A. SUMMARY OF PROVISIONS

The Agreement on Implementation of Article VI (Antidumping Agreement or Agreement) provides substantive and procedural rules for the conduct of antidumping investigations. Substantively, the Agreement preserves the ability of U.S. industries to obtain meaningful relief from dumped imports into the U.S. market and ensures U.S. exporters fair treatment in foreign antidumping investigations. Procedurally, the Agreement closely parallels existing U.S. law and practice. Unlike the 1979 Tokyo Round Antidumping Code (the 1979 Code), all countries which become members of the World Trade Organization (WTO) will be subject to the same antidumping rules.

Application of the WTO dispute settlement procedures in antidumping cases will greatly improve the ability of the United States to contest foreign antidumping actions against U.S. exporters that are inconsistent with the Agreement. The Antidumping Agreement also contains a special standard of review to be applied by WTO panels in resolving antidumping disputes. This standard will preclude panels from second-guessing U.S. antidumping determinations and from rewriting the terms of the Antidumping Agreement under the guise of legal interpretation.

The Agreement significantly improves on the 1979 Code in a number of ways. It incorporates many fundamental aspects of U.S. antidumping practice, including the right of workers to file and support petitions, the use of cumulative analysis in injury determinations, and the exclusion of below-cost sales in determining the fair price of imports. A Ministerial Decision accompanying the Agreement effectively acknowledges the legitimacy of anticircumvention measures, and, thus, does not inhibit the application of such measures by the United States. In addition, the Agreement adopts U.S. standards of transparency and procedural fairness, thereby ensuring that U.S. exporters will have the opportunity to defend their interests in foreign antidumping proceedings. In these and many other respects, the more detailed rules of the Agreement reflect existing U.S. law and practice.

The Agreement does require a number of changes in U.S. law, such as new standards for determining whether dumping margins are de minimis or import volumes are negligible and a new five-year "sunset" review provision. These changes do not diminish in any meaningful way the level of protection afforded U.S. industries from dumped imports.

1. Determination of Dumping

Article 1 sets forth the general principle that antidumping measures must be applied only under the circumstances provided for in Article VI of GATT 1994 and consistently with the procedures set forth in the Antidumping Agreement. Article VI, like U.S. law, permits action to be taken against dumped imports causing or threatening material injury to an established domestic industry or materially retarding the establishment of a domestic industry.

Article 2 provides, in much greater detail than the 1979 Code, specific rules for determining whether and to what extent dumping exists. It adopts the standard definition of dumping, i.e., a product is dumped within the meaning of the Agreement if its export price is less than its normal value. "Normal value" is defined as the comparable price for a product "like" the imported product when sold, in the ordinary course of trade, for consumption in the exporting country.

The Agreement recognizes that foreign home market prices may not always be available or usable as a basis for normal value. There may be no, or low volumes of, home market sales, or home market sales may be unusable because of a particular market situation. In the absence of usable home market prices, Article 2 provides that national authorities may establish normal value on the basis of either: (1) a representative price of the like product to an appropriate third country; or (2) the cost of producing the product plus a reasonable amount for administrative, selling and any other costs, and for profit, i.e., constructed value.

Footnote 2 clarifies the standard for determining when the volume of home market sales is viable. The home market normally is viable if home market sales constitute at least five percent of the volume of sales of the product to the country conducting the investigation. The five percent benchmark reflects existing Department of Commerce (Commerce) regulations and practice, but the use of sales to the country conducting the investigation as the basis for calculating the benchmark is a departure from existing U.S. law, which refers to export sales to countries other than the United States.

Article 2 reflects, for the first time, the U.S. practice of disregarding, for purposes of determining normal value, home or third country sales that are below the cost of production. Under Article 2.2.1, below-cost sales may be disregarded as not being in the ordinary course of trade if the sales are made:

in substantial quantities within an extended period of time (normally one year, but not less than six months); and

at prices which do not provide for the recovery of all costs within a reasonable period of time.

Footnote 5 provides that below-cost sales are in substantial quantities when either: (1) the weighted-average price of the merchandise in the period of investigation is lower than the weighted-average cost of that merchandise; or (2) below-cost sales constitute at least twenty percent of the volume sold in the home (or third country) market. Under Article 2.2.1, prices which are below cost at the time of sale but above the weighted-average unit cost of the merchandise over the period of the investigation provide for the recovery of costs within a reasonable time.

Again reflecting current U.S. practice and improving on the 1979 Code, Article 2.2 provides that national authorities should calculate costs on the basis of exporter's and producer's records, provided that such records are in accordance with generally accepted accounting principles in the exporting country and reasonably reflect the costs associated with producing and selling the merchandise. The Agreement provides more detailed rules regarding adjustments for non-recurring items of cost that benefit future and/or current production. It also includes the new requirement that cost calculations (for both constructed value and cost of production purposes) be adjusted "appropriately" for startup operations. Pursuant to footnote 6, this startup adjustment reflects costs at the end of the startup period or the most recent costs which reasonably can be taken into account if the startup period continues after the period of investigation.

Article 2.2.2 requires the national authorities to base profit and general selling and administrative costs on actual data pertaining to the exporter's or producer's production and sales in the ordinary course of trade (i.e., data pertaining to above-cost sales) of the foreign like product. When profits and costs cannot be determined this way, Article 2.2.2 sets forth three alternative methods of calculation, with no prescribed hierarchy:

costs and profits incurred by the producer or exporter in question on production and sales in its home market for the same general category of products;

the weighted-average of costs and profits incurred by other producers or exporters on production and sales of the same like product in the same market; and

any other reasonable method, as long as the amount calculated for profit does not exceed the amount generally realized by other producers or exporters on sales of the same general category of products in the same market.

Under current U.S. law, Commerce uses specified minimum percentages rather than actual data to calculate profit and general selling and administrative costs.

Article 2.4 establishes guidelines for comparing normal value and export price to calculate the margin of dumping. It includes a general requirement that comparisons be fair and provides specific requirements to achieve this, including requirements that comparisons be made at the same level of trade, normally at the ex-factory level, and between sales made as nearly as possible at the same time. As under existing U.S. law, Article 2.4 instructs national authorities to adjust for differences that affect price comparability, such as differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and other differences that are also demonstrated to affect price comparability. Footnote 7 recognizes that some of these elements may overlap, and admonishes national authorities not to double count adjustments.

If the importer is related to the exporter, Article 2.3 permits the use of the first sale to an independent buyer as the basis for constructed export price. Article 2.4 provides for additional adjustments to the constructed export price for costs, including duties and taxes, incurred between importation and resale, and for profits. National authorities also may make a level of trade adjustment to normal value if it is at a different level of trade than the constructed export price and this difference affects price comparability.

Finally, Article 2.4 requires the authorities to: (1) inform exporters of the information they must submit to ensure a fair comparison; and (2) not impose an unreasonable burden of proof on exporters.

Article 2.4.1 establishes rules for currency conversions. In a typical antidumping proceeding, prices or costs are denominated in a foreign currency and must be converted into U.S. dollars. Article 2.4.1 specifies that currency conversions should be made using the rate of exchange on the date of sale, which is defined as a date when the material terms of sale are established. Where a sale of foreign currency on forward markets is directly linked to the export sale, national authorities shall use the rate of exchange on the forward sale. Authorities are to ignore fluctuations in exchange rates, and, for purposes of investigations (not reviews) exporters are given at least sixty days to adjust their prices to reflect sustained changes in exchange rates which occurred during the period of investigation.

In a departure from current U.S. law, Article 2.4.2 provides that in investigations (not reviews), national authorities normally will establish dumping margins by comparing either:

a weighted-average of normal values to a weighted-average of export prices of comparable merchandise; or

normal value and export price on a transaction-to-transaction basis.

Where such comparisons are inappropriate, however, the United States' current methodology is authorized. Authorities may compare a weighted-average normal value to individual export transactions, provided that there is a pattern of prices that differs significantly and that they explain why a weighted-average- to-weighted-average or transaction-to-transaction comparison is not appropriate.

2. Determination of Injury

Article 3 prescribes standards for injury determinations that, with limited exceptions, are little changed from those in the 1979 Code and current U.S. law.

Article 3.3 expressly authorizes the longstanding U.S. practice of cumulating the impact of imports from multiple countries simultaneously subject to investigations. National authorities may cumulate imports if: (1) the dumping margin for each country is more than de minimis; (2) the volume of imports from each country is not negligible; and (3) a cumulative assessment is appropriate in light of the conditions of competition between the imported products and between the imports and the domestic like product.

In addition to the factors listed in the 1979 Code that national authorities must examine in determining the impact of dumped imports on the domestic industry, Article 3.4 adds a requirement to consider the magnitude of the margin of dumping. As with the 1979 Code, however, the list of factors is not exhaustive, and no one or several of the factors necessarily gives decisive guidance.

Like the 1979 Code and U.S. law, Article 3.5 requires that national authorities examine all the information presented and determine whether there is a sufficient causal link between unfairly traded imports and the injury to the domestic industry. The Agreement also requires that national authorities examine factors other than unfairly traded imports which may be injuring the domestic industry. Article 3.5 cautions authorities not to attribute injury from such other factors to the dumped imports.

Consistent with the 1979 Code and current U.S. law, Article 3.7 requires that a determination of threat of material injury be based on facts, and not merely on allegation, conjecture, or remote possibility. The Agreement adds a non-exhaustive list of factors that national authorities must examine in considering the existence of threat of material injury. The list is similar to, but less extensive than, the one in current U.S. law. As in U.S. law, no one of these factors can necessarily give decisive guidance. Instead, the totality of the factors considered must lead to the conclusion that further dumped imports are imminent and that material injury would occur unless action is taken. Article 3.8 provides that national authorities shall consider and decide threat of material injury with special care.

3. Definition of Domestic Industry

The definition of domestic industry in Article 4 is virtually identical to that in the 1979 Code and current U.S. law. The domestic industry consists of domestic producers as a whole of products that are like the merchandise under investigation, or those producers whose collective output constitutes a major proportion of the total domestic production of such products. Producers who are related to the exporters or importers, or who are themselves importers of the allegedly dumped product, may be excluded from the industry. Footnote 11 defines "related" in terms of one entity's ability to control another.

Consistent with the 1979 Code and U.S. law, Article 4 also permits national authorities to define the domestic industry to include regional industries. If the constitution of a WTO member, such as the U.S. Constitution, does not permit the levying of duties only on imported merchandise consigned for final consumption to the region in question, duties may be levied on a nation-wide basis only if: (1) the national authorities give exporters to the region an opportunity to enter into suspension agreements; and (2) the duties cannot be levied only on the products of those specific foreign producers that supply the region in question.

4. Procedural Rules for Investigations and Collection of Evidence

Articles 5 and 6 significantly improve the procedural rules governing the initiation and conduct of antidumping investigations, making them more transparent and objective. Article 5.2 contains new requirements for applications to initiate antidumping investigations (i.e., petitions) which closely parallel current U.S. practice. Article 5.2 also requires that an application contain evidence reasonably available to the applicant regarding dumping, injury, and causation and that simple assertion, unsubstantiated by relevant evidence, is not sufficient. Article 5.3 adds a new requirement that national authorities examine the accuracy and adequacy of the information in an application to determine whether the evidence is sufficient to justify initiation of an investigation.

Article 5.4 establishes a predictable standard for determining whether an application is supported by the domestic industry. Current U.S. law presumes that a petition is filed on behalf of the domestic industry unless producers accounting for a majority of U.S. production of the like product object. In contrast, Article 5.4 requires that domestic producers accounting for more than twenty-five percent of total domestic production of the like product expressly support a petition, and requires more support than opposition from those members of the domestic industry expressing a view on the application. National authorities may use statistically valid samples to determine industry support for fragmented industries involving an exceptionally large number of producers. In addition, in an important recognition of the role of labor, footnote 14 acknowledges that both management and labor may file and support applications for the initiation of an investigation.

Article 5.5 prohibits publicizing an application prior to the decision to initiate an investigation, and requires that the government of the exporting country be notified of the receipt of a properly documented application prior to initiation.

Article 5.8 establishes a new requirement that the national authorities must terminate an investigation if the authorities satisfy themselves that the margin of dumping is de minimis, which is defined as less than two percent of the export price, or the volume of imports is negligible, which is defined as normally less than three percent of the volume of total imports of the like product into the importing country. The negligibility rule does not apply if those countries whose imports are simultaneously subject to investigation and who individually account for less than three percent of imports collectively account for more than seven percent of such imports. Margins are de minimis if less than 0.5 percent under current Commerce standards. The U.S. International Trade Commission (Commission) currently does not have any specified numerical thresholds for negligible imports.

Article 6 establishes more detailed rules than the 1979 Code regarding the gathering of evidence and the general procedures for antidumping investigations. These rules generally parallel existing U.S. rules and practices, and should result in a substantial improvement in the transparency and procedural fairness of antidumping proceedings conducted by foreign authorities.

In addition to the existing procedures in the 1979 Code, Article 6 specifies that foreign exporters or producers will be given at least 30 days to respond to questionnaires, and encourages national authorities to grant extensions whenever practicable. Interested parties may present information orally, provided that the information is reduced to writing and made available to other interested parties. To promote transparency, Article 6 requires the national authorities to provide the full text of the application to known exporters and written evidence submitted by one interested party to other interested parties, subject to confidentiality requirements.

All interested parties must be given timely opportunities to: (1) see all non-confidential information that is relevant to their cases and that is used by the authorities; and (2) present their views on the basis of such information. The term "interested parties" includes, but is not limited to, exporters, foreign producers, importers, the government of the exporting country, producers of like products in the importing country, and trade associations.

Article 6 requires an interested party supplying confidential information to provide a meaningful non-confidential summary of the information, unless that party explains why the information cannot be summarized. This requirement is derived from current U.S. practice. The definition of confidential information continues to be the same as that in the United States for "business proprietary information."

In an addition to the 1979 Code, Article 6.6 requires that national authorities check the accuracy of the information supplied by interested parties if the authorities rely on such information, unless the authorities use the information as "facts available" (i.e., "best information available" under current U.S. law). Annex I to the Agreement provides detailed procedural rules for "on-the-spot investigations" (i.e., "verifications" under U.S. law) which balance the investigating country's need for information, the exporting country's sovereignty, and the investigated parties' need for reasonable advance notice of verification and protection of confidential information. Annex I recognizes the use of non-governmental experts in verifications. Article 6.7 requires the authorities to provide the results of verification in a foreign country to the firms concerned and to persons who filed the application for an investigation, subject to confidentiality requirements.

Like the 1979 Code and U.S. law, the Agreement permits national authorities to base preliminary and final determinations on the "facts available" whenever an interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period, or significantly impedes the investigation. Annex II sets the standards for using "facts available," including: (1) how national authorities should gather and use information; (2) what weight should be given to information not submitted in the form requested; (3) use of secondary sources; and (4) the consequences of failure to cooperate in an investigation.

Article 6.9 requires national authorities, before making a final determination, to inform all interested parties of the essential facts under consideration which form the basis for the determination, in sufficient time for the parties to defend their interests.

Consistent with existing U.S. practice, Article 6.10 establishes as a general rule that national authorities calculate an individual margin of dumping for each known exporter or producer. If there is a large number of parties or types of products involved which makes the calculation of individual dumping margins for all companies impracticable, the authorities may limit their examination either: (1) to a reasonable number of interested parties or products by using statistically valid samples; or (2) to the largest percentage of the export volume which reasonably can be investigated. Article 6.10 expresses a preference that, in limiting an investigation, national authorities consult with concerned exporters, producers, or importers and obtain their consent.

Article 6.10.2 specifically allows national authorities to use an "all-others" rate for firms that are not individually investigated. The authorities, however, should calculate individual rates for firms who voluntarily provide information, except where the number of such voluntary respondents is so large that the calculation of individual dumping margins for all such respondents would be unduly burdensome to the authorities and would prevent the timely completion of the investigation. Article 9.4 defines the "all others" rate as the weighted-average margin of dumping for the exporters examined, excluding zero or de minimis margins and margins based on facts available.

Article 6.12 ensures that industrial users of the product under investigation and representative consumer organizations, if the product is commonly sold at retail, have adequate opportunities to submit relevant information regarding dumping, injury, and causality. This provision is fully consistent with existing U.S. practice which permits any party to submit comments to Commerce and the Commission. Article 6.13 requires that authorities take due account of difficulties experienced by interested persons, particularly small companies, in supplying requested information and provide any assistance practicable, given the statutory deadlines authorities must meet. Commerce and the Commission currently provide such assistance.

Article 6.14 provides that the procedures set forth in Article 6 are not intended to prevent national authorities from expeditiously initiating, conducting, or concluding an investigation in accordance with the provisions of the Agreement.

5. Provisional Measures

Article 7 specifies rules for the application of provisional measures (i.e., under U.S. law, the suspension of liquidation of entries of merchandise subject to an antidumping proceeding and the imposition of a security requirement for potential antidumping duties). Article 7 allows national authorities to apply provisional measures if: (1) an investigation, with public notice, has been properly initiated and interested parties have been given adequate opportunities to submit information and make comments; (2) there is a preliminary affirmative determination of dumping and injury; (3) provisional measures are judged necessary to prevent injury during the investigation; and (4) at least sixty days have passed from the date of initiation of the investigation. The sixty-day rule was added because some countries imposed provisional measures only a few days after initiating an investigation, thereby depriving exporters of any opportunity to defend their interests. Other rules regarding the application of provisional measures generally follow the 1979 Code.

6. Price Undertakings

Article 8, is little changed from the 1979 Code and sets forth the rules applicable to price undertakings (i.e., suspension agreements under U.S. law). During the Uruguay Round, some countries proposed that national authorities be required to provide detailed, case-specific justifications for declining to enter into suspension agreements. The United States successfully resisted these proposals, and the relevant provisions of the Agreement expressly recognize that authorities may decline to enter into undertakings where acceptance would be impractical, (e.g., if the number of actual or potential exporters is too great) or for other reasons, including reasons of general policy. Article 8 also provides that the authorities must issue affirmative preliminary determinations of dumping and injury before seeking or accepting price undertakings. To the extent practicable, authorities should provide exporters with the reasons for rejecting an undertaking, and, to the extent possible, provide exporters an opportunity to comment on the rejection.

7. Imposition and Collection of Antidumping Duties

Repeating the basic provisions of the 1979 Code, Article 9 sets forth rules regarding the imposition and collection of antidumping duties once a definitive duty (i.e., an "antidumping duty order" under U.S. law) is imposed. National authorities must collect duties, if imposed, in appropriate amounts on a non-discriminatory basis not exceeding the dumping margin. National authorities have discretion to decide whether to impose antidumping duties and whether to make such duties equal to the full dumping margin.

Article 9.3 establishes new rules regarding the assessment of antidumping duties on a retrospective basis, as in the United States, and on a prospective basis, as in some other countries and the European Union. If the antidumping duties are assessed retrospectively, the determination of final liability for antidumping duties normally will be made within twelve months, and in no case more than eighteen months, after the request for a final assessment is made. The national authorities must promptly pay any refunds due, normally within ninety days after the determination of final assessment, and provide an explanation, if requested, for any delay. These deadlines may be delayed if the duty order is challenged in court.

Article 9.3 also establishes a standard for making refunds when authorities use a constructed export price. Article 9.4 adopts new rules for applying antidumping duties to non-investigated firms, expressly authorizing the application of an "all others" rate to such firms. Finally, Article 9.5 establishes special procedures for imposing antidumping duties on exporters or producers who did not export the product to the importing country during the original period of investigation (so-called "new shippers"). National authorities must initiate and conduct new shipper reviews on an accelerated basis, as compared to normal assessment and review proceedings. Authorities may not levy final antidumping duties on exports from new shippers while the review is pending, but may apply provisional measures to ensure that final duties, if any, can be levied retroactively on entries of subject merchandise covered by the review.

8. Retroactivity

Article 10 sets forth rules regarding the retroactive application of antidumping duties, making few changes to the 1979 Code on which current U.S. law is based. It establishes the general principle that provisional measures, in the case of a preliminary determination, and antidumping duties, in the case of a final determination, will apply to imports entered for consumption after the respective determinations are made.

Article 10 provides several exceptions to this general principle that permit the national authorities to apply final duties to imports entered at an earlier stage of an investigation. First, as under current U.S. law, national authorities may apply definitive antidumping duties from the date of application of provisional measures if the final injury determination is based on present material injury. Second, as under current law, national authorities may apply definitive antidumping duties from the date of application of provisional measures if the final injury determination is based on threat of material injury if the authorities determine that but for the application of provisional measures injury would have occurred. Third, as under current law, national authorities may apply final antidumping duties up to ninety days prior to the application of provisional measures if the authorities determine that "critical circumstances" exist.

Article 10.7 permits national authorities to apply measures such as withholding of appraisement to make it possible to collect final duties retroactively. In no case, however, may authorities levy duties on products imported before the date of initiation of the investigation.

9. Duration and Review of Antidumping Duties and Price Undertakings

Article 11 addresses the duration and review of antidumping duties and price undertakings. As in the 1979 Code, it requires that antidumping measures remain in force only as long as they are necessary to counteract injurious dumping. It also gives interested parties the right to request authorities to review whether the continued imposition of dumping duties is necessary to offset dumping or whether injury would be likely to continue or recur if the duty were removed or varied.

For the first time, the Agreement sets a time limit on the imposition of antidumping measures. Article 11.3 requires that duties or price undertakings terminate (or "sunset") not later than five years from the date of: (1) their imposition; (2) the most recent review that covered both dumping and injury; or (3) the most recent "sunset" review. During the negotiations, some countries proposed that antidumping and countervailing duty orders and suspended investigations should be revoked or terminated immediately if they had been in effect for more than five years as of the date of entry into force of the WTO Agreement. The United States resisted these efforts, and the transition rules in Article 18.3 provide that existing antidumping and countervailing duty measures shall be deemed to be issued as of the date of entry into force of the WTO Agreement for the particular member imposing the measure.

Either as a result of a request from the domestic industry or on their own initiative, national authorities may conduct a "five-year" review to determine whether termination of the antidumping measure would be likely to lead to the continuation or recurrence of dumping and injury. The duty may remain in force pending the outcome of such a review, and may continue for another five years if the authorities make affirmative findings of likely continuation or recurrence of dumping and injury. A zero or de minimis dumping margin at the time of the five-year review does not mean there is no likelihood of the continuation or recurrence of dumping and injury.

10. Requirement for Public Notice and Explanation of

Determinations

In a significant improvement over the 1979 Code, the Agreement establishes detailed rules regarding public notice and explanation of determinations. To make national antidumping systems more transparent, Article 12, consistent with U.S. law, requires public notice of all significant determinations during the course of an antidumping proceeding with sufficiently detailed explanations of material issues at each stage of the antidumping proceeding. Footnote 23 permits authorities to publish abbreviated public notices, provided that the details of the determination are included in a separate report that is readily available to the public. This preserves the Commission's existing practice of publishing a notice of its determinations in the Federal Register and its full determinations in a separate publication.

11. Judicial Review

In another improvement over the 1979 Code, Article 13 requires that each WTO member with an antidumping law maintain judicial, arbitral, or administrative tribunals or procedures for the prompt review of final antidumping determinations in investigations and reviews. Such tribunals or procedures must be independent of the authorities responsible for the determination or review in question. The current U.S. system of judicial and binational panel review (in the case of antidumping proceedings involving Canada or Mexico) satisfies the requirements of Article 13.

12. Consultation and Dispute Settlement

Article 17 acknowledges the application of the Dispute Settlement Understanding (DSU) to disputes arising under the Antidumping Agreement. The provisions set forth in Articles 17.4 through 17.7 are special and additional dispute settlement rules within the meaning of Article 1.2 of the DSU. As such, they supersede the DSU rules to the extent of any difference.

