67 FR 20090, April 24, 2002 A-570-868 Investigation Group III/Office 8: HMK, JD public document MEMORANDUM TO: Bernard T. Carreau Acting Assistant Secretary for Import Administration FROM: Richard O. Weible Acting Deputy Assistant Secretary for Import Administration, Group III SUBJECT: Issues and Decision Memorandum for the Final Determination in the Less Than Fair Value Investigation of Folding Metal Tables and Chairs from the People's Republic of China Case History The preliminary determination in this investigation was published on December 3, 2001. See Notice of Preliminary Determination of Sales at Less Than Fair Value:Folding Metal Tables and Chairs from the People's Republic of China, 66 FR 60185 ("Preliminary Determination"). The investigation covers two manufacturers/exporters, Feili Furniture Development Co., Ltd. and Feili (Fujian) Co., Ltd. ("Feili Group") and Shin Crest Pte. Ltd. ("Shin Crest"). The petitioner is Meco Corporation. In the Preliminary Determination we found a margin of 134.77 percent for Feili Group and no margin for Shin Crest. Summary We have analyzed the comments and rebuttals of interested parties in the antidumping duty investigation of folding metal tables and chairs ("FMTC") from the People's Republic of China. As a result of our analysis, we have made changes, including correction of clerical errors, in the margin calculation. We recommend that you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in this investigation for which we received comments and rebuttals by parties: 1. Whether import prices paid by Feili Group for cold-rolled steel coils from Korea may be distorted by reason of subsidies Whether import prices paid by Feili Group and Shin Crest for inputs from Taiwan may be distorted by reason of subsidies Whether Shin Crest is affiliated with its steel supplier in Taiwan by reason of control and its import prices should be disregarded Whether the Department's practice regarding allegedly dumped inputs is too restrictive, and the Department should disregard Shin Crest's import prices for steel as putatively dumped Whether it is appropriate to use Indian surrogate values for steel if the Department disregards market economy prices for steel from Korea and/or Taiwan Whether the Department should disregard Indian steel imports from Belgium, Brazil, France, Korea, Russia, South Africa, Thailand and Ukraine in calculating surrogate value Whether Feili Group's "multi-chair" falls within the scope of the investigation Whether National Public Seating Corp.'s double-hinged commercial chair is within the scope Whether the Department should use P.T. Lion Metal Works' financial statements to value overhead, SG&A and profit Whether the Department should use adverse facts available ("FA") to calculate the PRC-wide margin Whether the Department should use updated Indian import statistics for surrogate values and "correct" the exchange rate Whether the dates of sale for Feili Group and Shin Crest should be the purchase order date Whether the Department should apply adverse FA to Feili Group's steel consumption Whether the Department should apply a value to steel Feili Group purchased before the POI and used during the POI Whether Feili Group should be required to report usage rates for inputs purchased from third parties Whether the Department should deny a steel scrap adjustment to Feili Group Whether the Department should apply the Indian surrogate value for supported vinyl to all of Feili Group's vinyl consumption Whether Feili Group impermissibly included physically different models in the same control number Whether the Department should require Feili Group to report the usage rate for plastic pellets used to make cup corners for folding metal tables Whether the Department should assume Feili Group's production workers worked 12-hour shifts Whether the Department used the wrong weight for sets in the margin calculation program for Feili Group Whether the Department used the wrong inflation rate to value electricity for Feili Group Whether the Department incorrectly used Feili Group's market economy purchases of plastic pellets to value nylon caps instead of the Indian surrogate value for plastic caps Whether the Department incorrectly calculated the surrogate value of poly bags for Feili Group Whether the Department erred in adding, instead of subtracting, the steel scrap offset for Feili Group Whether the Department should correct the surrogate value for wooden pallets by dividing the average value by the average pallet weight for Feili Group Whether the Department incorrectly included Indian import values for cardboard other than boxes in its calculation of surrogate value for cardboard cartons for Feili Group Whether the Department made clerical errors in calculations of surrogate values for screws. other metal fittings and rubber washers for Feili Group Whether the Department should correct the weights of foam, vinyl and fabric inputs incorrectly reported by Feili Group Whether the Department should correct the number of tables packed in a carton for Feili Group Whether Shin Crest should include inland freight for one U.S. sale in the sales listing Whether the Department should apply adverse FA for Shin Crest's consumption of hardboard because it was not verified Whether the Department should apply Feili Group's usage of wooden pallets for packing to Shin Crest as FA Whether the Department's calculations of the surrogate value of water were incorrect Whether the Department should make a finding of critical circumstances for all Chinese producers of folding metal tables and chairs Changes Since the Preliminary Determination General For all of the surrogate values, we used updated Indian import statistics from April 2000 - March 2001. We applied an exchange rate corresponding to this period to convert Indian imports used as surrogate values to U.S. dollars. Based on the Department's policy articulated in the final determination in Automotive Replacement Glass Windshields from the People's Republic of China ("ARG"), 67 FR 6482 (February 12, 2002), we excluded imports from Korea, Thailand and Indonesia; we also excluded imports from non-market economies ("NMEs") and imports in quantities under 100 kilograms from our calculations of the average unit value of Indian imports. We corrected the calculation of the Indian surrogate value for water. Feili Group We revalued the average price of market economy purchases of steel by using purchases of steel from Korean companies which were found in final countervailing duty determinations to have received de minimis subsidies, and from Taiwan. We weight-averaged these purchases to obtain the value for steel inputs. We revalued the price of plastic pellets by eliminating purchases from countries where there were generally available subsidies. Feili Group purchased plastic pellets from companies in Korea and Singapore. We eliminated all of the purchases from Korea, leaving the purchase from Singapore, which accounted for more than 5 percent of all market purchases. We valued plastic pellets using this value. Based on our findings at verification that the factor input Feili Group designated as SBOARD is a formed metal product, we assigned the same surrogate value to SBOARD as for the factor input LLOCK. Based on our findings at verification that the washers Feili Group used in production are formed metal products and not rubber products, we assigned a new surrogate value to the factor input WASHER. Based on our findings at verification, we assigned a surrogate value to CUPCORNER for plastic furniture fittings. Based on our findings at verification, we assigned a surrogate value to PLINK for smaller plastic articles. We assigned the surrogate value for LLOCK and SBOARD to Piston Tubes, as all are formed metal products. We adjusted the surrogate value for vinyl to reflect findings at verification that Feili Group uses both supported and unsupported vinyl in the production of subject merchandise. Based on our findings at verification, we have corrected the weight of one product in the SAS program. We corrected the inflation rate used for valuing electricity. We have assigned a surrogate value to nylon caps, using HTS # 39235000. We corrected the methodology for calculating the surrogate value for poly bags. We have corrected our calculation methodology and are now subtracting the scrap credit from the cost of manufacturing. We recalculated the scrap credit by subtracting a portion which should be allocated to non-subject merchandise. We have corrected the calculation methodology for the wooden pallet surrogate value to reflect the fact that the Indian import statistics report these values in pieces, not kilograms. We have corrected the surrogate value calculation methodologies for screws and other metal fittings by subtracting imports from all of the countries necessary when calculating the average unit values. We have used the correct weights, which we verified, for foam, vinyl, and fabric inputs. We corrected the number of items packed per box for one product, in accordance with verification findings. We adjusted our methodology in calculating the surrogate value for boxes and cartons to remove specialized containers from the calculation of surrogate values. Shin Crest We corrected the average price for market economy purchases of polyester fabric, plastic bags, plastic caps, polyurethane foam, and screws, in accordance with verification findings. We corrected electricity usage to account for yield loss. We corrected the distance to the port for two invoices. Discussion of the Issues Comment 1: Whether Import Prices Paid by Feili Group for Cold-rolled Steel Coils from Korea May Be Distorted by Reason of Subsidies Petitioner The petitioner points to the Department's policy not to use market economy prices when it has reason to believe or suspect that the prices of inputs are distorted by subsidies or dumping, citing the Preamble to the Department's Final Rule, 62 FR 27296, 27366 (May 19, 1997); Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China; Final Results of the 1999-2000 Administrative Review, Partial Rescission of Review, and Determination Not to Revoke Order in Part, 66 FR 57420 (November 15, 2001); Issues and Decision Memorandum at Comment 1 ("TRB"); and ARG. Summarizing the decision in ARG, in which the Department rejected market economy input prices from Korea, Thailand and Indonesia because it had sufficient evidence to conclude that these countries provided "broadly available, non-industry specific export subsidies," the petitioner argues that the Department has properly interpreted the "reason to believe or suspect" standard as one that authorizes it to make "a reasonable inference from the evidence on the record that export prices may be subsidized," without requiring an actual finding of subsidization by any administering authority, nor a formal investigation. Furthermore, the petitioner argues, since Congress did not intend for the Department to conduct a formal investigation of subsidies or determine whether the input supplier benefited from them, the actual level of subsidization is irrelevant, since that would also require a formal investigation. Therefore, the petitioner concludes, even a de minimis subsidy rate in a formal countervailing duty ("CVD") finding would be sufficient for the Department to form a belief or suspicion of subsidies and, thus, use a surrogate value rather than an actual price paid for a market economy input. The petitioner argues that the Department's determination in ARG that Korea maintains broadly available, non-industry-specific export subsidies that may benefit all exporters to all markets is alone sufficient to compel rejection of the prices that Feili Group paid to any of its Korean steel suppliers. However, the petitioner also cites as an alternative basis the March 4, 2002, preliminary determination in Certain Cold-rolled Carbon Steel Flat Products from the Republic of Korea, 67 FR 9685, in which the Department found that all Korean cold-rolled steel producers received countervailable benefits and calculated net subsidy rates ranging from 0.32 to 7.0 percent. The petitioner concludes that, since even a de minimis subsidy rate is sufficient to reject a market economy price, the Department must reject the prices that Feili Group paid for Korean steel and use surrogate values because the preliminary determination provides a sufficient basis to believe they are distorted. Feili Group Feili Group comments that in its recent applications of the "reason to believe or suspect" standard, the Department impermissibly relies on de minimis export subsidies and impermissibly disregards market economy prices on the basis of non-industry specific subsidies that may benefit all exporters to all markets. Feili Group claims that in ARG, the Department made its determination that it had "reason to believe or suspect" that input prices from Korea, Thailand and Indonesia were subsidized based on non-specific subsidies of de minimis effect, despite long-standing law to the contrary. Feili Group argues that the Court of International Trade (CIT) held in China National Arts & Crafts Import & Export Corp. v. United States ("CNART"), 771 F.Supp. 407, 412 (CIT, 1991), that the Department could not rely on de minimis export subsidies to disqualify a country from use as a surrogate. Feili Group cites the Court's decision on appeal as holding that in the absence of record evidence that the foreign producers used an export subsidy program, it was inappropriate for the Department to assume that the foreign producer "might possibly use that de minimis subsidy to a countervailable extent." Id. at 411. Feili Group disputes the Department's position in TRB that it is not bound by the CNART decision because it involved an administrative review which was initiated prior to the effective date of the Omnibus Trade and Competitiveness Act of 1988 ("Act of 1988"). Feili Group argues that the amendment in the Act of 1988 which substituted the Department's current method for investigating non-market economies ("NMEs") for the previous method for investigating producers in state-controlled economies only updated the Department's practices, and did not alter the fundamental method of calculating antidumping margins as accurately as possible. Feili Group claims that the Department's action that was reversed in CNART was very similar to the Department's action in ARG, and that the Department engaged in essentially the same practice in ARG by excluding inputs from a country based on non-industry specific export subsidies that may benefit all exporters. Feili Group concludes that because CNART was applying law analogous to the current law, under similar circumstances, it continues to bind the Department. Feili Group argues that the decision in ARG, taken to its logical conclusion, would mean that in all cases actual market economy prices for all inputs from Korea, Indonesia and Thailand can be rejected, without any evidence that the prices were in fact distorted, in favor of surrogate values that often bear no relationship to reality. Such a result, Feili Group claims, is contrary to the Department's mandate to render accurate decisions based on the "best available information." Feili Group argues that at a minimum, the Department must allow parties an opportunity to offer evidence as to whether their market economy prices are distorted. Feili Group asserts that there is no reason to believe or suspect that its Korean steel prices are distorted, and that its market economy steel purchases from Korea constitute the best available information to value steel inputs. Feili Group argues that there are no dumping or subsidy determinations by China or any other third country on the record of this investigation in regards to generally available Korean subsidies. Feili Group claims that although the Department found evidence of non-specific countervailable Korean subsidies in ARG, the same determination cannot be made with respect to Feili Group's Korean steel purchases because the Department must consider its own Final Determination with respect to the Korean steel industry. See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea: Amended Final Affirmative Countervailing Duty Determination in Accordance with Decision Upon Remand, 66 FR 16656 (March 27, 2001). Feili Group points out that the Department found a countervailable subsidy rate of "only" 1.45 percent, but it excluded Feili Group's largest steel supplier during the POI from the countervailing duty order because of a de minimis rate. Feili Group argues that because its largest supplier was excluded from the CVD order, the Department lacks "reason to believe or suspect" that the supplier's prices are distorted and cannot reject those prices. Feili Group claims it would be contrary to the intent of the Tariff Act of 1930 to use surrogate values when market-based values are available, citing Shakeproof Assembly Components Division of Illinois Tool Works v. United States, 268 F.3d 1376, 1382 (Fed. Cir. 2001). Feili Group argues that record evidence establishes not only that the prices it paid for steel were not distorted, but that it paid a higher price than the prevailing world market prices. Feili Group argues that it is the Department's burden to weight what constitutes the best available information, and that by any reasonable measure the market prices paid by Feili Group are far better than the Indian import statistics. Feili Group contends that the Department may not rely on its recent preliminary determination in Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination: Certain Cold- Rolled Carbon Steel Flat Products from the Republic of Korea, 67 FR 9685 (March 4, 2002), because preliminary determinations may not be used for determining whether the Department has reason to believe or suspect that prices are distorted by subsidies, and because it does not constitute the best available information. Feili Group cites the court's decisions in Technoimportexport, UCF American, Inc. v. United States ("Technoimportexport"), 783 F. Supp. 1401 (CIT 1992) and CNART as holding that the Department may not exclude countries from surrogacy based on preliminary findings of export subsidies. Feili Group quotes the CIT in CNART as stating: Preliminary margins are presumably less reliable than final results of investigations or administrative reviews. Preliminary results are reviewed and commented upon by interested parties before becoming final. Hearings are held, if requested. ITA uses the time between preliminary and final determinations to correct and adjust its preliminary findings and reach more accurate conclusions in the final determination. CNART, 771 F. Supp. at 412. Feili Group points out that its largest Korean supplier did not participate in the current CVD investigation of cold-rolled steel, and argues