[Federal Register: November 6, 1995 (Volume 60, Number 214)]
[Notices]
[Page 56045-56052]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-840]
Notice of Final Determination of Sales at Less Than Fair Value:
Manganese Metal From the People's Republic of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: November 6, 1995.
FOR FURTHER INFORMATION CONTACT: David Boyland or Daniel Lessard,
Office of Countervailing Investigations, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue NW., Washington, DC 20230; telephone
(202) 482-4198 or (202) 482-1778.
Final Determination
We determine that manganese metal from the People's Republic of
China (PRC) is being, or is likely to be, sold in the United States at
less than fair value, as provided in section 735 of the Tariff Act of
1930 (``the Act''), as amended. The estimated sales at less than fair
value are shown in the ``Suspension of Liquidation'' section of this
notice.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Case History
Since the preliminary determination (60 FR 31282, June 14, 1995),
the following events have occurred. The Department published an amended
preliminary determination correcting a ministerial error (60 FR 37875,
July 24, 1995). We conducted verification of the questionnaire
responses in the PRC between July 24, 1995 and August 11, 1995, of the
following respondents: China National Electronics Import & Export Hunan
Company (CEIEC), China Hunan International Economic Development Corp.
(HIED), China Metallurgical Import & Export Hunan Corporation (CMIECHN/
CNIECHN), Minmetals Precious & Rare Minerals Import & Export Co.
(Minmetals), and Great Wall Industry Import and Export Corporation
(GWIIEC). Case and rebuttal briefs were filed by petitioners and
respondents on October 2, 1995, and October 4, 1995, respectively. On
October 6, 1995, the Department held a public hearing.
Scope of the Investigation
The subject merchandise in this investigation is manganese metal,
which is composed principally of manganese, by weight, but also
contains some impurities such as carbon, sulfur, phosphorous, iron and
silicon. Manganese metal contains by weight not less than 95 percent
manganese. All compositions, forms and sizes of manganese metal are
included within the scope of this investigation, including metal flake,
powder, compressed powder, and fines. The subject merchandise is
currently classifiable under subheadings 8111.00.45.00 and
8111.00.60.00 of the Harmonized Tariff schedule of the United States
(HTSUS). Although the HTSUS subheadings are provided for convenience
and customs purposes, our written description of the scope of this
proceeding is dispositive.
Period of Investigation
The period of investigation (POI) is June 1 through November 30,
1994.
Best Information Available
We have based the PRC-wide rate on best information available
(BIA). In administrative proceedings involving merchandise from
nonmarket economy countries, the Department's consistent practice has
been to treat all exporters as part of the government and assign to
them the single government rate, known as the country-wide rate, unless
an exporter affirmatively demonstrates that it is separate from the
government and entitled to its own rate. If a non-market economy
exporter does not respond to the Department's request for information,
the Department has no basis to treat that exporter separately from the
government and, as a result, the government (which includes the
exporter) receives a margin based on best information available because
one of its entities failed to respond.
In this case, the evidence on the record indicates that the
respondents identified during the investigation do not account for all
of the exports of the subject merchandise to the United States. As a
result, it is reasonable for the Department to conclude that it did not
receive responses from all exporters. In the absence of responses from
all exporters, we are basing the country-wide deposit rate on BIA,
pursuant to section 776(c) of the Act. (See, e.g., Final Determination
of Sales at Less Than Fair Value: Antidumping Duty Investigation of
Pure Magnesium From Ukraine (61 FR 16433, March 30, 1995)).
In determining what to use as BIA, the Department follows a two-
tiered methodology, whereby the Department normally assigns lower
margins to those respondents who cooperated in an investigation and
margins based on more adverse assumptions for those respondents who did
not cooperate in an investigation. As outlined in the Final
Determination of Sales at Less Than Fair Value: Certain Hot-Rolled
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat
Products, and Certain Cut-to-Length Carbon Steel Plate From Belgium (58
FR 37083, July 9, 1993), when a company refuses to provide the
information requested in the form required, or otherwise significantly
impedes the Department's investigation, it is appropriate for the
Department to assign to that company the higher of (a) the highest
margin alleged in the petition, or (b) the highest calculated rate of
any respondent in the investigation.
In this investigation, we are assigning to any PRC company, other
than those specifically identified in the ``suspension of liquidation''
section the PRC-Wide deposit rate of 143.32 percent, ad valorem. This
margin represents the highest margin in the petition, as recalculated
by the Department for purposes of the initiation (see Initiation of
Antidumping Duty Investigation: Manganese Metal from the People's
Republic of China 59 FR 61869 (December 2, 1994)).
GWIIEC
The Department has decided to disregard the sales made by GWIIEC to
the United States during the POI (see Comment 2 below for interested
party comments on this issue). The Court of International Trade has
stated the if evidence demonstrates to the Department that a respondent
has
[[Page 56046]]
``artificially orchestrated an export scheme involving artificially set
prices,'' the agency has the discretion to disregard the U.S. sales as
not resulting from a bona fide transactions. Chang Tieh Industry Co.,
Ltd. v. U.S., 840 F. Supp. 141, 146 (CIT 1993). The timing of these
sales relative to the filing of the petition coupled with the fact that
the prices were significantly higher than the world market price of
this commodity and prices observed in the United States at the time of
the sale, led the Department to gather additional information from the
U.S. purchaser to determine whether the sales were bona fide
transactions. Certain facts asserted by parties to these transactions
during this subsequent inquiry did not verify. See the October 27,
1995, Confidential Memorandum to File Re: Bona Fide Sales. Based on the
totality of the circumstances, viewed in light of the discrepancies
found, the Department determines, based on substantial evidence on the
record (much of which is proprietary), that these were not bona fide
sales for commercial purposes and, therefore, would not provide an
appropriate basis for determining GWIIEC's pricing behavior for sales
to the United States. Therefore, these sales have been disregarded.