Article 17.5(ii) provides that in reviewing antidumping actions taken by national authorities, the "scope" of WTO panel review will be based upon "the facts made available in conformity with appropriate domestic procedures to the authorities of the importing Member." Thus, as is the case in domestic judicial review, WTO panel review should be limited to the facts made available to the agency in conformity with the agency's procedures. Further, panel review should not constitute a reconsideration of the administrative proceedings, but should determine whether the agency's investigation of facts was properly conducted and its evaluation was unbiased and objective.

Article 17.6 contains a special standard of review, which is analogous to the deferential standard applied by U.S. courts in reviewing actions by Commerce and the Commission. It provides that:

a WTO panel may not reevaluate the factual findings of the national authorities if the national authorities' determination was objective and unbiased, even though the panel might have reached a different conclusion; and

where the language of the Agreement may be interpreted in more than one way, a panel must confirm a determination by national authorities that conforms to one of the permissible interpretations of the Agreement.

Article 17.6 ensures that WTO panels will not second-guess the factual conclusions of the agencies, even in situations where the panel might have reached a conclusion different from that of the agency. In addition, Article 17.6 ensures that panels will not be able to rewrite, under the guise of legal interpretation, the provisions of the Agreement, many of which were deliberately drafted to accommodate a variety of methodologies.

A Ministerial Declaration accompanying the Uruguay Round Agreements provides for the "consistent resolution" of disputes arising from the imposition of antidumping and countervailing duty measures through the application of the Article 17.6 standard of review to both types of disputes. A separate Ministerial Decision provides that Article 17.6 will be reviewed three years after entry into force of the WTO to consider whether it should be applied to other agreements.

13. Miscellaneous Provisions

Articles 14, 15, and 16 incorporate provisions from the 1979 Code regarding antidumping actions on behalf of a third country, application of the rules to developing country members, and the establishment of a Committee on Antidumping Practices. Article 18 contains miscellaneous provisions, including transition rules regarding the application of the Agreement to outstanding antidumping measures. Article 18.3 makes clear that the Agreement applies only to investigations or reviews initiated pursuant to applications made on or after the date the WTO Agreement enters into force for a member. Thus, for example, the United States need not apply the provisions of the Agreement to investigations or reviews that are pending as of the date the WTO Agreement enters into force for the United States. Article 18.3 does not require or suggest that the rules contained in the Agreement apply equally to investigations and administrative reviews.

There are two express exceptions to the general transition rule in Article 18.3. In the case of refund procedures under Article 9.3, national authorities will use the rules in effect at the time of the most recent determination or review applicable to the calculation of dumping margins. In addition, the five-year period for sunset reviews of existing antidumping measures will commence on the date the WTO Agreement enters into force for a Member. Therefore, the five-year period for U.S. antidumping duty orders, findings, and suspension agreements in existence on the date of entry into force of the WTO Agreement for the United States will begin on that date.

14. Decision on Anticircumvention

The draft Antidumping Agreement of the December 1991 Draft Final Act (referred to as the "Dunkel Draft") contained very weak anticircumvention provisions. The Administration succeeded in deleting these provisions from the final Antidumping Agreement and in obtaining a Ministerial Decision that recognizes the "problem" of circumvention and the desirability of having uniform rules on anticircumvention as soon as possible. The Decision refers the matter to the Committee on Anti-Dumping Practices for resolution. The Ministerial Decision constitutes a recognition of the legitimacy of anti-circumvention measures and does not preclude members from maintaining, modifying, or enacting anticircumvention measures at this time.

B. ACTION REQUIRED OR APPROPRIATE TO IMPLEMENT THE AGREEMENT

Amendments to the antidumping statute are either necessary or appropriate to implement Article 2 of the Antidumping Agreement, which establishes rules regarding the identification and measurement of dumping, and Article 14 of the Antidumping Agreement, which addresses antidumping investigations initiated on behalf of a third country. Amendments necessary or appropriate to implement both the Antidumping Agreement and the Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) are discussed in Part C below. The following discussion includes not only a description of the legislation itself, but also a description of how the Department of Commerce (Commerce) will apply the law. The Administration intends that Commerce will amend the applicable regulations, 19 CFR 353, to reflect the changes described below. Except where otherwise noted, these amendments are made to provisions of title VII of the Tariff Act of 1930, as amended (the Act) (19 USC 1671 et seq.).

Various sections of the bill change the nomenclature of the existing statute to conform to the terminology used in the Agreement. The term "export price" replaces the term "purchase price," and "constructed export price" replaces the term "exporters sales price." "Normal value" replaces the term "foreign market value." Because the Agreement uses the term "like product" to refer to both foreign and domestic merchandise, the term "foreign like product" is substituted for "such or similar merchandise," and the term "domestic like product" is substituted for the term "like product." What formerly was referred to as the "class or kind" of merchandise subject to investigation or covered by an order is now referred to simply as the "subject merchandise."

The substitution of terms from the Agreement is not, in itself, intended to affect the meaning ascribed by administrative and judicial interpretation to the replaced terms. Also, the bill is not intended to codify or overturn various benchmarks or rules of thumb that Commerce has developed for purposes of administering the antidumping law, except where such benchmarks or rules would be inconsistent with the Agreement.

1. Definition of Dumping

Sections 223 and 224 of the bill amend sections 772 and 773 of the Act, establishing new rules regarding the determination of export price or constructed export price and normal value. Under new section 773(a), as under existing law, the preferred method for identifying and measuring dumping is to compare home market sales of the foreign like product to export sales to the United States. Consistent with the Agreement, if home market sales of a foreign like product do not exist or are not useable as a basis for determining normal value, Commerce may identify and measure dumping by comparing the export price or constructed export price to normal value based on either: (1) sales of the foreign like product to a country other than the United States; or (2) constructed value. The requirement of Article 2.4 of the Agreement that a fair comparison be made between the export price or constructed export price and normal value is stated in and implemented by section 773. To achieve such a fair comparison, section 773 provides for the selection and adjustment of normal value to avoid or adjust for differences between sales which affect price comparability.

2. Price-to-Price Comparisons

Amended sections 773(a) (which defines, in part, normal value) and 772 (which defines export price) provide for the identification and measurement of dumping on the basis of price-to-price comparisons.

a. Market Viability and Third Country Sales

(1) Market Viability

New section 773(a)(1)(C) establishes general rules for determining when Commerce may base normal value on home market sales in the exporting country. (In Commerce practice, this is referred to as determining the "viability" of the home market.) The volume of sales in the home market normally will be deemed insufficient, i.e., the home market will not be considered usable if the quantity of sales by the exporter in the home market is less than five percent of the quantity of sales by the exporter to the U.S. market. This is a change from current law, under which the volume of home market sales is compared to the volume of sales to countries other than the United States.

The Administration has adopted the standard in the Antidumping Agreement that sales in the home market "normally" will be considered of sufficient quantity to render the home market viable if they are five percent or more of sales to the United States. The Administration intends that Commerce will normally use the five percent threshold except where some unusual situation renders its application inappropriate. A clear standard governing most cases is necessary because Commerce must determine whether the home market is viable at an early stage in each proceeding to inform exporters which sales to report. In unusual situations, however, home market sales constituting less than five percent of sales to the United States could be considered viable and home market sales constituting more than five percent of sales to the United States could be considered not viable.

The five percent test normally will be applied by comparing the quantity of merchandise sold in the home market to the quantity of merchandise sold in the U.S. market. In measuring the quantity of sales, Commerce may consider the number of items, weight, or other measures it considers appropriate. Occasionally, however, (such as when the merchandise in question is composed of both finished products and parts), the quantity sold will not be a reliable indicator of volume. In such cases, Commerce may measure viability on the basis of the value of merchandise sold.

The five percent benchmark is derived from current U.S. regulations. However, the use of sales to the United States as the benchmark for determining the viability of the home market is a change from the current statute, which requires that the quantity of goods sold in the home market be compared to quantities sold to countries other than the United States. This change will prevent the use of "thin" home markets as the basis for identifying dumping. The viability of a market will be assessed based on sales of all merchandise subject to an antidumping proceeding, not on a product-by-product or model-by-model basis.

Consistent with the Agreement, new section 773(a)(1)(C)(iii) provides that Commerce may determine that home market sales are inappropriate as a basis for determining normal value if the particular market situation would not permit a proper comparison. The Agreement does not define "particular market situation," but such a situation might exist where a single sale in the home market constitutes five percent of sales to the United States or where there is government control over pricing to such an extent that home market prices cannot be considered to be competitively set. It also may be the case that a particular market situation could arise from differing patterns of demand in the United States and in the foreign market. For example, if significant price changes are closely correlated with holidays which occur at different times of the year in the two markets, the prices in the foreign market may not be suitable for comparison to prices to the United States.

Finally, the legislation makes conforming changes to section 773(d) of the Act, which addresses the viability of the home market in situations involving multinational enterprises.

(2) Third Country Sales

New section 773(a)(1)(B)(ii) establishes rules for using third country sales. Unlike the existing law, which permits the use of sales to multiple third countries, this section permits only the use of sales to a single third country. As with home market sales, the third country market must be "viable" (i.e., sales to the third country must not be less than five percent of sales to the United States), and the particular market situation in the third country must not prevent a proper comparison. In addition, consistent with the Agreement, the price to the third country must be representative.

b. Export Price and Constructed Export Price

(1) Identification of the Starting Price

New section 772 retains the distinction in existing law between "purchase price" (now called the "export price") and "exporters sales price" (now called "constructed export price"). If the first sale to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for export to the United States, is made by the producer or exporter in the home market prior to the date of importation, then Commerce will base its calculation on export price. If, before or after the time of importation, the first sale to an unaffiliated person is made by (or for the account of) the producer or exporter or by a seller in the United States who is affiliated with the producer or exporter, then Commerce will base its calculation on constructed export price. Notwithstanding the change in terminology, no change is intended in the circumstances under which export price (formerly "purchase price") versus constructed export price (formerly "exporters sales price") are used. The bill adds a new definition of "affiliated person" at section 771(33) which is described below. The use of this definition renders obsolete existing section 771(13), which defines "exporter," and that section is eliminated by section 222(i)(2) of the bill.

(2) Adjustments to Export Price and Constructed Export Price

Under new section 772(c)(1), Commerce will calculate export price and constructed export price by adding to the starting prices: (1) packing costs for shipment to the United States, if not included in the price; (2) import duties that are rebated or not collected due to the exportation of the merchandise (duty drawback); and (3) countervailing duties attributable to export subsidies. Section 772(c)(2) requires that Commerce reduce export price to account for: (1) transportation and other expenses, including warehousing expenses, incurred in bringing the subject merchandise from the original place of shipment in the exporting country to the place of delivery in the United States; and (2) if included in the price, export taxes or other charges imposed by the exporting country. These adjustments have not changed from current law.

Additionally, under new section 772(d), constructed export price will be calculated by reducing the price of the first sale to an unaffiliated customer in the United States by the amount of the following expenses (and profit) associated with economic activities occurring in the United States: (1) any commissions paid in selling the subject merchandise; (2) any expenses which result from, and bear a direct relationship to, selling activities in the United States; (3) any selling expenses which the seller pays on behalf of the purchaser (assumptions); (4) any "indirect selling expenses" (defined as selling expenses not deducted under any of the first three categories of deductions); (5) any expenses resulting from a manufacturing process or assembly performed on the merchandise after its importation into the United States (except in the limited circumstances discussed below); and (6) an allowance, as explained below, for profit allocable to the selling, distribution, and further manufacturing expenses incurred in the United States. The deduction of profit is a new adjustment in U.S. law, consistent with the language of the Agreement, which reflects that constructed export price is now calculated to be, as closely as possible, a price corresponding to an export price between non-affiliated exporters and importers.

As under current law, Commerce is directed by section 772(d)(1)(A) to deduct commissions from constructed export price, but only to the extent that they are incurred in the United States on sales of the subject merchandise.

Direct selling expenses are defined as expenses which result from and bear a direct relationship to the particular sale in question. Section 772(d)(1)(B) provides a non-exhaustive list of examples of expenses that Commerce typically will consider as direct selling expenses when reported on an appropriate transaction-specific basis, and will deduct from constructed export price to the extent they are incurred after importation. The Administration does not intend to change Commerce's current practice, sustained by the courts, of allowing companies to allocate these expenses when transaction-specific reporting is not feasible, provided that the allocation method used does not cause inaccuracies or distortions.

Section 772(d)(1)(C) provides for the deduction of selling expenses which are assumed by the seller on behalf of the buyer. In practice, Commerce has treated these expenses in the same manner as the direct selling expenses in section 772(d)(1)(B). Their separate treatment in the statute is intended merely to provide a more precise definition, and not to change the calculation of export price or constructed export price.

Section 772(d)(1)(D) provides for the deduction of indirect selling expenses from constructed export price. Indirect selling expenses are expenses which do not meet the criteria of "resulting from and bearing a direct relationship to" the sale of the subject merchandise, do not qualify as assumptions, and are not commissions. Such expenses would be incurred by the seller regardless of whether the particular sales in question are made, but reasonably may be attributed (at least in part) to such sales.

Section 772(d)(2) is not intended to effect any substantive change in the deduction made under the current statute for value added from processing or assembly in the United States, with two exceptions. First, Commerce's current calculation of profit on value added from processing or assembly will be discontinued because the deduction for profit is now made under section 772(d)(3). Second, new section 772(e) establishes a special rule that allows Commerce to calculate constructed export price where a substantial amount of value is added after importation, as discussed below.

Section 772(d)(3) requires Commerce, in determining the constructed export price, to identify and deduct from the starting price in the U.S. market an amount for profit allocable to selling, distribution and further manufacturing activities in the United States. The profit to be deducted from the starting price in the U.S. market is that proportion of the total profit equal to the proportion which the U.S. manufacturing and selling expenses constitute of the total manufacturing and selling expenses. Thus, the profit to be deducted from the starting price in the U.S. market will be calculated by multiplying the total profit by the percentage obtained by dividing total U.S. expenses by total expenses. The total U.S. expenses are all of the expenses deducted under Section 772(d)(1) and (2) in determining the constructed export price. The total expenses are all expenses incurred by or on behalf of the foreign producer and exporter and the affiliated seller in the United States with respect to the production and sale of the first of the following alternatives which applies: (1) the subject merchandise sold in the United States and the foreign like product sold in the exporting country (if Commerce requested this information in order to determine the normal value and the constructed export price); (2) if Commerce did not request the information required to determine total expenses under (1), the narrowest category of merchandise sold in the United States and the exporting country which includes the subject merchandise; or (3) if the data necessary to determine total expenses under (1) and (2) is not available, the narrowest category of merchandise sold in all countries which includes the subject merchandise. The total profit is calculated on the same basis as the total expenses.

Commerce will request the information necessary to determine total expenses under the first alternative if Commerce is conducting a cost of production investigation. If Commerce is not conducting a cost of production investigation, the respondent may submit the necessary information on a voluntary basis. In such cases, Commerce will use the information if it is practicable to do so and the information can be verified. Under the second two alternatives, the information is obtained from financial reports. Whether alternative (2) or (3) is used will depend on the detail in which such reports break down total production and selling expenses and profits.

This same formula applies regardless of which of the three methods is used to determine total expenses. No distortion in the profit allocable to U.S. sales is created if total profit is determined on the basis of a broader product-line than the subject merchandise, because the total expenses are also determined on the basis of the same expanded product line. Thus, the larger profit pool is multiplied by a commensurately smaller percentage.

If there is no profit to be allocated (because the affiliated entity is operating at a loss in the United States and foreign markets) Commerce will make no adjustment under section 772(d)(3). This calculation of profit has no relationship to, nor effect upon, the calculation of transfer pricing under section 482 of the Internal Revenue Code. The transfer price between exporters or producers and the affiliated importer is irrelevant in determining the amount of profit to be deducted from constructed export price.

(3) Special Rule for Merchandise With Value Added After Importation

New section 772(e) establishes a simpler and more effective method for determining export price in situations where an affiliated importer adds value to subject merchandise after importation. For example, if roller chain subject to an antidumping order is imported by an affiliated importer for incorporation into a motorcycle which then is sold to an independent party, there would be an enormous burden on Commerce if it were required to "back out" from the price of the motorcycle all of the value added in the United States to work back to the constructed export price of the roller chain. For this reason, the legislative history of the Trade Act of 1974 indicates that Congress did not intend that Commerce engage in such an exercise. S. Rep. No. 1298, 93rd Cong., 2nd Sess. 173 (1974); H.R. Rep. No. 571, 93rd Cong., 1st Sess. 70 (1973). However, under existing law, in some situations, Commerce has been left with no choice but to exempt imported components from the assessment of antidumping duties.

To avoid imposing an unnecessary burden on Commerce, section 772(e) authorizes Commerce to determine export price based on alternative methods when it appears that the value added after importation is likely to "exceed substantially" the value of the imported product. While Commerce is not required to calculate precisely the level of value added after importation into the United States, "exceed substantially" means that the value added in the United States is estimated to be substantially more than half of the price of the merchandise as sold in the United States.

The alternative methods for establishing export price are: (1) the price of identical subject merchandise sold by the exporter or producer to an unaffiliated person; or (2) the price of other subject merchandise sold by the exporter or producer to an unaffiliated person. There is no hierarchy between these alternative methods of establishing the export price. If there is not a sufficient quantity of sales under either of these alternatives to provide a reasonable basis for comparison, or if Commerce determines that neither of these alternatives is appropriate, Commerce may use any other reasonable method to determine constructed export price, provided that it provides to interested parties a description of the method chosen and an explanation of the basis for its selection. Such a method may be based upon the price paid to the exporter or producer by the affiliated person for the subject merchandise, if Commerce determines that such a price is appropriate. Unlike the practice under current law, the imported components will not be exempt from antidumping duties.

In addition, for purposes of estimating whether the value added in the United States is likely to substantially exceed the value of the imported product, it is the Administration's intent that Commerce not be required to perform a precise calculation of the value added. Requiring such a precise calculation would defeat the purpose of the new rule of saving Commerce the considerable effort of measuring precisely the U.S. value added. Commerce will provide interested parties, normally as part of the preliminary determination, with a description of the method chosen and an explanation regarding the selection of such method.

c. Normal Value

New section 773(a) establishes rules for determining normal value in situations where Commerce relies on home market prices or prices to a third country.

(1) Identification of the Starting Price

Like the existing statute, new section 773(a)(1)(B) permits (but does not require) Commerce to base normal value on sales to related (now affiliated) parties in the home market. However, Commerce will continue to ignore sales to affiliated parties which cannot be demonstrated to be at arm's length prices for purposes of calculating normal value. See Section 773(a)(5). In addition, section 773(a)(1)(B)(i) codifies Commerce's current practice of calculating normal value, to the extent practicable, on the basis of home market sales that are made at the same level of trade as the constructed export price or the starting price for the export price. Under section 773(a)(1)(B)(ii), these same rules would apply to the calculation of normal value based on third country sales.

New section 773(a)(2) retains the requirement of section 773(a)(5) in existing law that Commerce not base normal value on home market sales which were made to establish a fictitious market. Section 773(a)(2) clarifies that Commerce will not determine normal value on the basis of pretended sales or offers, or sales or offers intended to establish a fictitious market. The changes in terminology and relocation of this provision are not intended to alter current law.

(2) Basic Adjustments to Normal Value

New section 773(a)(6) provides for adjustments to normal value. Section 773(a)(6)(A) requires that Commerce increase normal value for U.S. packing costs. Section 773(a)(6)(B) requires that Commerce reduce normal value to account for: (1) the cost of packing for shipment in the exporting country or to a third country; (2) if included in the price, transportation and other expenses, including warehousing expenses, incurred in bringing the merchandise from the original place of shipment in the exporting country to the place of delivery in the exporting country or a third country; and (3) the amount of any indirect taxes imposed on the foreign like product or components thereof that have been rebated or not collected, but only to the extent that such taxes are added to or included in the price of the foreign like product.

The existing statute requires the deduction of transportation and other movement-related expenses from export price, but is silent regarding similar costs in foreign markets. New section 773(a)(6)(B) explicitly provides for the deduction of movement charges from normal value. Failure to deduct all movement charges from the foreign price would result in a distorted comparison. This change reflects Article 2.4 of the Agreement, which requires that prices normally be compared at the ex-factory level.

The deduction from normal value for indirect taxes constitutes a change from the existing statute. The change is intended to ensure that dumping margins will be tax-neutral. The requirement that the home-market consumption taxes in question be "added to or included in the price" of the foreign like product is intended to insure that such taxes actually have been charged and paid on the home market sales used to calculate normal value, rather than charged on sales of such merchandise in the home market generally. It would be inappropriate to reduce a foreign price by the amount of the tax, unless a tax liability had actually been incurred on that sale.

(3) Additional Adjustments to Normal Value

Section 773(a)(6)(C) also authorizes Commerce to adjust normal value to account for other differences (or the lack thereof) between export price (or constructed export price) and normal value that are wholly or partly due to differences in quantities, physical characteristics, or other differences in the circumstances of sale. With respect to each of these adjustments, as well as with all other adjustments, Commerce will ensure that there is no overlap or double-counting of adjustments.

Section 773(a)(6)(C)(i) provides that Commerce may adjust normal value to account for the fact that the transactions involving the subject merchandise may involve greater or lesser quantities of merchandise than the transactions involving the foreign like product.

Section 773(a)(6)(C)(ii) provides for adjustments to account for any differences in costs attributable to physical differences between the merchandise exported to the United States and the merchandise sold in the home or third country market. The Administration intends that Commerce will continue its current practice of limiting this adjustment to differences in variable costs associated with the physical differences. Thus, for example, Commerce will not make an adjustment under this section for cost differences attributable to: (1) the fact that the exporter is charged different prices for its inputs depending on the destination of the finished product; or (2) the fact that the domestic and exported products are produced in different facilities with differing production efficiencies.

Section 773(a)(6)(C)(iii) retains Commerce's authority to make adjustments for differences in the circumstances of sales used to establish normal value, and those used to establish export price and constructed export price. The Administration intends Commerce's current practice with respect to this adjustment to remain unchanged, except with respect to the "constructed export price offset" (discussed below). Thus, Commerce will continue to employ the circumstance-of-sale adjustment to adjust for differences in direct expenses and differences in selling expenses of the purchaser assumed by the foreign seller, between normal value and both export price and constructed export price. In constructed export price situations Commerce will deduct direct expenses incurred in the United States from the starting price in calculating the constructed export price. However, direct expenses and assumptions of expenses incurred in the foreign country on sales to the affiliated importer will form a part of the circumstances of sale adjustment. Moreover, Commerce's practice with respect to assumptions by the seller of the buyer's selling expenses and commissions will remain the same.

(4) Level of Trade Adjustments

The Agreement provides that, where authorities use a constructed export price and the use of such a price results in the comparison of sales at different levels of trade, authorities shall either: (1) establish the normal value at a level of trade equivalent to the level of trade of the constructed export price; or (2) make due allowance as warranted. The statutory scheme, which provides for comparison at the same level of trade or, when levels of trade are different, consideration of a level of trade adjustment or constructed export price offset, is designed to ensure that a proper comparison is made. The bill implements this provision in two different ways.

First, as noted above, new section 773(a)(1)(B) requires that Commerce, to the extent practicable, establish normal value based on home market (or third country) sales at the same level of trade as the constructed export price or the starting price for the export price. If Commerce is able to compare sales at the same level of trade, it will not make any level of trade adjustment or constructed export price offset in lieu of a level of trade adjustment.

