the material 
terms of sale to the extent required by our regulations. Thus, the 
record evidence does not rebut the presumption that invoice date is the 
proper date of sale. See Preliminary Determination of Sales at Less 
Than Fair Value: Saccharin From the People's Republic of China, 67 FR 
79054 (December 27, 2002).

Fair Value Comparisons

    To determine whether sales of artist canvas to the United States by 
the two mandatory respondents were made at less than fair value, we 
compared export price (``EP'') or constructed export price (``CEP'') to 
normal value (``NV''), as described in the ``U.S. Price,'' and ``Normal 
Value'' sections of this notice.

U.S. Price

    In accordance with section 772(a) of the Act, we used EP for both 
Ningbo Conda and the Phoenix Group, as appropriate, because the subject 
merchandise was first sold (or agreed to be sold) before the date of 
importation by the producer or exporter of the subject merchandise 
outside the United States to an unaffiliated purchaser in the United 
States or to an unaffiliated purchaser for exportation to the United 
States and because the use of CEP was not otherwise indicated. In 
accordance with section 772(b) of the Act, we used CEP for certain of 
Ningbo Conda's sales because the subject merchandise was sold in the 
United States after the date of importation by a U.S. reseller 
affiliated with the Ningbo Conda Group and Jinhua Universal.
    We calculated EP and CEP based on the packed F.O.B., C.I.F., or 
delivered price to unaffiliated purchasers in, or for exportation to, 
the United States. We made deductions, as appropriate, for any movement 
expenses (e.g., foreign inland freight from the plant to the port of 
exportation, domestic brokerage, ocean freight, marine insurance, U.S. 
brokerage, and inland freight from warehouse to unaffiliated U.S. 
customer) in accordance with section 772(c)(2)(A) of the Act. For a 
detailed description of all adjustments, see Memorandum to The File 
Through Robert Bolling, Program Manager, China/NME Group, from Michael 
Holton, Case Analyst, Analysis for the Preliminary Determination of 
Certain Artist Canvas from the People's Republic of China: ColArt, 
Ningbo Conda Import & Export Co., Ltd., dated October 28, 2005, and 
Memorandum to the File Through Robert Bolling, Program Manager, China/
NME Group, From Jon Freed, Case Analyst, Analysis for the Preliminary 
Determination of Certain Artist Canvas from the People's Republic of 
China: Wuxi Phoenix Artist Materials Co., Ltd., dated October 28, 2005.
    In accordance with section 772(d)(1) of the Act and 19 CFR 
351.402(b), we calculated the CEP by deducting selling expenses 
associated with economic activities occurring in the United States for 
Ningbo Conda.
    We compared NV to weighted-average EPs and CEPs in accordance with 
section 777A(d)(1) of the Act. Where appropriate, for Ningbo Conda, in 
accordance with sections 772(d)(3) and 772(f) of the Act, we deducted 
CEP profit. For a detailed description of all adjustments, see the 
Company-Specific Analysis Memoranda dated October 28, 2005.

Normal Value

    Section 773(c)(1) of the Act provides that the Department shall 
determine the NV using a factors-of-production methodology if the 
merchandise is exported from an NME and the information does not permit 
the calculation of NV using home-market prices, third-country prices, 
or constructed value under section 773(a) of the Act. The Department 
bases NV on the factors of production because the presence of 
government controls on various aspects of these economies renders price 
comparisons and the calculation of production costs invalid under its 
normal methodologies.
    The Department's questionnaire requires that the respondent provide

[[Page 67420]]

information regarding the weighted-average factors of production across 
all of the company's plants that produce the subject merchandise, not 
just the factors of production from a single plant. This methodology 
ensures that the Department's calculations are as accurate as possible. 
See e.g., Final Determination of Sales at Less Than Fair Value and 
Critical Circumstances: Certain Malleable Iron Pipe Fittings From the 
People's Republic of China, 68 FR 61395 (Oct. 28, 2003); Issues and 
Decision Memorandum, Comment 19 (Oct. 20, 2003). Therefore, for the 
Phoenix Group, the Department calculated the factors of production 
using the weighted-average factor values for all of the facilities 
involved in producing the subject merchandise. For Ningbo Conda, the 
Department calculated normal values for each CONNUM based on the 
factors of production reported from each of Ningbo Conda's suppliers 
and then averaged the supplier-specific normal values together weighted 
by production quantity to derive a single, weighted-average normal 
value for each CONNUM exported by Ningbo Conda.

