[Federal Register: February 28, 1997 (Volume 62, Number 40)]
[Notices]
[Page 9160-9175]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28fe97-36]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-845, A-570-846]
Notice of Final Determinations of Sales at Less Than Fair Value:
Brake Drums and Brake Rotors From the People's Republic of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
EFFECTIVE DATE: February 28, 1997.
FOR FURTHER INFORMATION CONTACT: Brian C. Smith or Michelle A.
Frederick, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-1766 and (202) 482-0186,
respectively.
THE APPLICABLE STATUTE: Unless otherwise indicated, all citations to
the Tariff Act of 1930, as amended (the Act) are references to the
provisions effective January 1, 1995, the effective date of the
amendments made to the Act by the Uruguay Rounds Agreements Act (URAA).
FINAL DETERMINATIONS: We determine that brake drums and brake rotors
from the People's Republic of China (PRC) are being, or are likely to
be, sold in the United States at less than fair value (LTFV), as
provided in section 735 of the Act.
Case History
Since the amended preliminary determination in the brake drum
investigation (Amended Preliminary Determination of Sales at Less Than
Fair Value: Brake Drums from the People's Republic of China, 61 FR
60682 (November 29, 1996)), the following events have occurred:
The petitioner, the Coalition for the Preservation of American
Brake Drum and Rotor Aftermarket Manufacturers, and all of the
respondents <SUP>1 requested a hearing.
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\1\ The respondents in the brake drums case are: (1) China
North Industries Guangzhou Corporation (CNIGC); (2) Qingdao Metal,
Minerals & Machinery Import & Export Corporation (Qingdao); (3)
China National Machinery Import & Export Corporation (CMC); (4)
Beijing Xinchangyuan Automobile Fittings Corporation, Ltd.
(Xinchangyuan); and (5) Yantai Import/Export Corporation (Yantai).
The respondents in the brake rotors case are: China National
Automotive Industry Import & Export Corporation (CAIEC), Shandong
Laizhou CAPCO Industry (Laizhou CAPCO) and their U.S. affiliate
CAPCO International USA (CAPCO USA)(collectively CAIEC/Laizhou
CAPCO); CNIGC; China North Industries Dalian Corporation (Dalian);
Shenyang Honbase Machinery Co., Ltd., Lai Zhou Luyuan Automobile
Fitting Co., Ltd. (collectively Shenyang/Laizhou) and their U.S.
affiliates MAT Automotive, Inc., and Midwest Air Technologies, Inc.
(MAT); Southwest Technical Import & Export Corporation, Yangtze
Machinery Corporation (collectively Southwest), and its U.S.
affiliate MMB International, Inc. (MMB); China National Machinery
and Equipment Import & Export (Xinjiang) Corporation, Ltd.
(Xinjiang); and Yantai.
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From October 1996 through January 1997, we verified the
questionnaire responses of the selected respondents. In January 1997,
we issued our verification reports.
Interested parties submitted additional information on surrogate
values on January 9 and 10, 1997, for consideration in the final
determinations. Also in January 1997, at the Department's request, we
received revised computer tapes incorporating data corrections
identified at the verifications from the following respondents: CAIEC,
Dalian, Qingdao, Shenyang/Laizhou, Southwest, Xinchangyuan and
Xinjiang.
The petitioner and all of the respondents submitted case briefs on
January 21, 1997, and rebuttal briefs on January 27, 1997. The
Department held a public hearing for these investigations on January
29, 1997.
Scope of the Investigations
The products covered by these two investigations are (1) certain
brake drums and (2) certain brake rotors.
Brake Drums
Brake drums are made of gray cast iron, whether finished,
semifinished, or unfinished, ranging in diameter from 8 to 16 inches
(20.32 to 40.64 centimeters) and in weight from 8 to 45 pounds (3.63 to
20.41 kilograms). The size parameters (weight and dimension) of the
brake drums limit their use to the following types of motor vehicles:
automobiles, all-terrain vehicles, vans and recreational vehicles under
``one ton and a half,'' and light trucks designated as ``one ton and a
half.''
Finished brake drums are those that are ready for sale and
installation without any further operations. Semi-finished drums are
those on which the surface is not entirely smooth, and has undergone
some drilling. Unfinished drums are those which have undergone some
grinding or turning.
These brake drums are for motor vehicles, and do not contain in the
casting a logo of an original equipment manufacturer (OEM) which
produces vehicles sold in the United States (e.g., General Motors,
Ford, Chrysler, Honda, Toyota, Volvo). Brake drums covered in this
investigation are not certified by OEM producers of vehicles sold in
the United States. The scope also includes composite brake drums that
are made of gray cast iron, which contain a steel
[[Page 9161]]
plate, but otherwise meet the above criteria.
Brake drums are classifiable under subheading 8708.39.5010 of the
Harmonized Tariff Schedule of the United States (HTSUS). Although the
HTSUS subheading is provided for convenience and Customs purposes, our
written description of the scope of this investigation is dispositive.
Brake Rotors:
Brake rotors are made of gray cast iron, whether finished,
semifinished, or unfinished, ranging in diameter from 8 to 16 inches
(20.32 to 40.64 centimeters) and in weight from 8 to 45 pounds (3.63 to
20.41 kilograms). The size parameters (weight and dimension) of the
brake rotors limit their use to the following types of motor vehicles:
automobiles, all-terrain vehicles, vans and recreational vehicles under
``one ton and a half,'' and light trucks designated as ``one ton and a
half.''
Finished brake rotors are those that are ready for sale and
installation without any further operations. Semi-finished rotors are
those on which the surface is not entirely smooth, and has undergone
some drilling. Unfinished rotors are those which have undergone some
grinding or turning.
These brake rotors are for motor vehicles, and do not contain in
the casting a logo of an original equipment manufacturer (OEM) which
produces vehicles sold in the United States (e.g., General Motors,
Ford, Chrysler, Honda, Toyota, Volvo). Brake rotors covered in this
investigation are not certified by OEM producers of vehicles sold in
the United States. The scope also includes composite brake rotors that
are made of gray cast iron, which contain a steel plate, but otherwise
meet the above criteria.
Brake rotors are classifiable under subheading 8708.39.5010 of the
HTSUS. Although the HTSUS subheading is provided for convenience and
Customs purposes, our written description of the scope of this
investigation is dispositive.
Period of Investigations
The period of these investigations (POI) comprises each exporter's
two most recent fiscal quarters prior to the filing of the petition.
For Southwest, the POI is June 1995-December 1995. For all other
respondents, the POI is July 1995-December 1995.
Separate Rates
Each of the participating respondents in these investigations claim
to be eligible for individual dumping margins. Of those, CAIEC/Laizhou
CAPCO, CMC, CNIGC, Dalian, Qingdao, Southwest, Xinjiang and Yantai
claim to be owned by ``all the people.''
The ownership structure of the remaining respondents is as follows:
(1) Shenyang/Laizhou are affiliated parties. Shenyang is owned
entirely by GRI Honbase, a Hong Kong company which is U.S. owned.
Laizhou is a joint venture between GRI Honbase and ``all the people.''
The share in Laizhou owned by ``all the people'' is a minority share.
(2) Xinchangyuan is a joint venture between a U.S. company and a
PRC company, Beijing Changyuan Automotive Parts Factory. The PRC
company is the majority shareholder and is owned by ``all the people.''
As stated in the Final Determination of Sales at Less than Fair
Value: Silicon Carbide from the People's Republic of China, 59 FR
22585, 22586 (May 2, 1994) (Silicon Carbide) and in the Final
Determination of Sales at Less than Fair Value: Furfuryl Alcohol from
the People's Republic of China, 60 FR 22544 (May 8, 1995) (Furfuryl
Alcohol), ownership of a company by ``all the people'' does not require
the application of a single rate. Accordingly, each of these
respondents is eligible for separate rate consideration.
To establish whether a firm is sufficiently independent from
government control to be entitled to a separate rate, the Department
analyzes each exporting entity under a test arising out of 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) and
amplified in Silicon Carbide. Under the separate rates criteria, the
Department assigns separate rates in nonmarket economy cases only if
the respondents can demonstrate the absence of both de jure and de
facto governmental control over export activities.
1. Absence of De Jure Control
Each of the respondents has placed on the administrative record a
number of documents to demonstrate absence of de jure control,
including laws, regulations and provisions enacted by the State Council
of the central government of the PRC. Each has also submitted documents
which establish that brake drums and brake rotors are not included on
the list of products that may be subject to central government export
constraints. In addition, the respondents Xinchangyuan and Laizhou each
submitted the ``Law of the People's Republic of China on Chinese-
Foreign Contractual Joint Ventures'' (April 13, 1988). The articles of
this law authorize joint venture companies to make their own
operational and managerial decisions.
In prior cases, the Department has analyzed the laws which the
respondents have submitted in this record and found that they establish
an absence of de jure control. See Notice of Final Determination of
Sales at Less Than Fair Value: Certain Partial-Extension Steel Drawer
Slides With Rollers From the People's Republic of China, 60 FR 54472
(October 24, 1995) (Drawer Slides); see also Furfuryl Alcohol. We have
no new information in these proceedings which would cause us to
reconsider this determination.
However, as in previous cases, there is some evidence that the PRC
central government enactments have not been implemented uniformly among
different sectors and/or jurisdictions in the PRC. (See Silicon Carbide
and Furfuryl Alcohol.) Therefore, 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.
2. Absence of De Facto Control
The Department typically considers 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
subject to the approval of a governmental authority; (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 and Furfuryl Alcohol). These
factors are not necessarily exhaustive and other relevant indicia of
government control may be considered.
CAIEC/Laizhou CAPCO, CMC, Qingdao, Shenyang/Laizhou, Southwest,
Xinchangyuan, Xinjiang, and Yantai asserted, and we verified, the
following: (1) They establish their own export prices; (2) they
negotiate contracts, without guidance from any governmental entities or
organizations; (3) they make their own personnel decisions; and (4)
they retain the proceeds of their export sales, use profits according
to their business needs and have the authority to sell their assets and
to obtain loans. In addition, the questionnaire responses submitted by
the above-referenced respondents
[[Page 9162]]
indicate company-specific pricing during the POI which does not suggest
coordination among exporters. During the verification proceedings,
Department officials viewed such evidence as sales documents, company
correspondence, and bank statements. This information supports a
finding that there is a de facto absence of government control of the
export functions of these companies. Consequently, we have determined
that these exporters have met the criteria for the application of
separate rates.