Second, when sales in the U.S. and foreign markets cannot be compared at the same level of trade, an adjustment to normal value may be appropriate. New section 773(a)(7)(A) provides that, after making all appropriate adjustments to export price or constructed export price and normal value, Commerce shall adjust normal value to account for any differences in these prices that are demonstrated to be attributable to differences in the level of trade of the comparison sales in each market. This adjustment may either increase or decrease normal value. Commerce will grant such adjustments only where: (1) there is a difference in the level of trade (i.e., there is a difference between the actual functions performed by the sellers at the different levels of trade in the two markets); and (2) the difference affects price comparability.

Commerce will carefully investigate whether a level of trade adjustment should be made to increase or decrease normal value. However, if a respondent claims an adjustment to decrease normal value, as with all adjustments which benefit a responding firm, the respondent must demonstrate the appropriateness of such adjustment.

Commerce will require evidence from the foreign producers that the functions performed by the sellers at the same level of trade in the U.S. and foreign markets are similar, and that different selling activities are actually performed at the allegedly different levels of trade. Nominal reference to a company as a "wholesaler," for example, will not be sufficient. On the other hand, Commerce need not find that the two levels involve no common selling activities to determine that there are two levels of trade. Because level of trade adjustments may be susceptible to manipulation, Commerce will closely scrutinize claims for such adjustments. For example, a sales subsidiary created merely to perform the role of a de facto sales department is not an appropriate basis for adjustment.

The effect on price comparability is measured by examining price differences between goods sold to different levels of trade in the foreign market where normal value is being established. Commerce will measure any effect on price comparability by determining if there is a pattern of price differences between sales at the different levels of trade in the foreign market. While the pattern of pricing at the two levels of trade under section 773(a)(7)(A) must be different, the prices at the levels need not be mutually exclusive; there may be some overlap between prices at the different levels of trade.

Any adjustment under section 773(a)(7)(A) will be calculated as the percentage by which the weighted-average prices at each of the two levels of trade differ in the market used to establish normal value. The Administration intends that Commerce normally will base the calculation of the adjustment on sales of the same product by the same company; however, if information on the same product and company is not available, the adjustment may also be based on sales of other products by the same company. In the absence of any sales, including those in recent time periods, to different levels of trade by the exporter or producer under investigation, Commerce may consider the selling experience of other producers in the foreign market for the same product or other products. Where different products, company experiences, or time periods are used, Commerce will ensure that price differences reflect differences in levels of trade that are relevant to the product under consideration rather than differences in the nature of the products, companies or time periods.

Commerce will not make an adjustment based on the fact that expenses or costs differ between the two levels of trade. An effect on price comparability must be identified and measured by observed differences between prices at different levels of trade. Commerce will isolate the price effect, if any, attributable to the sale at different levels of trade, and will ensure that expenses previously deducted from normal value are not deducted a second time through a level of trade adjustment. For example, Commerce will ensure that a percentage difference in price is not more appropriately attributable to differences in the quantities purchased in individual sales.

Where it is established that there are different levels of trade based on the performance of different selling activities, but the data establish that there is a pattern of no price differences, the level of trade adjustment will be zero. No further adjustment is necessary.

Only where different functions at different levels of trade are established under section 773(a)(7)(A)(i), but the data available do not form an appropriate basis for determining a level of trade adjustment under section 773(a)(7)(A)(ii), will Commerce make a constructed export price offset adjustment under section 773(a)(7)(B). The adjustment will be "capped" by the amount of indirect expenses deducted from constructed export price under new section 772(d)(1)(D). In some circumstances, the data may not permit Commerce to determine the amount of the level of trade adjustment. For example, there may be no, or very few sales of a sufficiently similar product by a seller to independent customers at different levels of trade. This could be the case where there is only one foreign respondent and all sales are to affiliated purchasers. Also, there could be restrictive business practices which result in too few appropriate sales to determine a price effect. Similarly, the data could indicate a clearly contradictory result, for example contradictory patterns during different periods. In such situations, although an adjustment might have been warranted, Commerce may be unable to determine whether there is an effect on price comparability. In such situations, although there is a difference in levels of trade, Commerce may be unable to quantify the adjustment. Where this occurs, Commerce will make a capped "constructed export price offset" adjustment under section 773(a)(7)(B), in lieu of the level of trade adjustment that would be warranted under section 773(a)(7)(A).

The constructed export price offset adjustment will be made only where normal value is established at a level of trade more remote from the factory than the level of trade of the constructed export price; i.e. where the adjustment under 773(a)(7)(A), if it could have been quantified, would likely have resulted in a reduction of the normal value. The capped constructed export price offset adjustment will not be available to parties that refuse to provide necessary level of trade data.

(5) Adjustments to Constructed Value

New section 773(a)(8) ensures continuation of the ability to make appropriate adjustments to constructed value when amended section 773(e) serves as the basis for normal value. Such adjustments will be made under the same conditions as under current law.

3. Exclusion of Sales Below Cost from Determination of Normal Value

Since 1974, U.S. law has provided for the exclusion of below-cost foreign market sales as a basis for determining foreign market (normal) value. Section 773(b) of the Act currently provides that Commerce will determine whether foreign market sales are at prices below cost when it has "reasonable grounds to believe or suspect" that such sales have occurred. Such sales must be excluded from the determination of foreign market value if such sales occurred: (1) in substantial quantities; (2) over an extended period of time; and (3) at prices that do not permit the recovery of all costs within a reasonable period of time. If remaining above-cost sales are inadequate, Commerce is directed to base foreign market value on constructed value.

New section 773(b) incorporates the requirements of the Agreement, which, but for a few changes, are based on the existing U.S. law. Overall, these changes provide improved criteria for determining when to exclude below-cost sales as a basis for normal value.

The current statutory requirement that below-cost sales occur over an extended period of time is replaced by the requirement that such sales occur within an extended period of time. As in the Agreement, the term "extended period of time" is defined in new section 773(b)(2)(B) as being normally one year, but not less than six months. This is a change from current Commerce practice, under which the below-cost inquiry is confined to the normal six-month period of the initial antidumping investigation. By providing that below-cost sales need occur only within (rather than over) an extended period of time, Commerce no longer must find that below-cost sales occurred in a minimum number of months before excluding such sales from its analysis. In addition, the use of the term "within" means that for purposes of calculating the quantity of below-cost sales, Commerce will examine below-cost sales occurring during the entire period of investigation or review, as opposed to a shorter time period.

Another change concerns the definition of "substantial quantities." Under existing practice, Commerce considers below-cost sales to be in substantial quantities if they account for ten percent of total sales. Under new section 773(b)(2)(C), the benchmark is twenty percent. Commerce also may consider below-cost sales to be in substantial quantities if the weighted-average per unit price of the sales under consideration is less than the weighted-average per unit cost of production for such sales. This latter rule closely corresponds to the current Commerce practice of determining substantial quantities of sales below cost for highly perishable agricultural products, and will be the measurement of substantial quantities for such products in the future.

In addition, new section 773(b)(2)(D) specifies when particular prices provide for cost recovery within a reasonable period of time. Under current law, there is no clear definition of cost recovery -- the measure of cost recovery could have been based on speculative estimates of future production costs. Under the amended law, if prices which are below costs at the time of sale are above weighted-average costs for the period of investigation or review, such prices shall be considered to provide for recovery of costs within a reasonable period of time.

The determination of cost recovery is based on an analysis of actual weighted-average prices and costs during the period of investigation or review, except that, before testing for cost recovery, such costs incurred during the period of investigation or review may be adjusted as appropriate to take account of variations in unit costs caused by periodic temporary disruptions to production that occur on a less frequent than annual basis. For example, major maintenance may be scheduled every three years. While this maintenance is performed, output is suspended or reduced. This results in unit costs being artificially increased in years when the maintenance is performed and depressed in other years. To account for this, Commerce will spread out the effect of such disruptions over the appropriate period of time so that a proportional effect is recognized. The party claiming the adjustment must demonstrate that the disruptions have recurred at regular and predictable intervals. Although not a matter of cost recovery, when an unforeseen disruption in production occurs which is beyond management's control (e.g., destruction of production facilities by fire), Commerce will continue its current practice such as using the costs incurred for production prior to such unforeseen event. As under current practice, the cost test generally will be performed on no wider than a model-specific basis.

If home market (or third country) sales are below-cost and all of the criteria of section 773(b) are satisfied, Commerce may exclude such sales for purposes of determining normal value. The Administration intends that Commerce will disregard sales when the conditions in the law are met. However, in some cases, below-cost sales may be used to determine normal value if those sales are of obsolete or end-of-model-year merchandise. Such merchandise is often sold at less than cost as was recognized in the legislative history of the Trade Act of 1974. H. Rep. No. 571, 93rd Cong., 1st Sess. 70-71 (1973); S. Rep. No. 1298, 93rd Cong., 2nd Sess., 173 (1974). It is appropriate to use these sales as the basis of normal value when the merchandise exported to the United States is similarly obsolete or end-of-model year.

The existing statute provides that where below-cost sales are disregarded, Commerce shall use the remaining above-cost sales as the basis for determining foreign market (normal) value if such sales are "adequate." As a matter of practice, Commerce has used above-cost sales where they account for ten percent or more of total sales. New section 773(b)(1) changes this practice by requiring Commerce to use above-cost sales if they exist, and if such sales are otherwise in the ordinary course of trade. Only if there are no above-cost sales in the ordinary course of trade in the foreign market under consideration will Commerce resort to constructed value.

New section 773(b)(2)(A) retains the current requirement that Commerce have "reasonable grounds to believe or suspect" that below-cost sales have occurred before initiating such an investigation. "Reasonable grounds" will exist when an interested party provides specific factual information on costs and prices, observed or constructed, indicating that sales in the foreign market in question are at below-cost prices. In addition, new section 773(b)(2)(A)(ii), which codifies existing Commerce practice, provides that in the context of administrative reviews of antidumping orders, reasonable grounds exist if Commerce has excluded below-cost sales of a particular exporter or producer from the determination of normal value in the most recently completed segment of the antidumping proceeding.

The Administration intends that an allegation of sales below cost need not be specific to a particular exporter or producer, although a petitioner would be free to limit a below-cost allegation to a particular exporter or producer. Commerce will consider allegations of below-cost sales in the aggregate for a foreign country, just as Commerce currently considers allegations of sales at less than fair value on a country-wide basis for purposes of initiating an antidumping investigation. It is the Administration's intent that the standard for initiation of a sales below-cost investigation should be the same as the current standard for initiating an antidumping investigation based on a comparison of prices.

The changes described above are intended to permit Commerce to initiate below-cost inquiries at the outset of a case, thereby enhancing Commerce's ability to complete investigations and reviews in a timely, transparent, and effective manner. The ability to substantiate a below-cost allegation on the basis of observed or constructed prices and costs will enable Commerce to address the allegation of below-cost sales at an earlier stage of a proceeding than possible under current practice, thereby providing all parties with a greater opportunity to comment on Commerce's analysis.

4. Ordinary Course of Trade

Section 222(h) of the bill amends section 771(15) to specify additional types of transactions that Commerce may consider to be outside the ordinary course of trade, including: (1) sales disregarded as being below-cost under new section 773(b)(1); and (2) transactions disregarded under new section 773(f)(2), i.e., transactions between affiliated persons that are disregarded for purposes of calculating cost. Commerce may consider other types of sales or transactions to be outside the ordinary course of trade when such sales or transactions have characteristics that are not ordinary as compared to sales or transactions generally made in the same market. Examples of such sales or transactions include merchandise produced according to unusual product specifications, merchandise sold at aberrational prices, or merchandise sold pursuant to unusual terms of sale. As under existing law, amended section 771(15) does not establish an exhaustive list, but the Administration intends that Commerce will interpret section 771(15) in a manner which will avoid basing normal value on sales which are extraordinary for the market in question, particularly when the use of such sales would lead to irrational or unrepresentative results.

5. Calculation of Costs

Section 224 of the bill adds new section 773(f) to incorporate the provisions of the Agreement regarding the calculation of costs. In addition, section 773(f) harmonizes the methods of calculating cost for purposes of examining sales below cost and determining constructed value.

a. Calculation of Costs in General

Consistent with existing practice, new section 773(f)(1)(A) provides that Commerce normally will calculate costs on the basis of records kept by the exporter or producer of the merchandise, provided such records are kept in accordance with generally accepted accounting principles of the exporting (or producing) country and reasonably reflect the costs associated with the production and sale of the merchandise. Commerce will consider all available evidence submitted by the exporter or producer on a timely basis regarding the proper allocation of costs. The exporter or producer will be expected to demonstrate that it has historically utilized such allocations, particularly with regard to the establishment of appropriate amortization and depreciation periods and allowances for capital expenditures and other development costs.

In determining whether a company's records reasonably reflect costs, Commerce will consider U.S. generally accepted accounting principles employed by the industry in question. For example, a company's records might not fairly allocate the cost of an asset if a firm's financial statements reflect an extremely large amount of depreciation for the first year of an asset's life, or if there is no depreciation expense reflected for assets that have been idle. In such a situation, it would be appropriate for Commerce to adjust depreciation expenses. Costs shall be allocated using a method that reasonably reflects and accurately captures all of the actual costs incurred in producing and selling the product under investigation or review. In determining whether to accept the cost allocation methods proposed by a specific producer, Commerce will consider the production cost information available to the producer and whether such information could reasonably be used to compute a representative measure of the materials, labor and other costs, including financing costs, incurred to produce the subject merchandise, or the foreign like product. Commerce also will consider whether the producer historically used its submitted cost allocation methods to compute the cost of the subject merchandise prior to the investigation or review and in the normal course of its business operation. Also, if Commerce determines that costs, including financing costs, have been shifted away from production of the subject merchandise, or the foreign like product, it will adjust costs appropriately, to ensure they are not artificially reduced.

b. Identification of Costs To Be Calculated

Section 222(i)(1) of the bill adds section 771(28) to the Act which defines the term "exporter or producer" to include, where appropriate, both the exporter and producer of merchandise subject to an antidumping proceeding. The purpose of section 771(28), which is consistent with current Commerce practice, is to clarify that where different firms perform the production and selling functions, Commerce may include the costs, expenses, and profits of each firm in calculating cost of production and constructed value.

c. Non-recurring Costs

Section 224 of the bill adds section 773(f)(1)(B) to the Act to incorporate the provisions of the Agreement regarding the treatment of non-recurring costs. This section is consistent with current practice, under which Commerce associates expenditures with all production benefitting from the expenditure. For example, in the case of pre-production expenses, such as research and development costs, Commerce typically allocates such expenses over current and future production.

d. Startup Costs

Section 224 of the bill also adds section 773(f)(1)(C) to the Act to incorporate the provisions of the Agreement regarding the treatment of startup costs. In calculating cost of production and constructed value, it is appropriate to take into account that a firm may experience unusually high costs when it is "starting up" a new product or new production facilities. However, any adjustment for such startup costs must be carefully limited to ensure that such an adjustment is not transformed into a license to dump. Section 773(f)(1)(C) accomplishes these objectives.

(1) Defining Startup

Under section 773(f)(1)(C)(ii), Commerce may make an adjustment for startup costs only if the following two conditions are satisfied: (1) a company is using new production facilities or producing a new product that requires substantial additional investment, and (2) production levels are limited by technical factors associated with the initial phase of commercial production. Mere improvements to existing products or ongoing improvements to existing facilities will not qualify for a startup adjustment. Commerce also will not consider an expansion of the capacity of an existing production line to be a startup operation unless the expansion constitutes such a major undertaking that it requires the construction of a new facility and results in a depression of production levels due to technical factors associated with the initial phase of commer

cial production of the expanded facilities.

"New production facilities" includes the substantially complete retooling of an existing plant. Substantially complete retooling involves the replacement of nearly all production machinery or the equivalent rebuilding of existing machinery. A "new product" is one requiring substantial additional investment, including products which, though sold under an existing nameplate, involve the complete revamping or redesign of the product. This would not include routine model year changes. For example, a new model year automobile with incremental changes would not be considered a new product, but a completely redesigned model with a new structure would be so considered. Similarly, a 16 megabyte Dynamic Random Access Memory (DRAM) chip, for example, would be considered a new product if the latest version of the product had been a 4 megabyte chip. However, an improved version of a 16 megabyte chip (e.g., a physically smaller version) would not be considered a new product.

(2) Duration of the Startup Period

Under new section 773(f)(1)(C)(ii), startup will be considered to end at the time the level of commercial production characteristic of the merchandise, producer, or industry concerned is achieved. The attainment of peak production levels will not be the standard for identifying the end of the startup period, because the startup period may end well before a company achieves optimum capacity utilization. In addition, consistent with the basic definition of a startup situation, Commerce will not extend the startup period so as to cover improvements and cost reductions that may occur over the entire life cycle of a product.

To determine when a company reaches commercial production levels, Commerce will consider first the actual production experience of the merchandise in question. Production levels will be measured based on units processed. To the extent necessary, Commerce also will examine other factors, including historical data reflecting the same producer's or other producers' experiences in producing the same or similar products. A producer's projections of future volume or cost will be accorded little weight, as actual data regarding production are much more reliable than a producer's expectations.

In determining whether commercial production levels have been achieved and that the startup period is measured appropriately, Commerce will consider factors unrelated to startup operations that may have affected the volume of production processed, such as demand, seasonality, or business cycles. For example, commercial production levels may be low not because a company is in a startup situation, but because the industry in question is in the trough of its business cycle.

The Administration recognizes that the nature and timing of startup operations will vary from industry to industry and from product to product, and that any determination of the appropriate startup period involves a fact-intensive inquiry. In some industries, the startup period could be as short as one or two months; in others it could be much longer. For this reason, the Administration intends that Commerce determine the duration of the startup period on a case-by-case basis.

(3) Startup Adjustment Methodology

New section 773(f)(1)(C)(iii) sets out the basic methodology for making startup adjustments. If the criteria for making a startup adjustment are satisfied, Commerce will replace unit production costs incurred during the startup period with unit production costs incurred at the end of the startup period. An adjustment for startup may result in the exclusion from the cost calculation of actual costs incurred by a company during the startup period. As the startup adjustment results in some actual costs not being counted during the startup phase, the difference between actual costs and the costs of production calculated for startup costs will be amortized over a reasonable period of time subsequent to the startup phase over the life of the product or machinery, as appropriate.

In certain situations, the startup period may extend beyond the period of the investigation or administrative review, possibly even beyond the deadline for Commerce's final determination. In such cases, Commerce must cut off the submission of additional information to allow itself time to analyze and verify the data, as well as to provide interested parties with an opportunity to comment on the data. Consistent with the Agreement, Commerce will use as startup costs the most recent costs incurred prior to the end of the startup period that Commerce reasonably can take into account without delaying the timely completion of the investigation or administrative review.

Commerce will consider unit production costs to be items such as depreciation of equipment and plant, labor costs, insurance, rent and lease expenses, material costs, and overhead. However, sales expenses, such as advertising costs, or other non-production costs, will not be considered startup costs because they are not directly tied to the manufacturing of the product.

The Administration intends that the burden will be on companies to demonstrate their entitlement to a startup adjustment. Specifically, companies must demonstrate that, for the period under investigation or review, production levels were limited by technical factors associated with the initial phase of commercial production and not by factors unrelated to startup, such as marketing difficulties or chronic production problems. In addition, to receive a startup adjustment, companies will be required to explain their production situation and identify those technical difficulties associated with startup that resulted in the underutilization of facilities. This is consistent with the general rule in antidumping practice that a party seeking an adjustment has the burden of establishing entitlement to that adjustment as both a legal and factual matter.

e. Affiliated Party Transactions

Current law contains two definitions of persons who may be considered to be related, sections 773(e)(4) and 771(13). Section 222(i)(1) of the bill amends section 773(e)(4) by redesignating it as section 771(33), retitling it "Affiliated Persons," and adding new subparagraph (G), which provides that any person who controls any other person and that other person will be considered affiliated persons. Consistent with the Agreement, "control" exists if one person is legally or operationally in a position to exercise restraint or direction over another person. The Administration believes that including control in the definition of "affiliated" will permit a more sophisticated analysis which better reflects the realities of the marketplace.

The traditional focus on control through stock ownership fails to address adequately modern business arrangements, which often find one firm "operationally in a position to exercise restraint or direction" over another even in the absence of an equity relationship. A company may be in a position to exercise restraint or direction, for example, through corporate or family groupings, franchises or joint venture agreements, debt financing, or close supplier relationships in which the supplier or buyer becomes reliant upon the other.

The question of affiliation is relevant to a number of price and cost issues in an antidumping investigation or review. One example is the special rule for major inputs in existing section 773(e)(3), a provision added to the law in 1988 to address diversionary input dumping by authorizing Commerce to inquire whether the transfer between "related" persons (i.e., "affiliated" persons under section 773(f)(3)) of such an input is at a price below the input's production cost. H. Rep. 576, 100th Cong., 2d Sess. 595 (1988). Under the amended definition of "affiliated persons," Commerce may examine such transactions when the purchaser of the major input is in a position to exercise restraint or direction over the input supplier (or vice versa).

Paragraphs (2) and (3) of new section 773(f) address the treatment of transactions between affiliated parties for purposes of calculating cost. Under the existing statute, these provisions literally apply only to the calculation of constructed value, and the legislation relocates these paragraphs to section 773(f) to clarify that they apply for purposes of analyzing sales below cost of production and constructed value.

Under existing law, Commerce applies the definition of "exporter" in existing section 771(13) primarily to determine when an importer is "connected" to the exporter so as to warrant the use of "exporters sales price" as the basis for U.S. price. Section 222(i)(2) of the bill repeals section 771(13) of the Act because the new term "affiliated" is used for the purpose of determining export price and constructed export price in new sections 772(a) and (b).

6. Profit and Selling, General, and Administrative Expenses for Constructed Value

Section 224 of the bill adds section 773(e)(2) to implement the provisions of the Agreement regarding constructed value and the calculation of amounts for profits and selling, general, and administrative expenses (SG&A). Constructed value is used as the basis for normal value where home market sales of the merchandise in question are either nonexistent, in inadequate numbers, or inappropriate to serve as a benchmark for a fair price, such as where sales are disregarded because they are sold at below-cost prices. Because constructed value serves as a proxy for a sales price, and because a fair sales price would recover SG&A expenses and would include an element of profit, constructed value must include an amount for SG&A expenses and for profit.

Existing section 773(e)(1)(B) provides that Commerce calculate these amounts based on the average experience of producers in the country of exportation in selling merchandise of the same general class or kind as the merchandise under investigation. The statute also establishes minimum amounts for SG&A expenses and profit. As a matter of administrative practice, Commerce has calculated these amounts based on the experience of individual producers in selling the particular merchandise under investigation. Moreover, Commerce has used an average profit rate, which includes below-cost sales for which the profit is zero.

New section 773(e)(2) establishes new methods of calculating SG&A expenses and profits consistent with the methods provided for in the Agreement. Although section 773(e)(2) does not retain the current statutory minimums for profit and SG&A expenses, the Administration does not believe that this will diminish the ability of domestic industries to obtain relief under the antidumping law.

First, consistent with the Agreement, new section 773(e)(2)(A) establishes as a general rule that Commerce will base amounts for SG&A expenses and profit only on amounts incurred and realized in connection with sales in the ordinary course of trade of the particular merchandise in question (foreign like product). Commerce may ignore sales that it disregards as a basis for normal value, such as those disregarded because they are made at below-cost prices. Other examples of sales that Commerce could consider to be outside the ordinary course of trade include sales of off-quality merchandise, sales to related parties at non-arm's length prices, and sales with abnormally high profits. Unlike current practice, under section 773(e)(2)(A), in most cases Commerce would use profitable sales as the basis for calculating profit for purposes of constructed value.