that it would be inappropriate to give a preliminary determination in which it did not participate more weight than a final determination in which it was individually investigated and verified. Feili Group contends that if the Department nevertheless disregards Feili Group's purchase prices for steel from its largest supplier, consistency would require that the Department use its purchase prices for steel from its second largest supplier of Korean steel, which was preliminarily found to have received a de minimis benefit from export subsidies, rather than turn to Indian surrogate values. Feili Group further contends that even if the Department finds that its Korean steel prices were distorted by generally-applicable subsidies, it would be unnecessary and inappropriate to use Indian surrogate values for steel, and that the Department should use Feili Group's Taiwanese steel prices as the best available information. Department's Position: We disagree with the petitioner that the Department's determination in ARG provides sufficient reason to disregard the prices that Feili Group paid to all of its Korean steel suppliers. Our decision to disregard prices from Korea in ARG was based on a reason to believe or suspect that Korean exporters may be subsidized. In that case, we relied on information generally available to the Department at the time. That information principally included final countervailing duty determinations, as well as an examination of other sources, including WTO subsidy notifications. Unlike the recent ARG case, in this investigation two of the market input suppliers from Korea have been subject to recent countervailing duty investigations by the Department. In these investigations we established that the two companies received de minimis subsidies from the Korean Government. On the basis of this information, we conclude that there is no reason to believe or suspect that prices from these companies are subsidized. See Final Negative Countervailing Duty Determination: Stainless Steel Plate in Coils From the Republic of Korea, 62 FR 15530 (March 31, 1999); Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils From the Republic of Korea, 64 FR 30636 (June 8, 1999); Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From the Republic of Korea, 64 FR 73176 (December 29, 1999); and Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea: Amended Final Affirmative Countervailing Duty Determinations in Accordance with Decision Upon Remand, 66 FR 16656 (March 27, 2001). It is not appropriate to rely on the ongoing and incomplete countervailing duty investigation of cold- rolled carbon steel flat products from Korea. The preliminary findings in that case have not yet been verified or commented upon by the interested parties and are subject to changes. We disagree with the petitioner that a de minimis subsidy rate for an investigated company is sufficient reason to disregard prices from that company. The petitioner has misinterpreted our decision in ARG, where we stated that the level of subsidization is not a relevant consideration in determining whether we have a reason to believe or suspect that prices may be subsidized. In that case, we correctly concluded that where generally available information indicates that export prices from a country may be subsidized, the Department was not then required to examine the actual level of subsidization, because this would require the agency to conduct a formal investigation. Such an investigation was explicitly not envisioned by the statute. (1) However, that does not mean that where the Department has in fact investigated the industry and input suppliers in question, findings from such an investigation should not be taken into account. Respondents have correctly pointed out that the Department has previously investigated Korean steel producers and found that a number of those producers received de minimis subsidies. While we did establish a general presumption in ARG, based on generally available information, that Korean export prices were subsidized, we agree with respondents that the Department must take into account evidence that such prices are not distorted. The Department's own countervailing duty investigations, finding that two of Feili Group's Korean input suppliers received de minimis subsidies, provides such evidence. In the absence of new evidence to the contrary, we will continue to disregard prices from other Korean input suppliers, including those previously investigated by the Department and found to have above de minimis level of subsidies, on the basis of our decision in ARG Comment 2: Whether Import Prices Paid by Feili Group and Shin Crest for Inputs from Taiwan May Be Distorted by Reason of Subsidies Petitioner The petitioner argues that there are several reasons to believe that the actual prices the respondents paid to Taiwanese suppliers are distorted by subsidies. First, the petitioner cites the determination in Final Results of Expedited Sunset Review: Top-of-the-Stove Stainless Steel Cookware from Taiwan ("Cookware"), 64 FR 48372 (September 3, 1999), that the subsidy programs found countervailable in the original investigation remained in place. As a result, the Department did not revoke the order. Second, the petitioner cites the Office of the U.S. Trade Representative's finding in the annual National Trade Estimate Report on Foreign Trade Barriers ("NTER") for 1999, 2000 and 2001 that Taiwan continues to provide incentives to industrial firms that "may have the effect of subsidizing exports." Third, the petitioner cites a 2001 country report by the State Department which found that Taiwan's industrial subsidy programs have the effect of subsidizing exports. Finally, the petitioner cites Taiwan's notification to the WTO of subsidy programs that are inconsistent with the Agreement on Subsidies and Countervailing Measures ("ASCM"), and the October 5, 2001, Report of the Working Party on Taiwan's Accession summarizing these programs and noting the concerns of some Working Party members about conflicts of certain programs with provisions of the ASCM and the Agreement on Trade-Related Investment Measures ("TRIMS"). The notified prohibited export subsidy programs that allow recipients to be more competitive when exporting which the petitioner considers to be relevant to this case are: (1) tax credits for the creation of internationally recognized brands, a subsidy which allows a credit of up to 15 percent of expenditure for promoting in the international market any trademark, service mark or certification mark created by the company itself; (2) no duty or tax is refunded for imported machinery and equipment resold to firms in an economic (formerly, export) processing zone, which favors use of domestic machinery and equipment, as no duty or tax is levied on the latter; (3) no duty or tax is refunded for imported machinery and equipment resold to firms in a Science-Based Industrial Park; and (4) tax credits for the purchase of automation or environmentally- friendly equipment. In addition, the petitioner cites Taiwan's second notification to the WTO dated June 7, 1999, in which it disclosed programs that it deemed to be specific (i.e., countervailable) industrial subsidies under Article 25 of the ASCM. These include loans for small- and medium-sized enterprises at below market interest rates, for which 98 percent of the firms in Taiwan are eligible, according to its government. Among the purposes of these loans is enhancement of competitiveness. The petitioner contends that the WTO Working Party's report furnishes compelling evidence of export and other specific subsidies that would be available to input suppliers to Chinese producers of the subject merchandise. These include preferential tax rates and other subsidies contingent upon export performance, and other subsidies contingent upon use of domestic over imported goods. The petitioner contends that several of Taiwan's subsidy programs resemble or mirror those on which the Department relied in ARG in disallowing prices charged by market economy suppliers in Korea, Thailand and Indonesia. The petitioner claims that although Taiwan has undertaken, as part of its WTO accession, to phase out subsidies that violate the ASCM, export subsidies and other specific subsidies remained in effect and continued to benefit exports during the POI in this case. Further, the petitioner argues, even those subsidy programs that expired before or during the POI could have continued to confer countervailable benefits. Therefore, the petitioner concludes, the Department should reject the prices for all inputs from Taiwan and use Indian surrogate values in its calculations of factor values for Shin Crest and Feili Group. Feili Group Feili Group comments that there is nothing on the record of this investigation to give the Department "reason to believe or suspect" that market economy steel prices from Taiwan are distorted. Feili Group points out that the Department has used Chinese producers' inputs from Taiwan in other investigations, citing 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). Feili Group also notes that there are no United States or third-country CVD findings related to Taiwanese steel, and that the Department has not initiated a CVD investigation involving Taiwan since 1988. Feili Group claims that the only CVD order in effect for Taiwan, Cookware, is irrelevant to this investigation because the information on which the rates are based dates to 1986. Feili Group argues that Taiwan has engaged in a variety of trade liberalizing measures in order to meet the requirements for WTO membership, and it would therefore be inappropriate to consider information dating to 1986 as relevant to a determination of whether Taiwanese steel prices in 2000 and 2001 were distorted. Further, Feili Group argues, even if the Department were to consider the 1986 case relevant, only one of the four programs found to confer countervailable export subsidies, over-rebate of duty drawback on imported materials physically incorporated in export merchandise, was assigned more than a de minimis rate. Feili Group claims that only this program could possibly be considered in determining whether Taiwanese steel prices are distorted by reason of generally-applicable subsidies, and that this program could not have been used by its Taiwanese steel supplier, which is a mini-mill whose input is steel scrap. Feili Group provided evidence that Taiwan does not assess customs duties on steel scrap and a statement from its supplier that it did not import any raw materials during the POI to manufacture steel. Feili Group points out that to benefit from duty drawback, its supplier would have to pay duties on imports of raw materials. Feili Group concludes that the findings in Cookware are not applicable to the facts in this investigation and are insufficient to allow the Department to find "reason to believe or suspect" that Taiwanese steel prices are distorted by subsidies. Feili Group argues that a full, in-depth review of the programs cited in petitioner's case brief demonstrates that the WTO Working Party report on Taiwan cannot be used as evidence that Feili Group's steel prices are distorted by broadly-available non-industry specific export subsidies. Feili Group points out that its steel supplier is not located in an Economic Processing Zone or a Science-Based Industrial Park, and cites Taiwan's WTO commitment to abolish the tax credits for the creation of internationally recognized brands in December 2000. Feili Group argues that its Taiwanese steel supplier has stated that it did not take advantage of this program, and challenges the petitioner's claim that this program was broadly available. Feili Group argues that because steel is a commodity product, it is highly likely that creation of an international brand was intended. Additionally, Feili Group argues that inasmuch as its supplier suffered a loss in 2000, it paid no taxes and could not take advantage of a tax credit. Shin Crest Shin Crest argues that the Department should continue to use the market economy import prices paid by Shin Crest to value its reported factors of production in the final determination. Shin Crest contends that the Department does not have a sufficient basis to infer that Taiwanese export prices may be subsidized based on the sunset review of the CVD order on Cookware because record evidence suggests that these subsidy programs were terminated by the Taiwan government before the POI, citing the lack of notification to the WTO of these subsidies. Shin Crest placed on the record information showing that the Statute of Encouragement of Investment, which included two of the programs cited in Cookware (export loss reserve and 25 percent income tax ceiling for big trading companies), was abolished in 1990. See rebuttal brief dated March 20, 2002, at Exhibit 1. Shin Crest argues that the over-rebate of duty drawback on imported materials physically incorporated in export merchandise does not meet the ARG standards because it allows the drawback for certain imported materials used to produce certain export products, and is therefore product specific. Similarly, Shin Crest argues that the rebate of import duties and indirect harbor taxes on imported materials not physically incorporated in export merchandise applies only to imported liquid polish for manufacturers of stainless steel cooking ware, and is not broadly available. Shin Crest disputes the petitioner's claim that the Department must reject Shin Crest's market economy prices for inputs because the NTER suggests that certain programs maintained by the Taiwan government (i.e., incentives to industrial firms in export processing zones and to firms in designated "emerging industries") may have the effect of subsidizing exports. Shin Crest contends that the NTER contains no actual finding of any subsidy programs in Taiwan and does not meet the Department's substantial evidence standard. Shin Crest points out that the NTER does not state that generally available export subsidies exist in Taiwan. Shin Crest cites the court's decision in American Lamb Co. v. United States, 785 F. 2d 994 (Fed. Cir. 1986) as holding that the "reasonable indication" standard could not be treated as a "mere possibility" standard. In support of its contention that, in order to establish a "reason to believe or suspect" the existence of Taiwanese subsidies, the Department must have credible, objective, and specific evidence that establishes a basis for such a finding, Shin Crest cites the decision in AL Tech Specialty Steel Corp. v. United States, 575 F. Supp. 1277, 1280, 6 CIT 245, 247, n.3 (1983). Shin Crest further argues that the NTER does not meet the standards the Department established in previous cases, citing the Decision Memorandum in ARG, in which the Department stated (Comment 1): In the Department's recent determinations on tapered roller bearings from the PRC, we found that, where the facts developed in U.S. or third country CVD findings include subsidies that appear to be used generally (in particular, broadly-available, non-industry specific export subsidies), it is reasonable to infer that all exports to all markets from the investigated country are subsidized. Shin Crest points out that the NTER is not a CVD finding, nor even a factual determination of the existence of subsidies. Shin Crest claims that the record evidence in this investigation demonstrates that Taiwan does not maintain generally-available export subsidies available to all exporters in all markets. Shin Crest asserts that many of the programs cited by the petitioner in Taiwan's WTO notifications fail the ARG standard because they are not (1) broadly available, (2) non-industry specific, (3) for export only, and (4) beneficial to all exporters and all export markets. Shin Crest argues that the term "broadly available" means that the subsidy program must be available to everyone, that they cannot be available only to companies located in certain regions, of a certain size, or that satisfy certain criteria. Shin Crest points out that subsidies designed to benefit only high-tech industries would be irrelevant to Shin Crest's Taiwanese suppliers who are exporting only low-tech inputs. Further, Shin Crest argues that if a subsidy benefits both domestic and export activities, that subsidy would also not meet the ARG standard. Shin Crest notes that none of the subsidies listed in Taiwan's WTO notifications constitute "broadly available, non-industry specific export subsidies." Shin Crest analyzes the notified subsidies as either terminated, industry-specific (high-tech), regional specific, or sector specific (small and medium-sized enterprises). Shin Crest placed on the record information showing that all applications to operate in an Economic Processing Zone (which replaced the export processing zones) must be approved by a special review panel applying specific criteria or rules. Shin Crest points out that the incentives provided by the zones are therefore not available to all companies in Taiwan. Further, Shin Crest argues that the loans provided to small and medium enterprises are not export specific. Shin Crest argues that the absence of any findings of subsidies by the Department since 1988 further indicates that there is no reasonable basis to infer that Taiwan export prices may be subsidized. Shin Crest points out that the Department has conducted 23 investigations and 50 administrative reviews involving Taiwan since 1988, including Certain Cold- Rolled Carbon Quality Steel Products from Taiwan in 2000 (65 FR 34658), and has not discovered the existence of any subsidies. Shin Crest concludes that the lack of any subsidies findings under section 775 of the Tariff Act of 1930 provides compelling evidence of the absence of any such subsidies. Shin Crest contends that the standard articulated in ARG is an invalid, arbitrary, and unenforceable standard that is contrary to U.S. law and international standards. Shin Crest claims that in ARG the Department ignored the full text of the legislative history and arbitrarily ignored relevant discussion in TRB in order to reach an extreme legal standard. Shin Crest argues that the Department does not provide any support for its supposition in TRB that the language in the Omnibus Trade and Competitiveness Act of 1988, Conference Report to Accompany H.R. 3, H. Report No. 578, 100th Cong., 2nd Sess. at 590-591 ("Conference Report") applies to both surrogate values and to actual market economy inputs, and that the standard articulated in both TRB and ARG is based primarily on the same invalid interpretation of the legislative history. Shin Crest argues that a correct and complete reading of the Conference Report indicates that the prices the Conference Report instructs the Department to avoid are not the actual market economy prices paid