CNIGC and Dalian also claimed separate rates and provided
additional documentation at verification in support of their claims
that there is a de facto absence of government control of the export
functions of their companies. However, for the final determinations, we
have denied these respondents separate rates. Since the preliminary
determinations, we have collected additional information which
indicates that CNIGC and Dalian are still branches of the national
corporation, China North Industries Corporation (NORINCO), which is
controlled by the PRC government (see Comment 1 for further
discussion).
China-Wide Rate
U.S. import statistics indicate that the total quantity and value
of U.S. imports of brake drums and brake rotors from the PRC is
substantially greater than the total quantity and value of brake drums
and brake rotors reported by all PRC companies that submitted responses
in both the brake drums and brake rotors cases. Given these significant
discrepancies, we have no choice but to conclude that not all exporters
of PRC brake drums and brake rotors responded to our questionnaire.
Accordingly, we are applying in each investigation a single antidumping
deposit rate--the China-wide rate--to all exporters in the PRC (other
than those named above and those exporters which cooperated with our
investigations but which were not selected as respondents and received
separate rates), based on our presumption that those respondents who
failed to show that they are entitled to separate rates are under
common control by the PRC government. See, e.g., Final Determination of
Sales at Less Than Fair Value: Bicycles from the People's Republic of
China, 61 FR 19026 (April 30, 1996) (Bicycles).
Facts Available
The China-wide antidumping rate is based on adverse facts
available. Section 776(a)(2) of the Act provides that ``if an
interested party or any other person--(A) withholds information that
has been requested by the administering authority; (B) fails to provide
such information by the deadlines for the submission of the information
or in the form and manner requested, subject to subsections (c)(1) and
(e) of section 782; (C) significantly impedes a proceeding under this
title; or (D) provides such information but the information cannot be
verified as provided in section 782(i), the administering authority * *
* shall, subject to section 782(d), use the facts otherwise available
in reaching the applicable determination under this title.'
In addition, section 776(b) of the Act provides that, if the
Department finds that an interested party ``has failed to cooperate by
not acting to the best of its ability to comply with a request for
information,'' the Department may use information that is adverse to
the interests of that party as the facts otherwise available. The
statute also provides that such an adverse inference may be based on
secondary information, including information drawn from the petition.
When multiple companies are treated as a single enterprise, the
enterprise must submit a complete, consolidated response. If it fails
to do so, the Department may base the margin calculation for the
enterprise on the facts available. Additionally, as discussed above,
those PRC exporters that have not qualified for a separate rate have
been treated as a single enterprise. Because some exporters of the
single enterprise failed to respond to the Department's requests for
information, that single enterprise is considered to have failed to
cooperate to the best of its ability. Accordingly, consistent with
section 776(b)(1) of the Act, we have applied in each investigation the
higher of the applicable margin from the petition or the highest rate
calculated for a respondent in each proceeding as total adverse facts
available. In both cases, based on our comparison of the calculated
margins for the other respondents in these proceedings to the estimated
margins in the petitions, we have concluded that the petition is the
most appropriate record information on which to form the basis for the
China-wide rate in the brake drums and brake rotors investigations.
Section 776(c) of the Act provides that where the Department relies
on ``secondary information,'' the Department shall, to the extent
practicable, corroborate that information from independent sources
reasonably at the Department's disposal. The Statement of
Administrative Action (SAA), accompanying the URAA clarifies that the
petition is ``secondary information.'' See SAA at 870. The SAA also
clarifies that ``corroborate'' means to determine that the information
used has probative value. Id. However, where corroboration is not
practicable, the Department may use uncorroborated information.
In accordance with section 776(c) of the Act, we corroborate the
margins in the petition to the extent practicable. The petitioner based
export prices on prices charged by U.S. distributors of brake drums and
brake rotors and deducted from these prices a distributor mark-up. We
compared the starting prices used by the petitioner to prices derived
from U.S. import statistics and found that the similarity to the import
statistics corroborated the starting prices in the petition. See Notice
of Final Determination of Sales at Less Than Fair Value: Circular
Welded Non-Alloy Steel Pipe from South Africa, 61 FR 24271 (May 14,
1996). We found that the deduction for the distributor mark-up was
sufficiently documented for purposes of corroboration by examining
affidavits submitted by industry experts.
The normal value (NV) was based on factors of production employed
by the petitioner to produce brake drums and brake rotors, and to the
extent possible, surrogate factor values which were obtained from
Indian publicly available information. When analyzing the petition, the
Department examined and confirmed the accuracy of the NV data as
provided in the petition by comparing the values used in the petition
with values obtained from publicly available information collected in
these and previous non-market economy (NME) investigations. However, in
examining the factors which served as the basis for NVs calculated in
the petition, the Department found that petitioner treated certain
factory overhead items as direct materials. Therefore, we have
recalculated NV in the petition by treating these items as part of
factory overhead. In addition, we assigned an Indian surrogate value to
one material for which a value based on a U.S. price was assigned
previously in our NV calculations (See Margin Corroboration Memorandum
from the team to Gary Taverman, dated February 12, 1997). Thus, the
highest revised petition rate for brake drums is 86.02 percent. The
highest revised petition rate for brake rotors is 43.32 percent.
Fair Value Comparisons
To determine if the brake drums and brake rotors from the PRC sold
to the United States by the PRC exporters receiving separate rates were
sold at less
[[Page 9163]]
than fair value, we compared the ``United States Price'' (USP) to NV,
as specified in the ``United States Price'' and ``Normal Value''
sections of this notice.
United States Price
We based USP on export price (EP) in accordance with section 772(a)
of the Act, when the brake drums or brake rotors were sold directly to
the first unaffiliated purchaser in the United States prior to
importation and when constructed export price (CEP) methodology was not
otherwise appropriate. In accordance with section 777A(d)(1)(A)(i) of
the Act, we compared POI-wide weighted-average EPs to the factors of
production.
Shenyang/Laizhou/MAT and Southwest/MMB both claimed that their
sales are EP, not CEP, transactions and that the Department should
treat their sales accordingly. However, the Department has determined
that the sales of these two companies are CEP transactions (see Comment
14 for Shenyang/Laizhou/MAT and Comment 16 for Southwest/MMB).
We corrected the respondents' data for errors and minor omissions
found at verification. For CMC, Xinjiang and Yantai, we calculated EP
in accordance with our preliminary determinations. In addition, we made
company-specific adjustments as follows:
1. CAIEC/Laizhou CAPCO
We calculated EP and CEP in accordance with our preliminary
calculations, except that we (a) corrected credit expenses, inland
freight, repacking, indirect selling expenses, and inventory carrying
expenses; (b) removed credit returns from CAPCO's U.S. sales database;
(c) recalculated commissions based on the verified commission rates;
(d) revised brokerage and handling expenses; and (e) deducted from the
U.S. price of certain sales an inspection charge based on information
obtained at verification.
2. Qingdao
We calculated EP in accordance with our preliminary calculations
except that we excluded U.S. sales of one product that was found to be
outside the scope of the investigation.
3. Shenyang/Laizhou/MAT
We calculated EP and CEP in accordance with our preliminary
calculations except that we have recalculated credit and indirect
selling expenses based on information obtained at verification.
4. Southwest/MMB
We calculated EP and CEP in accordance with our preliminary
calculations except that we have adjusted the gross unit price for
certain U.S. sales where the price was incorrectly reported. We then
recalculated the credit and indirect selling expenses to take into
account revised prices.
5. Xinchangyuan
We calculated EP in accordance with our preliminary calculations
except that we did not deduct foreign brokerage and handling expenses
based on information derived at verification (see Comment 21 below). In
addition, we excluded U.S. sales of three products that were found to
be outside the scope of the investigation.
Normal Value
A. Factors of Production
In accordance with section 773(c) of the Act, we calculated NV
based on factors of production reported by the factories in the PRC
which produced brake drums and/or brake rotors for the exporters. Where
an input was sourced from a market economy and paid for in market
economy currency, we used the actual price paid for the input to
calculate the factors-based NV in accordance with our practice. See
Lasko Metal Products v. United States, 437 F. 3d 1442, 1443 (Fed. Cir.
1994). We valued the remaining factors using publicly available
information from India where possible. Where appropriate Indian values
were not available, we used publicly available information from
Indonesia.
B. Factor Valuations
The selection of the surrogate values was based on the quality and
contemporaneity of the data. Where possible, we attempted to value
material inputs on the basis of tax-exclusive domestic prices. Where we
were not able to rely on domestic prices, we used import prices to
value factors. As appropriate, we adjusted input prices to make them
delivered prices. For those values not contemporaneous with the POI, we
adjusted for inflation using wholesale price indices or, in the case of
labor rates, consumer price indices, published in the International
Monetary Fund's International Financial Statistics. For a complete
analysis of surrogate values, see the Preliminary Determinations
Factors Memorandum, dated October 3, 1996, and the Final Determinations
Factors Memorandum, (Final Factors Memorandum) dated February 24, 1997.
We have noted changes to surrogate valuation since the preliminary
determinations as follows:
To value unfinished castings used in producing rotors, we used a
purchase price for unfinished castings contained in the 1995-96
financial report of the Indian producer, Jayaswals Neco Limited
(Jayaswals), because only this producer's financial report contained a
POI purchase value for unfinished castings used to produce brake rotors
that are within the scope of our investigation (see Comment 15).
To value copper, copper powder, ferromanganese, ferrosilicon, other
ferrosilicon, ferrochromium, manganese, limestone, lubrication oil,
adhesive tape, corrugated cartons, nails, polyethylene, fiberboard,
steel angles, steel stamp, steel straps, printed and unprinted labels,
instruction sheets, wood brackets, wood pallets and wood crates, we
used import prices for months contemporaneous with the POI for which
such data were available from Monthly Statistics of the Foreign Trade
of India (Monthly Statistics). Where submitted data encompassed part of
the POI but also encompassed months outside the POI, we limited our use
of such data to the portion contemporaneous with the POI.
To value pig iron, steel scrap and iron scrap, we used the input-
specific prices contained in the 1995-96 financial report of the Indian
producer, Shivaji Works Limited (Shivaji) because Shivaji produces
goods which are in the same general category as the subject merchandise
(e.g., products similar to what the respondents produce) and because we
find that the separate line-item values for pig iron, steel scrap and
iron scrap contained in Shivaji's report are more specific than the
prices for these same inputs contained in the Indian publication Steel
Authority of India Limited (SAIL) or in Monthly Statistics (see Comment
7).
To value steel sheet, steel strip and steel wire rod, we used POI
prices from SAIL and not from Monthly Statistics (see Comment 7).