Second, new section 773(e)(2)(B) establishes alternative methods for calculating amounts for SG&A expenses and profit in those instances where the method described in section 773(e)(2)(A) cannot be used, either because there are no home market sales of the foreign like product or because all such sales are at below-cost prices. These methods are: (1) actual amounts incurred or realized by the same producer on home market sales of the same general category of products; (2) the weighted-average of actual amounts incurred or realized by other investigated companies on home market sales in the ordinary course of trade (i.e., profitable sales) of the foreign like product; or (3) any other reasonable method, provided that the amount for profit does not exceed the profit normally realized by other companies on home market sales of the same general category of products (the so-called profit cap).

At the outset, it should be emphasized that, consistent with the Antidumping Agreement, new section 773(e)(2)(B) does not establish a hierarchy or preference among these alternative methods. Further, no one approach is necessarily appropriate for use in all cases. While, as discussed below, Commerce has had some experience with certain aspects of these alternatives, its experience is insufficient to warrant any sort of ranking of the three alternatives. The Administration intends that the selection of an alternative will be made on a case-by-case basis, and will depend, to an extent, on available data. Commerce will explain the basis for the selection of a particular methodology in a given case. If alternative (3) is selected, Commerce will provide to interested parties a description of the method chosen and an explanation of why it was selected.

With respect to alternative (1), this methodology is consistent with the existing practice of relying on a producer's sales of products in the same "general class or kind of merchandise." The term "general category of merchandise" encompasses a category of merchandise broader than the "foreign like product." As under existing practice, the Administration intends that, if Commerce uses alternative (1), it will establish appropriate categories on a case-by-case basis. In addition, profits used by Commerce must be from reliable independent sources (e.g., financial reports), prepared in accordance with generally accepted accounting principles, and capable of verification.

With respect to alternative (2), although it relies on the sales experience of other companies, this alternative requires the use of sales in the ordinary course of trade, i.e., profitable sales. Absent this requirement, if Commerce could not calculate profit for a particular foreign producer under the general rule because all of that producer's sales were at below-cost prices, that producer would benefit perversely from its own unfair pricing, because its profit figure would be based on an average of other producers' profitable and unprofitable sales.

With respect to alternative (3), which provides for the use of "any other reasonable method," given the absence of a comparable standard in existing law, the Administration does not believe that it is appropriate at this time to establish particular methods and benchmarks for applying this alternative. Instead, the Administration intends that Commerce will develop this alternative through practice, and that Commerce will determine on a case-by-case basis the profits "normally realized" by other companies on merchandise of the same general category.

The Administration does not intend Commerce to require companies to submit all data necessary to apply each alternative. For example, Commerce will not require a company which has provided profit information on its own sales of the particular foreign like product also to submit profit information on its sales of the same general category of products solely to enable Commerce to use the latter information to calculate profit for a different company. Likewise, the Administration does not intend that Commerce would engage in an analysis of whether sales in the same general category are above-cost or otherwise in the ordinary course of trade.

The Administration also recognizes that where, due to the absence of data, Commerce cannot determine amounts for profit under alternatives (1) and (2) or a "profit cap" under alternative (3), it might have to apply alternative (3) on the basis of "the facts available." This ensures that Commerce can use alternative (3) when it cannot calculate the profit normally realized by other companies on sales of the same general category of products. In such a situation, the Administration intends that Commerce will not make an adverse inference in applying the facts available, unless the company in question withheld information requested by Commerce.

Finally, in situations where the producer and the exporter are separate companies, the Administration intends that Commerce may continue to calculate constructed value based on the total profit and total SG&A expenses realized and incurred by both companies. In such situations, failing to include the expenses and profits of both companies would understate the true cost of production and constructed value of the merchandise.

7. Currency Conversions

Section 225 of the bill adds new section 773A to implement the requirements of the Agreement regarding currency conversions. Typically in antidumping proceedings, the prices or costs used to determine normal value are denominated in a foreign currency. To determine whether dumping exists, these prices or costs must be converted to U.S. dollars. To a large extent, the Agreement tracks existing practice, the goal of which is to ensure that the process of currency conversion does not distort dumping margins. The Administration intends that Commerce will promulgate regulations implementing the requirements of section 773A. To the extent that the requirements of the Agreement apply only to investigations, as opposed to reviews, the regulations will reflect this distinction.

Under new section 773A, the general rule will be to convert foreign currencies based on the dollar exchange rate in effect on the date of sale. Under current practice, Commerce utilizes a quarterly rate, unless the daily rate varies by more than five percent from the rate in effect on the first day of the quarter. Some firms, including U.S. firms, commonly engage in hedging on forward currency markets to minimize their exposure to exchange rate losses. Therefore, as under existing practice, where a company demonstrates that a sale of foreign currency on forward markets is directly linked to a particular export sale, Commerce will use the rate of exchange in the forward currency sale agreement. Group sales of foreign currency on forward markets will be allowed, provided that sufficient documentation to establish the link between the currency purchase and the particular export sale is provided.

Section 773A also provides that Commerce will ignore fluctuations in exchange rates. In addition, in an investigation, Commerce will allow exporters at least sixty days in which to adjust their prices to reflect a sustained increase in the value of a foreign currency relative to the U.S. dollar.

8. Price Averaging

Section 229 of the bill adds new section 777A(d) to implement the provisions of the Agreement regarding the use of average normal values and export prices for purposes of calculating dumping margins. Although current U.S. law permits the use of averages on both sides of the dumping equation, Commerce's preferred practice has been to compare an average normal value to individual export prices in investigations and reviews. In part, the reluctance to use an average-to-average methodology has been based on a concern that such a methodology could conceal "targeted dumping." In such situations, an exporter may sell at a dumped price to particular customers or regions, while selling at higher prices to other customers or regions.

Consistent with the Agreement, new section 777A(d)(1)(A)(i) provides that in an investigation, Commerce normally will establish and measure dumping margins on the basis of a comparison of a weighted-average of normal values with a weighted-average of export prices or constructed export prices. To ensure that these averages are meaningful, Commerce will calculate averages for comparable sales of subject merchandise to the U.S. and sales of foreign like products. In determining the comparability of sales for purposes of inclusion in a particular average, Commerce will consider factors it deems appropriate, such as the physical characteristics of the merchandise, the region of the country in which the merchandise is sold, the time period, and the class of customer involved. For example, in the case of 13" and 21" televisions, average normal values would be calculated for each size of television, not a single average for sales of both sizes of televisions.

In addition to the use of averages, section 777A(d)(1)(A)(ii) also permits the calculation of dumping margins on a transaction-by-transaction basis. Such a methodology would be appropriate in situations where there are very few sales and the merchandise sold in each market is identical or very similar or is custom-made. However, given past experience with this methodology and the difficulty in selecting appropriate comparison transactions, the Administration expects that Commerce will use this methodology far less frequently than the average-to-average methodology.

New section 777A(d)(1)(B) provides for a comparison of average normal values to individual export prices or constructed export prices in situations where an average-to-average or transaction-to-transaction methodology cannot account for a pattern of prices that differ significantly among purchasers, regions, or time periods, i.e., where targeted dumping may be occurring. Before relying on this methodology, however, Commerce must establish and provide an explanation why it cannot account for such differences through the use of an average-to-average or transaction-to-transaction comparison. In addition, the Administration intends that in determining whether a pattern of significant price differences exist, Commerce will proceed on a case-by-case basis, because small differences may be significant for one industry or one type of product, but not for another.

In this regard, so that the exceptions are properly applied, the Administration intends that Commerce will continue to require that foreign companies report sales on a transaction-specific basis, and that Commerce will request information on sales to particular customers and regions. Transaction-specific information must be made available so Commerce may determine: (1) the appropriate product and/or transaction categories for which averages should be calculated; and (2) whether the exception for targeted dumping is applicable. The information submitted by interested parties for this purpose will be subject to disclosure to representatives of domestic interested parties under Administrative Protective Orders, except for the limited exceptions set out in existing section 777(c).

The Agreement reflects the express intent of the negotiators that the preference for the use of an average-to-average or transaction-to-transaction comparison be limited to the "investigation phase" of an antidumping proceeding. Therefore, as permitted by Article 2.4.2, the preferred methodology in reviews will be to compare average to individual export prices. New section 777A(d)(2) provides that, when comparing prices of individual export transactions to weighted-average foreign prices, Commerce will limit its averaging of prices to a period not exceeding the calendar month that corresponds most closely to the calendar month of the individual export sale. When constructed value is used for normal value, it is normally based on yearly data. However, when costs are rapidly changing, it may be appropriate to use shorter periods, such as quarters or months, which may allow a more appropriate association of costs with sales prices. However, where costs are incurred seasonally, such as in most agricultural products, costs are currently annualized, and the Administration intends that Commerce continue this practice.

9. Intermediate Country Sales

Article 2.5 of the Agreement continues to provide that, where products are exported from an intermediate country, rather than directly from the country of origin, national authorities generally will determine normal value based on sales or cost in the intermediate country. However, authorities may determine normal value in the country of origin in certain circumstances. While section 773(f) of the Act requires that normal value will be based on prices in the country of origin, it allows normal value to be based on sales in the intermediate country if a list of conditions is satisfied. In contrast, Article 2.5 of the Agreement requires that normal value ordinarily will be based on sales in the intermediate country, but provides an illustrative list of conditions that would justify finding normal value based on sales prices in the country of origin.

Section 224 of the bill redesignates and amends existing section 773(f) of the Act as new section 773(a)(3). New section 773(a)(3) paraphrases the requirement in current law that Commerce may use sales in the intermediate country as a basis for normal value only if the producer in the country of origin did not know that the merchandise sold to a reseller was intended to be exported to an intermediate country. The producer in the country of origin might sell at a lower price if it knows that the merchandise is to be exported than if the merchandise is intended for domestic consumption. This reflects the fact that dumping is primarily a matter of price discrimination between domestic and export markets. It would be inappropriate to determine fair value by reference to subsequent sales in or from the intermediate country if the sale to the intermediate country is dumped.

New section 773(a)(3) describes other situations in which it would be inappropriate to use the intermediate country as a basis for determining normal value, such as where goods are merely transshipped through the intermediate country, the foreign like product is not produced in the intermediate country, or the market in the intermediate country is not viable within the meaning of new section 773(a)(1)(C). New section 773(a)(3) eliminates the requirement of existing law that merchandise not be substantially transformed in the intermediate country. Outside of a situation involving circumvention of an antidumping duty order, a substantial transformation of a good in an intermediate country would render the resulting merchandise a product of the intermediate country rather than the original country of production.

e. De Minimis Dumping Margins

In conformity with Article 5.8 of the Antidumping Agreement, section 213 of the bill amends sections 733(b) and 735(a) of the Act to require that, in antidumping investigations, Commerce treat the weighted-average dumping margin of any producer or exporter which is below two percent ad valorem as de minimis. De minimis margins are regarded as zero margins. Exporters or producers with de minimis margins will be excluded from any affirmative determination. In practice this will have its major impact on final determinations, since it is only at that time that the margins are known with certainty. Margins calculated in preliminary determinations have not been subjected to full comment or verification and, as a result, are not suitable as a basis for final termination of a proceeding. This requirement applies only to investigations and not to reviews of orders or agreements.

The requirements of Article 5.8 apply only to investigations, not to reviews of antidumping duty orders or suspended investigations. The Administration intends that Commerce will continue its present practice in reviews of waiving the collection of estimated cash deposits if the deposit rate is below 0.5 percent ad valorem, the existing regulatory standard for de minimis. Section 229(b) of the bill adds section 771(35) which defines the terms "dumping margin" and "weighted-average dumping margin" in a manner consistent with existing Commerce regulations, 19 CFR 353.2(f).

10. Antidumping Investigations on Behalf of a Third Country

Section 232 of the bill adds section 783 to incorporate the provisions of Article 14 of the Antidumping Agreement, and establish a framework for taking antidumping actions on behalf of a third country. Current U.S. law authorizes the Trade Representative (Trade Representative) to request that other countries take action against dumping in their markets that injures U.S. exporters, but does not allow Commerce or the Commission to take action in response to similar requests by other governments.

New section 783(a) allows any WTO member to file a petition with the Trade Representative requesting an antidumping investigation based on allegations that a product is being dumped in the United States by exporters from another WTO member and thereby injuring the industry producing a like product in the requesting country. New section 783(b) requires the Trade Representative to consult with Commerce and the Commission prior to initiating a third-country action.

Subsection (b) also incorporates the provision of the Antidumping Agreement requiring the approval of the WTO Council for Trade in Goods prior to initiating such an investigation. In determining whether to initiate an investigation, the Trade Representative will take into account whether the petitioning country provides an equivalent opportunity for the United States to seek the initiation of antidumping investigation.

New section 783(c) authorizes the Trade Representative to request: (1) from Commerce a determination as to whether imports are being sold in the U.S. at less than fair value; and (2) from the Commission a determination as to whether there is material injury to an industry in the requesting country by reason of imports into the United States of the subject merchandise. The legislation does not itself establish the substantive and procedural standards that Commerce and the Commission will apply in third-country antidumping investigations. Instead, the Trade Representative will specify the substantive and procedural standards to be used by the agencies in such investigations.

New section 783(d) requires the Trade Representative to provide an opportunity for public comment in determining whether to initiate an investigation. Similarly, this section also requires Commerce and the Commission to provide an opportunity for public comment in making their respective determinations under section 783(c).

The Administration intends that the Trade Representative will develop consistent, transparent standards of general applicability that provide meaningful guidance to the agencies, while according them the necessary flexibility to develop appropriate procedures. With respect to procedural issues, the Trade Representative will indicate the deadlines (if any) applicable to such investigations, the persons who may participate as parties in such investigations, and the applicability of requirements such as hearings and exchanges of information pursuant to administrative protective order.

The Trade Representative will articulate the extent to which substantive rules, (particularly with respect to Commission injury investigations) applicable to antidumping investigations filed on behalf of U.S. industries -- such as like product, related parties, and cumulation -- are also applicable in third-country investigations. The Administration intends that these standards should, to a considerable extent, permit the Commission to incorporate by analogy the standards it uses concerning injury to U.S. industries. Nevertheless, certain concepts, such as regional industries, may have little applicability in third-country investigations. In such circumstances, the Commission should have the flexibility in third-country investigations to deviate from the standards used in antidumping investigations of U.S. industries.

In the event both Commerce and the Commission make affirmative determinations, Commerce will publish an antidumping duty order and take other actions necessary to assess antidumping duties. These orders will be subject to reviews for duty liability, changed circumstances, and sunset, and will be subject to judicial review under section 516A of the Act.

C. ACTION REQUIRED OR APPROPRIATE TO IMPLEMENT THE ANTIDUMPING AND SUBSIDIES AGREEMENTS

Amendments are either required or appropriate to implement the remaining articles of the Antidumping Agreement and the Subsidies Agreement (the Agreements). In most cases, the relevant provisions of the Agreements are identical. The following discussion includes not only a description of the legislation itself, but also a description of how the statute will be applied by Commerce and the Commission. The agencies will amend the applicable regulations, 19 CFR Parts 207, 353, 355, to reflect the changes described below.

Many of the amendments discussed in this section of the Statement of Administrative Action reflect the achievement of one of the United States' principal negotiating objectives -- to strengthen the procedural safeguards in antidumping and countervailing duty proceedings. In recent years, an increasing number of countries have begun to adopt and apply antidumping and countervailing duty laws. Some countries denied even minimal due process protections to exporters. Although the 1979 Tokyo Round Antidumping and Subsidies Codes purported to provide procedural safeguards, many of these provisions lacked sufficient detail.

To protect U.S. exporters from arbitrary actions by foreign antidumping and countervailing duty authorities, the United States negotiated procedural and evidentiary safeguards consistent with U.S. standards of transparency and procedural fairness. These procedural and evidentiary improvements in the Agreements ensure that U.S. exporters will be able to defend their interests in foreign antidumping and countervailing duty proceedings.

Most of the statutory amendments concerning antidumping and countervailing duty procedural and evidentiary requirements codify existing practices of Commerce and the Commission. Nevertheless, the Administration believes that it is important to reflect, in the statute itself or in regulations, the standards of the Agreements relating to transparency and procedural fairness. First, the codification of existing agency practices will document clearly for our trading partners that the United States adheres to these standards. Second, codification will make clear to our trading partners that the United States considers transparency and procedural fairness to be extremely important, and that the United States expects other countries to accord U.S. exporters similar procedural treatment.

1. Determination of Injury

The Agreements make relatively few changes to the substantive standards for determining injury and causation set forth in the 1979 Codes. The most significant change reflected in the Agreements is the express recognition of cumulative analysis.

a. Cumulative Analysis

Cumulative analysis has long been a critical component of U.S. antidumping and countervailing duty law and practice. In general, under current cumulative analysis, when determining whether a U.S. industry has been injured by unfairly traded imports, the Commission cumulatively assesses the volume and effect of imports from all countries subject to the investigation if those imports compete with each other and with the domestic like product. This analysis recognizes that a domestic industry can be injured by a particular volume of imports and their effects regardless of whether those imports come from one source or many sources. Although existing U.S. law and practice is largely consistent with the cumulation provisions of the Agreements, certain modifications to the statute are necessary to ensure complete consistency. These changes are incorporated in section 222(e) of the bill, which adds section 771(7)(G) to the Act.

Section 222(d) of the bill repeals current section 771(7)(C)(v), which treats negligible imports as an exception to the cumulation requirement. As discussed below, section 222(d) of the bill adds section 771(24) to the Act, which implements the provisions of the Agreements concerning negligible imports.

(1) Competition Requirement

As under current law, new section 771(7)(G)(i) requires imports to compete with each other and with the domestic like product to be eligible for cumulation. The new section will not affect current Commission practice under which the statutory requirement is satisfied if there is a reasonable overlap of competition, based on consideration of relevant factors. See Fundicao Tupy, S.A. v. United States, 678 F. Supp. 898, 902 (Ct. Int'l Trade), aff'd, 859 F.2d 915 (Fed. Cir. 1988).

(2) Simultaneous Filing or Self-Initiation

In conformity with the Agreements, new section 771(7)(G)(i) provides that the Commission cumulate imports only from countries as to which investigations under sections 702 or 732 were filed or self-initiated on the same day. The requirement of simultaneous filing will promote certainty in antidumping and countervailing duty investigations by defining, at the time of filing, the countries potentially subject to cumulative analysis.

Virtually all investigations are initiated based upon a petition filed by a domestic interested party. If, however, Commerce were to self-initiate an investigation under sections 702(a) or 732(a) without receiving a petition, that investigation would be eligible for cumulation with other investigations initiated pursuant to petitions filed on that same day.

The schedules for investigations that are filed on the same day may become staggered if parties in some, but not all, of the investigations request extensions of Commerce determinations. By basing the cumulation analysis on simultaneously filed investigations, section 771(7)(G) eliminates the incentive in multi-country investigations for respondents to seek extensions of individual Commerce determinations just to avoid cumulation.

While only imports in simultaneously filed (or self-initiated) investigations will be eligible for cumulative analysis, the Administration intends that the Commission retain the discretion to consider whether prior unfair imports have rendered the domestic industry more vulnerable to injury by reason of later dumped or subsidized imports.

New section 771(7)(G)(iii) provides that the Commission will make its determination in each of the staggered investigations based upon the record compiled in the first final investigation in which it makes a determination. This eliminates the need for the Commission to consider whether imports from the first-decided investigation that are subject to antidumping or countervailing duty orders have a "continuing effect" on "vote day" of each subsequent investigation. Compare Chaparral Steel Co. v United States, 901 F.2d 1097 (Fed. Cir. 1990), with Mitsubishi Materials Corp. v. United States, 820 F. Supp. 608 (Ct. Int'l Trade 1993). The record of the later-decided investigations, however, will be supplemented by Commerce's final determination(s) in those investigations and the parties' comments thereon. Thus, all interested parties will have full opportunity to comment on all issues relevant to their respective injury determinations.

As discussed in more detail below, the Antidumping Agreement requires the consideration of the magnitude of the dumping margin in determining whether there is material injury by reason of the dumped imports. In preliminary injury determinations, where Commerce has not yet calculated a dumping margin, the Commission will use the dumping margins published in Commerce's notice of initiation. In final injury determinations, the Commission will use the dumping margins most recently published by Commerce before the record in the Commission investigation has closed. These may be either the margins published in Commerce's final determination, or if no final determination has been made, in its preliminary determination.

(3) Cumulation Involving Refiled Petitions

If a petitioner decides, after initiation of an investigation, that it wants to file petitions against additional countries and seeks cumulation of those imports with imports subject to a pending investigation, the petitioner may withdraw its petition in the pending investigation and then file a new petition including imports from the additional countries, thereby triggering the general cumulation rule in new section 771(7)(G)(i). Section 217 of the bill amends sections 704(a) and 734(a) of the Act to permit Commerce and the Commission to use the records compiled in the earlier investigation in the refiled investigations. To prevent abuse and discourage repeated withdrawals and refilings, this provision is applicable only in the first instance that a petition is withdrawn and refiled within three months after withdrawal.

(4) Exceptions to Cumulation Requirement

New section 771(7)(G)(ii) modifies existing law by creating two new exceptions to the general rule on cumulation. The first exception is that the Commission may not cumulate imports for which Commerce has made a preliminary negative determination, unless Commerce has subsequently reached a final affirmative determination prior to the time of the Commission's final determination. Under current law, such imports are eligible for cumulation because they are still "subject to investigation." This change is necessary because the Agreements permit cumulation of imports only when there has been a finding (i.e., a Commerce initiation determination, preliminary determination, or final determination) that the margin of dumping or the countervailable subsidy rate is more than de minimis.

The second new exception is that imports that are the subject of terminated investigations may not be cumulated. This exception also implements the requirement of the Agreements that negligible or de minimis imports not be cumulated.

New section 771(7)(G)(ii) also retains two exceptions in the current law. The first partially exempts from cumulation imports from beneficiary countries under the Caribbean Basin Economic Recovery Act. Imports from beneficiary countries may be cumulated only with imports from other beneficiary countries. The second applies to imports from Israel. Imports from Israel may not be cumulated with imports from other countries unless the Commission first determines that the domestic industry is materially injured by reason of such imports from Israel.

(5) Cumulation in Regional Industry Investigations

New section 771(7)(G)(iv) codifies existing Commission practice of applying the same cumulation standards in regional industry investigations as in national industry investigations. In such investigations, any cumulative analysis is based on imports entering the pertinent region(s).

(6) Cumulation and Threat of Material Injury

Section 222(e) of the bill adds section 771(7)(H) to preserve the Commission's discretion to cumulate imports in analyzing threat of material injury. In conformity with the Agreement, each of the conditions and exceptions to potential cumulation that apply in a material injury analysis, including the requirement that investigations must be filed or self-initiated on the same day, apply in threat analyses.

b. Impact on Affected Domestic Industry; Consideration of Dumping Margin

Section 222(b)(1)(B) of the bill amends section 771(7)(C)(iii) of the Act by adding the magnitude of the margin of dumping to the list of factors the Commission considers in determining the impact of imports of subject merchandise on domestic producers of like products. There is no similar provision in the Subsidies Agreement and, as under current practice, the Commission will not be required to consider the rate of subsidization. This amendment does not alter the requirement in current law that none of the factors which the Commission considers is necessarily dispositive in the Commission's material injury analysis.

Section 229(b) of the bill adds section 771(35)(C) to the Act. This section defines "the magnitude of the margin of dumping" for purposes of the Commission's analysis as:

in a preliminary investigation, the margin(s) published by Commerce in its notice of initiation;

in a final investigation, the margin(s) most recently published by Commerce prior to the closing of the Commission's record;

in a changed circumstances review, the margin(s) most recently determined by Commerce; and

in a five-year review, the margin(s) determined by Commerce pursuant to its own sunset analysis under section 752(c)(3).