by an NME respondent, but rather are the prices in the comparable market economy to be used as surrogate values. Shin Crest quotes the relevant language as follows: The factors would be valued from the best available evidence in a market economy country (or countries) that is at a comparable level of economic development as the country subject to investigation and is a significant producer of the comparable merchandise. .... In valuing such factors, Commerce shall avoid using any prices which it has reason to believe or suspect may be dumped or subsidized prices. Shin Crest contends that "such factors" does not refer to actual import prices into the NME in question, which are (1) not necessarily from a country at a comparable level of economic development to the country under investigation and (2) not necessarily from a country that is a significant producer of the subject merchandise. Shin Crest asserts that the Department's alleged expansion of the Conference Report instructions to include a prohibition on actual market economy inputs that "may be dumped or subsidized" is an unreasonable and impermissible interpretation of the law. Shin Crest challenges the Department's reliance in TRB on Technoimportexport to support its statement that "it might be reasonable to infer that exports from the investigated country to all export markets are subsidized," arguing that this is not proper authority for the exclusion of market economy input prices. Shin Crest describes Technoimportexport as a dispute over whether the Department should use Yugoslav export prices as surrogates for purposes of valuing Romanian factors of production. According to Shin Crest, the dispute concerned the proper selection of surrogate values, and whether surrogate export values might benefit from subsidies, not actual market economy input prices. Shin Crest quotes the court as stating: Commerce's decision in this case, however, was based upon final antidumping duty determinations upon comparable merchandise and two final countervailing duty determinations in which Commerce determined that countervailable, non-product specific export subsidies were bestowed upon exports of steel products. Their decision was also based on several EC cases. In total, there was substantial evidence to allow a reasonable mind to conclude that there were dumping and subsidies favoring Yugoslavian steel exports. (783 F. Supp. at 1406.) Shin Crest argues that unlike the substantial evidence identified in Technoimportexport, there was insufficient evidence of U.S. or third country CVD findings in TRB to support the Department's belief that prices used to value the factors of production were subsidized. Shin Crest concludes that it is clear from this, coupled with the fact that Technoimportexport involved the selection of surrogate value, that this case does not support TRB. Shin Crest further argues that the invalid decision in TRB cannot support ARG, and ARG cannot support the exclusion of market economy input prices in this investigation. Shin Crest argues that the Department's claim that it can use de minimis subsidy findings to reject market economy prices because the statute does not require the Department to conduct a formal investigation of the level of subsidies of input prices is unreasonable. Shin Crest contends that lack of an obligation to conduct an investigation has nothing to do with the level of evidence required to establish a reasonable basis to believe or suspect the existence of distortive subsidies. Shin Crest claims that the Department has improperly established an unrebuttable presumption that export prices are subsidized. According to Shin Crest, at the heart of the standard articulated in ARG are the issues of who bears the burden of proof of establishing that export prices may be subsidized and what are the appropriate procedural burdens of production of evidence for determining whether export prices are subsidized. Shin Crest argues that the Department should examine and address carefully the standards discussed in Creswell Trading Company v. United States ("Creswell"), 15 F. 3d 1054 (Fed. Cir. 1994). Shin Crest explains that unlike the situation in Creswell, where the Indian government controlled the information required by the Department, the respondents in this case purchase market economy inputs from unaffiliated suppliers and thus do not control the information the Department requires in order to make a determination as to whether market economy inputs from Taiwan are subsidized. Shin Crest contends that it would be improper to shift the burden of production of evidence to the respondents to demonstrate that imports from Taiwan are not subsidized because the Chinese respondents are not in possession of the necessary information. Nevertheless, Shin Crest has provided signed affidavits from its Taiwanese suppliers affirming that they do not receive export subsidies. Shin Crest summarizes by claiming it has provided evidence that (1) its suppliers do not benefit from the alleged Taiwan subsidy programs; (2) the alleged subsidy programs are no longer available; (3) the program offers only de minimis levels of subsidization; and (4) import prices, even if subsidized, are not distorted. Shin Crest argues that if the Department excludes Shin Crest's actual market economy prices for inputs from Taiwan, the Department must provide actual evidence that Taiwanese exports were subsidized and that these subsidies caused the import prices to be distorted. Department's Position: As an initial matter, we disagree with the respondents' contention that the legislative history does not apply to inputs purchased from market economy countries. While the context of Congress' articulation of the "reason to believe or suspect" standard was a discussion of the method for calculating surrogate values, once the Department has found that it has "reason to believe or suspect" that prices from a country may be subsidized, it would be illogical to disregard only subsidized imports into the surrogate country and not actual purchases of inputs from those countries. Such a finding must, therefore, extend to all export prices. We also disagree with Shin Crest's claim that the Department has created an unrebuttable presumption that export prices are subsidized. All interested parties have had the opportunity to comment on this issue extensively, and to place on the record relevant information. We have carefully considered the arguments and information submitted in reaching our decision on this issue in this and other investigations. In fact, as noted above, in considering this information and argument, we have not disregarded market export prices from Korean steel producers found to have de minimis subsidies in previous countervailing duty determinations. As such, we strongly disagree with respondents that the standard outlined in ARG constitutes an unrebuttable presumption. With respect to Shin Crest's factor input purchases from Taiwan, we agree with the respondent that the information presented by the petitioner does not provide the Department with a reason to believe or suspect that these input prices may be subsidized. The programs cited by the petitioner have either been eliminated or are not relevant to Shin Crest's market input suppliers from Taiwan. For example, one of the programs in Cookware, over- rebate of duty drawback on stainless steel sheet and coil, does not apply because the steel supplier in this case is a mini-mill whose raw material is domestically-sourced steel scrap. Therefore, even if this program still is in effect, it could not benefit the input supplier since no import duties were paid against which there could be a drawback. While we disagree with Shin Crest that the failure of the authorities in Taiwan to notify these programs to the WTO by itself is sufficient proof of their discontinuance, the other programs cited in Cookware are also not relevant here. Tax credits for the creation of international brands, which was still in effect during the first half of the POI, does not apply to the commodity products in question, which cannot be differentiated by brand names. Tax credits for the purchase of automation and environmentally- friendly equipment, while appearing to be still in effect, favor domestically purchased equipment over imported equipment. As such, they are not generally available, non-industry specific export subsidies that could benefit all exporters. The petitioner did not put any evidence on the record to support its claim that expired programs provide residual benefits, which we therefore consider unsubstantiated. Information placed on the record by the respondent regarding eligibility for location in Economic Processing Zones and Science-Based Industrial Parks is sufficient to determine that the suppliers of the inputs for the subject merchandise are not eligible because they are producers of low-tech commodities. According to the Taiwanese representative to the WTO, 98 percent of Taiwanese firms are eligible for the loan program for small and medium- sized enterprises at below market rates. This is a generally available, non-specific domestic subsidy program and is not a countervailable export subsidy. For these reasons, we have continued to use the actual market economy prices Shin Crest paid for inputs from Taiwan in this final determination. Comment 3: Whether Shin Crest Is Affiliated with its Steel Supplier in Taiwan by Reason of Control and its Import Prices Should Be Disregarded Petitioner The petitioner argues that the Department should reject the prices that Shin Crest paid to its Taiwanese steel supplier because the companies allegedly meet the definition of affiliated parties due to their close supplier relationship. Under section 771(33)(G) of the Tariff Act of 1930 ("the Act"), an affiliated person includes "any person who controls any other person and such other person." Control exists "if the person is legally or operationally in a position to exercise restraint or direction over the other person." The petitioner cites the Statement of Administrative Action Accompanying the Uruguay Round Agreements ("SAA"), which held that control can be found when there are close supplier relationships in which the supplier or buyer becomes reliant on the other. H.R. Doc. No. 103-316, Vol. 1 at 838 (1994). The petitioner also cites the Department's regulations at 19 CFR §351.102(b), which provides that in determining whether control exists, the Department will consider, inter alia, close supplier relationships, but will not find that control exists unless the relationship has the potential to impact decisions on production, pricing, or cost of the subject merchandise or foreign like product. This regulation also provides that the Department will consider the temporal aspect of the relationship, i.e., whether it is temporary. The petitioner argues that record evidence demonstrates that Shin Crest's steel supplier has become heavily dependent upon Shin Crest as a customer, which has given Shin Crest the power to exercise control over its supplier. The petitioner reasons that because the supplier could not afford to lose such an important and longstanding customer, Shin Crest could use the threat of shifting to a new supplier to compel "astonishing low" steel prices and further price concessions. The petitioner points out that these prices were far lower than the weighted average value for all Chinese imports from Taiwan during the POI of the types of cold-rolled steel used in the production of the subject merchandise. Moreover, the petitioner argues, Feili Group's belated disclosure that its Taiwanese steel supplier was the same company that supplied Shin Crest provides additional evidence that Shin Crest purchased steel at distorted prices, citing proprietary information in support of its claim. The petitioner contends that it is reasonable to assume that the supplier sold steel to Shin Crest at below market prices because it was unable to develop alternative customers and would suffer extreme financial hardship if it lost Shin Crest's business. Therefore, the petitioner concludes, the supplier is controlled by Shin Crest within the meaning of the statute and regulations, and the leverage that Shin Crest possesses over its steel supplier directly affects the cost and price of the subject merchandise, since steel is by far the most important input. The petitioner urges the Department to reject the "distorted and aberrational" prices for steel and instead use a surrogate value in its normal value calculation. Shin Crest Shin Crest counters that the Department should reject the petitioner's argument because it is inconsistent with the Department's standards and practice for determining whether two parties are affiliated by reason of a control relationship. Shin Crest cites the Department's practice of examining all indicia, in light of business and economic reality, to determine whether they constitute evidence of control, including corporate or family groupings, franchise or joint venture agreements, debt financing, and close supplier relationships. Shin Crest cites the Department's clarification of the SAA that there must be record evidence of "actual reliance between the companies" in order to find a close supplier relationship. Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea, 62 FR 18404, 18417 (April 15, 1997). Shin Crest alleges that the petitioner fails to cite any record evidence that supports its allegation that Shin Crest actually controls the Taiwanese steel supplier. Shin Crest argues that the Taiwanese supplier is not reliant upon Shin Crest's purchases of its steel because the supplier sells steel to other customers, and there are no contracts or exclusive supply agreements between the companies. Department's Position: We agree with Shin Crest that there is no record evidence of reliance between Shin Crest and its Taiwanese steel supplier. It is customary in the steel industry to grant more favorable prices to steady customers who buy large volumes. See the proprietary correspondence between Shin Crest and its supplier in Verification Exhibit 8, pages 5 - 6, in which pricing is discussed in the context of market conditions. Moreover, the Department verified that there are no other indicia of control. Therefore, the petitioner's allegation that there is a close supplier relationship which is evidence of Shin Crest's control over its steel supplier is unsubstantiated. Furthermore, we found no other indication of affiliation. Comment 4: Whether the Department's Practice Regarding Allegedly Dumped Inputs Is Too Restrictive, and the Department Should Disregard Shin Crest's Import Prices for Steel as Putatively Dumped Petitioner The petitioner argues that the Department's current practice of using even a clearly dumped price unless the NME country has issued an antidumping order on the market economy input at issue is illogical because the Department relies on a distorted price through its narrow interpretation of the rule designed to avoid such an occurrence. The petitioner alleges that reliable public information on world market steel prices provides a reasonable basis to form a belief or suspicion of pervasive dumping by Shin Crest's and Feili Group's Taiwanese supplier, even in the absence of a specific Chinese antidumping order. The petitioner contends that the Department's current practice is contrary to Congress's instruction in the legislative history of the Act of 1988 to avoid using any prices which the Department has reason to believe or suspect may be dumped prices. The petitioner points out that the two largest non-market economies in 1988, China and Russia, did not have antidumping regulations until 1997 and 1993, respectively, and argues that Congress could not have intended that a dumping finding in either country would constitute the sole basis for the Department to form a belief or suspicion that an input was dumped. Further, the petitioner claims that although this is the only circumstance it has recognized to date, the Department has never stated that the only circumstance in which a belief or suspicion of dumping may be established is the situation where the NME imposes an antidumping order on the producer of the input at issue. The petitioner submits that other circumstances in which the Department can reasonably form a belief or suspicion of dumping are present in this case. First, the petitioner argues that Congress did not intend the threshold for forming a belief or suspicion of dumping or subsidies to be high because it indicated that the Department could base its decision on "information generally available to it at the time." Second, the petitioner points out that certain commodity products, including steel, compete in a world market that exerts strong price discipline over all producers. Third, the petitioner argues that the Department has deep and broad knowledge about certain products, including steel, that allows it to form a reasonable judgment concerning whether an input price is distorted or not. The petitioner cites the ongoing antidumping investigations of cold-rolled steel from 20 countries, including Korea and Taiwan, and contends that when a price is so far below prevailing world prices and is contrary to the Department's own knowledge and experience, the circumstances exist for the Department to believe or suspect that the price paid by the NME producer for the input is not the best available information. In these circumstances, the petitioner argues, a surrogate value is far superior to the actual price. The petitioner argues further that in an investigation involving a product that derives the majority of its value from a single input, it is especially important for the Department to exercise its discretion to reject a market economy price. The petitioner claims that when the Department has ample information based on world market prices to believe or suspect that this input was purchased at dumped prices, yet refuses to reject the prices as unreliable, it has failed to correct a serious and known distortion in its normal value calculation, and that this denies the domestic industry the relief from injuriously priced imports that Congress intended to provide through the antidumping law. Shin Crest Shin Crest cites the Department's position in ARG, Comment 3, that dumping is particular to markets, and "Where there is no dumping order in place in the country subject to investigation, the Department has no reason to believe or suspect dumping in that country." Shin Crest argues that third country dumping findings by themselves do not provide a sufficient basis for the Department to believe or suspect that certain import prices into China or the surrogate country are dumped. Shin Crest contends that the Department's general knowledge of the global steel industry and the experience of investigating steel