To value scrap wood, we have used a price from a 1990 U.S.
government publication, Marketing Opportunities for Social Forestry
Produce in Uttar Pradesh, because the price is more specific to the
input than the value previously obtained from Monthly Statistics.
We could not obtain a product-specific price from India to value
lug nuts for PRC companies which purchased this input from non-market
economies (NME). Therefore, we used Indonesian import data covering
July through November 1995 from
[[Page 9164]]
Indonesian Foreign Trade Statistical Bulletin (see Bicycles).
To value barge rates, we relied on information from an August 1993
cable from the U.S. consulate in India. Since the preliminary
determinations, the respondents submitted new prices for coke, ball
bearings and LPG gas for consideration in the final determinations.
However, we have continued to rely on the values assigned to these
inputs in the preliminary determinations for our final determinations
(see Comment 7 and Final Factors Memorandum for further discussion).
To value factory overhead, SG&A, and profit in the brake drums and
brake rotors cases, we calculated a simple average using the financial
reports of Jayaswals, Kalyani Brakes Limited (Kalyani), Krishna
Engineering Works (Krishna), Nagpur Alloy Castings Limited (Nagpur),
and Rico Auto Industries Limited (Rico) because these companies
produced both brake drums and brake rotors within the scope of these
investigations during the POI. We did not use the financial reports of
Ennore Foundaries Limited (Ennore), Electrosteel Castings Limited
(Electrosteel), Bhagwati Autocast Limited (Bhagwati), or Shivaji in the
surrogate factory overhead, SG&A, and profit percentage calculations
because there was no indication in the reports or any corroborating
publicly available information showing that these companies produced
brake drums or brake rotors within the scope of these investigations
during the POI (see Comment 5).
Where appropriate, we have removed from the surrogate overhead and
SG&A calculations the excise duty amount listed in the financial
reports (see Bicycles, 61 FR 19039). We also made certain adjustments
to the percentages calculated as a result of reclassifying expenses
contained in the financial reports.
For the Indian companies, we treated the line item labeled ``stores
and spares consumed'' as part of factory overhead where possible and
not part of materials consumed because stores and spares are not direct
materials consumed in the production process. Publicly available
information examined in the preliminary determination indicates that
Indian accounting practices require Indian companies to record molding
inputs (i.e., all types of sand, bentonite, lead powder, steel pellets
(if used for sand cores or molding), coal powder and waste oil) under
``stores and spares consumed.'' Therefore, we are considering these
molding inputs as indirect materials (i.e., a part of factory
overhead), and are not valuing them as materials. In addition to the
molding materials mentioned above, based on our verification findings,
we find that additional materials previously valued as direct inputs
such as dextrin, parting spray, rust inhibitor, antirust, steel shot,
cutting oil, cleaning agent, and dehydration oil, are in fact indirect
materials not incorporated into the final product. Therefore, we have
also considered these additional materials part of factory overhead
(see Comment 8). We have continued to treat rustproofing oil, limestone
and firewood as direct materials and valued them accordingly (see
Comment 8).
We have considered the line item labeled ``raw materials consumed''
to include direct materials such as pig iron, steel scrap, and steel
inputs, and non-steel direct inputs and not included them in factory
overhead. The designation of these items is consistent with standard
accounting procedures and recent determinations (see Final
Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from
the People's Republic of China, 61 FR 14062 (March 29, 1996) (PVA) and
Bicycles). We based our factory overhead calculation on the cost of
goods manufactured rather than on the cost of goods sold. We also
included interest and/or financial expenses in the SG&A calculation. In
addition, we only reduced interest and financial expenses by amounts
for interest income if the Indian financial report noted that the
income was short-term in nature (see Comment 6). Where a company did
not distinguish interest income as a line item within total ``other
income'' we used the relative ratio of interest income to total other
income as reported for the Indian metals industry in the Reserve Bank
of India Bulletin. (For a further discussion of other adjustments made,
see Final Factors Memorandum).
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by all selected respondents for use in our final
determinations. We used standard verification procedures, including
examination of relevant accounting and production records and original
source documents provided by the respondents.
Critical Circumstances
Section 735(a)(3) of the Act provides that, in a final
determination, the Department will determine whether:
(A)(i) there is a history of dumping and material injury by reason
of dumped imports in the United States or elsewhere of the subject
merchandise, or
(ii) the person by whom, or for whose account, the merchandise was
imported knew or should have known that the exporter was selling the
subject merchandise at less than its fair value and that there would be
material injury by reason of such sales, and
(B) there have been massive imports of the subject merchandise over
a relatively short period.
Because there is no history of dumping and material injury by
reason of dumped imports for either brake drums or brake rotors, we
conducted our analysis under section 735(a)(3)(A)(ii) of the Act
(importer knowledge of dumping and material injury).
1. Importer Knowledge of Material Injury
Pursuant to the URAA, and in conformance with the WTO Antidumping
Agreement, the statute now includes a provision requiring the
Department to determine, when relying upon section 735(a)(3)(A)(ii) to
determine whether critical circumstances exist, whether the importer
knew or should have known that there would be material injury by reason
of the less than fair value sales. In this respect, the preliminary
finding of the International Trade Commission (ITC) is instructive,
especially because the general public, including importers, is deemed
to have notice of that finding as published in the Federal Register.
Thus, the Department has determined that a preliminary ITC finding of a
reasonable indication of present material injury to the U.S. industry,
when coupled with massive imports and a high rate of dumping by a given
exporter (see Importer Knowledge of Dumping section, below) permits the
conclusion that importers of the subject merchandise from such
exporters knew or should have known that such imports would cause
injury to the domestic industry. When the ITC has preliminarily found
no reasonable indication that a U.S. industry is experiencing present
material injury by reason of the dumped subject merchandise, but only a
threat of such injury, the Department has determined that it is not
reasonable to conclude that an importer knew or should have known that
its imports would cause material injury. (See Decision Memorandum
Regarding Imputed Knowledge of Material Injury.)
Because the ITC preliminarily determined that there is no
reasonable indication that the U.S. brake drums industry is
experiencing present material injury, but only a reasonable indication
of threat of material injury,
[[Page 9165]]
we find that the ``importer knowledge of material injury'' prong is not
met with respect to brake drums. Therefore, we find that critical
circumstances do not exist with respect to brake drums, and it is not
necessary to examine the other critical circumstances criteria for this
product. Because the ITC preliminarily determined that there is a
reasonable indication that the U.S. brake rotors industry is, in
contrast, experiencing present material injury, we determine that
critical circumstances exist with respect to those exporters of brake
rotors which we have determined are responsible for massive imports and
high dumping margins, as described below.
2. Importer Knowledge of Dumping
In determining whether an importer knew or should have known that
the exporter was selling the subject merchandise at less than fair
value, the Department normally consider margins of 15 percent and 25
percent or more sufficient to impute knowledge of dumping for CEP sales
and EP sales respectively.
Since the company-specific margins in the final determinations for
brake drums and brake rotors are below 15 percent for CEP sales (with
the exception of brake rotors sales made by Southwest) and below 25
percent for EP sales, we have not imputed importer knowledge of dumping
and injury with respect to any firms except Southwest in the brake
rotors investigation. Therefore, we have only analyzed the brake rotor
shipment data of Southwest.
3. Massive Imports
When examining the volume and value of trade flow data, the
Department typically compares the export volume for equal periods
immediately preceding and following the filing of the petition.
Pursuant to 19 CFR 353.16(f)(2), unless the imports in the comparison
period have increased by at least 15 percent over the imports during
the base period, we will not consider the imports to have been
``massive.'' In order to determine whether there have been massive
imports of brake rotors for the companies for which we have determined
that there is knowledge of dumping and material injury, we compared
sales from August 1995 to February 1996 (the comparison period) to
sales from March 1996 to September 1996 (the base period).
In determining whether imports have been ``massive,'' pursuant to
19 CFR 353.16(f), we will normally consider, in addition to the volume
and value of imports, any seasonal trends affecting the merchandise and
the share of domestic consumption accounted for by the imports. There
is no indication on the record that brake rotors are a seasonal
product. Also, we were unable to consider the share of U.S. consumption
represented by the selected respondents, because we have insufficient
information with regard to the selected respondents'' market share of
domestic consumption. Based on our analysis of Southwest, we determine
that the increase in imports was less than 15 percent with respect to
that firm. Because imports from Southwest have not been massive, we
determine that critical circumstances do not exist with respect to
imports of subject merchandise from this company.
4. Unexamined Respondents/China-Wide Entity
As indicated in Preliminary Critical Circumstances Determinations,
61 FR 55269 (October 25, 1996), and in the Preliminary Determinations,
61 FR 53190 (October 10, 1996), the Department does not believe it is
appropriate to find critical circumstances with respect to respondents
whose individual data have not been analyzed due to the Department's
own administrative constraints. Therefore, we do not consider critical
circumstances to exist with regard to the non-analyzed cooperative
respondents in the brake rotors case.
With respect to the China-wide entity, we are imputing knowledge of
dumping, based on the China-wide dumping rate. As noted above, we have
determined that importers knew or should have known that there would be
material injury to the U.S. brake rotors industry based on the ITC's
preliminary determination of a reasonable indication of present
material injury for brake rotors. In the absence of shipment data for
the China-wide entity, we have determined based on the facts available,
and making the adverse inference permitted under section 776(b) of the
Act because this entity did not provide an adequate response to our
questionnaire, that there were massive imports of brake rotors. See
Preliminary Critical Circumstances Determinations, 61 FR at 55269.
Furthermore, we note that the record indicates a post filing surge in
U.S. brake rotor imports from the PRC which is not accounted for by the
cooperating respondents. Therefore, for the China-wide entity, we
determine that critical circumstances exist with respect to imports of
brake rotors.
5. Conclusion
With regard to brake rotors, we find that critical circumstances
exist only for companies subject to the China-wide rate.
With regard to brake drums, we find that critical circumstances do
not exist.
Interested Party Comments
General Comments
Comment 1: Separate Rates--CNIGC and Dalian
The petitioner maintains that there is sufficient evidence on the
record to deny CNIGC and Dalian separate rates in these cases. It
points out that these respondents failed to demonstrate at verification
that they were (1) not part of NORINCO, a trading company which is
monitored, if not controlled, by the PRC government; (2) not part of
the NORINCO Group, an organization controlled by the People's
Liberation Army (PLA); and (3) independent from the Ministry of Foreign
Trade and Economic Cooperation (MOFTEC), because they withheld all
information concerning their relationship with MOFTEC. The petitioner
further contends that the PRC government deliberately withheld
information which might have revealed that CNIGC and Dalian were part
of the NORINCO Group.