In final staggered investigations, the Commission is to use Commerce's final margins as to the pending investigations. For other investigations for which cumulation is appropriate, the Commission is to use the most recent dumping margin issued by Commerce at the time the Commission closes its record. This precludes challenges to a Commission determination on the basis that Commerce later modifies the original dumping margin.

Changes in the original margin could occur due to further proceedings in staggered investigations, corrections of ministerial errors, reconsideration of a determination, or judicial remand. Absent this provision, Commission determinations could be subject to repeated requests for reconsideration or judicial remands. The finality of injury determinations would be seriously compromised if the Commission were required to amend or revisit its determination each time the administering authority modified its dumping margin. The Commission, however, may conduct a changed circumstances review of its determination pursuant to Section 751(b) on the basis of recalculations by Commerce of the dumping margin in the original investigation, if the party seeking such review establishes that it is warranted. Changes in dumping margins in administrative reviews should not form the basis for a changed circumstances review.

c. Causation

Article 3.5 of the Antidumping Agreement and 15.5 of the Subsidies Agreement do not change the causation standard from that provided in the 1979 Tokyo Round Codes. Existing U.S. law and legislative history fully implement the causation standard of the 1979 Codes. Thus, existing U.S. law fully implements Articles 3.5 and 15.5. Articles 3.5 and 15.5 do include new language requiring WTO signatories to "examine all relevant evidence" including "any known factors, other than the dumped [or subsidized] imports which at the same time are injuring the domestic industry." The obligations embodied in the new language are reflected in the existing statute and legislative history.

The GATT 1947 Panel Report in the Norwegian Salmon case approved U.S. practice as consistent with the 1979 Codes. The panel noted that the Commission need not isolate the injury caused by other factors from injury caused by unfair imports. See GATT Committee on Anti-dumping Practices, United States -- Imposition of Anti-dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway: Report on the Panel Par. 555 (Nov. 30, 1992); GATT Committee on Subsidies and Countervailing Measures, United States -- Imposition of Countervailing Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway: Report on the Panel Par. 321 (Dec. 4, 1992). Rather, the Commission must examine other factors to ensure that it is not attributing injury from other sources to the subject imports.

d. Captive Production

Under section 777(7)(C)(iii), the Commission evaluates the relevant economic factors within the context of the business cycle and the conditions of competition that are distinctive to the affected industry. Among the factors that the Commission must evaluate in determining whether a domestic industry is materially injured by reason of unfairly-traded imports are penetration of the U.S. market by those imports and the financial performance of the U.S. producers included in the industry. Section 222(b)(2) of the bill adds section 771(7)(C)(iv) to the Act to amend current law with respect to import penetration and financial performance to address situations in which vertically-integrated U.S. producers sell a significant volume of their production of the domestic like product to U.S. customers (i.e., the merchant market) and internally transfer a significant volume of their production of that same like product for further internal processing into a distinct downstream article (i.e., captive production). No conforming changes to the other provisions of the Tariff Act of 1930, as amended, are necessary.

If the captive production provision applies, the Commission will focus primarily on the merchant market in analyzing the market share and financial performance of the domestic industry. The provision does not require the Commission to focus exclusively on the merchant market in its analysis of market share and financial performance. The basis for this analysis is the recognition that, in such a captive production situation, the imports compete primarily with sales of the domestic like product in the merchant market, not with the inventory internally-transferred for processing into a separate downstream article. This provision is consistent with the Antidumping and Subsidies Agreements.

Captive production refers to production of the domestic like product that is not sold in the merchant market and that is processed into a higher-valued downstream article by the same producer. Selling in the merchant market refers to sales of the domestic like product to unrelated customers. A downstream article is an article distinct from the domestic like product but is produced from that product. (It is not necessarily a "downstream product" within the meaning of section 780(d)). The Commission will determine on a case-by-case basis whether the volume sold in the merchant market and internally transferred is significant. Captive production and merchant sales are significant if they are of such magnitude that a more focused analysis of market share and financial performance is needed for the Commission to obtain a complete picture of the competitive impact of imports on the domestic industry.

The captive production provision is applicable if the Commission, in addition to finding that the volumes of the domestic like product sold in the merchant market and transferred internally for processing into a distinct downstream article are significant, also finds that: (1) the production of the domestic like product internally transferred for further processing into a separate downstream article does not enter the merchant market for the upstream like product; (2) the domestic like product is the predominant material input used in the production of that separate downstream article; and (3) the production of the domestic like product sold in the merchant market is not generally used in the production of that downstream article.

Under the second factor, the domestic like product will be considered "predominant" only where it is the primary material used in the production of a downstream article. Under the third factor, the production of the domestic like product sold in the merchant market will be considered "generally used in the production of that downstream article" if a significant portion of the production that enters the merchant market is actually processed into the same downstream article as that produced from the internally-transferred captive production. Whether the domestic like product sold in the merchant market is physically capable of being processed into the same downstream article (or some other downstream articles) is not relevant. Rather, the Commission should consider whether the production sold in the merchant market is actually used in the production of the same downstream article.

In cases in which this captive production provision applies, the Commission shall determine the extent to which the imports of the subject merchandise by a related party are sold in the merchant market or captively consumed by the related-party importer in the production of a downstream article. Imports which are sold in the merchant market shall be included in the import penetration ratio for the merchant market. Imports which are captively consumed by the related-party importer for processing into a downstream article shall be included in the import penetration ratio for the merchant market only if the imports compete with sales of the domestic like product. If such imports do not compete with sales of the domestic upstream like product in the merchant market, the Commission shall include such imports in the total import share of the industry's total production, but not in the import penetration ratio for the merchant market or in any other calculation in which captive domestic production is excluded.

This captive production analysis has no effect on the Commission's like product analysis. The Commission's discretion, in appropriate circumstances, to find that upstream and downstream articles constitute a single like product, and that integrated producers participate in a single industry, is unchanged. In such circumstances, the captive production provision would have no application.

e. Post-Petition Information

Section 222(f) of the bill amends section 771(7) to address the probative value of post-petition data by adding section 771(7)(I). The new statutory provision emphasizes that the Commission should consider whether changes in the volume of imports, their price effects, and their impact on the domestic industry occurring since the filing of the petition are related to the pendency of the investigation. Courts have repeatedly recognized that the initiation of antidumping and countervailing duty proceedings can create an artificially low demand for subject imports, thereby distorting post-petition data compiled by the Commission. See Metallverken Nederland, B.V. v. United States, 744 F. Supp. 281, 284 (Ct. Int'l Trade 1987); USX Corp. v. United States, 655 F. Supp 487, 492 (Ct. Int'l Trade 1987). The imposition of provisional duties, in particular, can cause a reduction in import volumes and an increase in prices of both the subject imports and the domestic like product. Similarly, improvements in the domestic industry's condition during an investigation can be related to the pendency of the investigation.

The provision also is intended to make clear that, when the Commission finds evidence on the record of a significant change in data concerning the imports or their effects subsequent to the filing of the petition or the imposition of provisional duties, the Commission may presume that such change is related to the pendency of the investigation. In the absence of sufficient evidence rebutting that presumption and establishing that such change is related to factors other than the pendency of the investigation, the Commission may reduce the weight to be accorded to the affected data. To the extent that the decision of the Court of International Trade in Chr. Bjelland Seafood/A/S v. United States, slip op. 92-196 (Ct. Int'l Trade Oct. 23, 1992), could be interpreted as requiring the Commission to demonstrate that the change is not related to other factors, it is disapproved.

f. Threat of Material Injury

Section 222(c) of the bill amends section 771(7)(F) of the Act regarding the basis for a threat determination and the list of statutory factors considered in threat of material injury determinations. No substantive change in Commission threat analysis is required.

The bill makes conforming changes to section 771(7)(F)(ii) of the Act, regarding the basis for a determination of threat of material injury, to track more closely the language contained in Articles 3.7 and 15.7 of the Agreements requiring that further dumped or subsidized imports must be "imminent" and that "material injury would occur" absent relief. This new language is fully consistent with the Commission's practice in making threat determinations, the existing statutory language which requires that threat determinations be based on "evidence that the threat of material injury is real and that actual injury is imminent," and judicial precedent interpreting the statute.

Section 222(c) of the bill also amends the list of specific factors in section 771(7)(F)(i) of the Act. Amended section 771(7)(F)(i) generally adopts the language of the Agreements for those factors included in both Agreements and the existing law. For example, the Agreements require consideration of "inventories of the product being investigated." Existing U.S. law requires consideration of "any substantial increase in inventories of the merchandise in the United States." Amended section 771(7)(F) tracks the more general reference to inventories, making clear that the Commission will consider inventories of the subject merchandise wherever they are located.

Amended section 771(7)(F) retains factors currently specified in the statute but not listed in the Agreements such as factors I, VII, VIII, IX, and X involving consideration of export subsidies, product shifting, raw and processed agricultural products, actual and potential negative effects on existing development and production efforts, and any other demonstrable adverse trends. The consideration of such additional factors is fully consistent with Articles 3.7 and 15.7 of the Antidumping and Subsidies Agreements which provide non-exhaustive lists of factors to consider in threat determinations.

Minor changes are made to clarify factors VIII and VII in the existing Act. Factor VIII is redesignated as factor VI, which clarifies that the Commission should consider product-shifting in the foreign country as a general matter, rather than limiting its inquiry to a specific type of product shifting. Factor VII is redesignated as factor IX, which conforms to the general rule for imposition of antidumping and countervailing duties that the threat of material injury be "by reason of" imports of the dumped or subsidized merchandise.

A threat of material injury determination is subject to the same evidentiary requirements and judicial standard of review as a present material injury determination. Because of the predictive nature of a threat determination, and to avoid speculation and conjecture, the Commission will continue using special care in making such determinations as provided in the Agreements.

g. Negligible Imports

The Agreements require termination of investigations if the investigating authority determines that the volume of dumped or subsidized imports is negligible. Under current law, the Commission may decline to cumulate imports that "are negligible and have no discernible impact on the domestic industry." Negligible imports, however, are subject to injury determinations. Existing law defines negligible imports by reference to a number of qualitative factors the Commission must consider. In comparison, Article 5.8 of the Antidumping Agreement uses a quantitative approach.

To implement Article 5.8, section 222(d) of the bill repeals section 771(7)(C)(v) (which deals with cumulative analysis), adds section 771(24), and section 212(b) of the bill makes conforming amendments to sections 703(a), 705(b), 733(a), and 735(b). New section 771(24) defines negligible imports by incorporating the quantitative standards in Article 5.8. Imports from the country subject to investigation are negligible if they account for less than three percent of the volume of all such merchandise imported into the United States in the most recent 12-month period preceding the filing of the petition (or, in the case of a self-initiated investigation, the initiation of the investigation) for which data are available. The comparison of subject imports to total imports contrasts with current practice, under which the Commission evaluates the U.S. market share held by each country's imports in determining negligibility. Although the "three percent" definition of negligible imports appears only in the Antidumping Agreement, the definition of negligible imports in new section 771(24) will be applicable to both antidumping and countervailing duty investigations.

In threat of material injury analyses, the Commission will examine "actual" as well as "potential" import volumes. Import volumes at the conclusion of the 12-month period examined for purposes of considering negligibility may be below the negligibility threshold, but increasing at a rate that indicates they are likely to imminently exceed that threshold during the period the Commission examines in conducting its threat analysis. In such circumstances, the Commission will not make a material injury determination concerning such imports because they are currently negligible, but it will consider the imports for purposes of a threat determination.

There are two exceptions to the general "three percent" rule for negligibility. The first, which appears in new section 771(24)(A)(ii), derives directly from the provision in Article 5.8 of the Antidumping Agreement which states that imports will not be deemed negligible when countries, which individually account for less than three percent of total imports, collectively account for more than seven percent of total imports. Under the bill, the Commission is to aggregate imports from countries that individually account for less than three percent of total imports to determine whether the seven percent figure is satisfied. The Commission may aggregate only those countries as to which investigations were simultaneously filed (or self-initiated) and which are not subject to the exceptions to cumulation.

The second exception implements Article 27.9 of the Subsidies Agreement and applies only to countervailing duty investigations. New section 771(24)(B) establishes the negligibility thresholds for certain developing countries at four percent (rather than three percent) for individual countries, and at nine percent (rather than seven percent) for aggregated countries. The designation of developing countries is described in the portion of this Statement on the Subsidies Agreement.

The Commission will continue its current practice of determining negligibility on the basis of each like product that it designates in an antidumping or countervailing duty investigation. To make such a determination, the Commission will need information concerning the volume of total imports in addition to the volume of imports from the country(ies) subject to investigation. The Commission may not have access to either complete questionnaire data or official import statistics conforming exactly to the Commission's like product(s) designations, particularly in preliminary investigations. Therefore, new section 771(24)(C) permits the Commission to make reasonable estimates on the basis of available statistics. For example, if available U.S. government import statistics concern a basket tariff provision that is broader than the like product designated by the Commission, the Commission may reasonably estimate a figure from the data available for the total imports corresponding to the like product.

New section 771(24)(D) addresses negligibility in regional industry investigations. If the Commission determines that there is a regional industry, it will determine negligibility by reference to the volume of imports shipped into the region, instead of the volume of imports shipped into the United States as a whole.

Amended sections 703(a), 705(b)(1), 733(a), and 735(b)(1) require termination of the investigation if the Commission determines that imports are negligible. In contrast to current practice, the Commission will not make material injury or threat determinations when it determines that imports are negligible.

Under amended sections 703(a) and 733(a), the Commission in preliminary investigations will determine whether there is a reasonable indication that imports are not negligible. The Commission's standard regarding negligible imports in preliminary investigations shall be the same as its standard for material injury determinations in these investigations, as set forth in American Lamb Co. v. United States, 785 F.2d 994 (Fed. Cir. 1986). The amendments, however, are not intended to limit the Commission's ability to use reasonable estimates in calculating whether import volumes are negligible. The amendments are, however, intended to preclude termination based on negligibility in a preliminary investigation where, for example: (1) the Commission is uncertain regarding appropriate like product designations and corresponding import volumes are not negligible with respect to one of the arguably appropriate designations; or (2) imports are extremely close to the relevant quantitative thresholds and there is a reasonable indication that data obtained in a final investigation will establish that imports exceed the quantitative thresholds.

2. Definition of Domestic Industry

a. General Rule

The definition of domestic industry is important to the Commission's injury analysis and Commerce's initiation determination. With the exception of conforming changes in terminology and the elimination of a special provision for wine (which does not apply to petitions filed after September 30, 1986), section 222(a) of the bill does not change the basic definition of domestic industry in section 771(4)(A).

With respect to imports of dumped or subsidized processed agricultural products, domestic growers and interim processors of agricultural commodities might be damaged by imports of the processed products, even though the domestic processors themselves may not be adversely affected. The Trade Representative will, in consultation with appropriate agencies, review remedies permitted to growers and interim processors of agricultural products under the WTO, and, if appropriate, propose legislation to make available to growers and interim processors remedies for dumped and subsidized imports of processed products.

b. Related Parties

In appropriate circumstances, Commerce and the Commission may exclude a domestic producer of a like product from the industry where the producer is itself related to exporters or importers, or where the producer is itself an importer of the subject merchandise. Section 222(a) of the bill amends section 771(4)(B) of the Act to implement the Agreements' definition of a "related" domestic producer. The new definition focuses on control between a domestic producer and an exporter or importer, whether the control is direct, indirect, or through a third party.

Control is defined as the ability of one party to legally or operationally exercise restraint or direction over another party. Although there is no precise statutory definition of the term importer, Commerce and the Commission will apply a sufficiently broad definition to encompass domestic producers who are not formally importers of record.

This definition of related parties is consistent with current Commission practice of considering the following factors as evidence of a relationship: (1) common corporate ownership between an importer or exporter and the domestic producer; (2) a special relationship between an importer and a domestic producer who is a purchaser, although not an importer of record, of the subject imports; or (3) control of a purchaser of large volumes of the subject imports by a domestic producer.

The Administration does not expect that the amendments to section 771(4)(B) will cause a significant change in practice. Both Commerce and the Commission will have discretion in applying the related party provision to determine whether a producer is related and whether appropriate circumstances exist for excluding such a related producer from the domestic industry.

In this regard, Commerce and the Commission utilize section 771(4)(B) for different purposes: Commerce to eliminate any conflicts of interest that may distort its consideration of the level of industry support for an antidumping or countervailing duty petition, and the Commission to reduce any distortion in industry data caused by the inclusion in the domestic industry of a related producer who is being shielded from the effects of the subject imports. For this reason, each agency will have discretion to apply this provision to accomplish these different purposes, even where this may lead to somewhat different results in individual cases.

Section 212 of the bill amends sections 702(c) and 732(c) of the Act to provide that, as a general rule, Commerce should not include as members of the domestic industry those domestic producers who oppose the petition, but are related to exporters, in determining the level of support within the domestic industry for the petition, unless such producers demonstrate that their interests as domestic producers would be adversely affected by the imposition of an order.

Amended sections 702(c)(4)(B)(ii) and 732(c)(4)(B)(ii) also provide that, as under current practice, Commerce will not apply a bright line test to determine whether a producer who is an importer of the subject merchandise or who is related to an importer of the subject merchandise should be excluded from the domestic industry. Instead, it will look to relevant factors, such as percentage of ownership or volume of imports. For example, the exclusion of a company that imports a small amount of subject merchandise, by comparison with its total production, will depend on whether that company and petitioners have a common stake in the investigation. See Citrosuco Paulista, S.A. v. United States, 704 F. Supp. 1075, 1085 (Ct. Int'l Trade 1988).

c. Special Rules for Regional Industry Investigations

The Agreements continue to provide for the imposition of antidumping and countervailing duties where a regional industry, as opposed to the national industry, is injured or threatened with injury by dumped or subsidized imports. The Agreements do not alter existing criteria regarding the identification of a regional industry, and section 218 of the bill amends the definition of regional industry in section 771(4)(C) only to make conforming changes in terminology. Section 218 of the bill does amend sections 704 and 734 of the Act to implement the requirements of the Agreements regarding the assessment of duties in regional industry investigations.

(1) Suspension Agreements in Regional Industry Investigations

If the Commission determines that a regional industry exists, new sections 704(l) and 734(m) require Commerce to provide exporters to that region an opportunity to enter into a suspension agreement, but only if they account for substantially all imports of the subject merchandise into the region. This caveat is not set forth in the Agreements, but rather is derived from the requirements of the existing law regarding suspension agreements in general.

Regional suspension agreements are subject to all of the requirements imposed under amended sections 704 and 734 for suspension agreements in general with one exception -- investigations in which the Commission does not find a regional industry until its final determination. In that case, exporters to the region may enter into an agreement within sixty days after an antidumping or countervailing duty order has been issued. If Commerce accepts a suspension agreement, it will rescind the outstanding antidumping or countervailing duty order, refund any cash deposits, release any bond or other security deposited, and instruct the Customs Service to disregard the order and liquidate all entries of the subject merchandise made while the order was outstanding.

(2) Assessment of Duties in Regional Industry Investigations

Section 218 of the bill amends sections 706(c) and 736(d) to provide Commerce with the authority in regional industry investigations to limit the assessment of duties to those exporters and/or producers that sold the subject merchandise for export to the region during the period of investigation. If the Commission finds injury to a regional industry, Commerce will, to the maximum extent possible, direct that the assessment of duties be limited to merchandise of the specific exporters or producers that exported dumped or subsidized merchandise for sale in the region during the period of investigation. These provisions exclude from the order, to the "maximum extent possible," those exporters or producers that did not export for sale in the region during the period of investigation.

New sections 706(c) and 736(d) also incorporate an exception for new shippers. If Commerce finds that, subsequent to the issuance of an antidumping or countervailing duty order in a regional industry case, an exporter or producer, who had not exported for sale in the region during the original period of investigation, begins to export subject merchandise for sale in the region, Commerce will direct that estimated duties be deposited on the subject merchandise of the new exporter or producer. Commerce may include merchandise in an order at any time it finds that merchandise from an exporter or producer not previously included in the order is being sold in the region in question. Under new section 751(a)(2)(B), the importer or exporter concerned may request an accelerated administrative review.

(3) Import Concentration In Regional Industry Investigations

Concentration will be found to exist if the ratio of the subject imports to consumption is clearly higher in the regional market than in the rest of the U.S. market and if such imports into the region account for a substantial proportion of total subject imports entering the United States. In this regard, there is no "benchmark" proportion of imports that enter the region relative to imports that enter the United States, either eighty percent or any other percentage, which is applicable in every case, and below which the Commission cannot determine that imports are concentrated. Mitsubishi Materials Corp. v. United States, 820 F. Supp. 608, 614-615 (Ct. Int'l Trade 1993). Rather, concentration should be assessed on a case-by-case basis, and no "precise mathematical formula [is] reliable in determining the minimum percentage which constitutes sufficient concentration because cases before the Commission are likely to involve different factual circumstances." Id., (quoting Certain Steel Wire Nails from the Republic of Korea, Inv. No. 731-TA-26 (Final), USITC Pub. 1088 (Aug. 1980) at 11 (citations omitted)).

(4) Definition of Regional Industry

Section 222(a)(2) adds a new definition at 771(4)(c) for regional industry. As under current practice, a regional industry means the domestic producers within the region concerned and the Commission's regional industry analysis will be limited to consideration of the production facilities within a region.

3. Initiation and Subsequent Investigation

a. Petition Requirements

Current Commerce regulations (19 CFR 353.12 and 19 CFR 355.12) set forth the information which petitions must contain. The Administration intends that Commerce will amend its regulations as necessary to implement the requirements of Article 5.2 of the Antidumping Agreement and Article 11.2 of the Subsidies Agreement that antidumping and countervailing duty petitions contain the following information: (1) the identity of the petitioner; (2) the identity of all known domestic producers of the domestic like product; (3) the volume and value of the domestic like product produced by the petitioner and each domestic producer identified; (4) a description of the merchandise to be investigated; (5) the name of each country in which the merchandise originates or from which the merchandise is exported; (6) the identity of each known exporter, foreign producer, and importer of the merchandise; and (7) information relating to injury. Antidumping petitions must also include: (1) the export price or constructed export price of the merchandise; and (2) the normal value of the merchandise. Countervailing duty petitions must also include information concerning the nature and amount of any subsidy provided with respect to the merchandise.

Sections 211 and 212 of the bill amend sections 702 and 732 to reflect some of the Agreements' other requirements for antidumping and countervailing duty petitions. New sections 702(b)(4) and 732(b)(3) specify the actions Commerce and the Commission will take to avoid publicizing the existence of a petition before the initiation of an investigation. Commerce will deliver a copy of the petition to a representative of the government involved, or, in the case of a separate customs territory, to an official representative of that territory. Commerce and the Commission will not issue press releases and Commerce will not, generally, accept communications regarding the petition prior to making its initiation decision. In the case of countervailing duty petitions involving WTO member countries, however, Commerce will afford the government of that WTO member an opportunity for consultations with respect to the petition. Consistent with longstanding practice, neither Commerce nor the Commission will disclose any information regarding a draft petition provided to the agencies prior to the formal filing of a petition.

b. Evaluation of Petition

New sections 702(c)(1)(A)(i) and 732(c)(1)(A)(i) reflect the requirements of the Agreements that Commerce examine the accuracy and adequacy of the evidence provided in a petition to determine whether the evidence is sufficient to justify initiation of an investigation. This amendment largely codifies existing Commerce practice, and the Administration believes that the amendment is consistent with the standards articulated in the legislative history of the Trade Agreements Act of 1979. See S. Rep. No. 249, 96th Cong., 1st Sess. 47, 63 (1979); H.R. Rep. No. 317, 96th Cong., 1st Sess. 51, 59-60 (1979).

c. Industry Support for a Petition

Section 212(a) of the bill amends sections 702(c) and 732(c) to implement the Agreements' requirements that Commerce determine, prior to the initiation of an investigation, that a minimum percentage of the domestic industry supports an antidumping or countervailing duty petition. In implementing these requirements, the Administration has sought to minimize the burden on U.S. industry and to streamline the administrative process in a manner consistent with the Agreements. For example, the question of industry support will be resolved conclusively at the outset of a proceeding, thereby eliminating the burden on petitioners under current law of potentially rearguing this issue after initiation.