Factor Valuations

    In accordance with section 773(c) of the Act, we calculated NV 
based on factors of production reported by respondents for the POI. To 
calculate NV, we multiplied the reported per-unit factor-consumption 
rates by publicly available Indian surrogate values. In selecting the 
surrogate values, we considered the quality, specificity, and 
contemporaneity of the data. As appropriate, we adjusted input prices 
by including freight costs to make them delivered prices. Specifically, 
we added to Indian import surrogate values a surrogate freight cost 
using the shorter of the reported distance from the domestic supplier 
to the factory or the distance from the nearest seaport to the factory 
where appropriate. This adjustment is in accordance with the Court of 
Appeals for the Federal Circuit's decision in Sigma Corp. v. United 
States, 117 F. 3d 1401, 1407-1408 (Fed. Cir. 1997).
    For this preliminary determination, in accordance with past 
practice, we used data from the Indian Import Statistics or Chemical 
Weekly in order to calculate surrogate values for the mandatory 
respondents' material inputs. In selecting the best available 
information for valuing factors of production in accordance with 
section 773(c)(1) of the Act, the Department's practice is to select, 
to the extent practicable, surrogate values which are non-export 
average values, most contemporaneous with the POI, product-specific, 
and tax-exclusive. See e.g., Notice of Preliminary Determination of 
Sales at Less Than Fair Value, Negative Preliminary Determination of 
Critical Circumstances and Postponement of Final Determination: Certain 
Frozen and Canned Warmwater Shrimp From the Socialist Republic of 
Vietnam, 69 FR 42672, 42682 (July 16, 2004), unchanged in Final 
Determination of Sales at Less Than Fair Value: Certain Frozen and 
Canned Warmwater Shrimp from the Socialist Republic of Vietnam, 69 FR 
71005 (December 8, 2004). The record shows that data in the Indian 
Import Statistics and Chemical Weekly represents import data that is, 
contemporaneous with the POI, product-specific, and tax-exclusive. 
Where we could not obtain publicly available information 
contemporaneous to the POI with which to value factors, we adjusted the 
surrogate values using, where appropriate, the Indian Wholesale Price 
Index as published in the International Financial Statistics of the 
International Monetary Fund.
    Furthermore, with regard to the Indian import-based surrogate 
values, we have disregarded import prices that we have reason to 
believe or suspect may be subsidized. We have reason to believe or 
suspect that prices of inputs from Indonesia, South Korea, and Thailand 
may have been subsidized. We have found in other proceedings that these 
countries maintain broadly available, non-industry-specific export 
subsidies and, therefore, it is reasonable to infer that all exports to 
all markets from these countries are subsidized. See Amended Final 
Determination of Sales at Less than Fair Value: Automotive Replacement 
Glass Windshields from the People's Republic of China, 67 FR 11670 
(March 15, 2002), see also Notice of Final Determination of Sales at 
Less Than Fair Value and Negative Final Determination of Critical 
Circumstances: Certain Color Television Receivers From the People's 
Republic of China, 69 FR 20594 (April 16, 2004) (``CTVs from the 
PRC''). We are also directed by the legislative history not to conduct 
a formal investigation to ensure that such prices are not subsidized. 
See H.R. Rep. 100-576 at 590 (1988). Rather, Congress directed the 
Department to base its decision on information that is available to it 
at the time it makes its determination. Therefore, we have not used 
prices from these countries in calculating the Indian import-based 
surrogate values. In instances where a market-economy input was 
obtained solely from suppliers located in these countries, we used 
Indian import-based surrogate values to value the input. See Final 
Determination of Sales at Less Than Fair Value: Certain Automotive 
Replacement Glass Windshields From The People's Republic of China, 67 
FR 6482 (February 12, 2002), and accompanying Issues and Decision 
Memorandum at Comment 1.
    The Department used the Indian Import Statistics to value the 
following raw material inputs, energy, and packing materials that 
Ningbo Conda and the Phoenix Group used to produce the subject 
merchandise during the POI: Linen Canvas, Cotton Canvas (bleached), 
Cotton Canvas (unbleached), Paulownia, Pine, Beech, Foam board, Three-
ply board, Carton Roll, Fiberboard, Paint, Glue, Staple, Nail, Plastic, 
Paper, Sand Paper, Acrylic Polymer Resin, Amine PH Adjuster, Cellulose, 
Cinnamene (monomer of polystyrene), Lithopone, Octyl Phenol emulsifynig 
agent, Paraffin, Polyvinyl Alcohol, Polyvinyl chloride (PVC), Talcum 
Powder, Thickening Agent, Tributyl phosphate (TBP), VAE Latex (Vinyl 
acetate ethylene), Zinc Sulfide, Paper Label, Plastic sheet (shrink 
wrap), Wooden Peg, Plastic Peg, Labor, Electricity, Coal, Water, Box, 
Cardboard, Plastic Strap, Rubber band, and Tape. For a detailed 
description of all surrogate values used for respondents, see Factor-
Valuation Memorandum.
    The Department used Chemical Weekly to value the following material 
inputs used by Ningbo Conda and the Phoenix Group: Calcium Carbonate, 
Crylic acid, Dispersant, Isobutyl Methacrylate, Methacryl acid methyl, 
Polyethylene Resin, Propylene Glycol, Sodium Benzoate, Sodium 
Hydroxide/Caustic Soda, Stearic Acid, and Titanium Dioxide/Titanium 
Pigment, see Factor-Valuation Memorandum.
    For direct, indirect, and packing labor, consistent with 19 CFR 
351.408(c)(3), we used the PRC regression-based wage rate as reported 
on Import Administration's home page, Import Library, Expected Wages of 
Selected NME Countries, revised in August 2005, http://ia.ita.doc.gov/wages/index.html.
 The source of these wage-rate data on the Import 