CNIGC and Dalian maintain that they demonstrated at verification
the absence of both de jure and de facto government control over their
export activities and that they have established through documentation
that they are separate from NORINCO and are entitled to a separate
rate. In addition, they argue that there is no information on the
record that supports the claim that they are affiliated with the PRC
government. Moreover, the two respondents contend that the PRC
government did not fail to cooperate with the Department because they
answered the Department's questions to the extent possible. However, if
the Department decides that the PRC government was uncooperative, then
they maintain that the Department cannot impute this lack of
cooperation to CNIGC or Dalian. They cite to Notice of Court Decision;
Exclusion From the Application of the Antidumping Duty Order, in Part;
Termination of Administrative Review in Part; and Amended Final
Determination: Certain Compact Ductile Iron Waterworks Fittings and
Glands from the People's Republic of China, 60 FR 2078 (January 6,
1995) and Final Determination of Sales at Less Than Fair Value: Certain
Helical Spring Lock Washers from the People's Republic or China, 58 FR
48833 (September 20, 1993) in support of their arguments.
[[Page 9166]]
DOC Position
The Department's NME separate rates policy is based upon a
rebuttable presumption that NME entities operate under government
control and do not merit separate rates. This presumption can only be
overcome by a respondent's affirmative showing that it operates without
de jure or de facto government control.
CNIGC and Dalian have met their affirmative evidentiary burden with
respect to the Department's criteria of de jure control, insofar as
they have provided copies of business licenses and applicable
government statute granting them the right to operate as independent
trading companies.
These two respondents have also provided evidence that purportedly
demonstrates absence of de facto control. However, other evidence
supports a conclusion that Dalian and CNIGC remain under the control of
the national corporation, NORINCO. Dalian and CNIGC were, until 1988
and 1991, respectively, legal and operational subsidiaries of NORINCO.
Although PRC law and regulations mandated the legal and operational
separation of these branches from their parent, evidence on the record
suggests that the two respondents have only partially severed their
ties to NORINCO, and are still recognized in the PRC and overseas as
branches of NORINCO.
At the Department's visit to NORINCO's Beijing office, we obtained
a NORINCO brochure which identifies CNIGC and Dalian as branches of
NORINCO. The brochure continued to be distributed to the public as of
the time of verification in late 1996. See exhibit 3 of the NORINCO
verification report, dated January 8, 1997. This is consistent with the
verification finding that NORINCO still maintains an office within the
headquarters of CNIGC. See CNIGC verification report dated January 8,
1997, at 6. It is also consistent with 1995 information obtained from
the U.S. Department of Defense which states that ``Norinco Guangzhou
[CNIGC] is a leading branch of NORINCO,'' and with a 1996 Company
Intelligence International article indicating that CNIGC is a branch of
NORINCO. Thus, it appears that the de facto relationship between
government-controlled NORINCO and its branches, including Guangzhou and
Dalian, has not been entirely severed.
We note that in the instant investigation, NORINCO has not made a
claim of independence from government control. Furthermore, there is
evidence on the record that NORINCO is controlled by the PRC
government. See, e.g., organizational chart submitted to the file on
October 3, 1996, describing NORINCO as under the control of the PRC's
State Council, and Foreign Broadcast Information Service reports.
In view of CNIGC's and Dalian's continuing ties to NORINCO, and in
the absence of a showing that NORINCO is independent from government
control, the two respondents fail to overcome the presumption of de
facto government control. Thus, we have not assigned separate rates to
these companies.
Comment 2: Treatment of Non-Selected Respondents
The petitioner maintains that the Department had sufficient
resources to investigate all of the responding PRC companies in these
investigations. The petitioner further states that the Department
should, at a minimum, request shipment data from non-selected
respondents in order to determine whether critical circumstances exist
for those companies, especially since U.S. import statistics indicate
that massive imports of one product type (i.e., brake rotors) has
occurred. The petitioner cites to Bicycles in support of its argument.
Eight respondents (i.e., the ten respondents except for Shenyang/
Laizhou and Southwest) (hereafter referred to as ``the eight
respondents'') state that the Department's sampling methodology is not
contrary to law. However, the eight respondents claim that the
Department should not impute knowledge of likelihood of material injury
to U.S. importers merely because of the existence of dumping,
maintaining that there is no inherent causal relationship between
dumping and injury. Therefore, the eight respondents argue that the
Department should find critical circumstances exist only if it
determines that importers knew or should have known that there was
likely to be material injury because of sales of brake drums and brake
rotors at less than fair value.
DOC Position
We disagree in part with the petitioner and the respondents. In
accordance with section 777A(c)(2) of the Act, given our limited
resources, we had to limit the number of respondents examined in these
cases in order to lessen the administrative burden on the Department,
and we did so by choosing the largest exporters to the United States
(see Honey and Bicycles). As for requesting shipment data from the non-
selected respondents which have cooperated in these investigations, we
did not do so due to the Department's own administrative constraints,
which limited our ability to examine questionnaire responses or request
shipment data for analysis. With respect to importer knowledge of
material injury by reason of sales at less than fair value, the
Department's position has changed since the preliminary determination.
This decision is now based on the ITC's preliminary determination, in
conjunction with massive imports and a high level of dumping. (See
``Importer Knowledge of Material Injury'' section of this notice and
Decision Memorandum from the team to Richard W. Moreland, dated
February 24, 1997).
Comment 3: Facts Available
The petitioner argues that the Department should resort to facts
available and deny all of the respondents separate rates. According to
the petitioner, throughout these proceedings the respondents have
submitted to the Department ``boiler plate'' answers in response to the
antidumping questionnaire, significantly revised their responses during
the course of the proceedings, and requested numerous extensions of
time to submit their incorrect data. In addition, the petitioner claims
that the Department found a large number of errors at verification for
the respondents and lists both general and respondent-specific
instances upon which the Department should base an adverse facts
available determination (see the petitioner's January 21, 1997, case
brief, at 13-20.)
The petitioner also contends that the Department should deny
separate rates to the companies under investigation because they
withheld information regarding their relationship with MOFTEC, and
because it could not be determined from a meeting at the Ministry of
Machinery Industry and letters sent to MOFTEC whether the respondents
have any relationship with any level of the PRC government. The
petitioner further urges the Department to assign the China-wide rate
to all of the respondents, claiming that not doing so may cause a
massive diversion of shipments of the subject merchandise between PRC
companies, with exports being shifted to companies assigned lower
rates.
The eight respondents first contend that the petitioner erroneously
equates ``facts available'' with ``adverse assumptions.'' They argue
that the Act has been amended so that the Department cannot
automatically make an adverse inference when applying facts available,
but rather must consider all evidence on the record in
[[Page 9167]]
determining whether adverse inferences are warranted.
The eight respondents and Southwest argue that there is no instance
in these proceedings that would justify the Department resorting to
adverse inferences or resorting to facts available. They state that (1)
there were no instances in any of the verifications in which the
Department was unable to verify particular information; (2) the errors
described by petitioner often were adverse to the respondents; and (3)
when the Department did find errors, the Department was able to obtain
and verify the correct information. Moreover, they maintain that there
is no evidence that they failed to cooperate by not acting to the best
of their ability to comply with Departmental requests for information
or that the errors discovered during verification undermined the
validity of any responses.
With respect to separate rates, all of the respondents stated that
they had made adequate showings of independence.
Respondent Shenyang/Laizhou states that the Department may use
facts available in making its determination if necessary information is
not on the record or if a respondent: (1) Withholds requested
information, (2) fails to provide requested information by the
deadlines for the submission of the information, or in the form and
manner requested, (3) significantly impedes an investigation, or (4)
provides unverifiable information. (See Section 776 of the Act).
Information that is adverse to a respondent may be used by the
Department when the respondent ``has failed to cooperate by not acting
to the best of its ability to comply with a request for information.''
(See Section 776(b) of the Act). Shenyang/Laizhou notes that none of
these conditions are present in its case and that although a few
discrepancies were noted at verification, they were resolved during
verification.
Furthermore, all respondents urge the Department to make those
corrections to the corresponding databases which were brought to the
attention of the Department prior to and during verification.
Lastly, all respondents address the list of verification errors
noted by the petitioner as reason for facts available, arguing that
while the Department verified every factor input, for those that were
in error, the corrections were clerical and minor in nature. They
further assert that with respect to the areas affected by these errors,
there are alternative verified data on the record that allow for
recalculation of the relevant factors.
DOC Position
We agree with all respondents that neither an across-the-board
denial of separate rates nor an across-the-board recourse to ``total''
facts available is warranted in these investigations. First, regarding
the petitioner's concern over the massive diversion of shipments of
brake drums and rotors between exporters if the Department does not
assign the China-wide rate to all exporters, the Department has
established that the companies receiving separate rates in these
investigations operate independently of each other and of government
entities with respect to their exports of the subject merchandise.
Thus, these respondents have been assigned rates based on their
different cost and pricing structures. It would be a normal phenomenon
that respondents with lower dumping margins would experience an
increase in sales of the subject merchandise as a result of an increase
in customers' demand for products with lower duty margins.
Second, we disagree with the petitioner that the other companies
(i.e., not including CNIGC and Dalian) in these investigations should
be denied separate rates based on the facts available. The information
submitted on the record by each of these companies, as well as the
Department's verification findings, show that these respondents under
investigation have met the qualifying criteria for separate rates (see
``Separate Rates'' section for further discussion). The records in
these investigations affirmatively indicate the absence of de jure and
de facto control by government entities over those responding
companies' operations with respect to the products under investigation.
In its verification, the Department found no evidence that these
respondents are controlled by MOFTEC or the Ministry of Machinery
Industry, or any level of the PRC government.
Third, we disagree with the petitioners depiction of the
respondents'' ``numerous'' extension requests and errors. In this
instance, the number of extensions granted was not extraordinary, nor
did these extensions prevent the petitioner from commenting on the
responses or the Department from making its preliminary determinations.
Lastly, with respect to the errors listed by the petitioner, a
review of the respondents' response revisions indicates that such
revisions were not unduly extensive. We do not believe that failure to
initially submit an error-free response, or the correction of these
errors, should result in the use of facts available because we found no
basis to conclude that these errors affect the overall integrity of the
response. Moreover, in an antidumping investigation, it is not unusual
to encounter errors throughout the proceeding up to the commencement of
verification.
As described in Ferrosilicon from Brazil: Final Results of
Antidumping Duty Administrative Review, 61 FR 59407 (November 22,
1996), errors that are not substantial do not affect the integrity of
the response. In addition, the errors in question do not warrant
wholesale rejection of the reported data since all such deficiencies
can be corrected using verified data on the record.