Separate Rates
CEIEC, HIED, CMIECHN, and Minmetals have requested separate
antidumping duty rates. In cases involving nonmarket economies, the
Department's policy is to assign a rate, separate from the country-wide
rate, only when an exporter can demonstrate the absence of both de jure
and de facto governmental control over export activities. In
determining whether companies should receive separate rates, we focus
our attention on the exporter rather than the manufacturer, as our
concern is the manipulation of dumping margins.
To establish whether a firm is sufficiently independent to be
entitled to a separate rate, the Department uses criteria that were
developed in the Final Determination of Sales at Less Than Fair Value:
Sparklers from the People's Republic of China (56 FR 20588, May 6,
1991) (Sparklers) and in the Final Determination of Sales at Less Than
Fair Value: Silicon Carbide from the People's Republic of China (59 FR
22585, May 2, 1994) (Silicon Carbide). Under the separate rates
criteria, the Department assigns a separate rate only when an exporter
can demonstrate the absence of both de jure <SUP>1 and de facto <SUP>2
governmental control over export activities.
\1\ Evidence supporting, though not requiring, a finding of de
jure absence of central control includes: (1) An absence of
restrictive stipulations associated with an individual exporter's
business and export licenses; (2) any legislative enactments
decentralizing control of companies; or (3) any other formal
measures by the government decentralizing control of companies.
\2\ The factors considered include: (1) Whether the export
prices are set by or subject to the approval of a governmental
authority; (2) whether the respondent has authority to negotiate and
sign contracts and other agreements; (3) whether the respondent has
autonomy from the government in making decisions regarding the
selection of management; and (4) whether the respondent retains the
proceeds of its export sales and makes independent decisions
regarding disposition of profits or financing of losses (see Silicon
Carbide).
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The business licenses of all respondents being considered for
separate rates indicate that they are owned ``by all the people.'' As
stated in Silicon Carbide, ``ownership of a company by all the people
does not require the application of a single rate.'' Accordingly, these
respondents are eligible to be considered for a separate rate.
De Jure Control
The respondents submitted a number of documents to demonstrate the
absence of de jure control of their business activities by the PRC
central government. The documents include the following:
<bullet> Law of the People's Republic of China on Industrial
Enterprises Owned by the Whole People (April 13, 1988) This law granted
autonomy to state-owned enterprises by separating ownership and control
(Article 2). It also granted enterprises the right to set prices and
the right to decide what type of commodity to produce (Article 22-26).
<bullet> Excerpts from PRC's State Council Decree: Provisions on
Changing the System of Business Operation for States Owned Enterprises
(December 31, 1992) This decree superseded the April 13, 1988 law and
codified existing practice. It also gave state-owned enterprises the
right to establish ``production, management, and operational policies''
and the right to set prices, sell products, purchase production inputs,
make investment decisions, and dispose of profits and assets. These
rights apply specifically to an enterprise's import and export
activities (Provision 12).
<bullet> Order from MOFERT, No. 4, 1992 and Temporary Provision for
Administration of Export Commodities (Export Provisions) (December 21,
1992) The Export Provisions indicate those products subject to direct
government control. Electrolytic manganese metal does not appear on the
Export Provisions list and, hence, the subject merchandise under
investigation is not subject to export constraints. We note that the
Emergent Notice on Changes in Issuing Authority for Export Licenses
Regarding Public Bidding Quota for Certain Commodities (MOFTEC #140)
(Effective April 1994) canceled previous export licenses for certain
commodities. Manganese metal was not among these commodities.
In addition to the above laws and regulations, respondents provided
the following documents:
<bullet> PRC's Enterprise Legal Person Registration Administrative
Regulations (June 13, 1988) This regulation sets forth the procedure
for registering enterprises as legal persons.
<bullet> Law of the People's Republic of China on Enterprise
Bankruptcy (December 2, 1986) This law sets forth bankruptcy procedures
for state-owned enterprises.
<bullet> GATT Document Concerning Transparency of China's Foreign
Trade Regime (February 12, 1992) This document listed the PRC central
government's response to questions by a GATT committee regarding the
PRC's foreign trade regime.
Consistent with Silicon Carbide, we determine that the existence of
the above-referenced laws and regulations demonstrates that CEIEC,
HIED, CMIECHN, and Minmetals are not subject to de jure central
government control with respect to export sales and pricing decisions.
However, there is some evidence that the provisions of the above-cited
laws and regulations have not been implemented uniformly among
different sectors and/or jurisdictions within the PRC (see ``PRC
Government Findings on Enterprise Autonomy,'' in Foreign Broadcast
Information Service-China--93-133 (July 14, 1993)). As such, the
Department has determined that a de facto analysis is necessary to
determine whether the respondent companies are subject to central
government control over export sales and pricing decisions.
De Facto Control
During verification, our examination of correspondence and sales
documentation revealed no evidence that the export prices of
respondents being considered for separate rates are set, or subject to
approval, by any governmental authority. It was evident from our
examination of correspondence and written agreements and contracts that
these respondents have the authority to negotiate and sign contracts
and other agreements
[[Page 56047]]
independent of any government authority. We also noted that the
respondents retained proceeds from their export sales and made
independent decisions regarding disposition of profits and financing of
losses (based on our examination of financial records and purchase
invoices). Finally, we have determined that these respondents have
autonomy from the central government in making decisions regarding the
selection of management, based on our examination of internal
management selection documents.