Administration's web site is the Yearbook of Labour Statistics 2002, 
ILO (Geneva: 2002), Chapter 5B: Wages in Manufacturing. Because this 
regression-based wage rate does not separate the labor rates into 
different skill levels or types of labor, we have applied the same wage 
rate to all skill levels and types of labor reported by the respondent. 
See Factor-Valuation Memorandum
    To value electricity, we used data from the International Energy 
Agency Key World Energy Statistics (2003

[[Page 67421]]

edition). Because the value was not contemporaneous with the POI, we 
adjusted the rate for inflation. See Factor-Valuation Memorandum.
    The Department valued water using data from the Maharastra 
Industrial Development Corporation (http://www.midcindia.org) since it 

includes a wide range of industrial water tariffs. This source provides 
386 industrial water rates within the Maharashtra province from June 
2003: 193 for the ``inside industrial areas'' usage category and 193 
for the ``outside industrial areas'' usage category. Because the value 
was not contemporaneous with the POI, we adjusted the rate for 
inflation. See Factor-Valuation Memorandum.
    The Department valued steam coal using the 2003/2004 Tata Energy 
Research Institute's Energy Data Directory & Yearbook (``TERI Data''). 
The Department was able to determine, through its examination of the 
2003/2004 TERI Data, that a) the annual TERI Data publication is 
complete and comprehensive because it covers all sales of all types of 
coal made by Coal India Limited and its subsidiaries, and b) the annual 
TERI Data publication prices are exclusive of duties and taxes. Because 
the value was not contemporaneous with the POI, we adjusted the rate 
for inflation. See Factor-Valuation Memorandum.
    We used Indian transport information in order to value the freight-
in cost of the raw materials. The Department determined the best 
available information for valuing truck freight to be from 
http://www.infreight.com. This source provides daily rates from six major 