Comment 4: CEP Deductions and Circumstance-of-Sale (COS) Adjustments
Southwest argues that the Department should not make adjustments to
CEP transactions for indirect selling expenses, credit and profit
because making an adjustment to one side of the equation without making
a comparable adjustment to the other results in an unfair calculation.
Alternatively, Southwest suggests that if the Department makes these
adjustments to the U.S. price then the Department should make similar
adjustments to NV.
The petitioner states that section 772(c)(2)(D) of the Act requires
the Department to reduce CEP by the selling expenses associated with
economic activity in the United States, and that the Act provides no
exception for cases involving NMEs. As for making COS adjustments, the
petitioner states that section 773(a)(6)(C) of the Act does not require
the Department to make COS adjustments to NV unless it has been
established to the satisfaction of the administering authority that
such adjustments are warranted.
DOC Position
We agree with the petitioner. Section 772(d)(1) of the Act requires
the Department to reduce CEP by the selling expenses associated with
economic activity in the United States (see SAA at 153, Final
Determination of Sales at Less Than Fair Value: Certain Pasta from
Italy, 61 FR 30326 (June 14, 1996), and Bicycles at 19031. Moreover,
section 772(d)(3) of the Act requires us to make a deduction for profit
associated with CEP selling expenses (see SAA at 154, and Bicycles, at
19032). As for COS adjustments to NV, given the imprecise nature of the
information about direct and indirect selling expenses in the record in
these cases (e.g., the financial reports of
[[Page 9168]]
Indian producers), we have no basis to conclude that such adjustments
are warranted in these cases (see Bicycles at 19031).
Comment 5: Indian Producer Financial Statements
The respondents, except for Southwest, argue that the Department
should only use data from financial statements of Indian producers of
brake drums and brake rotors to calculate factory overhead, SG&A and
profit percentages in respective investigations. In addition, the
respondents maintain that the Department should only consider using
data from the financial statements of Ennore, Jayaswals, Kalyani,
Krishna, Nagpur, and Rico because these Indian companies produce the
subject merchandise. The respondents claim that the financial reports
of Electrosteel and Shivaji should not be used to derive the
percentages because neither company produces the subject merchandise.
Alternatively, if the Department uses financial data from Shivaji's
report, then the eight respondents claim that the Department must also
use Electrosteel's financial data because both companies produce grey
iron castings which are similar to the subject merchandise. The
respondents cite to the Notice of Final Determination of Sales at Less
Than Fair Value: Melamine Institutional Dinnerware Products From the
People's Republic of China, 62 FR 1708 (January 13, 1997) (Melamine),
Notice of Final Determination of Sales at Less Than Fair Value: Tapered
Roller Bearings and Parts Thereof, Finished or Unfinished, from the
Hungarian People's Republic, 52 FR 17428 (May 8, 1987), and Bicycles in
support of their arguments.
The respondent Southwest maintains that all but Ennore's financial
report should be used to calculate the percentages because there is no
publicly available information indicating that Ennore produced the
subject merchandise during the POI. It argues that a letter from Ennore
(submitted on the record by other respondents) that stated that this
company produces brake drum castings should be rejected as ``private
information.''
The petitioner states that the Department should use the financial
reports of Ennore, Jayaswals, Kalyani, Krishna, Nagpur, Rico and
Shivaji to calculate percentages for both investigations and that the
Department should calculate the percentages based on the petitioner's
calculations of the data as shown in its case brief.
DOC Position
The Department disagrees with certain of the respondent's specific
statements, while agreeing in general, that the companies selected for
calculation of factory overhead, SG&A, and profit should reflect the
Department's preference for ``the most product-specific information
possible from the surrogate market'' as noted in Melamine. Based on
publicly available information, we find that Jayaswals, Kalyani,
Krishna, Nagpur and Rico produced both brake drums and brake rotors
within the scope of these investigations and sold during the POI.
Therefore, we are using these Indian producers' financial reports to
calculate surrogate percentages for use in both investigations. We are
not using the financial data of Electrosteel or Ennore because we have
no publicly available information which indicates that these companies
produced subject merchandise during the POI. Although the eight
respondents submitted a letter from Ennore which stated that it
produces brake drums, we have relied on publicly available information
instead of the private correspondence as the basis for our decision
because we normally prefer to rely on publicly available information
and consider the contents of the correspondence files of a company, by
nature, not to be publicly available information. We are not using
Shivaji's financial report for these calculations because publicly
available information, along with information from the U.S. consulate
in India, establishes that Shivaji did not produce subject merchandise
during the POI.
Comment 6: Adjustments to Indian Financial Reports' Data
The eight respondents argue that, when calculating SG&A, the
Department should offset the interest and financial expenses by the
amount of financial gains (i.e., items such as ``operating income,
miscellaneous receipts, miscellaneous income, and other interest
income'') when calculating SG&A. They contend that adding the financial
expenses to SG&A without reducing those amounts by any corresponding
operating income results in imprecise and overstated selling expenses.
They cite to the Notice of Final Results of Antidumping Duty
Administrative Review: Frozen Concentrated Orange Juice from Brazil
(Orange Juice), 55 FR 26721 (June 29, 1990) (Comment 8) in which the
Department offset financial expenses with short-term operating income.
The petitioner argues that the Department should not offset
financial expenses against financial gains, citing Bicycles, and claims
that section 773(a)(7) of the Act states that an offset to NV is only
required upon sufficient showing that differences exist justifying the
adjustment.
DOC Position
We agree with the respondents that we should offset interest
expense by the amount of short-term interest income when calculating
G&A, as in Orange Juice and in accordance with Departmental practice.
However, we disagree that operating income or all of miscellaneous
receipts should be in the offset. We do not include in our offset long-
term interest income nor short-term income from activities such as
rental. Thus, we reduced interest expenses by amounts for interest
income for those items identified in the financial reports as being
related to short-term interest, and utilized the April 1995 Indian
Reserve Bank Bulletin to allocate a portion of ``other income'' or
``miscellaneous receipts'' as short-term interest income for those
companies which did not specify a breakdown of their non-operating
income.
The petitioner's reliance on section 773(a)(7) of the Act and
Bicycles is misplaced. Section 773(a)(7) deals with level of trade
adjustments. The comment in Bicycles to which the petitioner refers
deals with a circumstance-of-sale (COS) adjustment. 61 FR at 19031
(Comment 1). This adjustment is not a COS adjustment but simply a
reduction in the total amount of SG&A expenses based on short-term
income received by the Indian producer.
Comment 7: Surrogate Values for Certain Material Inputs
The petitioner asserts that the Department should value pig iron,
steel sheet, steel wire rod and steel scrap using POI import prices
from the Indian publication Monthly Statistics rather than the POI
domestic prices from the Indian publication SAIL or from the financial
reports of certain Indian producers because the prices in Monthly
Statistics are exclusive of taxes and duties whereas the prices in SAIL
and in the financial reports are not. If the Department elects not to
use pig iron prices from Monthly Statistics, then the petitioner urges
the Department to use Indian Iron & Steel Company Limited (IISCO)
prices rather than SAIL prices for the same reason noted above. The
petitioner claims that the Department should not value ball bearing
cups by using prices from Indian Customs Daily Lists provided by
International Data Services (IDS) because IDS data is of
[[Page 9169]]
inferior quality and is therefore unreliable. For coke, the petitioner
maintains that the article containing domestic prices submitted by all
of the respondents on January 10, 1997, indicates that the prices are
controlled by the Indian government and therefore should not be
considered.
The eight respondents maintain that in past NME cases the
Department has expressed a clear preference for using tax-exclusive
domestic prices rather than import prices when valuing factors of
production. In addition, they state that in previous NME cases, the
Department has used SAIL data when the specificity of the steel product
has been most important in valuing the factor. They cite to Drawer
Slides and to the Notice of Final Results of Administrative Review:
Certain Helical Spring Lock Washers from the People's Republic of
China, 61 FR 41994, 41997 (August 13, 1996) in support of their
argument. For ball bearing cups, the respondents maintain that the IDS
data is publicly available information and is more specific to imports
of ball bearing cups than the category of ``other ball/roller bearing
parts'' listed in Monthly Statistics. For coke, they state that the
data from Economic Times of Mumbai provide prices for coke which are
contemporaneous with the POI and specific to Indian foundry industries.
DOC Position
We disagree in part with both the petitioner and the respondents.
The fact that domestic prices may include taxes is not determinative
when deciding which prices are preferable for use in valuing the
factors of production. For pig iron, steel scrap and iron scrap, we
find that the separated line item prices for each of these inputs in
Shivaji's 1995-96 report are more specific than the prices contained in
SAIL, Monthly Statistics or IISCO. Therefore, the prices in Shivaji's
report are more reflective of prices paid for inputs used by domestic
producers of castings (i.e., products of the same general category as
the subject merchandise). We have also removed, where possible, any
taxes included in the prices obtained from Shivaji's report.
The Department normally prefers to use prices that are
representative of prices in effect during the POI. For ball bearing
cups, we find that the IDS data is less representative of prices in
effect during the POI than the prices contained in Monthly Statistics
because the IDS data, selected by the respondents, consist of a single
transaction at a single port for a single customer and do not appear to
be more product-specific than the Monthly Statistics data. Therefore,
we have valued this input using prices from Monthly Statistics.
For coke, though the prices from Economic Times of Mumbai are POI
prices, we find that these prices are clearly government administered.
Since we have a POI coke value from Monthly Statistics in these
investigations which is not government administered, we have used these
prices to value this input.
Comment 8: Treatment of Indirect Materials
All of the respondents urge that, in calculating NV, the Department
should continue to consider molding inputs as indirect materials and
part of factory overhead, rather than as materials consumed. In
addition, Southwest maintains that the Department should also treat
dextrin, steel shot, antirust, cutting oil, cleaning agent, dehydrating
oil, and rustproofing oil as indirect materials and part of factory
overhead. In order for a material to be considered a direct material,
Southwest argues that the material must be physically incorporated into
the finished product, citing the Compendium of Statements and Standards
published by the Institute of Chartered Accountants of India. Finally,
Shenyang/Laizhou claims that limestone and firewood should be treated
as indirect materials because they are not physically incorporated into
the final product.
The petitioner did not comment on this issue.