in U.S. antidumping proceedings does not give the Department a reason to believe or suspect that Taiwan steel products were dumped when sold to Chinese folding metal table and chair manufacturers. Shin Crest points out that the Department has never based any of its determinations on the assumption that there is an average world steel price that indicates whether a steel price from anywhere in the world is fair. Instead, Shin Crest notes, the Department has recognized that dumping findings must be country-specific and company- specific. Shin Crest argues that the Department cannot impute its general knowledge of steel and U.S. antidumping matters on the specific market conditions in China or India. Department's Position: We agree with Shin Crest. In TRB we articulated the position that we will disregard market economy prices for imported inputs as dumped only when the importing country has an antidumping duty order in effect for the products in question. Unlike the situation when a CVD order is in effect in the United States or a third country against export subsidies and a presumption can be made that these subsidies are available on exports to all countries, dumping is specific to competitive conditions in particular markets and cannot be assumed to apply globally. We therefore will continue to use Shin Crest's import prices for steel from Taiwan. Comment 5: Whether it Is Appropriate to Use Indian Surrogate Values for Steel If the Department Disregards Market Economy Prices for Steel from Korea and/or Taiwan Feili Group Feili Group argues that if the Department determines that it has "reason to believe or suspect" the prices Feili Group paid to its Korean and Taiwanese steel suppliers are distorted by subsidies, it would be inappropriate for the Department to use the same methodology for these open world-market transactions as for domestic Chinese purchases. Feili Group claims that to do so would, in effect, propose that India is an appropriate surrogate country for the valuation of Korean and Taiwanese factors of production, which Feili Group characterizes as absurd. Feili Group suggests that the appropriate action is to utilize values that reflect the market price in the Far East for countries similar to Korea and Taiwan. Feili Group placed on the record data from the MEPS International Steel Review for each month of the POI. Feili Group argues that these data support the proposition that the prices Feili Group paid are not distorted, and are in fact higher than non-subsidized Japanese prices. Feili Group claims that these Japanese prices provide the Department with comparable, market-based alternative pricing data that are more appropriate for valuing steel purchases from Korea and Taiwan than using Indian average unit values. Feili Group argues that Indian steel prices are more likely to be distorted than Feili Group's actual market economy purchase prices. Feili Group further contends that the use of such an imprecise and broad measure would inevitably lead to a distortion of the material cost Feili Group incurred for its steel inputs that is far greater than any distortion that could conceivably be caused by using its actual market purchases. Feili Group cites ITA's Global Steel Trade: Structural Problems and Future Solutions ("Steel Report") (July 26, 2000) as the basis for its contention that the Indian steel market is highly protected and subject to various market-distorting barriers imposed by the Indian government. Feili Group refers to floor prices, high tariffs averaging about 25 to 30 percent, a 10 percent surcharge in addition to import duty and delays imposed by burdensome Customs procedures as insulating the Indian steel market from prevailing world-market prices. Feili Group argues that because of these market conditions in India, any imports of steel would fall into one of two categories: 1) lower-quality products that are extremely low-priced, so they can absorb the duties while remaining competitive with domestic Indian steel prices; or 2) niche products imported at high values which are in short supply in India. As an example, Feili Group cites Indian import statistics for April - June 2000 showing average prices for cold- rolled coils in the same HTS subheading of about US$190 per MT from Canada and about US$647 per MT from Japan. Feili Group argues that this 240 percent variance in average values demonstrates that the two products contained in the HTS subheading are very different. Feili Group contends that it is clear that the use of these Indian import prices to value its steel purchases would not constitute the best available information and would be contrary to law, citing Shakeproof at 1382. Feili Group also argues that Indian customs values do not take into consideration terms of payment, terms of delivery, or other factors that play a role in determining prices. Finally, Feili Group argues that only two of the four subheadings the petitioner argued should be used to calculate Indian surrogate value apply to Feili Group's purchases. Feili Group concludes that rejection of actual, specific, and verified information in favor of distorted Indian import values would result in a normal value calculation that is less accurate than it would be if the Department used Feili Group's actual Korean and Taiwanese prices, and would distort the final margin calculation. Petitioner The petitioner counters that the statute directs the Department to value factors of production in NME investigations using values in a surrogate country at a similar level of development to the subject country, and that using market economy prices is a narrow exception to that rule. Thus, the petitioner argues, Feili Group's comment that India is not a comparable economy to Korea and Taiwan is irrelevant, and its consequence, that the Department should use values that reflect the market price in the Far East, is both unprecedented and circular. The petitioner also contends that the information on Japanese and Far East prices that Feili Group submitted is new factual information that is untimely under the Department's rule for submission of surrogate value information, citing section 351.301(c)(3) of the Department's regulations. The petitioner points out that the Department used Indian steel import data in TRB, and argues that while the Department excludes imports that are in small quantities, from NMEs, or believed to be subsidized in order to derive a surrogate value, it does not otherwise test the surrogate value against some other measure to ensure that it reflects a market price. The petitioner contends that Feili Group's assumption that Indian market conditions lead logically to Indian steel imports being either low quality or niche products is pure speculation, and speculation is not support for a finding, citing Associacion Colombiana de Exportadores de Flores v. United States, 704 F. Supp. 1114, 1117 (CIT 1989), quoted in CNART at 412. Further, the petitioner argues that the Court of Appeals for the Federal Circuit considered and rejected a similar argument in Nation Ford Chemical Co. v. United States, 166 F.3d 1373, 1378 (Fed. Cir. 1999). In that case, the petitioner argued that the use of Indian import prices for sulfanilic acid was improper because the Indian government subsidized its domestic sulfanilic acid industry. According to the petitioner, the court stated that "this fact is irrelevant to the valuation of aniline in a hypothetical free-market China." 166 F.3d at 1378. Finally, the petitioner argues that Feili Group's claim that all of its steel purchases fall within only two of the subheadings is inadequate, since it has not shown that steel coil is excluded from the other two HTS subheadings. Moreover, the petitioner argues, there is no record evidence that rules out the applicability of these other subheadings to Shin Crest. Department's Position: We agree with the petitioner that if the Department were to disregard Feili Group's actual steel purchases from Korea and Taiwan, it would be appropriate to use Indian surrogate value. The arguments Feili Group raises are contrary to the Department's practice. Since we did not actually use Indian surrogate value for the respondents' steel inputs, we will not address the issue of which subheadings are appropriate. Comment 6: Whether the Department Should Disregard Indian Steel Imports from Belgium, Brazil, France, Korea, Russia, South Africa, Thailand and Ukraine in Calculating Surrogate Value The petitioner argues that when calculating the weighted-average unit value of cold-rolled steel coils imported into India as surrogate value, the Department should exclude, in addition to imports from NME countries (i.e., Russia, Ukraine and China), imports from countries that provide "broadly available, non-industry specific export subsidies which may benefit all exporters to all export markets." ARG at Comment 1. The petitioner urges the Department to exclude Korea, Thailand and Indonesia, the countries excluded in ARG, from the calculation of Indian surrogate value. The petitioner also cites the Issues and Decision Memorandum for the 1998- 1999 Administrative Review of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the PRC; Final Results (January 10, 2001), as supporting the exclusion of countries that grant specific subsidies to steel producers. In a footnote, the petitioner claims that a finding of specific subsidies that are frequently granted on very closely related products, such as hot-rolled steel or cut-to-length ("CTL") plate, reasonably supports a finding that cold-rolled steel has benefited as well. "In other words," the petitioner asserts, "this is a finding that such subsidies are 'generally' available to the entire steel industry of a particular country. Indeed, the very same producers in such countries that receive subsidies on other products also make cold-rolled steel." Supplemental Case Brief (March 15, 2002), at 2, fn 1. The petitioner argues that: Belgium should be excluded because the Department found that it provided export subsidies in its sunset review of CTL plate and in its administrative review for 1996; Brazil and France should be excluded because the Department found that they have extended specific subsidies, including in Brazil's case, export subsidies to cold-rolled steel producers; South Africa should be excluded based on the 2001 NTER that states that this country provides broadly available export subsidies. Department's Position: Because we are not using Indian import data to value the respondents' inputs of cold-rolled steel, the petitioner's arguments are moot. Comment 7: Whether Feili Group's "Multi-chair" Falls Within the Scope of the Investigation Petitioner The petitioner contends that a "multi-chair," produced by Feili Group, is within the scope of the investigation. Citing its letter of January 15, 2002, the petitioner note that the "multi-chair" is made of metal and folds. Furthermore, the item combines a stool-shaped seat with a seat back. Thus, according to the petitioner, the item is not distinguishable from any other chair included in the investigation. Noting Feili Group's March 6, 2002, submission, the petitioner states that the submitted information supports, rather than refutes, the assertion that a "multi-chair" is subject merchandise. The label attached to this chair states that it has "lots of uses/great anywhere" and is "perfect for home and office." These statements, according to the petitioner, perfectly describe the subject merchandise. Additionally, the petitioner points out that Feili Group does not claim that this chair is a child's chair, which is a type of chair specifically excluded from the scope of the order. Excluding the "multi-chair" on the basis of differences in the size and/or shape of the seat or back or leg height, according to the petitioner, would create possible routes for circumvention of the order, as well as difficulties for the U.S. Customs Service in attempting to determine whether subsequent merchandise is subject to the order. The petitioner argues that such bases for exclusion would set a bad precedent, allowing Chinese producers to make small changes to chairs which might remove them from the scope of any order arising from this investigation. Finally, the petitioner protests that Feili Group has yet to describe the physical characteristics and dimensions of the product that it wishes to exclude from the investigation. Therefore, the petitioner argues, it is unclear whether Feili Group wishes to exclude only the "multi-chair" mentioned in its March 6, 2002, letter, or other chairs as well. For all of these reasons, the petitioner urges that the Department not exclude "multi-chairs" from the scope of the order. Feili Group Feili Group argues that this product combines a traditional stool shape with a seat back and observes that stools are excluded from the scope of this investigation. Feili Group cites the Department's verification report, which noted the small sizes of the seat and back and low height of the legs and stated that it could not be used with a folding table because of its low height. Feili Group concludes that because this product is nothing more than a stool with a seat back, and is much smaller in dimension than the chairs intended to be in the scope of this investigation, it should be excluded from the scope. Department's Position: We agree with the petitioner. The scope of the investigation reads in part: "Assembled and unassembled folding chairs made primarily or exclusively from steel or other metal ("folding metal chairs"). Folding metal chairs include chairs with one or more cross- braces, regardless of shape or size, affixed to the front and/or rear legs with rivets, welds or any other type of fastener. Folding metal chairs include: those that are made solely of steel or other metal; those that have a back pad, a seat pad, or both a back pad and a seat pad; and those that have seats or backs made of plastic or other materials. The subject merchandise is commonly, but not exclusively, packed singly, in multiple packs of the same item, or in five piece sets consisting of four chairs and one table. Specifically excluded from the scope of folding metal chairs are the following: Folding metal chairs with a wooden back or seat, or both; Lawn furniture; Stools; Chairs with arms; and Child-sized chairs." The photograph of the chair Feili Group provided does not show any characteristics that would distinguish this chair from the subject merchandise. The "multi-chair" is a chair made of metal, which folds, has a seat and a seat back, neither of which is wooden. It does not have arms. The description of the product and its uses thus conforms with the published scope of this investigation. There is no evidence on the record to indicate that this product falls under the categories specifically excluded in the scope of the investigation. While this product may have a seat shaped like a stool, it is not a stool. The American Heritage® Dictionary of the English Language: Fourth Edition, defines a stool as "a backless and armless single seat supported on legs or a pedestal." This product clearly has a back and is therefore not a stool. Similarly, while the dimensions are small, Feili Group has not stated that this is a child's seat. Indeed, the evidence on the record indicates that this item is meant for adults. The item in question fits the description of merchandise covered by the scope of this investigation, and does not fit the descriptions of merchandise specifically excluded from the scope of the investigation. Therefore, we determine that the "multi-chair," as described in Feili's March 6, 2002, letter, is within the scope of this investigation and have used the sales and factors of production information on the record for this product in our final determination. Comment 8: Whether National Public Seating Corporation's Double-hinged Commercial Chair Is Within the Scope The petitioner objects to a request by National Public Seating Corporation ("NPSC") to exclude "double-hinged industrial strength" chairs from the scope of the investigation. In its submission, NPSC states that the chairs which it wishes to exclude are different from the chairs produced by Meco in that they have heavier gauge steel, two hinges rather than one, double-riveted arch braces, and tubular plugs. NPSC also claims that the market for folding chairs is divided into "commercial or industrial" markets and "individual or residential" markets, respectively. The petitioner counters that the type of chair imported by NPSC is not physically distinct from chairs included in the scope of the investigation. The NPSC chairs are metal and they fold, two of the basic characteristics of subject merchandise. The petitioner notes that the scope of the investigation does not make any reference to the gauge of steel used, and that chairs with one or more cross-braces, or whether a chair is riveted or welded, are specifically included in the scope. In addition, Meco and other producers in the United States produce "commercial" chairs which are very similar to NPSC's chair, according to the petitioner. Thus, NPSC's chair is not a distinct product and is no different from the chairs included in the scope of the investigation. The petitioner argues that if the Department were to exclude this chair from the scope, it would provide a way for other Chinese producers to circumvent any order issued for this investigation. The differences between NPSC's chair and "residential" chairs are so minor and inexpensive, according to the petitioner, that insignificant changes made by producers could result in a product being excluded from the scope and thus undermine the intent and effectiveness of any antidumping duty order on subject merchandise. For all of the reasons above, the petitioner requests that the Department find NPSC's chairs to be within the scope of the investigation. Department's Position: We agree with the petitioner. NPSC's chair is metal and folds, and conforms to the description of subject merchandise found in the scope. The gauge of steel, the number of hinges, and whether it is riveted or welded, or the type of plug, do not exclude an item from the scope. Additionally, whether the chair is sold for primarily commercial or residential use is immaterial. Therefore, we determine that NPSC's chair, as described in its October 5, 2001, submission, is within the scope of the order. Comment 9: Whether the Department Should Use P.T. Lion Metal Works' Financial Statements to Value Overhead, SG&A and Profit Petitioner The petitioner argues that the Indonesian producer of metal furniture, P.T. Lion Metal Works ("PTL"), is the surrogate producer whose financial results are as specific as possible to the subject merchandise. The petitioner points to the Department's rejection of the consolidated financial statement of a diversified