Conclusion
Given that the record of this investigation demonstrates a de jure
and de facto absence of governmental control over the export functions
of all respondents being considered for separate rates, we determine
that these respondents should receive a separate rate.
Surrogate Country
Section 773(c)(4) of the Act requires the Department to value the
NME producers' factors of production, to the extent possible, in one or
more market economies that (1) Are at a level of economic development
comparable to that of the NME country, and (2) are significant
producers of comparable merchandise.
The Department has determined that India is the most suitable
surrogate for purposes of this investigation (see Comment 1). Based on
available statistical information, India is at a level of economic
development comparable to that of the PRC, and is a significant
producer of comparable merchandise.
Fair Value Comparisons
To determine whether sales of manganese metal from the PRC by
CEIEC, HIED, CMIECHN, and Minmetals were made at less than fair value,
we compared the United States price (USP) to the foreign market value
(FMV), as specified in the United States Price and Foreign Market Value
sections of this notice.
United States Price
For CEIEC, HIED, CMIECHN, and Minmetals, we based USP on purchase
price, in accordance with section 772(b) of the Act, because manganese
metal was sold directly to unrelated parties in the United States prior
to importation into the United States, and because exporter's sales
price (ESP) methodology was not indicated by other circumstances.
Where appropriate, we calculated purchase price based on packed,
C&F and CIF prices to unrelated purchasers in the United States. We
made deductions to these prices for foreign inland freight, foreign
inland insurance, brokerage and handling expenses, ocean freight, and
marine insurance, as appropriate (see Comment 13). Generally, costs for
these items were valued in the surrogate country. However, where
transportation services were purchased from market economy suppliers
and paid for in a market economy currency, we used the cost actually
incurred by the exporter.
Foreign Market Value
In accordance with section 773(c) of the Act, we calculated FMV
based on the factors of production reported by the factories in the PRC
which produced the subject merchandise for the four exporters analyzed
in this determination. The factors used to produce manganese metal
include materials, labor and energy. To calculate FMV, the reported
factor quantities were multiplied by the appropriate surrogate values.
In determining which surrogate value to use for each factor of
production, we selected, where possible, an average non-export value
which was representative of a range of prices within the POI, or most
contemporaneous with the POI, specific to the input in question, and
tax-exclusive.
We first note that because business proprietary treatment was
requested by respondents for certain factor inputs, we have named these
inputs (``A'' through ``F''). A key to these letter assignments is
provided in the attachments to the October 27, 1995 calculation
memorandum.)
With the exception of Factor F, we obtained surrogate values from
the following Indian sources: Chemical Weekly (September-November
1994), the Monthly Trade Statistics of Foreign Trade of India, Volume
II--Imports, August 1994, (Indian Import Statistics); and the Indian
Minerals Yearbook: 1993 (see Comments 4 through 6). For Factor F, we
relied upon information submitted by the petitioners (taken from the
June-October 1994 Chemical Marketing Reporter) for a similar input (see
Comment 7). We are no longer using the surrogate value for manganese
ore which was used at the preliminary determination. We are using a
surrogate value for manganese ore from the Indian Minerals Yearbook
1993 because this ore has a manganese content that is comparable to the
ore used by the PRC producers and also represents a domestic price in
India. We adjusted the value of the manganese ore to reflect a
delivered price (see Comment 4).
For the reasons outlined in the June 6, 1995 preliminary
determination concurrence memorandum, we are using the April 1992
through March 1993 average tax-exclusive price for industrial
electricity in India, as provided by the World Bank, to value
electricity (see Comments 9 and 10). To value PRC labor costs, we used
data on Indian wage rates from the Yearbook of Labor Statistics (see
Comment 8). Because indirect labor was not reported by respondents and
was not included in the surrogate value for manufacturing overhead, we
have added an amount for indirect labor (see Comment 9).
We adjusted the factor values, when necessary, to the POI using
wholesale price indices (WPI's) published by the International Monetary
Fund (IMF). Labor rates have been adjusted using consumer prices
indices (CPI's).
To value factory overhead, we calculated the ratio of factory
overhead expenses to the cost of material, labor, and energy for
industries involved in ``Processing and Manufacture--Metals, Chemicals
and products thereof,'' as reported in the September 1994 Reserve Bank
of India Bulletin's (RBI Bulletin) (see Comment 11). This same source
was used to calculate selling, general and administrative (SG&A)
expenses as a percentage of cost of manufacturing. Because the
calculated SG&A percentage from the RBI was greater than the minimum 10
percent required by the statute, we used the SG&A percentage from the
RBI Bulletin for each company (see Comment 12). With respect to profit,
we used the statutory minimum of eight percent of materials, labor,
energy, overhead, and SG&A costs calculated for each factory.
At the verification of certain producers, we learned that there
were multiple suppliers of raw materials. In order to calculate the
inland freight cost for these inputs, we derived the relative
percentages obtained from each source and then, assuming that the input
was consumed in these same proportions, used the distances from each of
the sources to compute the cost per unit of output.
Interested Party Comments
As discussed above, the Department has not analyzed GWIIEC's sales
for this investigation. Therefore, comments specifically related to
GWIIEC have not been addressed in this notice.