points of origin to five destinations in India during the POI. The 
Department obtained a price quote on the first day of each month of the 
POI from each point of origin to each destination and averaged the data 
accordingly. See Factor-Valuation Memorandum
    The Department used two sources to calculate a surrogate value for 
domestic brokerage expenses. The Department averaged December 2003-
November 2004 data contained in Essar Steel's February 28, 2005, public 
version response submitted in the AD administrative review of Hot-
Rolled Carbon Steel Flat Products from India with October 2002-
September 2003 data contained in Pidilite Industries' March 9, 2004, 
public version response submitted in the AD investigation of Carbazole 
Violet Pigment 23 from India. The brokerage expense data reported by 
Essar Steel and Pidilite Industries in their public versions is ranged 
data. The Department first derived an average per-unit amount from each 
source. Then the Department adjusted each average rate for inflation, 
Finally, the Department averaged the two per-unit amounts to derive an 
overall average rate for the POI. See Factor-Valuation Memorandum.
    To value marine insurance, the Department obtained a price quote 
from http://www.rjgconsultants.com/insurance.html, a market-economy 

provider of marine insurance. See Factor-Valuation Memorandum.
    To value international freight, the Department obtained price 
quotes from http://www.maersksealand.com/HomePage/appmanager/, a 

market-economy provider of international freight services. See Factor-
Valuation Memorandum.
    To value factory overhead, selling, general, and administrative 
expenses, and profit, we used the audited financial statements for the 
fiscal year ending March 31, 2005, from Camlin Ltd., an Indian producer 
of artist canvas from India. See Factor-Valuation Memorandum for a full 
discussion of the calculation of the ratios from this financial 
statement.

Currency Conversion

    We made currency conversions into U.S. dollars, in accordance with 
section 773A(a) of the Act, based on the exchange rates in effect on 
the dates of the U.S. sales as certified by the Federal Reserve Bank.

Verification

    As provided in section 782(i)(1) of the Act, we intend to verify 
the information upon which we will rely in making our final 
determination.

Combination Rates

    In the Notice of Initiation, the Department stated that it would 
calculate combination rates for certain respondents that are eligible 
for a separate rate in this investigation. See Notice of Initiation, 70 
FR 21996, 21999. This change in practice is described in Policy 
Bulletin 05.1: Separate-Rates Practice and Application of Combination 
Rates in Antidumping Investigations involving Non-Market Economy 
Countries, (April 5, 2005), (``Policy Bulletin 05.1'') available at 
http://ia.ita.doc.gov/. The Policy Bulletin 05.1, states:

    ``[w]hile continuing the practice of assigning separate rates only 
to exporters, all separate rates that the Department will now assign in 
its NME investigations will be specific to those producers that 
supplied the exporter during the period of investigation. Note, 
however, that one rate is calculated for the exporter and all of the 
producers which supplied subject merchandise to it during the period of 
investigation. This practice applies both to mandatory respondents 
receiving an individually calculated separate rate as well as the pool 
of non-investigated firms receiving the weighted-average of the 
individually calculated rates. This practice is referred to as the 
application of ``combination rates'' because such rates apply to 
specific combinations of exporters and one or more producers. The cash-
deposit rate assigned to an exporter will apply only to merchandise 
both exported by the firm in question and produced by a firm that 
supplied the exporter during the period of investigation.''
Policy Bulletin 05.1, at page 6.