corporation in the Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Structural Steel Beams from the Russian Federation ("Steel Beams"), 66 FR 67217, 67222 (December 28, 2001), because the data included information from businesses and industries dissimilar to the experience of a South African steel beams producer and therefore did not provide a reasonable basis for calculating the ratios for the production of the subject merchandise. Instead, the Department preliminarily used the financial statement of a Turkish steel producer which did not produce steel beams to determine the three financial ratios. The petitioner concludes from this that the Department has a clear preference for the financial information of a surrogate producer of comparable merchandise, rather than that of a diversified corporation that also happens to produce subject merchandise. The petitioner argues that the situation in this investigation is the same: PTL is a producer of comparable merchandise whose financial statement provides a reasonable basis for calculating the ratios for Chinese producers of the subject merchandise. According to the petitioner, PTL produces a narrow line of merchandise made primarily of steel, utilizing the same production processes used in the production of the subject merchandise. In addition, the petitioner argues, 80 percent of all raw material used by PTL is cold-rolled steel, which is also the single most important input for the subject merchandise, comprising well over 80 percent of the raw material inputs for chairs produced by Feili Group and Shin Crest. Other materials are also used both by PTL and the respondents, according to the petitioner. In contrast, the petitioner claims, Godrej & Boyce, the Indian company whose financial statement was used in the preliminary determination, is a diversified corporation whose financial statement includes information on industries that are quite dissimilar to the subject merchandise, including security equipment, typewriters, printers, machine tools, chemical machinery, forklift trucks, locks, and press tools, in addition to steel furniture. According to the petitioner, these industries, which do not employ the same or similar manufacturing processes as are used in producing the subject merchandise, accounted for over 60 percent of Godrej & Boyce's sales in fiscal 2001, and it is not possible to determine how much of the company's production of steel furniture consists of folding metal tables and chairs. Therefore, the petitioner concludes, the Department should reject the information of Godrej & Boyce and instead use the much more comparable information of PTL. Further, the petitioner argues that there is no barrier to the Department's use of a second surrogate country when appropriate values are not available in the primary surrogate country. The petitioner cites several recent cases in which the Department used Indonesian data to value certain inputs when appropriate values could not be obtained in India. See Final Determination of Sales at Less Than Fair Value: Solid Agricultural Grade Ammonium Nitrate from Ukraine, 66 FR 38632, 38634 (July 25, 2001) and Preliminary Results, Partial Rescission and Postponement of Final Results of Fourth Antidumping Duty Administrative Review: Brake Rotors from the People's Republic of China, 67 FR 557 (January 4, 2002). The petitioner disputes the Department's rejection of PTL's financial ratios on the grounds that the SG&A and profit ratios may be too high on the grounds that the Department did not provide any factual basis for its statement. See Surrogate Country Selection Memorandum (November 23, 2001) at 3. Further, the petitioner argues that since the Department has continued to use Indonesia as a surrogate country and to calculate ratios using Indonesian producers' financial statements, the fact that "Indonesia has undergone significant capital outflows which have resulted in substantial exchange rate fluctuations and inflation" is not a basis for rejecting PTL's financial statement. Moreover, the petitioner claims, the Department's policy is not to hypothesize on the reasons for a company's reported results, and the alleged "lack of information about the economic factors that produced Lion's high ratios" has never precluded use of a surrogate producer's ratios in the past. Feili Group Feili Group argues that the Department should continue to use the financial ratios derived from Godrej & Boyce's financial statements for its final determination. Feili Group disputes the petitioner's claim that PTL's production processes are more similar to the production processes of Chinese producers of folding metal tables and chairs than Godrej & Boyce's. Feili Group argues that PTL's home web page indicates that it has a very broad range of products, many of which do not closely resemble the subject merchandise, which it does not produce. Feili Group emphasizes that Godrej & Boyce is the only one of the two companies that produces folding metal chairs, and concludes that there is no reason to favor PTL over Godrej & Boyce on the basis of product line alone. Feili Group further argues that there is no reason to deviate from the Department's use of India as the preferred surrogate country for China. Feili Group claims that the Reserve Bank of India financial data it provided confirm the reasonableness of the ratios derived from Godrej & Boyce data. Feili Group argues that the Indonesian economy suffers from many distortions caused by years of violence and economic and political turmoil, and for that reason alone, should not be used. Feili Group also claims that the Department's recent use of Indonesia as a surrogate country has only been as a last resort. Shin Crest Shin Crest argues that the extent or significance of a surrogate producer's production of the subject merchandise is irrelevant to the Department's surrogate value evaluation. Shin Crest cites section 351.408(c)(4) of the Department's regulations as providing that surrogate overhead, SG&A, and profit ratios are to be derived from data from producers of identical or comparable merchandise in the surrogate country. Shin Crest argues that data from a comparable surrogate producer is acceptable and does not require adjustment because the Department is not required to have perfectly conforming information in calculating the surrogate ratios. Shin Crest argues that the factual record indicates that PTL is not more comparable than Godrej & Boyce. Shin Crest claims that PTL's financial statement is an inappropriate surrogate value source for four reasons: The profit ratio is distorted due to the depreciation of local currency; PTL's related party transactions cast doubt about the accuracy of PTL's financial figures; PTL's financial ratios appear to be distorted and unreliable because of dramatic shifts from one year to another; and PTL's financial statement provides insufficient information for the Department to calculate surrogate ratios. Department's Position: We have carefully weighed the arguments presented by the interested parties in this investigation. Section 351.408(c)(4) of the Department's regulations provides: For manufacturing overhead, general expenses, and profit, the Secretary normally will use non-proprietary information gathered from producers of identical or comparable merchandise in the surrogate country. We have used India not only as the surrogate country in this investigation, but in almost all of the other investigations involving the People's Republic of China. See, e.g., ARG; Creatine Monohydrate From the People's Republic of China; Final Results of Antidumping Duty Review, 67 FR 10892 (March 11, 2002); Tapered Roller Bearings and Parts Thereof, Finished and Unfinished From the People's Republic of China; Final Results of New Shipper Reviews, 67 FR 10665 (March 8, 2002); Sulfanilic Acid From the People's Republic of China; Final Results and Final Partial Rescission of Antidumping Duty ReviewI, 67 FR 1962 (January 15, 2002); Final Determination of Sales at Less Than Fair Value: Certain Folding Gift Boxes From the People's Republic of China, 66 FR 58115 (November 20, 2001) ("Gift Boxes"); Heavy Forged Hand Tools From the People's Republic of China: Final Results of New Shipper Administrative Review, 66 FR 54503 (October 29, 2001); Final Determination of Sales at Less Than Fair Value; Honey From the People's Republic of China, 66FR 50608 (October 4, 2001) ("Honey"), and Final Determination of Sales at Less Than Fair Value; Certain Hot-Rolled Carbon Steel Flat Products From the People's Republic of China, 66 FR 49632 (September 28, 2001) ("Hot-Rolled"). Normally, the Department uses publicly available information from a single surrogate country to value factors of production in a NME proceeding. We depart from this norm only when suitable information from the surrogate country is not available. In those exceptional cases, we use information from another country identified by our Office of Policy as being at a comparable level of development to the NME country. Whether we use Indian financial data therefore depends on the availability of information from producers of identical or comparable merchandise. In reaching our decision, we could not rely on Steel Beams as a precedent, as proposed by the petitioner, because it is a preliminary determination that has not yet been commented upon by the interested parties, and is subject to change. In this investigation, we have on the record Indian financial information from two sources. The Reserve Bank of India data for ferrous/non-ferrous metal products submitted by Feili Group is not as specific as possible to the subject merchandise. Although Godrej & Boyce is a diversified company, a substantial percentage of its sales consists of metal furniture, including the subject merchandise. Thus, Godrej & Boyce is a producer of both identical and comparable merchandise. There is no compelling reason to resort to financial information from another country, Indonesia. Moreover, PTL, the company proposed by the petitioner, does not produce identical merchandise. Therefore, consistent with our use of Indian surrogate values for production inputs, we have continued to use the Indian company's financial statement for the final determination. Comment 10: Whether the Department Should Use Adverse Facts Available ("FA") to Calculate the PRC-wide Margin The petitioner states that the Department should follow its normal practice and calculate a China-wide "all-others" rate using adverse facts available. The petitioner points out that in previous NME cases, the Department has determined that non-responding parties are not entitled to a separate rate, and that such parties are considered uncooperative, when responding parties do not account for all imports of the merchandise under investigation. In this case, the petitioner points out that the responding companies do not account for all of the imports of subject merchandise. Therefore, the petitioner concludes that the Department should follow its past practice and assign as a China-wide rate either the highest margin stated in the Notice of Initiation, or the highest calculated margin. The respondents did not comment on this issue. Department's Position: We agree with the petitioner and in accordance with our normal practice have used adverse facts otherwise available to assign the corroborated highest rate from the petition as the "all-others" China-wide rate. See, e.g., Gift Boxes, Honey, and Hot-Rolled. Comment 11: Whether the Department Should Use Updated Indian Import Statistics for Surrogate Values and "Correct" the Exchange Rate The petitioner alleges that Shin Crest applied an incorrect exchange rate when converting the Indian import statistics submitted on February 8, 2002, from rupees to U.S. dollars. The petitioner states that Shin Crest used an exchange rate of 0.021434829, while the Department used a rate of 0.0219116 in the preliminary determination. Therefore, the petitioner concludes, the suggested surrogate values are too low. The petitioner advocates the use of the submitted surrogate values with the "corrected" exchange rate for the POI. The respondents did not comment on this issue. Department's Position: In the preliminary determination, we used an exchange rate contemporaneous with the period covered by the Indian import statistics, i.e., April 2000 - February 2001, which were the latest data available at the time. Therefore, this was not the average exchange rate for the POI. For this final determination, we have used the most recently published Indian import statistics, covering April 2000 through March 2001, and the average exchange rate for this period, which is 0.021871. See Final Analysis Memorandum, dated April 17, 2002. Comment 12: Whether the Dates of Sale for Feili Group and Shin Crest Should Be the Purchase Order Date The petitioner believes that the dates of sale used by both Feili Group and Shin Crest are incorrect, and that the Department should adjust the date of sale. Currently, Feili Group uses the shipment date as the date of sale, while Shin Crest uses the invoice date. The petitioner believes that the purchase order date is a more appropriate date for the date of sale for both companies. The petitioner points to the Department's Section C Questionnaire, which defines "date of sale" as "the date on which the basic terms of the sale, particularly price and quantity, are agreed upon by the buyer and the seller." The petitioner then points to the verification report for Feili Group, specifically Verification Exhibits 10 through 14, and asserts that these demonstrate that the purchase order for each sale contains both a quantity and a price. These purchase orders are usually followed by an order confirmation approximately two days later. Therefore, the petitioner believes that Feili Group's statement during verification that price is not set by the purchase order is not true. While the petitioner acknowledges that there are instances of changes in quantity and price between the purchase order date and the shipment date, it argues that such changes occur in only a small percentage of sales, and that they are insufficient to justify considering the shipment date as the date of sale. The petitioner speculates that Feili Group did not use the purchase order date in order to avoid reporting sales at the end of the POI which would contain the lowest prices charged during the period. As a remedy, the petitioner believes that the Department should use adverse facts available. At a minimum, the petitioner requests that the Department use the average lag between purchase order date and shipment date, disregard Feili Group's sales for that number of days at the beginning of the POI, and include an equal volume of sales at the end of the POI. For Shin Crest, the petitioner alleges that both the verification report and exhibits show that Shin Crest should have used the purchase order date as the date of sale. The petitioner points to page 8 of the verification report, which states that Shin Crest's own sales ledgers identify sales by the purchase order number, not the invoice number. The purchase order is included with the sales traces, and all invoices are tied to a purchase order. Since each purchase order contains a price and quantity, the petitioner notes that Shin Crest was able to demonstrate all instances of changes in price or quantity between the purchase order date and invoice date. This close connection, reasons the petitioner, is sufficient for the Department to use purchase order date as the date of sale. The petitioner advocates that the Department use the same facts available methodology as it requested for Feili Group. Feili Group Feili Group retorts that its use of the date of shipment as date of sale is appropriate. Feili Group states that the Department's normal practice is to define the date of sale as occurring at the point at which the respondent company recognizes the sale as having occurred under its normal accounting procedures. Feili Group says that under this standard, the date of shipment is the correct date of sale. Feili Group further states that it provided the Department during verification with numerous examples of changes in the terms of sale between the purchase order date and shipment date, demonstrating that changes do occur with some frequency. Finally, Feili Group states that it has cooperated to the best of its ability and has provided all information requested of it. To adopt the petitioner's facts-available methodology would not be appropriate under the circumstances, according to Feili Group. Shin Crest Shin Crest argues that the Department should continue to use the methodology from the preliminary determination, which is to use the invoice date as date of sale. Shin Crest states that the Department should not use the purchase order date since the terms of the sale are not finalized and can change up to the date of the invoice. As proof of this assertion, Shin Crest points to the verification report and the Department's review of differences between purchase order date and invoice date for some sales. Furthermore, Shin Crest notes that the Department's questionnaire specifically states that respondents are to use the invoice date as date of sale unless the material terms of a sale are set by something else. Since there are changes on a "significant" number of sales between purchase order date and invoice date, Shin Crest claims that it is more accurate to consider the invoice date as the date at which all terms are finalized. Finally, Shin Crest states that while it identifies sales by purchase order, it does not recognize sales at this time in its accounting system. As explained in the verification report, a normal purchase order results in multiple shipments by Shin Crest over a period of several months. The quantity and price may change during this time as Shin Crest fills the purchase order. Therefore, for all of these reasons, Shin Crest argues that the Department's practice of using the date of invoice in the preliminary determination with regard to this issue is correct and should be used in the final determination. Department's Position: We disagree with the petitioner. Section 351.401(i) of the Department's regulations states: "In identifying the date of sale of the subject merchandise or foreign like product, the Secretary normally will use the date of invoice, as recorded in the exporter or producer's records kept in the ordinary course of business. However, the Secretary may use a date other than the date of invoice if the Secretary is satisfied that a different date better reflects the date on which the exporter or producer establishes the material terms of sale." Information on the record determines whether the Department will use the date of invoice, or select another date. In this instance, since the invoice date occurred after the