New sections 702(c)(1)(A)(ii) and 732(c)(1)(A)(ii) implement the requirement that Commerce determine that a petition is supported by the domestic industry before initiating an investigation. A petition is filed "by or on behalf of the industry" if: (1) domestic producers or workers who support the petition account for more than fifty percent of the production of that product produced by those members of the domestic industry expressing support for or opposition to the petition; and (2) those domestic producers or workers expressing support account for at least twenty-five percent of total domestic production of the domestic like product. Commerce normally will determine the existence of industry support based on the volume or value of production.

Under new sections 702(c)(4)(D) and 732(c)(4)(D), if a petition provides sufficient evidence that domestic producers or workers accounting for more than fifty percent of total domestic production of the domestic like product expressly support the petition, Commerce will determine, on the basis of evidence contained in the petition, that the petition is filed "by or on behalf of the domestic industry." If Commerce determines that the other requirements for a petition are satisfied, Commerce will initiate an investigation.

If the requisite support is not established on the face of the petition, Commerce will poll or otherwise determine whether the industry supports the petition. In appropriate circumstances, Commerce may use statistically valid samples to determine whether the required support exists. In conducting any required sampling, a primary source of information for Commerce will be information contained in the petition and placed on the record by domestic interested parties.

New sections 702(c)(4)(A) and 732(c)(4)(A) recognize that industry support for a petition may be expressed by either management or workers. The Administration intends that labor have equal voice with management in supporting or opposing the initiation of an investigation. Commerce's implementing regulations will make clear that in considering the views of labor, Commerce will count labor support or opposition as being equal to the production of the domestic like product of the firms in which the workers are employed. If workers are represented by a union, Commerce will count the production of those firms whose workers are represented by the union as being for or against the petition in accordance with the workers' position. If the management of a firm expresses a position in direct opposition to the views of the workers in that firm, Commerce will treat the production of that firm as representing neither support for nor opposition to the petition. As under current practice, the views of workers may be submitted by unions, other employee organizations, or ad hoc groups of workers.

New sections 702(c)(4)(C) and 732(c)(4)(C) establish a special rule for determining industry support if the petition is filed on behalf of a regional industry. In such situations, Commerce will apply the fifty and twenty-five percent domestic industry support requirements on the basis of production in the alleged region. Thus, a petitioner need only show that domestic producers or workers in the relevant region, as opposed to the entire United States, support the petition.

The Administration expects to initiate most cases within twenty days of the filing of a petition, as required under existing law. New sections 702(c)(1)(B) and 732(c)(1)(B) provide for an extension of up to twenty additional days after the filing of a petition in exceptional circumstances where Commerce cannot establish whether there is the requisite industry support within twenty days. Such exceptional circumstances may arise where the petition provides insufficient information on support, the domestic industry is fragmented, or there is a large number of producers in the industry. The Administration expects that, in the vast majority of cases, the determination of industry support will be made within the initial twenty-day period. The ability to extend the initiation determination will avoid negative initiation determinations simply because Commerce was unable to gather the required support information in twenty days. The Administration intends that Commerce will use this extension authority only in exceptional circumstances where the industry support issue cannot be decided in twenty days, and the initiation determination will be extended only for the additional time necessary to make a determination regarding industry support.

Under existing law, the deadlines for making preliminary determinations run from the date on which a petition is filed. To allow Commerce and the Commission the same amount of time to make preliminary determinations as they have under existing law, the statutory deadlines in subsections (a), (b), and (c) of sections 703 and 733 may be extended if Commerce extends the deadline for an initiation determination, as described in the preceding paragraph. Additionally, to provide the Commission with sufficient time to prepare its opinions in preliminary investigations, section 212(b) of the bill amends sections 703(f) and 733(f) of the Act to permit the Commission to transmit its opinion to Commerce not more than five working days after the date on which its preliminary determination is required to be made.

New sections 702(c)(4)(E) and 732(c)(4)(E) change current practice by precluding reconsideration of support for a petition after the initiation of an investigation. Arguments regarding industry support should not be made to either Commerce or the Commission following initiation. Interested parties will continue to be able to challenge the adequacy of Commerce's industry support determination under section 516A of the Act, if Commerce dismisses the petition or initiates an investigation and subsequently issues an antidumping or countervailing duty order. Because of this change, new sections 702(c)(4)(E) and 732(c)(4)(E) allow the submission of comments and information on the issue of industry support prior to the initiation of an investigation. In contrast, under current law, potential respondents in an investigation are not allowed to comment or present evidence on any issue until the investigation is initiated. The Administration intends that this pre-initiation right to comment will be limited solely to the issue of industry support for the petition. Because the investigation would not yet have been initiated, the statutory definition of interested party in section 771(9) does not directly apply. Therefore, new sections 702(c)(4)(E) and 732(c)(4)(E) specify that those who would qualify as an interested party under section 771(9) if an investigation were initiated may comment and supply information on the issue of industry support.

Section 231(a) of the bill adds section 782(h) authorizing Commerce to terminate an investigation or revoke an order or suspended investigation when producers accounting for substantially all of the production of the domestic like product inform Commerce that they are not interested in the issuance of or continuation of an order. The provision is needed to make clear that Commerce's authority to carry out no-interest terminations/revocations is unaffected by the new provision in section 702(c)(4)(D) and 732(c)(4)(D) prohibiting post-initiation reconsideration of the adequacy of industry support. If the conditions for termination or revocation are met, the fact that a petitioner does not agree with the termination or revocation will not be dispositive. Orders provide relief to the industry -- if producers accounting for substantially all of the production want an order revoked, a suspended investigation terminated, or an order not issued, opposition by producers accounting for minimal production should not prevent that result.

d. Self-Initiation of Investigations

The Agreements do not alter the ability of Commerce to self-initiate antidumping and countervailing duty investigations under sections 702(a) and 732(a). To implement the requirements of the Agreements, Commerce intends to publish notice in the Federal Register of a determination to self-initiate an antidumping or countervailing duty investigation, consistent with current practice.

4. Evidentiary and Procedural Requirements for Antidumping and Countervailing Duty Proceedings

The amendments to implement the new evidentiary and procedural requirements of the Agreements are included in section 231 of the bill, creating section 782 which applies to both antidumping and countervailing duty proceedings.

a. Collection, Acceptance, Rejection, and Sharing of Information

(1) General Rules

Under new section 782(c)(1), Commerce or the Commission may modify their respective requests for information if promptly asked to do so by an interested party, to avoid imposing an unreasonable burden on the party. Commerce or the Commission will take due account of difficulties experienced by parties, particularly small companies, in supplying information, and will provide such assistance as the agencies consider practicable. If Commerce or the Commission requests an interested party to provide data in a particular computer medium or language, and the interested party promptly notifies the requesting agency that it does not maintain its records in such a medium or language, and demonstrates that providing the information in the requested manner would result in an unreasonable extra burden, Commerce or the Commission will not insist on the submission of the data in the requested medium or language, but will explore alternative methods to obtain the necessary data in such cases. These might, for example, include the submission of data in an alternate computer medium or language or, where this is not practicable, the Administering Authority may consider sampling. Section 782(c)(1) is intended to alleviate some of the difficulties encountered by small firms and firms in developing countries, particularly with regard to the submission of data in computerized form. It is not intended to exempt small firms from the requirements of the antidumping and countervailing duty laws.

Section 231(a) of the bill redesignates existing section 776(a) as section 782(b), and continues the requirement that any person providing factual information to Commerce or the Commission must certify as to the accuracy and completeness of that information.

New section 782(d) requires Commerce and the Commission to notify a party submitting deficient information of the deficiency, and to give the submitter an opportunity to remedy or explain the deficiency. This requirement is not intended to override the time-limits for completing investigations or reviews, nor to allow parties to submit continual clarifications or corrections of information or to submit information that cannot be evaluated adequately within the applicable deadlines. If subsequent submissions remain deficient or are not submitted on a timely basis, Commerce and the Commission may decline to consider all or part of the original and subsequent submissions. Pursuant to new section 782(f), Commerce and the Commission will provide, to the extent practicable, a written explanation of the reasons for not accepting information.

New section 782(e) directs Commerce and the Commission to consider deficient submissions if the following conditions are met: (1) the information is submitted within the established deadline; (2) the information is verifiable to the extent that verification is required; (3) the information is sufficiently complete to serve as a reliable basis for reaching a determination; (4) the party has acted to the best of its ability in supplying the information and meeting the requirements established by the agencies; and (5) the agencies can use the information without undue difficulties. Commerce and the Commission may take into account the circumstances of the party, including (but not limited to) the party's size, its accounting systems, and computer capabilities, as well as the prior success of the same firm, or other similar firms, in providing requested information in antidumping and countervailing duty proceedings. "Computer capabilities" relates to the ability to provide requested information in an automated format without incurring an unreasonable extra burden or expense.

(2) Time for Response to Questionnaires

Commerce and the Commission obtain most of their information in antidumping and countervailing duty proceedings from data provided in response to questionnaires issued by the agencies to foreign exporters and producers and U.S. importers, producers, and purchasers.

Article 6.1 of the Antidumping Agreement and Article 12.1.1 of the Subsidies Agreement provide that foreign producers and exporters shall have at least thirty days to submit a response to questionnaires. Commerce and the Commission will amend their regulations to provide that:

Exporters and foreign producers will have at least thirty days to respond to initial questionnaires in Commerce preliminary investigations or reviews and initial questionnaires in Commission final investigations or reviews;

The day of receipt is one week from the day on which the initial questionnaire was transmitted unless the agency has reason to know that the initial questionnaire was received at an earlier date; and

Upon the request of a person in a foreign country, Commerce representatives may visit the premises of that person for the purpose of explaining a questionnaire, but only if Commerce notifies the government of that country of the visit and that government does not object to the visit.

The thirty-day response and one-week mail rules apply only to initial antidumping or countervailing duty questionnaires, not to subsequent requests to obtain supplemental information or to remedy deficiencies identified in responses to initial questionnaires. Although neither Commerce nor the Commission would be prohibited from allowing thirty days or more for responses to subsequent requests, in many cases time may not permit, or the nature of the request may not require, a response period of thirty days.

Commerce will continue its current practice of granting extensions of the 30-day deadline for the submission of questionnaire responses in an investigation or review where practicable, and where an extension would not delay the completion of an investigation or review or cause other interested parties difficulties in representing their interests.

(3) Distribution of Petition

Consistent with Article 6.1.3 of the Antidumping Agreement and Article 12.1.3 of the Subsidies Agreement, the Administration intends for Commerce to amend its regulations to require that, upon initiating an investigation, Commerce promptly will provide a public version of the petition to all known exporters of the subject merchandise, except that, if Commerce determines that there is a particularly large number of exporters involved, it may provide the public version to the government of the exporting country or to a trade association of the exporters, in lieu of providing the public version to all known exporters. Producers who sell for export to the United States are considered exporters, even if another person makes export arrangements.

(4) Sharing of Interested Party Information; Definition of Interested Party; Public Proprietary Records

Section 231(b) of the bill amends section 777(a)(4) of the Act to conform to existing practice and to ensure that interested parties share nonproprietary information. Section 222(g) of the bill also amends the definition of interested party in section 771(9) by adding: (1) trade associations of producers, exporters, or importers; and (2) the government of the exporting country. The latter change reflects the possibility that a country in which merchandise is produced or manufactured may be different from the country from which such merchandise is exported.

Article 6.1.2 of the Antidumping Agreement and Article 12.1.2 of the Subsidies Agreement require that evidence presented in writing by one party shall be made available promptly to other interested parties participating in the investigation. Commerce and the Commission will specify in regulations their current practices of maintaining a public record of non-proprietary, non-privileged, and non-confidential information obtained in each antidumping and countervailing duty proceeding.

(5) Unwarranted Claim for Proprietary Treatment

Section 226(b) of the bill amends section 777(b) to address situations in which Commerce or the Commission returns information because the person submitting the information has made an unwarranted claim for proprietary treatment. Consistent with current practice, the new language provides the person with an opportunity to submit other information for which a claim of proprietary treatment is warranted or for which the person is willing to accord nonproprietary status. However, to ensure that parties do not use this provision as a vehicle for extending deadlines for the submission of information, the provision makes clear that, absent an extension by the agency, any such submissions of other information must be within the time period established for the initial submission.

(6) Verification of Information

Section 231(a) of the bill moves the general requirement that Commerce verify information from section 776(b) of the Act to new section 782(i). To the extent necessary, Commerce will amend its regulations to implement the specific requirements in Article 6.7 and Annex I of the Antidumping Agreement and Article 12.6 of the Subsidies Agreement concerning the conduct of verifications. The regulations will provide that Commerce will verify information in a foreign country only after: (1) obtaining agreement from the persons whose information will be examined; and (2) notifying the foreign government concerned of the details of the verification. Consistent with current practice, if the foreign government concerned or the person whose information is to be verified objects to verification, Commerce will not conduct the verification and may disregard the submitted information in favor of the facts available, pursuant to amended section 776(a)(4).

The regulations also should provide that Commerce shall give sufficient notice to persons involved before verification is conducted. This notice should identify any member of the verification team who is not an officer or employee of the U.S. Government. Such non-government members will be subject to an administrative protective order to ensure the confidentiality of proprietary information obtained or examined during verification.

As under existing practice, where practicable, verification will be conducted after receipt of all questionnaire responses, and Commerce should provide advance notice as to the general nature of the information which will be requested. These regulations are not intended to preclude Commerce from requesting further information during a verification.

The regulations also should require Commerce, consistent with its current practice, to report the methods, procedures, and results of the verification prior to making its final determination in an investigation and its preliminary determination in an administrative review.

b. Determinations on the Basis of the Facts Available

The current statute mandates use of the best information available (commonly referred to as BIA) if a person refuses or is unable to produce information in a timely manner or in the form required. Although the use of BIA by Commerce has been controversial at times, it is an essential investigative tool in antidumping and countervailing duty proceedings. Commerce's potential use of BIA provides the only incentive to foreign exporters and producers to respond to Commerce questionnaires. Although the Commission has the power to subpoena information, the requirement to use BIA is important because issuing and enforcing subpoenas often is not a practical use of the Commission's investigative resources.

The Agreements largely track current law, but use different terminology. If an interested party does not provide necessary information or significantly impedes an investigation, authorities may make determinations on the basis of the "facts available." Annex II to the Antidumping Agreement elaborates on the use of the facts available. Section 231(c) of the bill amends section 776 to implement these provisions in the Agreement. Additionally, the Administration intends that Commerce will publish regulations incorporating the provisions of paragraph 1 of Annex II. Such regulations will provide that, at the outset of an investigation or administrative review, Commerce and the Commission will give notice to each interested party from whom the agency requests information concerning: (1) the information the party will be required to submit; (2) the form and manner in which the party must submit the information (for both electronic and written submissions); (3) the deadlines for submitting information; and (4) the potential use of facts available if a party does not submit requested information in the requested form and manner by the date specified. These requirements are consistent with the agencies' current practice.

New section 776(a) requires Commerce and the Commission to make determinations on the basis of the facts available where requested information is missing from the record or cannot be used because, for example, it has not been provided, it was provided late, or Commerce could not verify the information. Section 776(a) makes it possible for Commerce and the Commission to make their determinations within the applicable deadlines if relevant information is missing from the record. In such cases, Commerce and the Commission must make their determinations based on all evidence of record, weighing the record evidence to determine that which is most probative of the issue under consideration. The agencies will be required, consistent with new section 782(e), to consider information requested from interested parties that: (1) is on the record; (2) was filed within the applicable deadlines; and (3) can be verified.

Commerce and the Commission use the facts available in different ways. In general, the Commission makes determinations by weighing all of the available evidence regarding a multiplicity of factors relating to the domestic industry as a whole and by drawing reasonable inferences from the evidence it finds most persuasive. Therefore, new section 776(a) generally will require the Commission to reach a determination by making such inferences as the evidence of record supports even if that evidence is less than complete. In contrast, Commerce generally makes determinations regarding specific companies, based primarily on information obtained directly from those companies. Section 776(a) generally will require Commerce to reach a determination by filling gaps in the record due to deficient submissions or other causes.

Therefore, neither Commerce nor the Commission must prove that the facts available are the best alternative information. Rather, the facts available are information or inferences which are reasonable to use under the circumstances. As noted above, the Commission balances all record evidence and draws reasonable inferences in reaching its determinations. It is not possible for the Commission to demonstrate that its inferences are the same as those it would have made if it had perfect information. Similarly, where Commerce uses the facts available to fill gaps in the record, proving that the facts selected are the best alternative facts would require that the facts available be compared with the missing information, which obviously cannot be done.

In conformity with the Antidumping Agreement and current practice, new section 776(b) permits Commerce and the Commission to draw an adverse inference where a party has not cooperated in a proceeding. A party is uncooperative if it has not acted to the best of its ability to comply with requests for necessary information. Where a party has not cooperated, Commerce and the Commission may employ adverse inferences about the missing information to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully. In employing adverse inferences, one factor the agencies will consider is the extent to which a party may benefit from its own lack of cooperation. Information used to make an adverse inference may include such sources as the petition, other information placed on the record, or determinations in a prior proceeding regarding the subject merchandise.

Consistent with Annex II, paragraph VII of the Agreement, section 776(c) requires Commerce and the Commission to corroborate secondary information where practicable using independent sources. Secondary information is information derived from the petition that gave rise to the investigation or review, the final determination concerning the subject merchandise, or any previous review under section 751 concerning the subject merchandise. Secondary information may not be entirely reliable because, for example, as in the case of the petition, it is based on unverified allegations, or as in the case of information from prior section 751(a) reviews, it concerns a different time frame than the one at issue. Independent sources may include, for example, published price lists, official import statistics and customs data, and information obtained from interested parties during the particular investigation or review.

Corroborate means that the agencies will satisfy themselves that the secondary information to be used has probative value. The Administration does not intend that the corroboration requirement will apply when information from a prior determination is being used to establish the facts concerning the period that was the subject of that prior determination. In such cases, the information is not being used "rather than" facts obtained in the course of the current investigation or review. This situation may arise, for example, when a prior determination is used for evaluating the likelihood of future injury if an order is revoked or an agreement terminated in a changed circumstances review under section 751(b) or a five-year review under section 751(c).

In the application of this provision, it is recognized that Commerce more frequently relies on secondary information than does the Commission. The fact that corroboration may not be practicable in a given circumstance will not prevent the agencies from applying an adverse inference under subsection (b).

c. Public Comment on Information

(1) General Rule

The Agreements provide that all interested parties be informed of the essential facts under consideration that form the basis for a determination in sufficient time for the parties to the proceeding to defend their interests. Section 231 of the bill implements this requirement by repealing section 777(e) and adding section 782(g) in its place.

New section 782(g) restates the existing right of interested parties to comment on information submitted to the agencies, but requires that the record be closed prior to the time the agency's determination is made, and that the parties to the proceeding be permitted a final opportunity to comment on all information obtained by the agency upon which the parties have not yet had an opportunity to comment. All final comments properly filed by the date reasonably specified by the agency will be accepted for the record, but the agencies will not obtain or accept for the record new factual information, argument, or comment after this date.

The disclosure requirement in new section 782(g) applies to both public information and business proprietary information. Therefore, the agencies will make the confidential record available to those parties subject to an administrative protective order. Consistent with new section 782(g), such disclosure shall take place before the agency's determination is made, with an opportunity for the parties to comment on any new information that had not previously been subject to comment.

(2) Opportunity for Comment by Consumers and

Industrial Users

Section 227 of the bill adds section 777(h) to the Act which specifies that both Commerce and the Commission will provide industrial users of the subject merchandise and representative consumer organizations, if the merchandise is commonly sold at the retail level, with an opportunity to provide relevant information. This is not a change in practice, because there are no constraints on the ability of persons to file comments under current law. Such comments must concern matters relevant to a particular determination of dumping, subsidization, or injury. It should be noted that subsection (h) does not per se confer interested party status on industrial users and consumer organizations. Unless they otherwise qualify as interested parties under section 771(9), such entities would not have the rights of interested parties, including access to proprietary information under administrative protective order, and standing to challenge agency determinations under section 516A of the Tariff Act of 1930.

d. Sampling, All Others Rate, and Voluntary Respondents

Under existing practice, Commerce attempts to calculate individual dumping margins for all producers and exporters of merchandise who are subject to an antidumping investigation or for whom an administrative review is requested. As a practical matter, however, Commerce may not be able to examine all exporters and producers, for example, when there is a large number of exporters and producers. In such situations, Commerce either limits its examination to those firms accounting for the largest volume of exports to the United States or employs sampling techniques. Commerce will calculate individual dumping margins for those firms selected for examination and an "all others" rate to be applied to those firms not selected for examination.

During the Uruguay Round negotiations, certain countries sought a requirement that national authorities examine all firms producing or exporting a product subject to an antidumping investigation. This requirement would have made it virtually impossible for authorities to impose antidumping duties in a WTO-consistent manner in many cases. As negotiated, Articles 6.10 and 9.4 of the Antidumping Agreement largely reflect existing U.S. law and practice. Nevertheless, certain statutory amendments are necessary to conform the statute to the Agreement.

(1) Sampling

Section 229 of the bill amends section 777A, which currently authorizes Commerce to use sampling techniques, by adding a new subsection (c), which codifies the current practice of determining, where practicable, an individual weighted-average dumping margin for each known exporter or producer of subject merchandise. This amendment is not intended to change Commerce's normal practice of calculating an individual dumping margin only for the party, whether technically an exporter or producer, that makes the first sale which is for exportation to the United States.

New section 777A(c)(2) provides that where there are large numbers of exporters, producers, importers, or products involved in an investigation, Commerce may limit its examination to: (1) a statistically valid sample of exporters, producers or types of products; or (2) exporters and producers accounting for the largest volume of the subject merchandise from the exporting country that can reasonably be examined. Consistent with the Antidumping Agreement, new section 777A(b) recognizes that the authority to select samples rests exclusively with Commerce, but, to the greatest extent possible, Commerce will consult with exporters and producers regarding the method to be used.

The phrase "statistically valid sample" is intended merely to conform the language of the statute with that of the Antidumping Agreement, and is not a substantive change from the current phrase "generally recognized sampling techniques." Commerce will employ a sampling methodology designed to give representative results based on the facts known at the time the sampling method is designed. This important qualification recognizes that Commerce may not have the type of information needed to select the most representative sample at the early stages of an investigation or review when it must decide on a sampling technique.

(2) All Others Rate

Recognizing the impracticality of examining all producers and exporters in all cases, Article 9.4 of the Antidumping Agreement permits the use of an all others rate to be applied to non-investigated firms. To implement the Agreement, section 219(b) of the bill adds section 735(c)(5)(A) to the Act which provides that the all others rate will be equal to the weighted-average of individual dumping margins calculated for those exporters and producers that are individually investigated, exclusive of any zero and de minimis margins, and any margins determined entirely on the basis of the facts available. Currently, in determining the all others rate, Commerce includes margins determined on the basis of the facts available.

Section 219(b) of the bill adds new section 735(c)(5)(B) which provides an exception to the general rule if the dumping margins for all of the exporters and producers that are individually investigated are determined entirely on the basis of the facts available or are zero or de minimis. In such situations, Commerce may use any reasonable method to calculate the all others rate. The expected method in such cases will be to weight-average the zero and de minimis margins and margins determined pursuant to the facts available, provided that volume data is available. However, if this method is not feasible, or if it results in an average that would not be reasonably reflective of potential dumping margins for non-investigated exporters or producers, Commerce may use other reasonable methods.