Comment 1: Cometals, an interested party, argues that based on the
criteria set forth in 773(c)(4), India should not be considered the
surrogate country in this investigation. First, India is not at
[[Page 56048]]
the same level of economic development as China, as reflected in
Indias lower per capita gross domestic product measured in terms of
purchasing power parity. Second, India should not be considered a
market economy given its protected markets and centralized control of
economic activity. Third, since a surrogate country must be
disqualified if the comparable merchandise is being subsidized, the
Department should reject India because the Indian economy is
characterized by heavily protected markets and regulated prices of
essential products including energy and industrial inputs.'' Finally,
since ferromanganese (one of two products considered by the Department
to be comparable to the subject merchandise) uses high grade ore, in
contrast to the subject merchandise which can use lower grade ore, and
also is made pursuant to a different production process, it should not
be considered comparable to the subject merchandise. According to
Cometals, South Africa does fit the Department's criteria pursuant to
773(c)(4) (i.e., it is at a level of economic development similar to
the PRC, it is a market economy, and it produces subject merchandise
without subsidies); therefore, it should be considered the surrogate
country in this investigation.
DOC Position: It is the Department's longstanding practice in
selecting surrogate countries to rely on market-exchange-rate-based per
capita income figures as a rough indicator of economic development.
While some arguments can be made for relying, instead, on purchasing
power parity (PPP) per capita income figures, Cometals has not provided
information which demonstrates why this measure would be preferable to
the data normally relied on by the Department. Therefore, the
Department continues to rely primarily on exchange-rate-based per
capita income figures and continues to find India (with a per capita
income of approximately US$300 in 1993) at a level of economic
development comparable to that of China (with a per capita income of
approximately US$500 in 1993). The Department also finds on the basis
of exchange-rate-based income figures that South Africa (with a per
capita income of approximately US$3,000 in 1993) is not at a level of
economic development comparable to that of China.
With regard to government involvement in the Indian economy, it has
been and remains our longstanding practice to treat India as a market
economy under the antidumping law. In antidumping cases involving
Indian products, we have accepted Indian prices and costs as market
determined. We do not find Cometal's arguments concerning government
involvement in India's economy sufficient grounds to reject India as
and appropriate surrogate market economy.
With respect to the allegation that the comparable merchandise in
India is subsidized, we note that any subsidies which may be provided
on the final product generally would be of concern to the Department
only if foreign market value is based on export prices of the final
product from the surrogate country. Here, foreign market value is not
based on exports from India of the final product but rather on domestic
input prices in India. There is no evidence on the record indicating
that the input prices in the instant investigation are subsidized.
Finally, regarding the comparability of manganese metal and
ferromanganese, the Department analyzes the comparability in terms of
following four criteria: (1) Manufacturing process, (2) production
inputs (3) intensity of input usage and (4) normal end-uses and
applications. As noted in a May 5, 1995 Memorandum to Dave Mueller,
Director of the Office of Policy, we found that ferromanganese is
comparable to manganese metal based on several of the above criteria.
This finding of comparability does not mean that the two products are
identical in terms of the four criteria. It means that the two products
are sufficiently similar that the Department can reasonably assume that
commercial production of the merchandise under investigation can occur
in the surrogate. Therefore, we do not agree that the possible
dissimilarities between manganese metal and ferromanganese described by
Cometals are sufficient to render the products non-comparable.
Furthermore, the decision to select India as a surrogate country was
based on its production of both ferromanganese and electrolytic
manganese dioxide (EMD), the latter of which we consider to be another
comparable product.
Comment 2: Petitioners contend that GWIIEC's U.S. sales are not
bona-fide and should be excluded from the antidumping calculations.
Petitioners argue that GWIIEC's accounting system inhibited the
Department from verifying the legitimacy of the suspect terms
surrounding GWIIEC's U.S. sales. Also, according to petitioners, Chang
Tieh Industry Co. v. United States, 840 F. Supp 141, 146 (1993)
demonstrates that the Department should disregard sales as not
resulting from a bona fide transaction if evidence demonstrates that a
respondent ``orchestrated an export scheme involving artificially set
prices for purposes of dumping after the investigative period.''
GWIIEC argues that the Department verified the terms of its U.S.
sales characteristics of the product sold. GWIIEC also argues that
petitioners by conceding that Bureau of the Census import data showed
imports of manganese metal in February 1995 from the PRC at a volume
and average value consistent with that it reported, confirmed GWIIEC's
U.S. sales.
According to respondent, the precedent cited by petitioners in
Chang Tieh is misstated and actually supports using GWIIEC's U.S.
sales. Furthermore, GWIIEC points to the U.S. International Trade
Commission preliminary determination which found that ``substantial
volumes of manganese metal are purchased for non-price reasons, end-
users face difficulties in maintaining supplies, atypical transactions
are significant in the marketplace, and prices are subject to sharp
changes.''
DOC Position: As stated above, we have decided to disregard the
sales made by GWIIEC (see, the GWIIEC section of this notice).
Comment 3: With respect to all respondents, petitioners argue that
the record on de facto control remains deficient because the
Department's separate rates questionnaire addressed to the central and
provincial governments remains unanswered. Petitioners add that this
deficiency is important in light of the National People's Congress'
mandate to MOFTEC to ``take charge of the foreign trade work in the
whole country,'' and in light of other administrative practices such as
foreign exchange targets set by the central or local government.
Respondents CEIEC, HIED, CMIECHN, and Minmetals state that the laws
placed on the record establish that the responsibility for managing the
business activities of ``owned by all the people'' companies has been
transferred from the central and provincial governments to the
companies themselves; i.e., there is an absence of de jure control by
the central or provincial governments. Additionally, respondents
contend that during the course of verification it was demonstrated that
the activities of CEIEC, HIED, CMIECHN, and Minmetals ``are not subject
to governmental control nor direction.'' Respondents also note that the
Department confirmed at verification that they are allowed ``to borrow
freely, to make independent business decisions regarding the
disposition of profit or losses, and have autonomy from the central or
provincial
[[Page 56049]]
government in making decisions regarding the selection of management.''