DOC Position
We have continued to treat molding materials listed in the
``Factors of Production'' section of this notice as indirect materials
because although these inputs are used to produce the subject
merchandise, these inputs are not incorporated into the final product
and are also categorized as ``stores and spares consumed'' based on
Indian accounting standards. According to the Compendium of Statements
and Standards, in order for a material to be considered as part of
factory overhead, it must ``assist the manufacturing process, but * * *
not enter physically into the composition of the finished product.'' We
agree that dextrin, steel shot, antirust, cutting oil, cleaning agent
and dehydrating oil are indirect materials and should be treated as
part of factory overhead, because the function of these materials is to
``assist'' in the manufacturing process and do not enter physically
into the composition of the finished product. With respect to
rustproofing oil, we find that this input is a direct material because
it is used as a packaging material. As for limestone and firewood, we
find that limestone is a direct material which is consumed during the
smelting process as flux (i.e., a material resulting from the
production process which removes undesirable substances, like sand,
from the metal bath) and that firewood is an energy input used in the
production process.
Comment 9: Surrogate Value for Rustproofing Oil
Southwest claims that if the Department treats rustproofing oil as
a direct material, then the Department should value it using the value
of lubrication oil because other respondents, such as CAIEC/Laizhou
CAPCO, use rustproofing oil for the same process. Thus, the Department
should use the same surrogate value for all respondents (i.e.,
lubrication oil).
The petitioner did not comment on this issue.
DOC Position
We disagree with Southwest. We found at the verification of
Southwest's factory that it used a rustproofing oil, not lubrication
oil, to coat its finished brake rotors for packaging. In contrast,
although we found that CAIEC/Laizhou CAPCO used an oil to protect its
brake rotors before packaging, it is clear that CAIEC/Laizhou CAPCO
uses lubrication oil and not rustproofing oil. However, given that we
could not obtain a surrogate value for rustproofing oil, we have used
the value of lubrication oil to value this input for all respondents.
Comment 10: Foreign Inland Freight
The eight respondents maintain that the Department should not
deduct an amount for foreign inland freight from EP or CEP because that
expense was incurred by the factories and not by the trading companies.
According to these respondents, the original places of shipment were
the seaports where the suppliers delivered the merchandise for shipment
to the United States. Citing Notice of Final Results of Antidumping
Duty Administrative Review: Titanium Sponge from the Russian
Federation, 61 FR 58525 (November 15, 1996), (Titanium Sponge from
Russia), they claim that the Department should consider the seaports
from which the subject merchandise was shipped to be the original
places of shipment and to deduct only the movement charges incurred in
transporting the merchandise from the PRC to the U.S. customers from EP
and CEP. Alternatively, they maintain that if the Department does
deduct the foreign inland freight from the factories to the seaports
from EP and CEP, then the
[[Page 9170]]
Department should, at a minimum, ensure that a similar amount is
excluded from the overhead and selling expense ratios calculated for
building normal value. They contend that if the overhead and selling
expense ratios are derived from Indian producer financial statements
wherein overhead and/or SG&A contain delivery expenses, the inclusion
of such expenses in normal value with the simultaneous exclusion of
such expenses from EP and CEP would constitute double-counting.
The petitioner did not comment on this issue.
DOC Position
The Department disagrees with the respondents'' implied conclusion
that in these investigations, the cost of transporting the subject
merchandise from the factory to the PRC port of exportation should be
treated as a component of the factories'' total costs (i.e., as a
factor in the construction of normal value) instead of as a deduction
from the price to the U.S. customer. While it is true that, in Titanium
Sponge from Russia, the Department did not deduct factory-to-port
movement charges from the U.S. starting price, and instead included
``in normal value an amount for the inland freight,'' the circumstances
in that particular case were very different from those of the instant
investigations. Our normal methodology is to strip all movement
charges, including all foreign inland freight, from the U.S. price
being compared to NME normal value based on factors of production. The
facts in these instant investigations differ from those in Titanium
from the Russian Federation, wherein (1) the subject merchandise
produced in an NME country was sold to an exporter located in a market
economy without knowledge on the part of the producer of the United
States as the ultimate destination and (2) the exporter took physical
possession of the subject merchandise. Since neither of these
conditions apply to these instant investigations, the comparison to
Titanium from the Russian Federation is misplaced, and the Department
has followed its normal methodology.
The respondents in these investigations are either (1) PRC self-
exporting producers, such as Xinchangyuan or (2) PRC trading companies,
such as CMC, which purchased subject merchandise from PRC producers. We
are therefore deducting the surrogate value for the cost of
transporting the subject merchandise from the factories to the port of
exportation from the U.S. price, whether EP or CEP, in keeping with our
past practice. See Bicycles. As to the respondents'' claim that the
overhead and/or SG&A rates applied in calculating normal value may
already contain the cost of transporting the merchandise to the port as
a selling expense, and that the deduction of foreign inland freight
charges from the U.S. price constitutes a double-counting of expenses,
we have ensured that any expense line-item which refers to ``freight,''
``movement,'' ``carriage,'' or ``transportation'' of goods, as well as
the portion of ``vehicle maintenance'' and ``vehicle depreciation''
expenses applicable to product delivery, have been removed from the
total SG&A costs and total overhead costs contained in the financial
statements of Indian companies used in calculating NV.
Comment 11: Use of Exchange Rates
The eight respondents maintain that when calculating the exchange
rate used in converting Indian surrogate values into U.S. dollars, the
Department should use the buying exchange rates for U.S. dollars
contained in Federal Exchange Bulletin, because the issue here is not
how many dollars it takes to purchase one Indian rupee, but rather how
many rupees are required to purchase one U.S. dollar.
The petitioner argues that the Department should not reject its use
of daily Indian rupee-U.S. dollar exchange rates from the Federal
Reserve Bank of Chicago and argues that there is no merit in
respondents' request for the Department to abandon the use of these
exchange rates in favor of simple average rates in the Federal Exchange
Bulletin.
DOC Position
We agree with the petitioner. Based on Policy Bulletin 96-1: Import
Administration Exchange Rate Methodology, we have used daily noon
buying rates to establish the Indian rupee exchange rates used in these
investigations. The daily noon buying rates are based on the rates in
New York for cable transfers, which are certified by the New York
Federal Reserve Bank for customs purposes, as required by section 522
of the Act. This information has been downloaded from an electronic
bulletin board maintained by the Chicago Federal Reserve Bank. (See
``Currency Conversion'' section of this notice for further discussion).
Comment 12: Currency Conversion
The eight respondents urge the Department to round to the nearest
one-thousandth of a dollar when converting Indian rupee values to U.S.
dollars, because rounding to the nearest one-hundredth of a dollar
often can cause significant distortions.
The petitioner did not comment on this issue.
DOC Position
We disagree with the respondents. In converting values from Indian
rupees to U.S. dollars, we have derived U.S. values and rounded those
values to the nearest one-hundredth, not one-thousandth, of a dollar
because we do not find their use to have a significant effect on the
margins.
Company-Specific Issues
Qingdao
Comment 13: Calculation of Total Material Cost
The petitioner claims that the Department did not include the cost
of wire rod scrap when it calculated the total material cost for each
model in the factors of production database for Changzhi Automobile
Parts Factory (Changzhi), Qingdao's supplier. The petitioner urges the
Department to include this factor in its calculation of total material
cost.
Changzhi states that the Department correctly did not separately
value wire rod scrap.
DOC Position
We agree with the petitioner. We verified that Changzhi reported a
separate factor amount for wire rod scrap in the factors of production
database. Therefore, for the final determination, we have valued this
factor accordingly.
Shenyang/Laizhou/MAT
Comment 14: EP vs. CEP Sales Classification
Shenyang/Laizhou maintains that the Department incorrectly
classified U.S. sales made prior to importation through its U.S.
affiliate, MAT, as CEP transactions, and requests that the sales be
reclassified as EP transactions.
The petitioner maintains that the Department should continue to
treat these sales as CEP transactions.
DOC Position
We agree with the petitioner that these sales are properly treated
as CEP sales. With respect to EP sales, section 772 (a) of the Act
states that:
The term ``export price'' means the price at which the subject
merchandise is first sold (or agreed to be sold) before the date of
importation by the producer or exporter of the subject merchandise
outside of the United States to an unaffiliated purchaser in the
United States or to an unaffiliated purchaser for exportation to the
United States . . .
[[Page 9171]]
Based on Department practice, we examine several criteria for
determining whether sales made prior to importation through an
affiliated sales agent to an unaffiliated customer in the United States
are EP sales, including: (1) Whether the merchandise was shipped
directly from the manufacturer to the unaffiliated U.S. customer; (2)
whether the sales follow customary commercial channels between the
parties involved; and (3) whether the function of the U.S. selling
agent is limited to that of a ``processor of sales-related
documentation'' and a ``communications link'' with the unrelated U.S.
buyer. Where all criteria are met, the Department has regarded the
routine selling functions of the exporter as ``merely having been
relocated geographically from the country of exportation to the United
States,'' and has determined the sales to be EP sales. Where all
conditions are not met, the Department has classified the sales in
question as CEP sales. See, e.g., Final Determination of Sales at Less
Than Fair Value: Large Newspaper Printing Presses and Components
Thereof, Whether Assembled or Unassembled, from Germany (LNPP from
Germany), 61 FR 38166, 38174 (July 23, 1996).
In this case, the sales through MAT meet the first two criteria
described above. However, with respect to the third criterion, the
record evidence in this case indicates that MAT is not merely a
processor of sales-related documentation nor a ministerial
communication link between the factories and their unaffiliated
customers. On the contrary, MAT is instrumental in determining the
terms of sale. In the questionnaire responses and at verification,
company officials repeatedly stated that the U.S.-based president of
MAT and owner of the Shenyang and Laizhou factories is solely
responsible for all production, distribution, and sales decisions.
Indeed, the case brief submitted by Shenyang/Laizhou concedes that
instructions regarding pricing are sent from MAT's office in the United
States. See case brief at 20. We are not persuaded by the argument that
the U.S.-based president of MAT directs sales activities in his role as
owner of the factories rather than as president of MAT, nor by the
argument that his U.S. sales activities are ``simply the consequence of
(the U.S.-based president of MAT) being a U.S. citizen and resident.''
Id. The fact is that the U.S.-based president of MAT operationally
controls both the factories and MAT from his U.S. office, with the
result that MAT directs the factories, not the opposite. Therefore, the
sales through MAT are properly classified as CEP sales.
Comment 15: Surrogate Value for Purchased Unfinished Castings
Shenyang/Laizhou argues that the Department should use Laizhou's
casting-related factors of production to calculate a surrogate value
for castings purchased by Shenyang from unaffiliated PRC suppliers
because Laizhou's valued factors for castings are more reflective of
Shenyang's costs for castings if it had produced the castings itself.