(3) Treatment of Voluntary Respondents

Section 231 of the bill adds section 782(a) to the Act which provides that, in cases where Commerce has limited its examination to selected exporters and producers, it nevertheless will calculate an individual dumping margin for any exporter or producer not selected for examination that provides the necessary information on a timely basis and in the form required. Although Commerce, consistent with Article 6.10.2 of the Agreement, will not discourage voluntary responses and will endeavor to investigate all firms that voluntarily provide timely responses in the form required, in certain cases (including cases involving the same product from multiple countries) where the number of exporters or producers is particularly high, Commerce may decline to analyze voluntary responses because it would be unduly burdensome and would preclude the completion of timely investigations or reviews. Section 782(a) generally codifies existing practice.

5. Provisional Measures

Section 215 of the bill amends existing sections 703(d) and 733(d) of the Act to reflect the provisions in the Agreements concerning the imposition of provisional measures, including the prohibition on imposing provisional measures less than sixty days after the initiation of an investigation. The amendments do not require any change in existing practice.

Amended sections 703(d)(1) and 733(d)(2) implement the Agreements' provisions limiting the duration of provisional measures to four months. In antidumping investigations, Commerce may extend the period to six months if exporters representing a significant portion of exports of the subject merchandise so request. The amendments do not affect the ability of the United States to impose duties retroactively where critical circumstances exist.

6. Suspension Agreements

Although existing law provides for the suspension of antidumping and countervailing duty investigations pursuant to the conclusion of suspension agreements, early experience with such agreements demonstrated that they were not always effective in providing relief from unfairly traded imports. Therefore, longstanding Commerce policy has been to treat such agreements as the exception rather than the rule.

To implement new procedural requirements in the Agreements, section 216 of the bill amends sections 704(d) and 734(d) to provide that, if a suspension agreement is rejected, Commerce will: (1) upon request and where practicable, provide the reasons for rejecting the agreement; and (2) where possible, provide exporters with the opportunity to submit comments thereon.

7. Imposition and Collection of Antidumping and Countervailing Duties

a. Time Limits For Completion of Reviews and Liquidation of Entries

Article 9.3.1 of the Antidumping Agreement establishes deadlines for administrative reviews and the subsequent liquidation of entries. The Subsidies Agreement does not contain a comparable provision, but section 220(a) of the bill applies these deadlines to administrative reviews of both antidumping and countervailing duty orders to promote uniformity in administrative procedures.

New section 751(a)(3)(A) establishes the time limits for completion of preliminary and final results of administrative reviews in which final duty liability is established. Consistent with existing Commerce regulations and Article 9.3.1 of the Antidumping Agreement, reviews normally will be completed within 365 days of initiation. This period may be extended up to a total duration of 545 days if it is not practicable to complete the review within the normal deadline.

Consistent with Article 9.3.1., new section 751(a)(3)(B) requires liquidation of entries following the completion of an administrative review, to the greatest extent practicable, within ninety days after the issuance of liquidation instructions to Customs. If liquidation does not occur within that period, the Secretary of the Treasury is required, upon request, to provide an explanation for the delay. Footnote 20 of the Antidumping Agreement recognizes that it may not be possible to meet this deadline if the final determination of duty liability is subject to litigation. Therefore, new section 751(a)(3)(C) provides that the 90-day period will not begin running until the litigation is completed and Commerce has issued liquidation instructions to the Customs Service. Section 220(c) makes conforming changes to section 504 of the Tariff Act of 1930, a provision which establishes general rules regarding the liquidation of customs entries.

The Administration is aware of prior complaints regarding delays in the completion of administrative reviews and the liquidation of entries, and intends to do its utmost to ensure that Commerce and Customs are able to comply with the deadlines established by the bill. At the same time, however, it is not the Administration's intent to sacrifice accuracy of results and fairness to the parties involved for the sake of speed.

b. New Shipper Reviews

Under existing practice, antidumping duty orders are applied on a country-wide basis. Thus, except for merchandise from firms that Commerce has determined to be selling at non-dumped prices, all merchandise from a country covered by an order is subject to potential liability for antidumping duties. This includes merchandise from new shippers. During the negotiations, there was an attempt to exempt new shippers from duty liability by requiring an entirely new antidumping investigation (along with a separate finding of injury) for each new shipper. The United States agreed to a more reasonable proposal, embodied in Article 9.5 of the Antidumping Agreement, to provide new shippers with an expedited review that will establish individual dumping margins for such firms on the basis of their own sales.

Section 220(a) of the bill implements article 9.5 of the Agreement by amending section 751(a)(2)(B) of the Act which requires Commerce to initiate accelerated administrative reviews of new shippers if requested. New shippers are defined as exporters and producers who demonstrate in the request for a new shipper review that they: (1) did not export the merchandise to the United States (or in the case of a regional industry, the region concerned) during the original period of investigation; and (2) are not affiliated with any exporter or producer who did export the merchandise to the United States (or the region concerned) during that period, including those not examined during the investigation. Any exporter or producer making such a request will be required to provide, with appropriate certifications, a list of the firms with which it is affiliated, and a statement from each of those firms that they did not export the merchandise during the period of investigation. Upon completion of the review, Commerce will issue instructions to Customs for the final assessment of duties on all entries covered by the review.

New exporters or producers may request an accelerated administrative review at any time. It would be virtually impossible for Commerce to comply with the statutory and regulatory deadlines in investigations and administrative reviews if it had to initiate a separate accelerated administrative review for each request. Therefore, Commerce will initiate new shipper reviews only at the end of the month following the six-month anniversary date of the order, or at the end of the month of the annual anniversary date of the order, whichever is earlier. For example, if the anniversary month of the order is January, and the exporter or producer submits a satisfactory request for a review in March, Commerce will commence the review at the end of July rather than at the end of the following January.

8. Retroactive Application of Antidumping Duties

a. Critical Circumstances

Section 214 of the bill amends sections 703, 705, 733, and 735 of the Act to incorporate the new provisions of the Antidumping Agreement relating to critical circumstances determinations and the assessment of retroactive duties. To preserve the parallel structure in U.S. law, conforming changes are also made in the countervailing duty provisions.

Under current law, critical circumstances exist if Commerce determines that:

there have been massive imports of the subject merchandise over a relatively short period of time (i.e. a surge of imports) prior to the suspension of liquidation; and

in countervailing duty investigations, the subsidy is inconsistent with the Agreement, or

in antidumping investigations, there is either a history of dumping or that the importer knew or should have known that the exporter was selling the merchandise at less than fair value.

If Commerce determines that critical circumstances exist, then the Commission determines whether retroactive duties are necessary to prevent recurrence of material injury. In making this determination, the Commission is required to evaluate whether the effectiveness of the order would be materially impaired if retroactive duties were not imposed. If both agencies make affirmative determinations in their final investigations, retroactive duties will be applied for a period ninety days prior to suspension of liquidation.

To conform the current law to the Agreement, no significant change is required with respect to Commerce's determination in countervailing duty investigations. For antidumping investigations, however, section 735(a)(3)(A) is amended to require that Commerce determine whether there is a history of dumping and material injury by reason of dumped imports in the United States or elsewhere or whether the importer knew or should have known that the exporter was selling the subject merchandise at less than its fair value and that there was likely to be material injury by reason of such sales.

With regard to Commission determinations, the legislation clarifies that the Commission is to determine whether the surge in imports prior to the suspension of liquidation, rather than the failure to provide retroactive relief, is likely to seriously undermine the remedial effect of the order. Consistent with Commission practice and judicial precedent, the Commission is not required to make a separate material injury determination regarding the surge in imports. ICC Industries, Inc. v. United States, 632 F. Supp. 36, 40 (Ct. Int'l Trade 1986).

Sections 214(a)(2)(B) and (b)(2)(B) of the bill amend sections 705(b)(4)(A) and 735(b)(4)(A) to eliminate the existing references to "recurrence of material injury." This term is used in the changed circumstances and five-year review provisions and could be misinterpreted to imply similarities between critical circumstances and those other two different inquiries. Critical circumstances determinations focus on whether an order's effectiveness is undermined by increasing shipments prior to the effective date of the order. Changed circumstances and five-year reviews focus on likely developments if an order is revoked.

Section 214(a)(2)(b) of the bill also eliminates the reference in section 705(b)(4)(A) of the Act to "injury which is difficult to repair" to conform to the new language in the antidumping provision concerning the Commission determination regarding a surge in imports. This deleted language is unnecessary and redundant because the Commission is already required to determine whether, by massively increasing imports prior to the effective date of relief, the importers have seriously undermined the remedial effect of the order. If the effectiveness of a remedy is undermined, the underlying injury would be difficult to repair.

Sections 214(a)(2)(B) and (b)(2)(B) of the bill also amend the current list of factors in sections 705(b)(4)(A)(iii) and 735(b)(4)(A)(iii) that the Commission considers in making its final critical circumstances determination. The new factors track the language of the Agreement, and essentially are reformulations of many of the factors in the current statute. The new list is not exclusive. The factors provided in existing statute, even though not specifically mentioned in the bill, may be relevant in particular investigations.

b. Time Limits on Retroactive Assessments

Section 215(a)(2) of the bill amends sections 703(e)(2) and 733(e)(2) of the Act to implement the requirement in Article 10.8 of the Agreement that duties not be assessed pursuant to a finding of critical circumstances on entries made prior to the initiation of an antidumping duty investigation. Although this requirement is not reflected in the Subsidies Agreement, it is consistent with current countervailing duty practice.

9. Duration and Review of Antidumping and Countervailing Duty Orders

a. Changed Circumstances Reviews

Section 220(a) of the bill amends section 751(b) of the Act to incorporate the provisions of the Agreements relating to changed circumstances reviews. Section 751(b) currently contains a lengthy list of determinations and agreements for which a changed circumstances review may be requested. The bill simplifies this list by dividing it into three categories:

affirmative determinations resulting in an antidumping or countervailing duty order or an antidumping finding (as pre-1980 orders were termed),

determinations regarding suspension agreements, and

final affirmative determinations resulting from an investigation continued following the entry into a suspension agreement.

Amended section 751(b) also applies a new substantive standard, which is consistent with current Commission practice. In the case of an antidumping or countervailing duty order or finding or a suspended investigation, the Commission must determine whether revocation of the order or finding, or termination of the suspended investigation, is likely to lead to continuation or recurrence of material injury. In reviewing the effectiveness of a suspension agreement, the Commission will determine whether the agreement, in light of the changed circumstances, continues to eliminate completely the injurious effects of imports of the subject merchandise.

Under amended section 751(b), the party seeking revocation continues to bear the burden of persuasion with respect to whether there are changed circumstances sufficient to warrant revocation of an antidumping duty or countervailing duty order or an antidumping duty finding. The bill imposes the same burden of persuasion on a party seeking termination of a suspended investigation or a suspension agreement.

b. Five-Year Reviews

Section 220(a) of the bill adds new Section 751(c) establishing the procedural and basic substantive rules to be applied by Commerce and the Commission in conducting five-year reviews (i.e., sunset reviews).

(1) Automatic Reviews

New section 751(c)(1) requires Commerce and the Commission to conduct a review no later than five years after the issuance of an antidumping duty order or finding or countervailing duty order, the suspension of an investigation, an injury determination in a countervailing duty proceeding under new section 753, or a changed circumstances or prior five-year review, to determine whether revocation of the order, or termination of the suspended investigation, would be likely to lead to continuation or recurrence of dumping or countervailable subsidies and injury. Commerce and the Commission will make their sunset determinations on an order-wide, rather than a company-specific, basis.

New section 751(c)(1) provides for automatic initiation of five-year reviews by Commerce. Automatic initiation will avoid placing an unnecessary burden on the domestic industry and promote efficiency of administration by: (1) combining into a single action notification to all parties of the upcoming five-year review; and (2) providing an effective means of evaluating the level of interest of all affected parties and the need for a full-fledged review.

(2) Participation in Five-year Reviews

New section 751(c)(2) requires Commerce to publish a notice in the Federal Register requesting interested parties to submit: (1) a statement regarding willingness to participate in the review and the likely effect of revocation or termination; and (2) other information specified by Commerce and the Commission such as certain key data regarding sales, prices, imports, and market conditions. Under new section 751(c)(3)(A), if there is no response from domestic interested parties to the notice of initiation, Commerce will revoke the order or terminate the suspended investigation within ninety days of the initiation of the review. Under new section 751(c)(3)(B), if there is inadequate response to a notice of initiation by foreign and domestic interested parties, Commerce and the Commission will conduct an expedited review based on the facts available, and will issue final determinations within 120 days and 150 days, respectively, of the initiation of the review. The facts available may include prior agency determinations involving the subject merchandise as well as information submitted on the record by parties in response to the notice of initiation. Because Commerce and the Commission may require different information from different sources to conduct reviews, the agencies may decide separately whether the responses are inadequate and whether to issue a determination based on the facts available without further fact-gathering.

New section 751(c)(3) is intended to eliminate needless reviews. This section will promote administrative efficiency and ease the burden on the agencies by eliminating needless reviews while meeting the requirements of the Agreements. If parties provide no or inadequate information in response to a notice of initiation, it is reasonable to conclude that they would not provide adequate information if the agencies conducted a full-fledged review. However, when there is sufficient willingness to participate and adequate indication that parties will submit information requested throughout the proceeding, the agencies will conduct a full review.

The Administration expects that in many cases some, but not all, interested parties will respond to the initial request for information. Where there are such mixed responses, the agencies must decide whether the responses are adequate to warrant a full-fledged review. The agencies, in making this decision, will consider the proportion of parties that respond and their likely share of the market if the order were revoked or the suspended investigation terminated. Commerce also will consider the effect of the order or suspension agreement, taking into account the possible impact of the different dumping margins or net countervailable subsidies for individual exporters on import volumes. This decision is within the agencies' discretion, and they will develop guidelines, either through regulation or practice, for making the decision called for by new section 751(c)(3)(B).

As a practical matter, in five-year reviews conducted by Commerce regarding the likelihood of continuation or recurrence of countervailable subsidies, an adequate response to an initial request for information must include a response from the foreign government in question. The participation of the foreign government is indispensable, because only that government is in a position to explain its actions and intentions with respect to present and future subsidization. Therefore, the Administration intends that if the relevant foreign government does not respond, Commerce will proceed in accordance with section 751(c)(3)(B), and will rely on evidence provided by the domestic industry.

Section 220(b) amends sections 516A(a)(1) and 516A(b)(1)(B) to apply the arbitrary and capricious standard of review in judicial or binational panel review of final determinations by Commerce and the Commission under section 751(c)(3). Determinations under section 751(c)(3) will be based on limited information in the record resulting from no response or inadequate response to the notice of initiation. Therefore, such determinations should not be subject to the substantial evidence standard of review. The substantial evidence standard will apply to final determinations under section 752 which are made on a fully developed record. This is consistent with the legislative history of the 1979 Act establishing two standards of reviews for antidumping and countervailing duty final determinations. H.R. Rep. No. 317, 96th Cong., 1st Sess. 180 (1979). The amendment to section 516A(b)(1)(B) ensures that the same standard of review will apply to reviews in both courts and binational panels consistent with Article 1904 and Annex 1911 of the North American Free Trade Agreement.

(3) Timing of Five-year Reviews and Waivers of Participation

To reduce the burden on all parties involved, new section 751(c)(4) permits foreign interested parties, including foreign governments, to waive their participation in a Commerce sunset review. If Commerce receives such a waiver, Commerce will conclude that revocation or termination would be likely to lead to continuation or recurrence of dumping or countervailable subsidies with respect to the submitter. The Administration intends that in a countervailing duty case, where the foreign government waives its participation in the review, Commerce will conclude that countervailable subsidies are likely to continue or recur with respect to all foreign interested parties in that review.

New section 751(c)(5) establishes time limits for the completion of reviews that have not been completed pursuant to the expedited procedures of paragraphs (3) or (4) of section 751(c). Normally, Commerce will make its final sunset determination within 240 days of the initiation of the review. If Commerce's determination is affirmative, the Commission will make its final sunset determination within 360 days of the initiation of the review.

Under new section 751(c)(5)(C), Commerce or the Commission may declare a five-year proceeding to be extraordinarily complicated if the issues are large in number or complex, a large number of firms is involved, or the review involves grouped reviews or a transition order. If a review is extraordinarily complicated, each agency may extend the time limit for making its determination by not more than ninety days. If Commerce extends its time limit, but the Commission does not, the Commission shall make its final determination within 120 days of Commerce's final affirmative determination.

(4) Grouped Five-year Reviews

New section 751(c)(5)(D) permits the Commission, in consultation with Commerce, to group five-year reviews together if such grouping is appropriate and promotes administrative efficiency. The Commission may consolidate reviews involving antidumping and countervailing duty orders, findings, suspended investigations, or any combination thereof. The Commission should consolidate reviews involving the same domestic like product, and also may consolidate reviews involving related like products or identical or related producers.

Consolidating reviews will permit the simultaneous collection of information and the use of a single administrative record in making determinations. Because the grouping of reviews promotes administrative efficiency, the decision to consolidate reviews is committed to agency discretion. Under new section 751(c)(2), Commerce will initiate a five-year review no later than thirty days before the five-year anniversary date of the order or suspension agreement. Commerce normally will initiate a five-year review shortly before the thirty-day period begins. Upon request of the petitioner, however, Commerce may initiate a five-year review at an earlier date. This provides a mechanism for consolidating two or more reviews that ordinarily would not be considered at the same time. Such consolidation will minimize the burden on the domestic industry and promote efficient administration of the laws.

(5) Five-year Reviews of Transition Orders

New section 751(c)(6) establishes special rules for five-year reviews of antidumping duty and countervailing duty orders, findings, and suspended investigations that are deemed to be issued as of the date the WTO Agreement enters into force with respect to the United States. Because there likely will be more than 400 of these transition orders, special rules are necessary to enable the agencies to conduct five-year reviews within a reasonable period and in a manner consistent with the Agreements.

New section 751(c)(6)(A) establishes a schedule for completing five-year reviews of transition orders in a timely and efficient manner. It requires Commerce to begin its review of transition orders within eighteen months prior to the fifth anniversary of the date of entry into force of the WTO Agreement with respect to the United States. Commerce shall commence reviews of all transition orders by the fifth anniversary. Commerce and the Commission shall complete their review of each transition order within eighteen months of the initiation of the review. Commerce and the Commission shall complete their reviews of all transition orders within eighteen months of the fifth anniversary of the date of entry into force of the WTO Agreement with respect to the United States.

New section 751(c)(6)(A)(iv) provides that Commerce will not revoke or terminate a transition order before the fifth anniversary of the date of the entry into force of the WTO with respect to the United States, unless the petitioner requests an accelerated review. Section 751(c)(6)(A)(iii) also provides that subsequent five-year reviews of transition orders will follow the same time frame as initial five-year reviews -- reviews will begin eighteen months prior to, and will be completed within eighteen months after, the fifth anniversary of the date of a determination to continue the transition order. Extended initiation and completion dates for subsequent five-year reviews of transition orders are necessary because the five-year anniversary of such orders will always occur at the same time, thereby creating an extraordinary burden on the agencies' resources.

To promote administrative efficiency, new section 751(c)(6)(B) gives Commerce, in consultation with the Commission, discretion to determine the appropriate sequence of five-year reviews of transition orders. To the maximum extent practicable, the agencies will review older orders first. To accommodate special problems that may arise where reviews of transition orders are grouped, Commerce may initiate reviews out of chronological sequence. The Administration intends that, at some time reasonably in advance of the commencement of the initial five-year reviews of transition orders, Commerce will publish a proposed schedule including the Commission's proposal for grouping reviews. After considering the comments, the Commission will determine which transition orders will be grouped, and Commerce will determine the review schedule. As with the grouping of reviews, the determination of the sequence of reviews of transition orders will be committed to agency discretion.

c. Standards for Determining Likelihood of Continuation or Recurrence of Injury, Countervailable Subsidies, or Dumping

Section 221(a) of the bill adds new section 752 which establishes standards to be applied by Commerce and the Commission in conducting changed circumstances and five-year reviews. Specifically, section 752 elaborates on the standards for determining whether revocation of an order or termination of a suspended investigation would be likely to lead to a continuation or recurrence of injury, countervailable subsidies, or dumping.

The determination called for in these types of reviews is inherently predictive and speculative. There may be more than one likely outcome following revocation or termination. The possibility of other likely outcomes does not mean that a determination that revocation or termination is likely to lead to continuation or recurrence of dumping or countervailable subsidies, or injury, is erroneous, as long as the determination of likelihood of continuation or recurrence is reasonable in light of the facts of the case. In such situations, the order or suspended investigation will be continued.

(1) Likelihood of Injury

(a) General Rules

Under the likelihood standard in new section 752(a)(1), the Commission must decide the likely impact in the reasonably foreseeable future of an important change in the status quo -- the revocation of an order or termination of a suspended investigation and the elimination of the restraining effects of that order or suspended investigation on volumes and prices of imports. The likelihood of injury standard applies regardless of the nature of the Commission's original determination (material injury, threat of material injury, or material retardation of an industry). Likewise, the standard applies to suspended investigations that were never completed.

The likelihood of continuation or recurrence of material injury standard is not the same as the standards for material injury and threat of material injury, although it contains some of the same elements. Under the material injury standard, the Commission determines whether there is current material injury by reason of imports of subject merchandise. Under the threat of material injury standard, the Commission decides whether injury is imminent, given the status quo. By comparison, under the likelihood standard, the Commission will engage in a counter-factual analysis: it must decide the likely impact in the reasonably foreseeable future of an important change in the status quo -- the revocation or termination of a proceeding and the elimination of its restraining effects on volumes and prices of imports.

The likelihood of continuation or recurrence of material injury standard is prospective in nature, and, thus, a separate determination regarding current material injury is not necessary. Nonetheless, the Commission may consider relevant factors such as current and likely continued depressed shipment levels and current and likely continued prices for the domestic like product in the U.S. market in making its determination of the likelihood of continuation or recurrence of material injury if the order is revoked. In appropriate circumstances, the Commission may make an affirmative determination notwithstanding the lack of any likely further deterioration of the current condition of the domestic industry if revocation of the order, or termination of a suspended investigation, would be likely to lead to the continuation or recurrence of material injury.

Subparagraphs (A) through (D) of new section 752(a)(1) list the factors that the Commission must take into account in conducting a likelihood of injury analysis. Under subparagraph (A), the Commission must consider its prior injury determination(s), including the volume, price effect, and impact of imports on the industry during the period preceding the issuance of an order or acceptance of a suspension agreement. This consideration is important, because this period is the most recent time during which imports of subject merchandise competed in the U.S. market free of the discipline of an order or agreement. If the Commission finds that pre-order or pre-agreement conditions are likely to recur, it is reasonable to conclude that there is likelihood of continuation or recurrence of injury. Section 226(a)(1) of the bill amends section 777(b)(1) of the Act to expressly allow proprietary information submitted in connection with an investigation or review to be used by the agency to which the information originally was submitted in a changed circumstances or sunset review under section 751(b) or (c) involving the same subject merchandise.

Under subparagraph (B), the Commission must consider whether there has been any improvement in the state of the domestic industry that is related to the imposition of the order or the acceptance of a suspension agreement. The Commission should not determine that there is no likelihood of continuation or recurrence of injury simply because the industry has recovered after the imposition of an order or acceptance of a suspension agreement, because one would expect that the imposition of an order or acceptance of a suspension agreement would have some beneficial effect on the industry. Moreover, an improvement in the state of the industry related to an order or suspension agreement may suggest that the state of the industry is likely to deteriorate if the order is revoked or the suspended investigation terminated.