Finally, these respondents disagree with petitioners claim that
the responses to the government portion of the separate rates
questionnaire do not reflect the totality of government knowledge.
Respondents note that Department personnel met with PRC government
officials and that the Department could have obtained additional
information.
DOC Position: We first note that, CEIEC, HIED, CMIECHN, and
Minmetals, provided certifications from both MOFTEC and the appropriate
municipal authorities stating that the responses to the separate rates
questionnaire were accurate. Moreover, based on the test described in
Silicon Carbide, we have sufficient information on the record to award
separate rates to the four analyzed companies.
Notwithstanding MOFTEC's mandate with respect to foreign trade work
and the other administrative practices alleged by petitioners, we found
no evidence of MOFTEC's or other government agencies' involvement in
the export operations of these companies. While statements such as that
quoted by petitioners may serve to support a presumption that a single
rate should be applied to all exporters in the PRC, the specific
evidence in this case rebuts that presumption for the four exporters in
question.
Comment 4: The petitioners state that the Department should include
an amount for freight between the PRC manganese metal producers and
their ore suppliers. According to petitioners, the surrogate value for
manganese ore should be viewed as an ex-mine price because there is no
factual information in the record that establishes the location of the
Goan mine (the Indian mine from which the surrogate value for manganese
ore was derived) or its distance from the port. Petitioners also argue
that for every other price quote of Indian ore, ``FOB'' meant FOB
plant, which by definition, excludes freight.
Respondents claim that petitioners' argument that the surrogate
value is an ex-mine price is not supported by the record. According to
respondents, the manganese ore in question was shipped via a ``berth,''
which means the buyer took possession of the goods at the port, not at
the plant. Accordingly, the price quoted is FOB port, as opposed to FOB
plant. Therefore, the Department would be double counting freight if it
were to include the distance between the PRC producers and their
suppliers.
DOC Position: We have not used the same source to derive the
surrogate value for manganese ore as the one used for the preliminary
determination (see Foreign Market Value section above). Therefore, the
cite by respondents stating that the surrogate value included freight
is not relevant. For the reasons stated in the October 18, 1995
Memorandum from team to Susan G. Esserman, we have used a domestic
price quote in India taken from the Indian Mineral Yearbook 1993. This
publication, at page 497, states that price is quoted on a ``Free On
Rail Mine Siding'' basis. Therefore, the Department is adding a freight
expense to the surrogate value of manganese ore.
Comment 5: Respondents claim that the Department should use a
particular form of Factor B for the surrogate value instead of the form
used in the preliminary determination. Respondents argue that the form
of Factor B used at the preliminary determination is incorrect because
it is not the form used by the PRC producers. Further, respondents note
that there is a significant price differential between the two forms of
Factor B. Even if the Department uses the correct form of Factor B,
respondents claim that it is still necessary to adjust the surrogate
value to reflect the content levels of Factor B used by the PRC
producers. Respondent suggest that the Department employ the same
adjustment methodology it applied to manganese ore in the preliminary
determination.
DOC Position: We agree with respondents. We verified that the input
actually used by the respondents was a particular form of Factor B.
Accordingly, we have used a surrogate value for this particular form.
We have also adjusted the surrogate value for this factor to reflect
the producer-specific content levels.
Comment 6: Respondents argue that the surrogate values for certain
chemicals (Factors C and D) which were based on prices reported in a
1993 Chemical Weekly publication and Indian Import Statistics,
respectively, do not comport with economic reality and, therefore,
should not be used in the final determination. Furthermore, respondents
note that these values are higher than the delivered factor values in
the Chemical Marketing Reporter, as submitted by petitioners and
should, therefore, be considered aberrational. Respondents suggest that
the Department use the values considered reasonable by petitioners, as
obtained from the Chemical Marketing Reporter.
Petitioners argue that respondents did not provide any information
to indicate what ``economic reality'' is with respect to these
surrogate values. Regarding Factor C, petitioners argue that
respondents did not correct the reported Chemical Marketing Reporter
value for content, thereby invalidating their comparison to the
Chemical Weekly. As regards Factor D, petitioners assert that the form
of Factor D from the Chemical Marketing Reporter cited by respondents
is not comparable to the Factor D used by the Department, as obtained
from Indian Import Statistics. Additionally, petitioners note that
respondents failed to provide publicly available published information
(PAPI) information, which is preferred by the Department for valuing
factors, and that the Chemical Marketing Reporter represents U.S.
prices, as opposed to PAPI from the surrogate country. Finally,
petitioners argue that respondents are drawing an unfair comparison
between non-delivered prices from the Chemical Marketing Reporter and
the delivered prices from the Chemical Weekly and Indian Import
Statistics.
Petitioners also argue that the Department incorrectly adjusted the
input cost for Factor C for HIED in the preliminary determination.
DOC Position: We do not agree with respondents' claim that the
Indian values for Factor C and D are aberrational and do not comport
with economic reality. After adjusting the Chemical Weekly price for
Factor C to account for Indian taxes, it is very close to the price
reported in the Chemical Marketing Reporter. With respect to Factor D,
the Chemical Marketing Reporter price suggested by respondents is not
for the form used by respondents in the production of subject
merchandise, as noted by petitioners. Therefore, we have used the data
from the Chemical Weekly and the India Import Statistics to value these
factors.
Finally, we agree with petitioners that we did not correctly adjust
HIED's input cost for Factor C in the preliminary determination. We are
making the correct adjustment for HIED's specific content level for
Factor C, as verified by the Department.