Preliminary Determination

    The weighted-average dumping margins are as follows:

                          Artist Canvas from the PRC - Weighted-average Dumping Margins
----------------------------------------------------------------------------------------------------------------
          Exporter                              Producer                       Weighted-Average Deposit Rate
----------------------------------------------------------------------------------------------------------------
NingboConda.................                             Jinhua Universal                                  55.78
Ningbo Conda................    Wuxi Silver Eagle Cultural Goods Co. Ltd.                                  55.78
Conda Painting..............         Wuxi Pegasus Cultural Goods Co. Ltd.                                  55.78
Jinhua Universal............                             Jinhua Universal                                  55.78
Phoenix Materials...........                            Phoenix Materials                                  73.66
Phoenix Materials...........                           Phoenix Stationary                                  73.66
Phoenix Materials...........                              Shuyang Phoenix                                  73.66
Pheonix Stationary..........                            Phoenix Materials                                  73.66
Pheonix Stationary..........                           Phoenix Stationary                                  73.66
Pheonix Stationary..........                              Shuyang Phoenix                                  73.66

[[Page 67422]]


Jiangsu By-products.........                          Jiangsu By-products                                  70.28
China-Wide Rate.............  ...........................................                                 264.09
----------------------------------------------------------------------------------------------------------------

Disclosure

    We will disclose the calculations performed within five days of the 
date of publication of this notice to parties in this proceeding in 
accordance with 19 CFR 351.224(b).

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we will instruct U.S. 
Customs and Border Protection (``CBP'') to suspend liquidation of all 
entries of subject merchandise, entered, or withdrawn from warehouse, 
for consumption on or after the date of publication of this notice in 
the Federal Register. We will instruct CBP to require a cash deposit or 
the posting of a bond equal to the weighted-average amount by which the 
normal value exceeds U.S. price, as indicated above. The suspension of 
liquidation will remain in effect until further notice.

International Trade Commission Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our preliminary affirmative determination of sales at less than 
fair value. Because we have postponed the deadline for our final 
determination to 135 days from the date of publication of this 
preliminary determination, section 735(b)(2) of the Act requires the 
ITC to make its final determination as to whether the domestic industry 
in the United States is materially injured, or threatened with material 
injury, by reason of imports of artist canvas, or sales (or the 
likelihood of sales) for importation, of the subject merchandise within 
45 days of our final determination.

Public Comment

    Case briefs or other written comments may be submitted to the 
Assistant Secretary for Import Administration no later than seven days 
after the date of the final verification report is issued in this 
proceeding and rebuttal briefs limited to issues raised in case briefs 
no later than five days after the deadline date for case briefs. A list 
of authorities used and an executive summary of issues should accompany 
any briefs submitted to the Department. This summary should be limited 
to five pages total, including footnotes.
    In accordance with section 774 of the Act, we will hold a public 
hearing, if requested, to afford interested parties an opportunity to 
comment on arguments raised in case or rebuttal briefs. If a request 
for a hearing is made, we intend to hold the hearing three days after 
the deadline of submission of rebuttal briefs at the U.S. Department of 
Commerce, 14th Street and Constitution Ave, NW, Washington, DC 20230, 
at a time and location to be determined. Parties should confirm by 
telephone the date, time, and location of the hearing two days before 
the scheduled date.
    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 after the date of publication of this notice. See 
19 CFR 351.310(c). Requests should contain the party's name, address, 
and telephone number, the number of participants, and a list of the 
issues to be discussed. At the hearing, each party may make an 
affirmative presentation only on issues raised in that party's case 
brief and may make rebuttal presentations only on arguments included in 
that party's rebuttal brief.
    We will make our final determination no later than 135 days after 
the date of publication of this preliminary determination, pursuant to 
section 735(a)(2) of the Act.
    This determination is issued and published in accordance with 
sections 733(f) and 777(i)(1) of the Act.

    Dated: October 28, 2005.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 05-22149 Filed 11-4-05; 8:45 am]

BILLING CODE 3510-DS-S