Alternatively, the respondent argues that the Department should derive
a casting value based on the financial statements of Indian casting
producers Nagpur and Jayaswals. According to the respondent, these
financial statements are the only sources on the record that provide
data for purchases or consumption of unfinished gray cast iron castings
by producers of brake rotors.
The petitioner maintains that the Department should not value
castings using the Laizhou factors of production given that there is
reliable public information on the record regarding the price of input
castings in India. The petitioner requests that the Department continue
to use the inventory value for castings in Shivaji's financial
statements as it did in the preliminary determination.
DOC Position
We disagree with the respondent that the unfinished castings
purchased by Shenyang should be valued using the casting-related
factors of production reported by Laizhou because, in NME cases, we
value a respondent's factors based on its actual production experience
during the POI. In this case, Shenyang purchased its unfinished
castings during the POI and did not produce them, and thus we have
valued these factors accordingly (see Notice of Final Determination of
Sales at Less Than Fair Value: Coumarin from the People's Republic of
China (PRC), 59 FR 66895, (Comments 4 and 5) (December 28, 1994). The
Department values inputs purchased in an NME using surrogate values
derived from publicly available information in a market economy of a
similar stage of development. The record of this investigation includes
financial statements of Indian producers of brake rotors which provide
reliable surrogate values for the purchase price of input castings, and
there is therefore no need to build up a casting purchase value using
the factors of production reported by Laizhou.
In identifying appropriate Indian financial statements for
valuation of castings, we have excluded the statements of producers
which did not manufacture rotors during the POI, since castings for
rotors may have significantly different prices from castings for other
products. Also, we have sought data on purchases of castings from
casting suppliers, since it is reasonable to assume that such castings
are unfinished or at most semi-finished. We believe that purchased
casting data are more reliable than casting inventoried values, which
may reflect large quantities of finished castings, and also more
reliable than casting consumption values, which may include large
quantities of castings produced internally rather than purchased from
outside suppliers. Given these criteria, the Jayaswals financial
statements provide the only appropriate Indian surrogate value for
unfinished castings on the record, and we have relied on that value.
For a more extensive discussion of our valuation of unfinished
castings, please refer to the final factors valuation memorandum.
Southwest/MMB
Comment 16: EP vs. CEP Sales Classification
The respondent maintains that sales made by its U.S. affiliate
(MMB) should be considered EP and not CEP transactions because (1) the
price of the merchandise is set by Southwest, not by MMB, prior to
importation; (2) the customary commercial channel is to ship the
merchandise directly to the customer; and (3) MMB maintains no
inventory in the United States. Southwest cites to The Final
Determination of Sales at Less Than Fair Value: Certain Stainless Steel
Rod from France, 58 FR 68865 (December 29, 1993) (Stainless Steel Rod)
in support of its argument.
The petitioner asserts that the Department should continue to treat
these sales as CEP.
DOC Position
We disagree with Southwest. Our verification findings indicate that
Southwest's sales through MMB were properly classified as CEP sales.
When we requested at verification evidence that Southwest sets U.S.
prices, rather than MMB, Southwest was only able to provide negotiation
and sales correspondence for one customer purchase order (which covered
an insufficient number of the total POI invoices of subject
merchandise). Further, the only documentation Southwest provided at
verification to
[[Page 9172]]
support its claim was documentation that it had been requested to
prepare prior to verification. We find this failure to be significant,
especially given that the respondent originally stated in its response
that MMB is ``not a mere conduit of sales by Southwest'' and that MMB's
salesman ``negotiates the final prices with MMB's customers.'' (see
Southwest's supplementary sales response, dated August 27, 1996, at A-
2). With regard to Southwest's reference to Stainless Steel Rod, we
note that unlike the U.S. affiliate in that case, MMB's sales of brake
rotors do not involve a situation in which the U.S. affiliate had no
flexibility to set the price (i.e., price is set by the parent
company). Therefore, we find no compelling evidence in Southwest's
responses or in our verification findings to treat these sales as EP
sales.
Comment 17: Treatment of Bartered Scrap
The petitioner argues that no adjustment for bartered steel scrap
should be made because the respondent did not provide a surrogate value
to the Department.
Yangtze, Southwest's supplier, claims that the Department should
grant it a credit for the scrap (i.e., turnings and shavings) sold or
bartered by it and that a surrogate value for steel scrap is already on
the record.
DOC Position
We agree with Yangtze. It is Department practice to subtract the
sales revenue of by-products such as steel scrap from the production
costs of the subject merchandise (see Notice of Final Determination of
Sales at Less Than Fair Value: Sebacic Acid from the People's Republic
of China, 59 FR 28053 (May 31, 1994). Moreover, we have a surrogate
value for steel scrap on the record. Therefore, we have granted Yangtze
a credit for the turnings and shavings it sold or bartered during the
POI.
Comment 18: Credit Expense
Southwest maintains that if credit expenses are deducted from CEP,
then the Department should use the date of the U.S. affiliate's invoice
and not the date when Southwest shipped the subject merchandise from
the PRC.
The petitioner maintains that the Department should use the PRC
date of shipment to calculate this expense.
DOC Position
We disagree with Southwest that the Department should use the date
of the U.S. affiliate's invoice to calculate credit expenses. When
merchandise produced by the foreign-based exporter's affiliated factory
(Yangtze) is shipped from the factory through the foreign-based
exporter (Southwest) and then directly to an unaffiliated U.S. customer
without entering the inventory of a U.S. affiliate (MMB), then it is
the Department's standard practice to calculate credit expenses based
on the date of shipment from the factory to the U.S. customer.
Therefore, we have based credit expenses for this respondent on the
number of days between the date of shipment to the U.S. customer and
the date of payment. See Final Determination of Sales at Less Than Fair
Value: Hot-Rolled Carbon Steel Flat Products from Italy, 58 FR 37152
(July 9, 1993).
Comment 19: Misreported Weights for Unfinished Castings
The petitioner maintains that Yangtze incorrectly reported the
weights for all of its unfinished casting models listed in the sales
and factors of production databases, and the factors for those
unfinished castings.
The respondent maintains that it did not misreport the weights of
its unfinished castings in the factors of production database. The
respondent argues that the Department should use the reported standard
weights for unfinished castings rather than the actual weights because
the reported weights are reflected in its accounting records and those
weights were used to allocate raw materials used in making all castings
(i.e., unfinished castings and finished castings). Respondent further
maintains that using the actual weights rather than the standard
weights would be distortive because they overstate the constructed
value for each unfinished casting. Respondent cites To Notice of Final
Determination of Sales at Less Than Fair Value: Minivans from Japan, 57
FR 21937 (1992) in support of its argument.
DOC Position
We disagree with the respondent. At verification, we found that the
difference in weight of an unfinished casting compared to a finished
casting for the same model is large in magnitude. We know that using
the standard weights for allocating inputs for unfinished castings from
Yangtze's accounting records distorts the actual production costs of
the subject merchandise. Using the standard weights will also
undervalue the factors used to produce unfinished castings and distort
the actual production cost of the brake rotors, because the standard
weights are lower than the actual weights. Therefore, the reasons for
using standard weights in the Minivans case do not apply in this case.
If we do not take into account the actual weight of the unfinished
brake rotor, then we would not be considering that there is a yield
loss between a finished and unfinished product. However, in actuality,
the yield loss is not as high for an unfinished product as a finished
product, and therefore, the cost allocations are inaccurate as
reported. Yangtze has not offered any alternative allocation
methodology to account for these distortions. Furthermore, Yangtze did
not even realize that its reported weights for unfinished brake rotors
were based on its standard accounting system until Department officials
found that the weights for unfinished brake rotors were incorrectly
reported at verification.
In sum, in light of the distortive effects which would result from
using Yangtze's theoretical standard weights, which bear no resemblance
to the actual weights of unfinished castings, we are using the actual
weights as the basis for allocation for those castings.
Comment 20: Welfare Fund
The petitioner alleges that Southwest failed to establish an
absence of de facto or de jure government control because verification
demonstrated that Southwest places a portion of its profits in a fund
called ``the public welfare fund'' and claims that this fund is set up
for payment of profits to the PRC government. For these reasons, the
petitioner urges the Department to resort to facts available and deny
Southwest a separate rate.
Southwest maintains that the Department found at verification that
``the public welfare fund'' is an employee welfare fund retained by the
respondent.
DOC Position
We disagree with the petitioner. Southwest, like all the other
respondents, is required to maintain an accounting system based on
current PRC accounting standards. Included in the standard chart of
accounts is an account entitled ``public welfare fund.'' We examined
the activity in this account during the POI and found that no payments
were made to the PRC government. In addition, Southwest has
demonstrated both a de jure and de facto absence of government control.
(See ``Separate Rates'' section, above). Therefore, the Department sees
no reason to deny Southwest a separate rate.
[[Page 9173]]
Yantai
Comment 21: Misreported Factors
The petitioner maintains that Laizhou Magnetic Iron Powder (MIP)
Factory incorrectly reported its usage of five packing material factors
for all models in the factors of production database. As a result of
these errors, the petitioner urges the Department to resort to facts
available for these materials.
Respondent maintains that the petitioner's request for use of facts
available for Laizhou MIP's packing costs is misplaced. According to
the respondent, of the six types of packing materials used by Laizhou
MIP, the factory consistently and conservatively over-reported usage
for five of the materials. For the sixth material, plastic bags,
Laizhou MIP maintains that the magnitude of its under-reporting was
less than one gram per bag.
DOC Position
We disagree for the most part with the petitioner's request that
the Department utilize facts available in determining Laizhou MIP's
usage of packing materials. For five of the six materials in question--
cartons, nails, steel strap, pallet wood, and tape--the usages reported
were found to be significantly overstated by the respondent. With
respect to one packing material, plastic bags, the samples examined at
verification indicate that Laizhou MIP did underreport usage by a
relatively minor amount. We have corrected all of these usages using
the verification findings as non-adverse facts available.
Currency Conversion
We made currency conversions into U.S. dollars based on the
official exchange rates in effect on the dates of the U.S. sales as
certified by the Federal Reserve Bank.
Section 773A(a) of the Act directs the Department to convert
foreign currencies based on the dollar exchange rate in effect on the
date of sale of the subject merchandise, unless it is established that
a currency transaction on forward markets is directly linked to an
export sale. When a company demonstrates that a sale on forward markets
is directly linked to a particular export sale, the Department will use
the rate of exchange in the forward currency sale agreement.