Comment 7: According to respondents, the price of a chemical
submitted by petitioners and used by the Department as a substitute for
a PRC Factor of production was not properly adjusted at the preliminary
determination. Respondents note that petitioners, as producers of
subject merchandise, know what prices are reasonable for their industry
and cannot be biased in favor of the respondents. Therefore, according
to respondents, the adjusted price submitted by petitioners should be
used by the Department in the final determination.
Petitioners argue that they did not provide a value for the
chemical used by
[[Page 56050]]
respondents because this input was never specified. Petitioners assert
that the Department should not adjust the price that they submitted
because the figures used in their calculations were based on chemicals
used in their production process. Accordingly, these values are not
applicable to the PRC production process.
DOC Position: Because we have been unable to develop valuation
information for the actual chemical used by PRC respondents, we are
continuing to use a substitute chemical based on information provided
by petitioners. Further, we agree with respondents and have made the
necessary adjustments to the price of this substitute chemical to
reflect the appropriate concentration level.
Comment 8: Respondents challenge the Department's valuation of
skilled labor. Specifically, they argue that the surrogate value for
skilled labor should be based on the upper range of the ``skilled
worker'' category instead of being based on the upper range of the
``industrial worker'' category. Respondents state that ``given the fact
that the lower range of the industrial category chosen by the
Department for unskilled labor corresponds to the lowest monthly wage
for the unskilled worker category, it would be logical and fair for the
Department to use the lower range of the skilled worker category for
determining the average monthly wage for skilled labor.'' Finally, they
state that the Department's decision to use the upper range of the
``industrial worker'' category is not supported by the record.
Petitioners argue that the ``industrial worker'' rate should
continue to be used by the Department because the production of subject
merchandise is an industrial process and ``skilled workers'' represents
a category which includes workers who are not engaged in an industrial
process.
DOC Position: As noted in the Foreign Market Value section above,
the Department is using Indian labor wages from the Yearbook of Labor
Statistics to value PRC labor costs (see October 17, 1995 memorandum
from David R. Boyland, Import Compliance Specialist, to case file).
Therefore, because the comments above are concerned with information
from a source the Department is no longer using, these comments are
moot.
Comment 9: Petitioners argue that respondents incorrectly
classified skilled and supervisory labor as indirect labor and did not
report indirect labor hours needed to produce the merchandise.
Petitioners argue that skilled, supervisory and clerical labor should
be considered direct labor because they are directly related to the
manufacturing operations. Petitioners support their claim by referring
to Plant Design and Economics for Chemical Engineers (Plant Design),
and note that according to this source, the cost of direct supervisory
and clerical labor should be 15 percent of the cost of unskilled and
skilled operating labor.
Additionally, petitioners argue that all respondents, except
GWIIEC, under-reported their labor usage. Petitioners state that the
respondents' production process is less automated than that of
petitioners' and, hence, should reflect higher labor intensiveness.
Petitioners suggest that the Department correct for this by using
GWIIEC's labor hours for the other respondents.
Respondents argue that for one of the producers, the Department
verified that certain workers were not involved in direct labor
activities and, hence, only a part of their labor cost should be used
to calculate FMV. Further, respondents argue that the skilled and
unskilled labor hours were verified by the Department and, as such,
should be used in the final determination. According to respondents,
Plant Design classifies costs based on the fixed or variable nature of
a particular expense, with the result that these costs are treated as
direct costs. However, a cost accounting approach would define items
such as ``maintenance and repairs'' and supervisory labor as a part of
factory overhead. Respondents urge the Department to follow the cost
accounting approach. In support of this position, respondents point out
that the Department's standard cost of production questionnaire for
market economies treats supervisory labor as part of factory overhead.
DOC Position: Because there is no indirect labor component in the
Departments factory overhead surrogate, we reject respondents'
argument that only a portion of verified indirect labor hours be
included in the FMV. With the exception of GWIIEC, all respondents, as
requested by the Department in its questionnaire, reported direct labor
hours, as opposed to direct and indirect labor hours. Pursuant to
information gathered at verification, the Department was able to
quantify some of the indirect labor hours incurred by respondents, as
well as identify other indirect labor functions performed. Because we
do not have complete indirect labor information for respondents and, as
noted above, our factory overhead surrogate does not include a
component for indirect labor, we have estimated the amount of indirect
labor that was not quantified by the Department and have used this
value to calculate FMV (see October 27, 1995 calculation memorandum).
While petitioners have argued that total labor is under-reported
based on their own experience, we have not rejected the labor component
of CEIEC's, HIED's, CMIECHN's and Minmetals' responses in favor of
GWIIEC's data. Instead, we have relied on these companies' verified
amounts of labor usage adjusted for indirect labor as discussed above
in our final determination.
Comment 10: Petitioners argue that electricity consumption for the
majority of respondents is unrealistically low. Petitioners claim that
the use of certain inputs (i.e., Factor A) does not explain
respondents' low electricity consumption and that respondents'
electricity consumption should not be less than the minimal amounts
indicated as being necessary to produce manganese metal based on the
Kirk-Othmer Encyclopedia of Chemical Technology (2nd Edition) (Kirk-
Othmer). Additionally, according to petitioners, respondents' less
efficient economies of scale should result in higher electricity
consumption. Given that the production process employed and the raw
materials consumed by each of the respondents are basically the same,
petitioners also argue that the wide range of electricity usage rates
reported by these respondents indicates that the reported electricity
consumption is suspect for all of them. Petitioners contend that the
Department should use the electricity consumption reported by GWIIEC's
producer for all producers in this investigation since GWIIEC's
manganese metal producer reported electricity consumption within
minimum operational requirements. Respondents, argue that the
electricity consumption extrapolated from Kirk Othmer by petitioners is
based on the electricity consumption in 1967 of two companies no longer
producing manganese metal and should be considered outdated. Therefore,
the verified electricity usage of the individual producers should be
used by the Department in its final determination.