Under subparagraph (C), the Commission must consider whether the domestic industry is vulnerable to injury if the order is revoked or the suspended investigation terminated. The term "vulnerable" relates to susceptibility to material injury by reason of dumped or subsidized imports. This concept is derived from existing standards for material injury and threat of material injury. See H.R. Rep. No. 317, 96th Cong., 1st Sess. 47 (1979); H.R. Conf. Rep. No. 1156, 98th Cong., 2d Sess. 174, 175 (1984). In material injury determinations, the Commission considers, in addition to imports, other factors that may be contributing to overall injury. While these factors, in some cases, may account for the injury to the domestic industry, they also may demonstrate that an industry is facing difficulties from a variety of sources and is vulnerable to dumped or subsidized imports. In threat determinations, the Commission must carefully assess current trends and competitive conditions in the marketplace to determine the probable future impact of imports on the domestic industry and whether the industry is vulnerable to future harm.

If the Commission finds that an industry is vulnerable to injury from subject imports, it may determine that injury is likely to continue or recur, even if other causes, as well as future imports, are likely to contribute to future injury. If the Commission finds that the industry is in a weakened state, it should consider whether the industry will deteriorate further upon revocation of an order or termination of a suspended investigation. It also should consider whether such a weakened state is due to the possible ineffectiveness of the order or suspension agreement or its circumvention.

When an importer is affiliated with the exporter, dumping is measured by reference to the affiliated importer's resale price. However, it is the affiliated importer, not the unaffiliated U.S. purchaser of the dumped goods, who must pay the antidumping duty. Under certain circumstances, the affiliated importer may choose to pay the antidumping duty rather than eliminate the dumping, either through lowering prices in the foreign market, raising prices in the United States, or a combination of both.

During an administrative review initiated two or four years after the issuance of an order, Commerce will examine, if requested, whether absorption has taken place by reviewing data on the volume of dumped imports and dumping margins. Duty absorption is a strong indicator that the current dumping margins calculated by Commerce in reviews may not be indicative of the margins that would exist in the absence of an order. Once an order is revoked, the importer could achieve the same pre-revocation return on its sales by lowering its prices in the U.S. in the amount of the duty that previously was being absorbed. The duty absorption inquiry would not affect the calculation of margins in administrative reviews. This new provision of law is not intended to provide for the treatment of antidumping duties as a cost.

An affirmative finding of absorption in an administrative review initiated two years after the issuance of an order is intended to have a deterrent effect on continued absorption of duties by affiliated importers; if they engage in duty absorption, they will know that they will face an additional hurdle that will make it more difficult to obtain revocation or termination. If, in the four-year review, Commerce finds that absorption has taken place, it will take that into account in its determination regarding the dumping margins likely to prevail if an order were revoked.

Commerce will inform the Commission of its findings regarding duty absorption, and the Commission will take such findings into account in determining whether injury is likely to continue or recur if an order were revoked. Duty absorption may indicate that the producer or exporter would be able to market more aggressively should the order be revoked as a result of a sunset review. Thus, the Commission is to consider duty absorption in determining whether material injury is likely to continue or recur.

Also, Commerce has full authority under its current regulations (19 CFR 353.26) to increase the duty when an exporter directly pays the duties due, or reimburses the importer, whether independent or affiliated, for the importer's payment of duties. Commerce intends no change in its practice in this area, which is to instruct Customs to double the duties if the importer fails to furnish a certificate of non-reimbursement to Customs prior to liquidation of entries.

(b) Volume, Price, and Impact of Imports on the Domestic Industry

Paragraphs (2), (3), and (4) of new section 752(a) adapt the standard volume, price effect, and impact factors contained in the Agreements for normal injury analysis to likelihood of injury analysis. Thus, in five-year and changed circumstances reviews, the Commission is required to consider the likely volume of imports, the likely price effects of imports, and the likely impact of imports on the domestic industry if the order were revoked or the suspended investigation terminated. In addition, specific factors applied by the Commission in its threat of injury analysis have been adapted for purposes of determining the likely volume, price and impact of subject imports in the event of revocation or termination.

(c) Basis for Determination

New section 752(a)(5) establishes the basis for making a likelihood of continuance or recurrence of material injury determination. As in the case of injury and threat determinations, the Commission must consider all factors, but no one factor is necessarily dispositive. In particular, the Commission need not determine that both the volume and price effects of imports are likely to be significant to determine that material injury is likely within a reasonably foreseeable time. Consistent with its practice in investigations, in considering the likely price effects of imports in the event of revocation or termination, the Commission may rely on circumstantial, as well as direct, evidence of the adverse effects of unfairly traded imports on domestic prices.

A "reasonably foreseeable time" will vary from case-to-case, but normally will exceed the "imminent" timeframe applicable in a threat of injury analysis. New section 752(a)(5) expressly states that the effects of revocation or termination may manifest themselves only over a longer period of time. The Commission will consider in this regard such factors as the fungibility or differentiation within the product in question, the level of substitutability between the imported and domestic products, the channels of distribution used, the methods of contracting (such as spot sales or long-term contracts), and lead times for delivery of goods, as well as other factors that may only manifest themselves in the longer term, such as planned investment and the shifting of production facilities.

(d) Magnitude of the Dumping Margin or Net Countervailable Subsidy

New section 752(a)(6) permits the Commission to consider the magnitude of the dumping margin or net countervailable subsidy in determining the likely continuation or recurrence of injury. In a countervailing duty case, the Commission also will consider whether a subsidy is a prohibited subsidy or a subsidy for which serious prejudice may be presumed pursuant to the Subsidies Agreement. Because Commerce has the expertise regarding the identification and measurement of dumping and countervailable subsidies, new sections 752(b)(3) and 752(c)(3) require Commerce to provide the Commission with the dumping margins or net countervailable subsidies that are likely to prevail in the event of revocation or termination. The Commission shall not itself calculate or otherwise determine likely dumping margins or net countervailable subsidies or the nature of the subsidies in question.

(e) Cumulative Analysis

New section 752(a)(7) grants the Commission discretion to engage in a cumulative analysis if: (1) reviews are initiated on the same day; and (2) imports likely would compete with one another and with the domestic like product in the United States market. The statute provides that the Commission may cumulate imports from countries that were not originally investigated together if the conditions for cumulation in section 752(a)(7) are otherwise satisfied. The Commission shall not cumulate imports from any country if those imports are likely to have no discernable adverse impact on the domestic industry.

(f) Regional Industry Investigations

For investigations involving a regional industry, new section 752(a)(8) provides that the Commission is not bound by any determination it may have made in the original investigation regarding the existence of a regional industry. If there is sufficient evidence to warrant revisiting the original regional industry determination, the Commission may base its likelihood determination on: (1) the regional industry defined by the Commission in the original investigation; (2) another regional industry satisfying the criteria of amended section 771(4)(C); or (3) the United States industry as a whole.

Given the predictive nature of a likelihood of injury analysis, the Commission's analysis in regional industry investigations will be subject to no greater degree of certainty than in a review involving a national industry. Because the issuance of an order or the acceptance of a suspension agreement may have affected the marketing and distribution patterns of the product in question, the Commission's analysis of a regional industry should take into account whether the market isolation and import concentration criteria in section 771(4)(C) are likely to be satisfied in the event of revocation or termination. Neither the Commission nor interested parties will be required to demonstrate that the regional industry criteria currently are satisfied. The Commission should take into account any prior regional industry definition, whether the product at issue has characteristics that naturally lead to the formation of regional markets (e.g., whether it has a low value-to-weight ratio and is fungible), and whether any changes in the isolation of the region or in import concentration are related to the imposition of the order or the acceptance of a suspension agreement.

(2) Likelihood of Countervailable Subsidies

Section 221 of the bill adds section 752(b) to the Act which establishes standards to be applied by Commerce in determining the likelihood of continuation or recurrence of countervailable subsidies. Under new section 752(b)(1), Commerce first will consider the net countervailable subsidies in effect after the issuance of the order and whether the relevant subsidy programs have been continued, modified, or eliminated. Continuation of a program will be highly probative of the likelihood of continuation or recurrence of countervailable subsidies. Temporary suspension or partial termination of a subsidy program also will be probative of continuation or recurrence of countervailable subsidies, absent significant evidence to the contrary. In addition, as long as a subsidy program continues to exist, Commerce will not consider company- or industry-specific renunciations of countervailable subsidies, by themselves, as an indication that continuation or recurrence of countervailable subsidies is unlikely.

If the foreign government has eliminated a subsidy program, the Administration intends that Commerce will consider the legal method by which the government eliminated the program and whether the government is likely to reinstate the program. For example, programs eliminated through administrative action may be more likely to be reinstated than those eliminated through legislative action.

New section 752(b)(2)(A) provides that, for good cause shown, Commerce also will consider other programs determined to be countervailable in other investigations or reviews involving imports from the same country. The existence of such programs may indicate the likelihood of continuation or recurrence of countervailable subsidies to the extent that companies subject to the review can use the programs and the programs did not exist when the order was issued or the suspension agreement accepted. However, if companies have a long track record of not using a program, the mere availability of the program should not, by itself, indicate likelihood of continuation or recurrence of countervailable subsidies.

New section 752(b)(2)(B) provides that, for good cause shown, Commerce also may consider allegations of new countervailable subsidies, but only to the extent that it determines such programs to be countervailable with respect to the exporters or producers subject to the review. In this regard, the Administration notes that subsidy allegations normally should be made in the context of reviews conducted pursuant to section 751(a), and the Administration does not expect Commerce to entertain frivolous allegations in changed circumstances or five-year reviews. However, where there have been no recent section 751(a) reviews, or where the alleged countervailable subsidy program came into existence after the most recently completed section 751(a) review, Commerce may consider new subsidy allegations in the context of a changed circumstances or five-year review.

Special problems may arise when Commerce considers subsidies for which the benefits are allocated over time, such as grants, long-term loans, or equity infusions. In these instances, Commerce will consider whether the fully allocated benefit stream is likely to continue after the end of the review, without regard to whether the program that gave rise to the long-term benefit continues to exist.

Under new section 752(b)(4), the existence of a zero or de minimis countervailable subsidy at any time while the order was in effect shall not in itself require Commerce to determine that continuation or recurrence of countervailable subsidies is not likely. However, if the combined benefits of all programs considered by Commerce for purposes of its likelihood determination have never been above de minimis at any time the order was in effect, and if there is no likelihood that the combined benefits of such programs would be above de minimis in the event of revocation or termination, Commerce should determine that there is no likelihood of continuation or recurrence of countervailable subsidies.

(3) Likelihood of Dumping

Section 221 of the bill adds section 752(c) which establishes standards for determining the likelihood of continuation or recurrence of dumping. Under section 752(c)(1), Commerce will examine the relationship between dumping margins, or the absence of margins, and the volume of imports of the subject merchandise, comparing the periods before and after the issuance of an order or the acceptance of a suspension agreement. For example, declining import volumes accompanied by the continued existence of dumping margins after the issuance of an order may provide a strong indication that, absent an order, dumping would be likely to continue, because the evidence would indicate that the exporter needs to dump to sell at pre-order volumes. In contrast, declining (or no) dumping margins accompanied by steady or increasing imports may indicate that foreign companies do not have to dump to maintain market share in the United States and that dumping is less likely to continue or recur if the order were revoked.

The Administration believes that existence of dumping margins after the order, or the cessation of imports after the order, is highly probative of the likelihood of continuation or recurrence of dumping. If companies continue to dump with the discipline of an order in place, it is reasonable to assume that dumping would continue if the discipline were removed. If imports cease after the order is issued, it is reasonable to assume that the exporters could not sell in the United States without dumping and that, to reenter the U.S. market, they would have to resume dumping.

New section 752(c)(2) provides that, for good cause shown, Commerce also will consider other information regarding price, cost, market or economic factors it deems relevant. Such factors might include the market share of foreign producers subject to the antidumping proceeding; changes in exchange rates, inventory levels, production capacity, and capacity utilization; any history of sales below cost of production; changes in manufacturing technology of the industry; and prevailing prices in relevant markets. In practice, this will permit interested parties to provide information indicating that observed patterns regarding dumping margins and import volumes are not necessarily indicative of the likelihood of dumping. The list of factors is illustrative, and the Administration intends that Commerce will analyze such information on a case-by-case basis.

Under new section 752(c)(4), the existence of zero or de minimis dumping margins at any time while the order was in effect shall not in itself require Commerce to determine that there is no likelihood of continuation or recurrence of dumping. Exporters may have ceased dumping because of the existence of an order or suspension agreement. Therefore, the present absence of dumping is not necessarily indicative of how exporters would behave in the absence of the order or agreement.

(4) Provision to the Commission of Dumping Margins and Net Countervailable Subsidies

The Commission may consider likely dumping margins or net countervailable subsidies to be relevant to its analysis of the likelihood of injury. Section 221 of the bill adds sections 752(b)(3) and 752(c)(3) which direct Commerce to provide the Commission with the net countervailable subsidies and the magnitude of the margin of dumping that are likely to prevail in the event of revocation or termination. Commerce normally will select dumping margins or net countervailable subsidies determined in the original investigation or in a prior review. The Administration intends that Commerce normally will select the rate from the investigation, because that is the only calculated rate that reflects the behavior of exporters and foreign governments without the discipline of an order or suspension agreement in place. In certain instances, a more recently calculated rate may be more appropriate. For example, if dumping margins have declined over the life of an order and imports have remained steady or increased, Commerce may conclude that exporters are likely to continue dumping at the lower rates found in a more recent review.

In providing information to the Commission, the Administration does not intend that Commerce calculate future dumping margins or net countervailable subsidies, because such an exercise would involve undue speculation regarding future selling prices, costs of production, selling expenses, exchange rates, and sales and production volumes. Only under the most extraordinary circumstances should Commerce rely on dumping margins or net countervailable subsidies other than those it calculated and published in its prior determinations.

d. Revocation and Termination of Orders and Suspension Agreements

Section 220 of the bill replaces existing subsection 751(c) with subsection 751(d) which adds a new paragraph (2) regarding five-year reviews. Paragraph (2) provides that in a five-year review, Commerce will revoke an order or terminate a suspended investigation unless Commerce determines that dumping or countervailable subsidies would be likely to continue or recur, and the Commission determines that injury would be likely to continue or recur, in the event of revocation or termination.

New subsections 702(c)(1)(C) and 732(c)(1)(C) provide that the agencies will expedite, to the maximum extent practicable in light of procedural requirements, an investigation of a petition filed within two years of revocation of an order (or termination of a suspended investigation) involving imports of the same subject merchandise, notwithstanding the maximum time limits established by the statute for conduct of investigations. Expeditious conduct of investigations will be especially important following revocation or termination under the new sunset provisions required by the Agreements and implemented in section 751(c).

Section 226(a)(2) of the bill amends 777(b)(3) to expressly allow proprietary information submitted in connection with a sunset or changed circumstances review that resulted in termination of the order or suspended investigation to be used by the agency to which the information was originally submitted in a subsequent investigation involving the same subject merchandise, provided that the petition for such investigation was filed within two years of the termination or revocation. This provision will help conserve the resources of parties because many of the necessary data were collected by each of the agencies in the course of the preceding reviews.

10. Public Notice and Explanation

At the urging of the United States, the Agreements require national authorities to provide public notice and explanation of their antidumping and countervailing duty determinations. Although these obligations reflect current U.S. practice, section 228 of the bill adds section 777(i) to the Act to codify these obligations and to consolidate the existing public notice requirements which currently are scattered throughout Title VII of the Act.

The Administration does not intend that new section 777(i) alter existing law regarding public notice and explanation of antidumping and countervailing duty determinations. Existing law does not require that an agency make an explicit response to every argument made by a party, but instead requires that issues material to the agency's determination be discussed so that the "'path of the agency may reasonably be discerned'" by a reviewing court. See, e.g., Ceramica Regiomontana, S.A. v. United States, 810 F.2d 1137, 1139 (Fed. Cir. 1987) (quoting Bowman Transportation v. Arkansas-Best Freight Sys., 419 U.S. 281, 286 (1974)); National Association of Mirror Manufacturers v. United States, 696 F. Supp. 642, 649 (Ct. Int'l Trade 1988). For example, current law requires the Commission to explain its reasoning, and particularly to address the three key factors of volume, price effects and impact, as well as any other relevant factor on which it has relied in its determination. To the extent there is precedent suggesting that the Commission is not required to address even the main arguments of the parties in its opinions, that precedent is disapproved. See, e.g., British Steel Corp. v. United States, 593 F.Supp. 405, 414 (Ct. Int'l Trade 1984).

On the other hand, neither existing law nor new section 777(i) require Commerce or the Commission in every case to discuss every statutory factor, particularly where certain factors are not germane to a particular industry or investigation, or to discuss each argument or fact presented by a party, regardless of how irrelevant or trivial. For example, if the Commission rejects a party's proposed definition of the like product, the Commission need not necessarily, later in its opinion, continue to reference arguments on causation made by the party on the assumption that its proposed like product definition would be accepted.

Likewise, Commerce and the Commission need not issue explicit findings of fact or conclusions of law. Such findings and conclusions, while appropriate for adjudicatory proceedings, are not appropriate for antidumping or countervailing duty proceedings, which are investigatory in nature and which do not allow an extensive period of time in which to write determinations. Instead, the agencies must specifically reference in their determinations factors and arguments that are material and relevant, or must provide a discussion or explanation in the determination that renders evident the agency's treatment of a factor or argument.

11. Anticircumvention

The current statutory provisions on anticircumvention were enacted as part of the Omnibus Trade and Competitiveness Act of 1988 based on the experience Commerce had had with circumvention up to that time. Commerce subsequently encountered new circumvention scenarios that revealed serious shortcomings in the 1988 Act. Given these shortcomings and in light of the Ministerial Decision recognizing the problem of circumvention, it is appropriate, in the context of implementing legislation, to amend the anticircumvention provisions of the statute.

For example, in a number of anticircumvention investigations, the outcome has been determined by the current statutory requirement that the difference between the value of the parts imported into the United States (or into a third country) from the country subject to the order and the value of the finished product be "small." This mechanical, quantitative approach fails to address adequately circumvention scenarios in which only minor assembly is done in the United States (or in a third country), but for various reasons the difference in value is not "small."

Another serious problem is that the existing statute does not deal adequately with the so-called third country parts problem. In the case of certain products, particularly electronic products that rely on many off the shelf components, it is relatively easy for a foreign exporter to circumvent an antidumping duty order by establishing a screwdriver operation in the United States that purchases as many parts as possible from a third country. Given the language of the existing statute, these third country parts cannot be included with the parts imported from the country subject to the order in determining whether the difference between the value of the parts imported from the country subject to the order and the value of the finished product is "small." This has proved to be an elusive standard substantially limiting the effectiveness of the law.

Section 230 of the bill amends existing sections 781(a) and 781(b) of the Act which address the circumvention of antidumping or countervailing duty orders through the establishment of screwdriver assembly operations in the United States or a third country, respectively. Sections 781(a)(1) and 781(b)(1) (the so-called mandatory factors) focus the inquiry on whether: (1) minor or insignificant assembly or completion is occurring in the United States (or a third country); and (2) the value of the parts imported into the United States (or a third country) from the country subject to the order is a significant proportion of the total value of the finished product.

New sections 781(a)(2) and 781(b)(2) list the following factors Commerce will consider in determining whether the process of assembly or completion is minor or insignificant: (1) the level of investment; (2) the level of research and development; (3) the nature of the production process; (4) the extent of production facilities; and (5) whether the value of the processing performed in the United States (or the third country) is a small proportion of the value of the finished article sold in the United States. Commerce will evaluate each of these factors as they exist either in the United States or a third country, depending on the particular circumvention scenario. No single factor will be controlling.

With respect to the factor of small value added, the existing statute requires that the value of imported parts from the country under the order be compared to the value of the finished product and that the difference between the two values be "small," as a prerequisite for an affirmative determination. This has the effect of including third country parts in U.S. value, thereby making it easier for a foreign producer to circumvent an order. New sections 781(a)(2)(E) and 781(b)(2)(E) require Commerce to determine whether the value of the processing performed in the United States (or a third country) represents a small proportion of the value of the finished product. This is consistent with the overall thrust of section 230 of the bill which is to focus the anticircumvention inquiry on the question of whether minor or insignificant assembly or completion is taking place.

These new provisions do not establish rigid numerical standards for determining the significance of the assembly (or completion) activities in the United States or for determining the significance of the value of the imported parts or components.

Finally, section 230 of the bill renumbers existing sections 781(a)(2) and 781(b)(2) as sections 781(a)(3) and 781(b)(3), respectively. As under current law, before deciding to include imported parts within the scope of an antidumping or countervailing duty order, Commerce will consider: (1) changes in the pattern of trade; (2) whether the producer of the finished product subject to the order is related to the assembler in the United States (or the third country); and (3) whether imports of parts from the country subject to the order into the United States (or the third country) have increased after the initiation of the investigation resulting in the issuance of the order.

With respect to the first factor (changes in the pattern of trade), section 781(a)(3) also requires Commerce to consider changes in the sourcing patterns of parts used to produce the finished product. With respect to the third factor (increased imports of parts), current law requires Commerce to examine imports occurring after the issuance of the order in question. In the case of certain products, it is possible for a foreign producer to establish a screwdriver operation in the United States or a third country before an initial antidumping or countervailing duty investigation is completed and thereby potentially avoid any finding of circumvention. Therefore, Commerce will examine imports occurring after the initiation of the investigation resulting in the issuance of the order.

The Administration believes that with the changes described above, the United States will have an anticircumvention provision that is effective, WTO-consistent, and fair to all parties. Because Commerce will find circumvention only where assembly or completion operations in the United States or in third countries are minor, the proposed amendments will not deter legitimate investment, characterized by the addition of substantial value.

In a related matter, as under current law when parties are "related," if an investigation or review is initiated of a downstream product which incorporates an upstream product as a major input, the existence of an "affiliation" between the producer of the downstream product and the producer of the upstream product can result in application of the major input rule of section 773(f)(3), for purposes of determining the cost of production or constructed value of the downstream product.

Section 230 of the bill amends section 781(f) of the Act to require Commerce normally to complete determinations under section 781(f) of whether an antidumping or countervailing duty order is being circumvented within 300 days of initiation. The Administration also intends that Commerce shall amend its regulations to provide that determinations of whether particular types of merchandise are the subject merchandise of an antidumping or countervailing duty order normally will be completed within 120 days.

12. Transition Rules; Effective Date

Consistent with the Agreements, the amendments to the Act will apply to investigations and reviews based on petitions or requests received after the WTO Agreement enters into force with respect to the United States. Thus, investigations and reviews that are based on petitions or requests received before or on the date the WTO Agreement enters into force with respect to the United States will be completed under the current statutory regime. With regard to self-initatiated investigations and reviews, the amendments will apply to investigations and reviews initiated after the entry into force of the WTO Agreement with respect to the United States. For this purpose, the date of publication in the Federal Register of the notice of initiation of the investigation or review will be considered the date of initiation.

13. Reports

The Office of the United States Trade Representative will prepare and submit to the Committee on Ways and Means and the Committee on Finance an annual report on foreign antidumping and countervailing duty actions against exports from the United States for the most recent year for which data are available.

The Department of Commerce will prepare and submit to the Committee on Ways and Means and the Committee on Finance a report on the efficiency, effectiveness, and impact on exporters, importers, and domestic industries of different antidumping and countervailing duty assessment systems, and estimated duty collection. The report will be submitted no later than twelve months after the effective date of the legislation except that the portion of the report dealing with estimated duty collection will be submitted no later than six months after such date.