Section 773A(a) also directs the Department to use a daily exchange
rate in order to convert foreign currencies into U.S. dollars unless
the daily rate involves a fluctuation. It is the Department's practice
to find that a fluctuation exists when the daily exchange rate differs
from the benchmark rate by 2.25 percent. The benchmark is defined as
the moving average of rates for the past 40 business days. When we
determine a fluctuation to have existed, we substitute the benchmark
rate for the daily rate, in accordance with established practice.
Further, section 773A(b) directs the Department to allow a 60-day
adjustment period when a currency has undergone a sustained movement. A
sustained movement has occurred when the weekly average of actual daily
rates exceeds the weekly average of benchmark rates by more than five
percent for eight consecutive weeks. (For an explanation of this
method, see Policy Bulletin 96-1: Currency Conversions, 61 FR 9434
(March 8, 1996).) Such an adjustment period is required only when a
foreign currency is appreciating against the U.S. dollar. The use of an
adjustment period was not warranted in this case because the Indian
rupee did not undergo a sustained movement.
Continuation, and Termination in Part, of Suspension of Liquidation
Brake Drums
In accordance with section 735(c) of the Act, we are directing the
Customs Service to continue to suspend liquidation of all entries of
brake drums from the PRC, except for the exporter/producer combinations
listed below, that are entered, or withdrawn from warehouse, for
consumption on or after October 10, 1996, which is the date of
publication of our notice of preliminary determination in the Federal
Register:
------------------------------------------------------------------------
Exporter(s) Producer(s)
------------------------------------------------------------------------
CMC....................................... Xinchangyuan
Qingdao................................... Changzhi
Xinchangyuan.............................. Xinchangyuan
Yantai.................................... Longkou Bohai; Laizhou MIP.
------------------------------------------------------------------------
With respect to the above companies, the suspension of liquidation
ordered on or after October 10, 1996, will be terminated and any cash
deposit or bonds will be released.
Under the Department's NME methodology, the zero rate for each
exporter is based on a comparison of the exporter's U.S. price and NV
based on the factors of production of a specific producer (which may be
a different party). Therefore, the exclusion of the above-mentioned
companies from an antidumping duty order (should one be issued) applies
only to subject merchandise sold through the exporter/producer
combinations noted above. Merchandise that is sold by an above-
mentioned exporter but manufactured by producers not noted above for
that exporter will be subject to the order, if one is issued (see
Notice of Final Determination of Sales At Less Than Fair Value: Cased
Pencils from the People's Republic of China, 59 FR 55625 (November 8,
1994) and Drawer Slides). Entries of such merchandise will be subject
to the ``China-wide'' rate.
For imports of brake drums that are sold by CAIEC/Laizhou CAPCO,
Hebei Metals and Machinery Import & Export Corporation, Jiuyang
Enterprise Corporation, Longjing Walking Tractor Works Foreign Trade
Import & Export Corporation and Shanxi Machinery and Equipment Import &
Export Corporation, we are directing the Customs Service to suspend
liquidation at a rate indicated below.
As stated in the preliminary determination, it would be
inappropriate to assign these fully cooperative respondents a rate
based on ``facts available'' that would also apply to PRC exporters who
refused to cooperate. However, for this final determination, all of the
rates determined for the selected brake drum respondents were either
zero or entirely based on facts available.
We note that the Act is silent with respect to a situation in an
NME investigation in which all of the rates determined for the selected
respondents are either zero, de minimis or based on facts available.
However, section 735(c)(5)(B) of the Act, which deals with the
analogous ``all others'' determination, allows us to ``use any
reasonable method to establish the estimated all-others rate for
exporters and producers not individually investigated, including
averaging the estimated weighted average dumping margins determined for
the exporters and producers individually investigated.'' The SAA at 873
explicitly recognizes that if the latter approach ``results in an
average that would not be reasonably reflective of potential dumping
margins for non-investigated exporters or producers, Commerce may use
other reasonable methods.'' CNIGC, the only one of the five examined
companies which did not receive a de minimis or zero rate, became
subject to a rate based on facts available because it was found not to
be entitled to a separate rate, rather than due to a failure to provide
data on its sales practices. Furthermore, this company's volume of
sales of brake drums to the U.S. market is one of the largest in the
investigation. Given the unique circumstances of this case, we do not
consider that a weighted-average which includes that company's adverse
facts available rate is reasonably reflective of potential
[[Page 9174]]
dumping margins for cooperative non-investigated exporters or producers
who submitted full questionnaire responses. Therefore, in order not to
give undue weight to CNIGC in determining a rate for non-examined
companies which is reasonably reflective of potential dumping margins,
we have assigned to these companies a rate which is the simple average
of the dumping margins determined for the exporters and producers
individually investigated.
We are also directing the Customs Service to continue to suspend
liquidation of entries sold by the PRC brake drum companies subject to
the China-wide rate, that are entered, or withdrawn from warehouse, for
consumption on or after October 10, 1996.
The Customs Service will require a cash deposit or posting of a
bond equal to the estimated duty margins by which the normal value
exceeds the USP, as shown below. These suspension of liquidation
instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
Brake Drums
------------------------------------------------------------------------
Manufacturer/Producer/Exporter Weighted-average margin percentage
------------------------------------------------------------------------
CMC/Xinchangyuan.................... 0.00 (Excluded).
Qingdao/Changzhi.................... 0.00 (Excluded).
Xinchangyuan/Xinchangyuan........... 0.00 (Excluded).
Yantai/Longkou Botai Machinery 0.00 (Excluded).
Company or Laizhou MIP.
CAIEC/Laizhou CAPCO................. 17.20.*
Hebei Metals and Machinery Import & 17.20.*
Export Corporation.
Jiuyang Enterprise Corporation...... 17.20.*
Longjing Walking Tractor Works 17.20.*
Foreign Trade.
Import & Export Corporation Shanxi 17.20.*
Machinery and Equipment Import &
Export Corporation.
China-Wide Rate..................... 86.02.
------------------------------------------------------------------------
* Rate is based on the simple average of rates determined for the
selected respondents.
Brake Rotors
In accordance with section 735(c) of the Act, we are directing the
Customs Service to continue to suspend liquidation of all entries of
brake rotors from the PRC except for the exporter/producer combinations
listed below, that are entered, or withdrawn from warehouse, for
consumption on or after October 10, 1996:
------------------------------------------------------------------------
Exporter(s) Producer(s)
------------------------------------------------------------------------
CAIEC or Laizhou CAPCO.................... Laizhou CAPCO.
Shenyang or Laizhou....................... Shenyang or Laizhou.
Xinjiang.................................. Zibo Botai Manufacturing
Co., Ltd.
------------------------------------------------------------------------
With respect to the above companies, the suspension of liquidation
ordered on or after October 10, 1996, is to be terminated and any cash
deposit or bonds are to be released. However, if any of the above-
referenced companies sell subject merchandise which is not manufactured
by the producers noted above for those companies, then those entries
will be subject to the ``China-wide'' rate (for a full explanation, see
the ``Brake Drums'' section above).
For imports of brake rotors that are sold by Hebei Metals and
Machinery Import & Export Corporation, Jilin Provincial Machinery &
Equipment Import & Export Corporation, Jiuyang Enterprise Corporation,
Longjing Walking Tractor Works Foreign Trade Import & Export
Corporation, Qingdao Metals, Minerals & Machinery Import & Export
Corporation, Shanxi Machinery and Equipment Import & Export
Corporation, Xianghe Zichen Casting Corporation and Yenhere
Corporation, we have assigned these companies a weighted-average
dumping margin based on the calculated margins of the selected brake
rotors respondents, excluding margins which were zero, de minimis or
based on facts available (see Preliminary Determinations).
Because we have determined that critical circumstances exist with
respect to the PRC brake rotor companies which have received the China-
wide rate, we are directing the Customs Service to continue to suspend
liquidation of entries sold by these companies, that are entered, or
withdrawn from warehouse, for consumption on or after July 12, 1996,
which is 90 days prior to the date of publication of our notice of
preliminary determination in the Federal Register.
The Customs Service will require a cash deposit or posting of a
bond equal to the estimated duty margins by which the normal value
exceeds the USP, as shown below. These suspension of liquidation
instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
Brake Rotors
------------------------------------------------------------------------
Manufacturer/producer/exporter Weighted-average margin percentage
------------------------------------------------------------------------
CAIEC and Laizhou CAPCO/Laizhou 0.00 (Excluded).
CAPCO.
Shenyang and Laizhou/Shenyang or 0.00 (Excluded).
Laizhou.
Xinjiang/Zibo Botai Manufacturing 0.00 (Excluded).
Co. Ltd.
Yantai Import & Export Corporation.. 3.56.
Southwest Technical Import & Export 16.35.
Corporation, Yangtze Machinery
Corporation, and MMB International,
Inc.
..................................
Hebei Metals and Machinery Import & 8.63.*
Export Corporation.
Jilin Provincial Machinery & 8.63.*
Equipment Import & Export Corp.
Jiuyang Enterprise Corporation...... 8.63.*
Longjing Walking Tractor Works 8.63.*
Foreign Trade Import & Export
Corporation.
Qingdao Metals, Minerals & Machinery 8.63.*
Import & Export Corp..
Shanxi Machinery and Equipment 8.63.*
Import & Export Corporation.
Xianghe Zichen Casting Corporation.. 8.63.*
Yenhere Corporation................. 8.63.*
China-Wide Rate..................... 43.32.
------------------------------------------------------------------------
* Rate is based on the weighted-average of calculated rates that are not
zero or based on facts available.
China-Wide Rate
China-Wide Rates have been assigned to brake drums and brake rotors
exporters based on the revised highest petition rates. The China-Wide
rate applies to all entries of subject merchandise except for entries
from exporters/factories that are identified individually above under
each product type.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determinations. As our final determinations are affirmative,
the ITC will determine, within 45 days, whether these imports are
causing material injury, or threat of material injury, to an
[[Page 9175]]
industry in the United States. If the ITC determines that material
injury, or threat of material injury, does not exist, for one or both
proceedings, that proceeding or both proceedings will be terminated and
all securities posted will be refunded or canceled. If the ITC
determines that such injury does exist in both proceedings, the
Department will issue antidumping duty orders directing Customs
officials to assess antidumping duties on all imports of the subject
merchandise entered, or withdrawn from warehouse, for consumption on or
after the effective date of the suspension of liquidation.
These determinations are published pursuant to section 735(d) of
the Act.
Dated: February 24, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-5029 Filed 2-27-97; 8:45 am]
BILLING CODE 3510-DS-P