shipment date in the case of Feili Group, the respondent used the shipment date as the date of sale. In instances where the invoice date is after the shipment date, it is the Department's normal practice to use the date of shipment, as the material terms of sale, particularly quantity, are understood to be set when the merchandise is shipped. Essentially, the petitioner's argument is that while the material terms of the sale do sometimes change between the purchase order date and the shipment date, the percentage of changed sales for both companies is so small that the majority of sales where quantity and price do not change is sufficiently large to establish the purchase order date as the proper date of sale. The Department has previously determined the date of sale to be the date of shipment or invoice, even when the frequency of material changes is low between purchase order date and sale date. See Circular Welded Non-Alloy Steel Pipe and Tube From Mexico: Final Results of Antidumping Duty Administrative Review, 65 FR 37518 (June 15, 2000), and Issues and Decision Memorandum for the 1997-1998 Administrative Review of Circular Welded Non-Alloy Steel Pipe from Mexico: Final Results of Antidumping Duty Administrative Review (June 6, 2000) ("Steel Pipe"). In Steel Pipe, the Department set the purchase order date as the date of sale for U.S. sales, since there was no evidence on the record that the material terms of the sale ever changed between purchase order date and invoice date. However, for home market sales, the Department found evidence on the record to suggest that prices did change from time to time between the purchase order date and the invoice date. Therefore, for home market sales, the Department continued to use the invoice date as the date of sale. The facts in this investigation are similar. Information on the record indicates that a double-digit percentage of sales made by Feili Group incur changes in either quantity or price between the purchase order date and the date of shipment. For Shin Crest, the percentage is nearly the same. The material terms of sale can and do change between the purchase order date and date of shipment for both companies. Therefore, the Department will continue to use the date of shipment as the date of sale for Feili Group and the invoice date for Shin Crest. Comment 13: Whether the Department Should Apply Adverse FA to Feili Group's Steel Consumption Petitioner The petitioner comments on proprietary information the Department obtained during verification while reconciling Feili Group's reported purchases of cold-rolled steel to the actual inventory and steel used during the POI. Feili Group explained how it records purchases of inputs in its warehouse ledgers and indicated a single supplier was involved in certain domestic purchases of one product. In examining invoices obtained during verification, the petitioner discovered that more than one supplier and product was involved. Because this allegedly did not comport with Feili Group's explanation, the petitioner believes that the reconciliation is in doubt. The petitioner contends that the Department should use an adverse inference in calculating the amount of steel purchased and consumed by Feili Group. Feili Group Feili Group responds that the petitioner misread the verification report's reference on page 16 to a single supplier, which related to a specific transactions trace. Feili Group points out that the verification team examined the information carefully and discussed all aspects of the transactions with company officials. Feili Group urges the Department to reject the petitioner's argument. Department's Position: We disagree with the petitioner. Department officials were able to reconcile the actual quantity of cold-rolled steel purchased and consumed without any discrepancies. See the proprietary version of the Department's verification report dated February 26, 2002, at 14-18 for further explanation. Therefore, there is no basis for applying an adverse inference to Feili Group's verified steel consumption. Comment 14: Whether the Department Should Apply a Value to Steel Feili Group Purchased Before the POI and Used During the POI Petitioner The petitioner notes that Verification Exhibits 16 and 18 show that Feili Group consumed more steel during the POI than it purchased during the same period for the production of subject merchandise. The petitioner argues that, should the Department accept the prices that Feili Group paid for Korean or Taiwanese steel, it must revise the calculation of the acquisition cost of the steel to include steel previously in inventory. Since the Department does not know the actual price paid for the steel in question, the petitioner urges the Department to use facts available and assign a price equal to that paid by Feili Group for the first purchases during the POI. Feili Group Feili Group replies that in NME cases, the Department strives to value the factors of production with values that are contemporaneous with the POI. Feili Group points out that the Department's questionnaire directs the respondents to: "List the inputs that your company purchased from a market economy supplier and paid for in a market economy currency during the POI." Feili Group argues that the Department did not ask about inventory movements, nor does it consider them when determining market economy prices for inputs purchased during the POI. Feili Group urges the Department to continue to use a weighted average price for the steel purchases made during the POI to value all steel used during the POI. Department's Position: We agree with Feili Group. It is the Department's practice in NME cases, as indicated by the questionnaire instructions, to value inputs consumed during the POI using the weighted average prices for inputs purchased during the POI from market economy suppliers and paid for in a market economy currency. Since Feili Group complied with the Department's instructions, we have not revised the calculation of the weighted-average steel price to account for inventory withdrawals. The amount of steel actually consumed is fully accounted for by the post- verification correction to the steel consumption variance which is applied to the standard usage rates to derive the weight of steel in each product. Comment 15: Whether Feili Group Should Be Required to Report Usage Rates for Certain Inputs Purchased from Domestic Suppliers Petitioner The petitioner points out that during verification, Feili Group disclosed for the first time that it purchased some fabricated steel products from unrelated Chinese suppliers for use in the production of subject merchandise. The petitioner argues that the Department would have valued these items using surrogate values if this information had been disclosed earlier. The petitioner urges the Department to require Feili Group to submit factors of production for these fabricated steel products, and to assign surrogate values to them. Feili Group Feili Group responds that a small percentage of fabricated steel products were purchased from domestic suppliers. In these situations, Feili Group states that it treated the raw material buildup for steel as if all stages of production were done in-house and applied the yield-loss rates applicable to in-house processes to material sourced from outside. According to Feili Group, this is consistent with the Department's practice of applying an in-house standard cost to small amounts of purchased inputs. Department's Position: We agree with Feili Group. We verified that a small percentage of certain fabricated steel materials was purchased from domestic suppliers. Feili Group fabricated most of these materials in- house. Moreover, in some cases Feili Group supplied the fabricator with steel coils from its own inventory. Applying in-house standard costs to small amounts of purchased inputs is reasonable. For this final determination we have accepted Feili Group's methodology and usage rates, revised in accordance with the verification findings. Comment 16: Whether the Department Should Deny a Steel Scrap Adjustment to Feili Group Petitioner The petitioner notes that Feili Group's scrap recovery rate is higher than the rate reported by Shin Crest. Because of the difference, the petitioner is suspicious of the reported amount and believes that the Department should re-examine the claimed scrap credit. Specifically, the petitioner notes that there is no basis for believing that all of the scrap recovered has been allocated between subject and non- subject merchandise. It is possible that scrap from all operations has been allocated to subject merchandise only, thus increasing the scrap credit. Moreover, the petitioner states that there is no basis to believe that the scrap sold by Feili Group was generated during the POI. Because of these ambiguities, the petitioner believes that the Department should deny Feili Group a scrap credit. Feili Group Feili Group retorts that the Department verified its scrap recovery rate during verification. Feili Group states that one of the petitioner's concerns is that the scrap recovery rates in the production of both subject and non-subject merchandise might be different. In reply, referencing verification exhibit 7, Feili Group first states that the vast majority of its production is for subject merchandise. Because most of Feili's production is for subject merchandise, Feili Group argues that different scrap recovery rates for different merchandise cannot be applicable. Feili Group further notes that the Department received sufficient evidence at verification to verify that scrap produced during the POI was sold, and points to Verification Exhibit 22 as support. Finally, Feili Group notes that the Department verified all sales and revenue receipts from the sale of scrap during the POI. Department's Position: The Department verified the actual sales of scrap by Feili Group during the POI and found no discrepancies. See verification exhibit 22. The remaining question is whether these scrap sales are of scrap generated in the production of subject merchandise only, or for all production by Feili Group. During the plant tour, the Department's verification team observed that bins are set up around the factory to collect scrap. The tubing shop makes tubing for both subject and non- subject merchandise. No distinction is made between what types of products generated the scrap. We believe that evidence on the record indicates that Feili Group calculated the scrap offset using steel scrap generated by production of both subject and non-subject merchandise. Therefore, we have recalculated the scrap credit by calculating subject merchandise produced by Feili Group as a percentage of total production, and applying this percentage to the scrap offset. See Final Analysis Memorandum dated April 17, 2002. Comment 17: Whether the Department Should Apply the Indian Surrogate Value for Supported Vinyl to All of Feili Group's Vinyl Consumption Petitioner The petitioner points out that Feili Group claimed on January 4, 2002, that for the Preliminary Determination the Department used an inappropriate HTS subheading for supported vinyl to value inputs of vinyl fabric, and that the proper HTS subheading is 39204200, covering unsupported vinyl fabric. The petitioner points to the Department's verification exhibits 4 and 19 as showing that Feili Group used both supported and unsupported vinyl in its production of subject merchandise. The petitioner argues that, in light of the verification findings, Feili Group's January 4, 2002, letter is misleading and misrepresents the actual input used during production. Therefore, the petitioner urges the Department to continue to use the HTS subheading for supported vinyl for all vinyl used during Feili Group's production of subject merchandise. Feili Group Feili Group states that, given all of the information on the record, the Department has a number of options. The Department could use the value for unsupported polyvinyl chloride, or the value for supported polyvinyl chloride, or an average of the two based upon Feili Group's usage. Feili Group states that its primary reason for submitting its January 4, 2002, letter was to ensure that the Department does not use the HTS subheading for polyethylene, but instead uses the subheading for polyvinyl chloride. Department's Position: Contrary to the petitioner's statements, the HTS number used by the Department in the preliminary determination was for imports of polyethylene sheet, not supported vinyl. The January 4, 2002, letter from Feili Group points this out and requests that the Department use the HTS number for polymers of vinyl chloride in a flexible plate; i.e. unsupported vinyl. Evidence on the record, gathered at verification, indicates that Feili Group used both supported and unsupported vinyl in the manufacture of subject merchandise. Given that Feili Group used both types of vinyl, it would be more appropriate to use a figure which reflects the use of both. As facts available, we have used both HTS subheading 39204200, for unsupported polyvinyl chloride, and HTS subheading 39204100, for supported polyvinyl chloride, to obtain a surrogate value for vinyl consumed by Feili Group. We have taken a simple average of the two to obtain a surrogate value for all vinyl used by Feili Group. Comment 18: Whether Feili Group Impermissibly Included Physically Different Models in the Same Control Number Petitioner The petitioner contends that Feili Group improperly included physically different models in one control number, contrary to the Department's questionnaire, and that the Department discovered this during verification. The petitioner notes that the weight of steel in the legs of two different models is different, and that the inclusion of both in the same control number is wrong. The petitioner states that Feili Group should be directed to create separate control numbers. Feili Group Feili Group notes that it had numerous discussions with the Department during the course of the investigation regarding its reported control numbers, and that the control numbers are correct insofar as they follow the Department's questionnaire instructions. Feili Group points out that different control numbers are determined by different product characteristics and that the weight of steel or diameter of a leg are not product characteristics as set forth by the Department. Therefore, Feili Group asserts that it correctly grouped multiple products within a control number in accordance with the Department's methodology. Department's Position: We agree with the respondent and observe that the Department set aside a period at the beginning of this investigation for interested parties to comment on the product characteristics. Petitioner did not argue that the weight of steel or the weight of tubes should be a separate product characteristic. In creating the control numbers submitted to the Department, Feili Group followed the Department's instructions and used the criteria set forth in the questionnaire. The weight of steel used in different models is not a product characteristic. Accordingly, we have not changed the control numbers for the final determination. Comment 19: Whether the Department Should Require Feili Group to Report the Usage Rate for Plastic Pellets Used to Make Cup Corners for Folding Metal Tables Petitioner The petitioner notes that the Verification Report (at 24) states that Feili Group did not report as a raw material input the factor for plastic pellets consumed in making cup corners. The petitioner states that Feili Group must report this factor, as well as the excess amount that is scrapped. Feili Group Feili Group states that it reported the weight of all inputs for cup corners. It separated cup corners into the raw materials for component parts, namely plastic pellets and a poly bag. Feili Group labels as irrelevant the fact that it classified cup corners as packaging material, stating that the Department treats packaging the same as other inputs. Department's Position: We agree in part with the petitioner. Feili Group reported the value of plastic pellets purchased in its questionnaire response, and reported the weights of cup corners for the control numbers which use this item. However, the plastic pellet purchase price is not the same as a cup corner, since there are costs associated with transforming it from pellets to an actual plastic item. We have assigned an Indian surrogate value for cup corners, using HTS #39263009, which is plastic furniture fittings. Comment 20: Whether the Department Should Assume Feili Group's Production Workers Worked 12-hour Shifts Petitioner The petitioner contends that Feili Group significantly understated the labor costs used to produce subject merchandise, questioning the assumption underlying the labor cost calculation that production workers work 8 hour shifts. The petitioner points to Verification Exhibit 23, and notes that salaried supervisors work 12 hour shifts. The petitioner wonders what the supervisors are doing if the workers have finished their shifts. In the absence of evidentiary support for plant operations of 8 hours a day, the petitioner contends that the Department should assign the hours that salaried workers work to production workers. Feili Group Feili Group retorts that the petitioner's comments represent a lack of understanding of Feili's production operations. Feili Group explains that while supervisors work 12 hours and oversee all shifts, the actual production facilities operate in a schedule of three 4-hour shifts each day. Production workers rotate through these shifts so that the average worker usually works 8 hours per day. Therefore, according to Feili Group, the "difference" is simply a function of the different tasks performed by supervisors and production workers. Feili Group continues by stating that the Department examined Feili's labor calculations in detail, and that the Department verified the total hours of production (see Verification Report at 24-26). Feili Group's normal company records regarding capacity use 8 hour shifts as the standard. Moreover, Feili Group states that its labor calculations are actually conservative, overstating the hours worked rather than understating them. Since Feili Group's normal production labor records are kept on a per-piece basis, Feili Group states that it had to convert this to hours using conservative assumptions. Therefore, Feili Group concludes, since labor hours are actually overstated for production workers, rather than understated, the Department should reject the petitioner's request. Department's Position: Both the verification report (at 25) and Feili Group's rebuttal brief indicate that workers rotate on four hour shifts. The Department's team observed the shift changes during verification. We note that the verification report (at 