DOC Position: While the domestic and PRC production processes are
fundamentally the same, there are some important differences between
the two. For example, the PRC producers use a certain input (Factor A)
which improves electricity current efficiencies; i.e., all things being
equal, the electrolysis stage of the process requires relatively less
electricity in the presence of Factor A.
Given the large number of variables (e.g., different production
processes and inputs), it is unknown whether the use of Factor A can
fully explain the
[[Page 56051]]
difference in the electricity consumption reported by producers and the
levels submitted by petitioners. However, based on information supplied
by the U.S. Bureau of Mines, we have determined that the electricity
usage reported by respondents is not outside the range that would be
expected for a producer using Factor A (see the October 16, 1995
memorandum to Barbara R. Stafford, Deputy Assistant Secretary, Import
Administration). Therefore, the Department has used the verified
amounts of electricity consumption.
Comment 11: Respondents argue that indirect material costs were
double counted by the Department when it valued minor process chemicals
and also included the ``stores and spares consumed'' category from the
RBI Bulletin as a component of factory overhead. Respondents argue that
either the ``stores and spares consumed'' component should be
eliminated from the surrogate factory overhead or the Department should
avoid directly valuing process chemicals. Respondents also argue that
inputs that are considered as ``consumables'' in the accounting systems
of the producers should be treated as indirect materials.
Respondents also disagree with petitioners' interpretation of the
term ``stores and spares consumed'' listed in the RBI Bulletin, arguing
that the Department can reasonably assume that the ``stores and spares
consumed'' category includes an element for indirect materials. They
point out that the reference to Plant Design cited by petitioners
distinguishes between ``raw materials,'' which are direct materials,
and ``catalysts and solvents, which are not direct materials.'' The
chemicals in question, according to respondents, are ``catalysts and
solvents.'' Respondents also note that the Department's recognition of
variable overhead in market economy cases contradicts petitioners'
assertion that all variable inputs must be direct materials. Finally,
since the chemicals in question are not physically incorporated into
the finished goods or are used in very small quantities (i.e., the
antithesis of the cost accounting definition of direct materials),
these chemicals should be considered indirect materials which are
included in factory overhead.
Petitioners argue that the ``stores and spares consumed'' line item
in the RBI Bulletin should be considered ``operating supplies,'' as the
term is used in Plant Design; i.e., ``miscellaneous supplies * * *
needed to keep the process functioning.'' Petitioners note that Plant
Design states that ``[r]aw materials are all items that must be
supplied in the manufacturing process for each unit of product
produced.'' According to petitioners, to the extent that process
chemicals are variable inputs, they must be considered ``raw
materials'' for which surrogate values must be attributed. Therefore,
petitioners state that because these items are not included in the
surrogate factory overhead in the ``stores and spares consumed'' line
item, the Department should value these chemicals separately from
overhead.
DOC Position: Both petitioners and respondents have attempted to
explain what the RBI ``stores and spares consumed'' category contains,
but neither side has persuaded us. Based upon our own analysis, we have
concluded that only those chemicals used after the metal has been
produced or those chemicals used for cleaning purposes unrelated to the
actual production process should be included in factory overhead (see
October 16, 1995 Memorandum to Barbara R. Stafford, Deputy Assistant
Secretary, Import Administration). With respect to the other chemicals
in question, while respondents' accounting systems may treat them as an
element of factory overhead, these materials are more appropriately
considered direct materials because they are required for a particular
segment of the production process. Based on this analysis, we have
treated certain of the so-called ``process chemicals'' as indirect
materials which are covered by the surrogate value for factory overhead
and the remainder have been valued as direct materials.
Comment 12: Petitioners argue that the Department omitted certain
expense categories (i.e, ``selling commission,'' ``rates and taxes,''
``other provisions,'' and ``financing interest'') which should have
been included in the surrogate SG&A value. Additionally, if the
Department continues to exclude ``financing interest'' from the SG&A
value, it should use ``gross operating profit'' instead of ``operating
profit.'' Finally, according to petitioners, regardless of how PRC
producers categorize certain items, costs cannot be assigned to factory
overhead or SG&A categories unless the above-referenced RBI Bulletin
table attributes the cost to factory overhead or SG&A.
Respondents argue that the Department should not include ``rates
and taxes'' in SG&A because the surrogate input values are exclusive of
internal taxes or duties. Also, according to respondents, because the
Department does not normally adjust for credit expenses in NME cases,
it should not include a value for credit expenses (``financing
costs''). Moreover, since the cost of producing manganese metal is
determined at the producer level, ``selling commissions'' should not be
included as the producer does not sell the merchandise, only the
exporter does. Generally with respect to SG&A, respondents claim that
because the Indian surrogate information is for a broad group of
industries and India has no manganese metal industry, the Department
should include in its surrogate SG&A only those expenses incurred by
the PRC producers. As an alternative to determining what should be
included in the surrogate SG&A value, respondents suggest that the
Department use the statutory minimum of 10 percent. With respect to
profit, respondents argue that the Department's normal practice is to
use operating profits.
DOC Position: We agree with petitioners that we incorrectly omitted
certain SG&A expense categories listed in the RBI table. We have
included these amounts in our final determination.
We disagree with respondents that financing costs should be removed
from the SG&A. The Department does not adjust for differences in
selling expenses because we do not know enough about the selling
expenses included in the surrogate SG&A to make the adjustment.