26) quotes company officials as stating that the employees produce only for eight hours, while Feili Group's rebuttal brief states that there are three four-hour shifts, which would indicate production over a twelve hour period. Regardless, the verification report indicates that work shifts are four hours in duration, as stated in the rebuttal brief. Nothing that we discovered during verification would contradict Feili Group's reported hours, or indicate that a normal shift for production workers is 12 hours. Therefore, we will continue to use the methodology from the preliminary determination and use a labor cost based upon an eight hour shift. Comment 21: Whether the Department Used the Wrong Weight for Sets in the Margin Calculation Program for Feili Group Feili Group Feili asserts that the Department assigned the wrong weight to one of the control numbers, putting the number three in a position where a number two should be. The petitioner did not comment on this issue. Department's Position: We agree with the respondent and have corrected the weight for the final determination. Comment 22: Whether the Department Used the Wrong Inflation Rate to Value Electricity for Feili Group Petitioner The petitioner contends that the Department applied the wrong inflation rate to the electricity value for Feili Group. Rather than use 1.20696, the Department incorrectly used 1.19, according to the petitioner. The petitioner claims the correct calculation for electricity for Feili Group is $0.07 times 1.20696 (inflation rate) for a figure of $0.0968. Respondent Feili Group did not comment on this issue. Department's Position: We agree in part with the petitioner. The Department should have used a price of $0.08 and an inflator of 1.21 in the preliminary results. The correct value was used for Shin Crest. We will continue to use this rate in the final determination for Shin Crest, and will use this rate for Feili Group. Comment 23: Whether the Department Incorrectly Used Feili Group's Market Economy Purchases of Plastic Pellets to Value Nylon Caps Instead of the Indian Surrogate Value for Plastic Caps Petitioner The petitioner asserts that the Department used an incorrect methodology for calculating the surrogate value for nylon caps. The petitioner says that rather than rely on the market economy purchase of the raw material for the nylon caps (i.e., plastic pellets), the Department should identify a separate surrogate value for the input itself. The petitioner believes that the Department should use the average Indian import value for plastic caps, which the Department already calculated. That value is 89.4570 rupees, which is $1.9601 dollars. Feili Group Feili Group asserts that the Department's methodology in the preliminary determination is correct, and that the Department should continue to use this methodology. Department's Position: As with cup corners, the value of the plastic pellets reported by Feili Group does not include the costs to transform these into nylon caps. Consequently, we have calculated the value by using the HTS # 39235000, plastic articles including caps, to value nylon caps. Comment 24: Whether the Department Incorrectly Calculated the Surrogate Value of Poly Bags Petitioner The petitioner notes that the Department's calculated value for poly bags in the Preliminary Determination is much lower than the value calculated for the same product in Certain Cased Pencils from the People's Republic of China. While the Pencils case derived its value based on imports from April 2000 through August 2000, the Department in this case used imports for the period April 2000 through February 2001. The petitioner does not believe that such a large drop in the unit value, from 96.7184 rupees to 0.33 rupees, could have occurred between August 2000 and February 2001. Therefore, the petitioner asks that the Department examine its methodology and either correct the calculation or use the Pencils value as a surrogate. Respondent Feili Group did not comment on this issue. Department's Position: We have examined our methodology and determined that the wrong number was used for the total value of imports of poly bags into India. We have corrected this error for the final results. Comment 25: Whether the Department Erred in Adding, Instead of Subtracting, the Steel Scrap Offset for Feili Group Feili Group Feili Group believes that the Department committed a ministerial error in the Preliminary Determination when it added the steel scrap byproduct figure to the cost of manufacturing. Feili Group states that the figure should be subtracted instead. Petitioner did not comment on this issue. Department's Position: We agree with respondent and have corrected the SAS program to subtract the scrap offset for the final determination. See Final Analysis Memorandum dated April 17, 2002. Comment 26: Whether the Department Should Correct the Surrogate Value for Wooden Pallets by Dividing the Average Value by the Average Pallet Weight for Feili Group Feili Group Feili Group believes that the Department committed a ministerial error when it calculated the valuation for wooden pallets in the Preliminary Determination. Feili Group notes that the Department stated the quantity of pallets imported by India in kilograms. However, the Monthly Statistics of the Foreign Trade of India, the source of the information used by the Department to value the surrogate values for this investigation, indicated that the quantity of wooden pallets is reported in units. Thus, according to Feili Group, the unit value that the Department used, $7.8326 per kg of wooden pallets, is actually a unit value of $7.8326 per wooden pallet. Since a wooden pallet weighs more than one kilogram, Feili Group argues that the unit cost used by the Department is largely overstated. Feili Group believes that the Department should correct this error by dividing the unit value by the average pallet weight, as reported in Feili Group's November 15, 2001, submission at Exhibit 2. Petitioner did not comment on this issue. Department's Position: We agree with the respondent and have corrected the calculation to obtain a correct per kg value for the final determination. See Final Analysis Memorandum dated April 17, 2002. Comment 27: Whether the Department Incorrectly Included Indian Import Values for Cardboard Other than Boxes in its Calculation of Surrogate Value for Cardboard Cartons for Feili Group Feili Group Feili Group claims that the Department made a clerical error in its valuation of cardboard cartons in the Preliminary Results. In valuing the cardboard boxes, the Department used the HTS subheadings 48191001, 48191009, 48192001, and 48192009, respectively. Feili Group states that those subheadings ending with "01" are used to define boxes, while those ending with "09" are used to define "others" in the corrugated and non- corrugated paper categories. By including the HTS subheadings with endings in "09," Feili Group believes that the Department inadvertently included non-box cardboard in its calculations. Feili Group asks that the Department remove these subheadings from the calculation and use only those for "boxes" when calculating the surrogate value for cardboard cartons. Petitioner The petitioner believes that the Department should reject the assertion that there was a clerical error in valuing cardboard cartons and continue to use the "09" subcategory. The petitioner notes that all of the HTS categories in question include cartons, boxes, and cases. The petitioner argues that the "01" and "09" subcategories distinguish boxes and others, and believes that the "other" category can only consist of cartons and cases. The petitioner states that were the Department to change its valuation of this input, it would be better to remove the "01" subcategory rather than the "09" subcategory. Department's Position: The description of the HTS heading 4819 in the Indian import statistics is "cartons, boxes, cases, bags & other containers of paper, paperboard, cellulose wadding or webs of cellulose fibers; box files etc. used in offices." It is clear from this description that the 4819 heading consists of containers. Our examination of the U.S. HTS numbers, which are similar to the Indian HTS numbers, indicates that the 48191001 and 48192001 subcategories are for general cardboard cartons and boxes, while the 1009 and 2009 categories are for more specialized boxes such as food containers. We believe that boxes and cartons in the 1009 and 2009 categories are not reflective of the types of boxes and cartons used by Feili Group. Therefore, we have changed our methodology and have excluded the 1009 and 2009 subcategories from the calculation of the surrogate value for packing boxes. Comment 28: Whether the Department Made Clerical Errors in Calculations of Surrogate Values for Screws, Other Metal Fittings and Rubber Washers for Feili Group Feili Group Feili Group states that several of the Lotus 1-2-3 worksheets in the Preliminary Determination which derive unit values contain errors in the formula for the total. Specifically, those worksheets for screws, metal fittings, and rubber washers do not subtract all of the figures which they are supposed to subtract due to formulae mistakes. Feili Group requests that the Department correct this ministerial error by using the correct formulae for these worksheets. Petitioner did not comment on this issue. Department's Position: We agree with the respondent and corrected the above-referenced worksheets with the proper formulae. In the case of rubber washers for the SPACER field, we have changed the HTS number used based on our findings at verification that these are metal, rather than rubber. The new HTS number for spacers is 73182200. Comment 29: Whether the Department Should Correct the Weights of Foam, Vinyl and Fabric Inputs Incorrectly Reported by Feili Group Feili Group Feili Group contends that the Department should use the revised data for foam, vinyl, and fabric inputs that were submitted on November 30, 2001. Feili Group made this submission after it discovered that its November 15, 2001 submission was inaccurate. Feili Group notes that it requested that the Department publish an amended preliminary determination, but that the Department declined to do so. Feili Group also notes that the Department verified the correct numbers at verification (see Verification Report at 23-24, Verification Exhibit 19). Petitioner The petitioner agrees that these corrections should be made. Department's Position: We agree with the respondent and made the corrections for the final determination. Comment 30: Whether the Department Should Correct the Number of Tables Packed in a Carton for Feili Group Feili Group Feili Group indicates that the number of tables packed in a carton was reported incorrectly for one U.S. control number. Feili Group points to the Verification Report, at 12-13, as indicating the actual number of units packed for this control number in the PKGUNITU field. Feili Group requests that the Department correct this figure according to its verification findings. The petitioner did not comment on this issue. Department's Position: We agree with the respondent and have corrected the PKGUNITU field for this control number for the final determination. Comment 31: Whether Shin Crest Should Include Inland Freight for One U.S. Sale in the Sales Listing Petitioner The petitioner notes that in the Verification Report (at 10), there is an indication that Shin Crest did not report inland freight from the plant to the port for one sale. The petitioner wants the Department to require Shin Crest to report all inland freight charges from plant to port of exportation. Shin Crest Shin Crest responds that the Department reviewed Shin Crest's ledgers and accounting records during the verification and found no other inland freight charges paid to market economy suppliers during the POI. Further, Shin Crest points out that the Department stated in the verification report that it found no discrepancies with regard to the other sales traces. Finally, Shin Crest states that evidence is on the record for the inland freight charge for OBS 60. Department's Position: We agree with Shin Crest. The petitioner has misinterpreted the verification report on this point. Shin Crest reported the inland freight in its response, but did not include it in the data base. We verified Shin Crest's reported inland freight expenses. Furthermore, we included the inland freight charge for this one sale in the margin calculation program for the Preliminary Determination. Comment 32: Whether the Department Should Apply Adverse FA for Shin Crest's Consumption of Hardboard, Rivets and Staples Because it Was Not Verified Petitioner The petitioner notes that the Verification Report (at 21) states that the Department was unable to review purchases and consumption of hardboard, rivets and staples, due to Shin Crest's lack of preparation. The petitioner advocates the use of adverse facts available to value these factors and to establish levels of consumption for each item. Shin Crest Shin Crest responds that there are sufficient data on the record that would allow the Department to reconcile Shin Crest's reported factors with its actual consumption. First, the Department weighed all material inputs used in the production of the subject merchandise during the verification. Further, Shin Crest points out, the Department verified the factor inputs that account for the vast majority of the value and weight of the finished subject merchandise. Shin Crest suggests that the Department can reasonably determine the weights of hardboard, rivets and staples used by comparing the actual weight of the finished product with the combined weight of all other factor inputs, which were fully verified. Second, Shin Crest argues, the Department can verify the amount of hardboard and rivets consumed in the production of the subject merchandise by comparing the reported factor consumption with the engineering drawings (Verification Exhibit 4) and the standard production usage charts (Verification Exhibit 35) that the Department collected during the verification. Shin Crest concludes that the application of adverse FA is not required. Department's Position: We agree with Shin Crest that the information in Verification Exhibit 35, which shows the engineering standards for usage of inputs for each model of the subject merchandise, can be used to verify the reported consumption of hardboard and rivets. Moreover, the outline drawings in Verification Exhibit 4 illustrate where each part is inserted in the final assembly. However, these exhibits do not appear to contain information on staples usage. However, this is a very minor input. As the discrepancies we found at verification involved over reporting, rather than under reporting, by Shin Crest, we have no basis for using adverse facts available. Therefore, we have used the reported consumption rates for these three inputs for the final determination. Comment 33: Whether the Department Should Apply Feili Group's Usage of Wooden Pallets for Packing to Shin Crest as FA Petitioner The petitioner observes that Shin Crest did not include pallets as part of its reported packing materials. Noting that the Verification Report does not indicate that Shin Crest does not use pallets, the petitioner suggests that the Department assume that Shin Crest does indeed use pallets. As they have not reported pallet factors of production or costs, the petitioner suggest that the Department use Feili Group's pallet factor value as facts available. Shin Crest Shin Crest responds that it does not use pallets to ship the subject merchandise, and that the Department verified all packing materials used by Shin Crest. Shin Crest notes that the Department is not required to verify the absence of all potential material inputs that could have been used to produce the subject merchandise. Moreover, Shin Crest argues, during verification the Department reviewed Shin Crest's inventory and materials ledgers and found no purchases of pallets during the POI. Shin Crest points out that the Department's practice is not to use one respondent's reported factor inputs to value another respondent's normal value. Shin Crest points out that different companies produce the same subject merchandise using different production processes and different materials, including packing materials. Shin Crest asks the Department to reject the petitioner's request. Department's Position: We agree with Shin Crest for the reasons cited. Evidence on the record, obtained at verification, indicates that Shin Crest did not use pallets when shipping subject merchandise. Therefore, it would be inappropriate to insert any value for pallets into the calculation of Shin Crest's normal value. Comment 34: Whether the Department's Calculations of the Surrogate Value of Water Were Incorrect Petitioner The petitioner contends that the Department made two errors with regard to the surrogate value of water. First, the petitioner claims that the Department applied the wrong exchange rate in converting the value of water for Shin Crest from rupees to U.S. dollars. The petitioner notes that the Department used a conversion rate of 0.214348 for water, instead of 0.219116, the value used for other conversions of surrogate values. Second, the petitioner believes that the Department used both an incorrect unit water value and inflation rate for Feili Group. The petitioner states that the Department used 18.93 for the per kilogram unit value without adjusting for inflation, rather than a rate of 16.62, which is the rate that the petitioner contends should be used. In both instances, the petitioner believes that the correct methodology for calculating the water value is 16.62 (water unit value) times 1.20696 (inflation rate) times 0.219116 (exchange rate), for a U.S. dollar value of $0.43954. Respondents did not comment on this issue. Department's Position: We agree in part with the petitioner. The calculation of the surrogate value for water in the Preliminary Determination was incorrect for Feili Group. The correct adjustment for inflation between 1995-1997 and the POI is 1.26. However, the petitioner misinterpreted the exchange rate the Department used to convert Indian surrogate values for other inputs as the POI exchange rate. In fact, as noted in the Department's Memorandum on Factors of Production Valuation for Preliminary Determination at 2, footnote 2, it was the average exchange rate for the period corresponding to the Indian import statistics, April 2000 - February 2001. The exchange rate used to convert the surrogate value of water for Shin Crest was the average rate for the POI. For the final determination we will correct the value for water, which should be US$0.449 per MT. Comment 35: Whether the Department Should Make a Finding of Critical Circumstances for All Chinese Producers of Folding Metal Tables and Chairs Petitioner On March 22, 2002, the petitioner filed an allegation of critical circumstances in this investigation. In its allegation, the petitioner asserts that the importer Cosco/Doral increased imports massively after the filing of the petition while at the same time knowing that exporters were selling subject merchandise at less than fair value and that there would be material injury by reason of these sales. Based upon the information submitted in support of this allegation, the petitioner requests that the Department make a finding of critical circumstances for all other Chinese producers of merchandise under investigation. The petitioner begins by noting that the Department normally relies on an affirmative preliminary determination by the International Trace Commission ("ITC") on injury as sufficient to meet the requirement that importers had reason to believe that material injury was likely. Noting that the ITC reached an affirmative preliminary determination in this case, petitioner believes that this requirement is satisfied. Next, the petitioner addresses the issue of "massive imports" of the merchandise under investigation. Citing 19 CFR § 351.206(h)(2)(i), the petitioner notes that the standard for massive imports is generally met when there is an increase of at least 15 percent in imports of the merchandise under investigation over a short period of time, defined as the period beginning on the date the proceeding begins and ending at least three months later. In order to demonstrate that imports of the merchandise under investigation increased by at least 15 percent in a short period of time, the petitioner submitted data on the record obtained from a database maintained by Trade Intelligence, Inc. According to the petitioner, Trade Intelligence collects data from the U.S. Customs Service on all imports arriving in the United States on water. The petitioner maintains that this database is a reliable alternative to data derived from the U.S. Customs HTS numbers, which are broad and contain non-subject merchandise. Searching this database by the words Cosco, Doral, tables, and chairs, for imports from the PRC, for the time period November 2000 to October 2001, petitioner shows that imports increased over 275 percent from the November 2000 - April 2001 period to the May 2001 - October 2001 period. This large increase, according to the petitioner, satisfies the massive imports criterion for a finding of critical circumstances. Given this large increase in a broad range of items purchased by one importer, the petitioner believes that this information is sufficient to compel the Department to request import data information from both the U.S. Customs Service and the respondents (mandatory and voluntary) in this investigation. Additionally, the petitioner asks that the Department collect import data from Cosco/Doral. Petitioner notes that this data has already been submitted to the ITC, so it should not be an undue burden on the responding companies. With this information, the petitioner believes that the Department will have sufficient information to make its determination. With regard to determining whether massive imports have occurred for all other companies, the petitioner cites to Stainless Steel Butt-Weld Pipe Fitting from Malaysia (65 FR at 47402) to indicate that where U.S. Customs data include both subject and non-subject merchandise within an HTS number, the Department should examine only the import data of exporters that it investigates. Since only four producers responded to the Department's original questionnaire, reasons petitioners, the Department should use adverse facts available to determine whether critical circumstances exists for all other PRC producers. Using the data of the four exporters, petitioner argues that the Department should apply an adverse inference for imports from all other Chinese producers. Finally, the petitioner addresses the requirement that an importer knew, or should have known, that sales were being made at less than fair value. The petitioner notes that the preliminary determination found a zero margin for Shin Crest, and that while there was a large margin for Feili Group, much of this was attributable to clerical errors. The petitioner believes that at the final determination, if the Department takes into consideration all of its comments in its case and rebuttal briefs, that the margin will meet the 25 percent threshold for EP sales. Given all of these facts, the petitioner believes that the Department has ample information to solicit more information and to determine whether critical circumstances exist in this investigation. The petitioner believes that the information is and will be sufficient for an affirmative determination. Feili Group Feili Group responds to the petitioner's allegations by reviewing both the governing regulations and the case record, as well as the petitioner's allegation of critical circumstances. Feili Group ultimately concludes by stating that the petitioner failed to provide enough factual information to the Department so that the Department could find a reasonable basis to determine critical circumstances. Feili Group first states that the petitioner's allegation is in an improper form and untimely. Next, Feili Group notes the regulation governing critical circumstances by citing to 19 CFR § 351.206(b), which states that the Department may find critical circumstances if such a finding is reasonably supported by available factual information. Feili Group goes on to state that the Department may find critical circumstances if there is a reasonable basis to believe or suspect that (A) there is a history of dumping and material injury with the subject merchandise, or the entity which imported the merchandise knew, or should have known, that the exporter was selling the subject merchandise at less than fair value and that there was likely to be material injury, and (B) there was a massive surge of imports of subject merchandise over a relatively short period of time. Having laid out the criteria for finding critical circumstances, Feili Group then attempts to rebut each point based upon information on the record of this proceeding. First, Feili Group notes that there are no antidumping duty orders on folding metal tables and chairs from the PRC in effect in other countries. Since there are no antidumping duty orders in place for this merchandise, Feili Group states that the Department must go to the next step. Namely, the Department must consider whether the importer knew, or should have known, that the exporter was selling subject merchandise at less than fair value. Citing to the Notice of Final Determination of Sales at Less Than Fair Value: Certain Non-Frozen Apple Juice Concentrate from the People's Republic of China, 66 FR 60185 (December 3, 2001) ("Apple Juice"), Feili Group notes that the Department's practice in determining whether there is a reasonable basis to believe or suspect that an importer knew, or should have known, that the exporter was selling subject merchandise at less than fair value is to impute knowledge of dumping if the margin in a preliminary determination is 25 percent or more for Export Price ("EP") sales and 15 percent or more for Constructed Export Price ("CEP") sales. While Feili Group admits that the margin in the preliminary determination was over 25 percent, Feili Group contends that the high margin was the result of clerical errors that, when corrected, would bring the margin well below the 25 percent threshold. Furthermore, Feili Group notes that the margin in the preliminary determination for Shin Crest was zero. Therefore, Feili Group argues that the petitioner failed to provide reasonably accurate factual information to support and allegation of critical circumstances, and on this basis alone the Department should not find critical circumstances. Feili Group goes on to address the petitioner's belief that the final determination will contain margins sufficient to input knowledge of dumping. Feili Group states that the level of the final margins is irrelevant to any analysis of whether or not importers knew, or should have known, that imports of subject merchandise were being sold at less than fair value. Feili Group cites Notice of Preliminary Determination of Sales at Less Than Fair Value: Honey from the People's Republic of China, 66 FR 24106 (May 11, 2001) and Apple Juice in support of its position. Feili Group further states that should the Department somehow impute knowledge of dumping, there is still insufficient factual information on the record to support the petitioner's allegation of a massive surge in imports. Feili Group notes that a surge of imports is normally defined as a 15 percent increase over a relatively short period of time, and that the Department examines the volume and value of imports, any seasonal trends, and the share of domestic consumption accounted for by imports. The petitioner's submitted data, according to Feili Group, do not address all of these criteria. First, Feili Group states that the petitioner's data discuss imports in terms of quantity, but do not discuss the value of the merchandise. Moreover, the submitted data contain a number of alleged methodological flaws which, Feili Group asserts, render it unsuitable. Feili Group notes that the data submitted is for imports of tables and chairs from the PRC, and that there was neither an attempt to segregate folding tables and chairs from non-folding tables and chairs, nor to segregate metal tables and chairs from non-metal ones. Therefore, the submitted data contain both subject and non-subject merchandise. An examination of the bills of lading demonstrates that it is not possible to differentiate at all times whether the merchandise is subject to this investigation, but that there is evidence that some of the merchandise is indeed not subject. In fact, some of the merchandise is neither a table nor a chair. Further, Feili Group notes that one search criterion is for the names Cosco and Doral, which may not exclude a large international ocean transport company with the name COSCO. In fact, Feili Group states that some bills of lading apparently were captured that had nothing to do with the importer Cosco/Doral. All of these facts, asserts Feili Group, render the submitted database flawed and unsuitable for use in determining whether critical circumstances exist. Finally, Feili Group notes that the petitioner addressed neither the value of the imports nor any seasonal trends. For all of the reasons cited, Feili Group urges the Department not to make a critical circumstances investigation and finding. Shin Crest Shin Crest states that its own data indicate that there are no critical circumstances for Shin Crest. In its rebuttal brief of March 29, 2002, Shin Crest submitted its export data for the periods May 2001 through July 2001 and for May 2001 through October 2001. The data demonstrate, according to Shin Crest, that exports from Shin Crest did not increase by 15 percent or more during the two time periods mentioned. Therefore, there was not a massive surge in imports of subject merchandise produced or exported by Shin Crest. Furthermore, Shin Crest argues that the Department should not find critical circumstances for all other non-responding Chinese producers and exporters of subject merchandise. Shin Crest notes that the petitioner did not submit import data from all producers from the PRC of subject merchandise, even though the petitioner had an opportunity to do so. Instead, notes Shin Crest, the petitioner attempted to limit its search to one importer (Cosco/Doral). Thus, it does not make sense, according to Shin Crest, for data on one importer to be used as a basis for a critical circumstances decision on all imports from the PRC of subject merchandise. Shin Crest states that its own export data demonstrate that the imports by Cosco/Doral are not indicative of the actual levels of imports. For all of these reasons, Shin Crest states that the Department should not find critical circumstances with respect to Shin Crest. Further, the Department should not find critical circumstances for all other exporters or producers from the PRC of subject merchandise. Dongguan Shichang Metals In its submission of April 1, 2002, Dongguan Shichang Metals Factory ("Dongguan") argues that the Department should not find critical circumstances with regard to its exports. Adjusting for seasonality, Dongguan states that imports increased only 0.6 percent in the period May through October 2001. Dongguan placed on the record the monthly export data for 1999, 2000, and 2001, and divided the data into two segments corresponding to the time periods May through October and November through April. To demonstrate seasonality, Dongguan notes that exports increased by over 100 percent during the May through October time periods for the last two years. Noting that this is the normal pattern, Dongguan then notes that the increases for the time period for May through October of 2001 were not substantially different than those for the same period of 2000. Thus, taking seasonality into account, Dongguan states that shipments to the United States did not increase by 15 percent or more. Therefore, the Department cannot find a massive increase in imports and should not find that critical circumstances exist for Dongguan. Petitioner Rebuttal of Feili Group The petitioner argues that Feili Group's rebuttal brief contained misstatements and has no merit. The petitioner asserts that its critical circumstances allegation is timely and in proper form. Petitioner further states that Feili Group is wrong in its assertion that the final margins are irrelevant to a finding of critical circumstances. In fact, a final determination margin can be used in determining critical circumstances, as demonstrated in Apple Juice. Regarding the database submitted in its original allegation, the petitioner states that it is the best information reasonably available (if not the only publicly available information) concerning imports of subject merchandise. The petitioner argues that if it cannot rely on this database, then the critical circumstances regulations would become meaningless. The petitioner notes that while it is difficult to identify subject merchandise, a search using the word "folding" for tables and chairs would yield little, as these terms are not commonly used on manifests to describe merchandise being shipped. As to the non-subject merchandise included in the original manifests, the petitioner submitted a new table in which it purports to have excluded all merchandise which can be clearly defined as non-subject. Such exclusions, according to petitioner, account for only 3.6 percent of the total. As to the claim that some imports by a shipping company with the same name might be picked up in this search, the petitioner argues that this is pure speculation and that Feili Group has not provided any evidence of the extent of any distortion from such entries. The petitioner also states that Feili Group spent a great deal of time rebutting the petitioner's comments, while not placing on the record its import data. The data, according to the petitioner, are available, as Feili Group has already submitted them to the International Trade Commission. Feili Group is also aware of seasonal trends, according to the petitioner. Thus, according to the petitioner, the Department can reasonably infer that Feili Group's decision not to include its export data or to discuss seasonal trends is a clear indication that its exports increased by more than 15 percent after the filing of the petition. Finally, in a footnote, the petitioner states that the preliminary "all others" margin of 134.77 percent is ample evidence that the Department can input knowledge of sales at less than fair value for all other PRC producers. The petitioner asserts that Feili Group's "weak" defense of clerical errors does not diminish the fact that the Department found margins in the preliminary determination which exceed the 25 percent threshold and, thus, demonstrate that importers knew, or should have known, that sales of subject merchandise were being made at less than fair value. Department's Position: We agree with the respondents. While the preliminary determination of sales at less than fair value included a margin of 134.77 percent for Feili Group and for all other exporters except Shin Crest, this rate was based upon a clerical error made by the respondent. Furthermore, the calculated margins for both Shin Crest and Feili Group in the final determination are below the 25 percent threshold for imputing knowledge of dumping. Therefore, the first prong of the test is not met and we do not find critical circumstances for these exporters. As to Dongguan and New-Tec, the PRC exporters that were not selected as respondents but did not fail to respond to our requests for information, the final margins also are below 25 percent. Therefore, we do not find critical circumstances with respect to these exporters. With respect to exporters subject to the PRC-wide rate, the final margin is above 25 percent. Furthermore, the ITC preliminarily determined that there is material injury by reason of imports of the subject merchandise. Therefore, the first prong of the test is met. With regard to massive imports, because the PRC-wide entity failed to respond to our request for information, the Department has based its massive imports determination on facts available and used an adverse inference in accordance with section 776(b) of the Act. We cannot use U.S. Customs import data to analyze imports from the PRC-wide entity, in part because the relevant product categories include both subject and non-subject merchandise. Because we have no independent means by which to determine import levels for the PRC- wide entity, we have determined, as adverse facts available, that there were massive imports. See, e.g., Notice of Preliminary Determination of Sales at Less Than Fair Value: Honey from the People's Republic of China, 66 FR 24106 (May 11, 2001), and Honey. Accordingly, we determine that there are critical circumstances with respect to the PRC-wide entity. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions and adjusting all related margin calculations accordingly. If these recommendations are accepted, we will publish the final determination and the final weighted-average dumping margins in the Federal Register. AGREE ____________ DISAGREE _________ ______________________________ Bernard T. Carreau Acting Assistant Secretary for Import Administration ________________ (Date) _________________________________________________________________________ footnote: 1. See H.R. Conf. Rep. 100-576, 100th Cong., 2d Sess. 514, 590-91 (1998), reprinted in 1988 U.S.C.A.A.N. 1547, 1623 (1988).