However, the lack of an adjustment does not mean that these costs
should be excluded from FMV. We also disagree with respondents
regarding selling commissions. Section 773(c)(1) clearly requires the
Department to include an amount for general expenses in the FMV.
Therefore, regardless of whether the FMV is being constructed at the
producer or exporter level, it is appropriate to add an amount for
selling expenses.
Further, we disagree with respondents' argument that we should use
only those elements of the surrogate SG&A that correspond to expenses
incurred by the PRC producers. It is the Department's consistent
practice to use a surrogate amount for the entirety of SG&A as
calculated using the RBI Bulletin, as opposed to basing the surrogate
SG&A percentage on actual expenses incurred by respondents.
Finally, following our normal practice, we considered operating
rather than gross profit. Because this amount was less than 8 percent
of COM and SG&A, we used the statutory minimum.
Comment 13: Respondents claim that the Department verified that
certain charges deducted in the preliminary determination were not
incurred by respondents. Therefore, these amounts should not be
deducted for the final determination. Moreover, respondents reject
petitioners' claim that it is
[[Page 56052]]
common practice in the PRC to include insurance as part of inland
freight.
Specifically, for CEIEC, respondents claim that the Department
verified that foreign brokerage charges were included in ocean freight
and hence, this expense should not be valued separately. Regarding
CEIEC's ocean freight, the charges were incurred in U.S. dollars.
Therefore, respondents argue that CEIEC's actual shipping should be
used.
For HIED, respondents claim that the Department verified that
foreign inspection charges were not incurred. Hence, no deduction
should be made for this expense in the final determination.
Finally, for Minmetals' ocean freight, respondents ask the
Department to take the average amount Minmetals paid in U.S. dollars
for shipping on most of its U.S. sales on market carriers and use that
amount to value the shipping for its remaining sale.
Petitioners argue that an amount for insurance should be added to
foreign inland freight because the Department found numerous situations
where insurance was included as part of the freight charges paid by the
respondents. Regarding the specific exporters, petitioners generally
refute respondents' claims. Much of their discussion is proprietary in
nature. Hence, the details are not presented here.
DOC Position: We have made deductions for all expenses incurred in
shipping the merchandise to the United States (see CFR
353.41(d)(2)(i)). If an expense was not incurred, no deduction was
made. With respect to insurance for foreign inland freight, we have
made deduction only where we verified that insurance was included in
the inland freight charge.
We have not used CEIEC's actual freight because an NME carrier was
used. We have made the adjustment by using a surrogate ocean freight
which includes brokerage and handling. No additional deduction for
brokerage and handling was made. Thus, there is no double counting of
brokerage and handling.
For HIED, we disagree that we made any deduction for inspection
charges at the preliminary determination. As stated in Comment 12, the
Department does not adjust for differences in selling expenses because
we do not know enough about the selling expenses included in the
surrogate SG&A to make an adjustment. Thus, for the final
determination, the Department has continued not to make a deduction for
this expense for any respondent.
Finally, for Minmetals, we used the shipping rate proposed by
respondents for the single U.S. sale where shipping was paid in RMB.
Comment 14: Respondents argue that a type of packing material
identified by the Department in its verification report of CMIECHN/
CNIECHN's supplier should not be used to calculate FMV because this
packing material was not used for POI sales.
DOC Position: The sales in question were not found to be outside
the POI, as respondents claim. Therefore, we have calculated the FMV
for these sales using the estimated weight of the packing material used
for these sales.
Comment 15: According to respondents, both the statute and the
Department's regulations require that internal taxes remitted or
refunded upon export are to be excluded from the calculation of the
constructed value. Further, these respondents argue that the Department
verified that the value added tax (VAT) paid by the exporters to the
manganese metal producers is reimbursed by the PRC government upon
exportation of the merchandise. Therefore, according to respondents,
the Department should deduct VAT from all direct material inputs used
to determine the cost of manufacture and which were refunded by the PRC
government when subject merchandise was exported. The respondents also
submit an alternative suggestion for a VAT adjustment in which the
Department increases the export price by the amount of the VAT they
receive from the PRC government upon exportation of the merchandise.
The petitioners claim that the PRC government does not refund VAT
on material inputs, rather, the refund is on the final product.
Additionally, the VAT is not incorporated in the FMV calculation,
because the inputs are valued using Indian surrogate values which do
not incorporate a VAT. Petitioners claim that respondents' alternative
to increase the U.S. price is without merit, and that the Department
correctly excluded VAT from the U.S. price-to-FMV comparison.
DOC Position: The Department's factors of production calculation
uses Indian surrogate values which are exclusive of Indian taxes.
Because the FMV is net of taxes, neither a downward adjustment to FMV
nor the alternative upward adjustment to USP suggested by respondents
is necessary.
Continuation of Suspension of Liquidation
In accordance with section 733(d)(1) and 735(c)(4)(B) of the Act,
we are directing the Customs Service to suspend liquidation of all
entries of manganese metal from the PRC, as defined in the ``Scope of
the Investigation'' section of this notice, that are entered, or
withdrawn from warehouse, for consumption on or after the date of
publication of this notice in the Federal Register. The Customs Service
shall require a cash deposit or posting of a bond equal to the
estimated dumping margins, as shown below. This suspension of
liquidation will remain in effect until further notice. The weighted-
average dumping margins are as follows:
------------------------------------------------------------------------
Margin
Manufacturer/producer/exporter percent
------------------------------------------------------------------------
CEIEC........................................................ 10.27
CMIECHN/CNIECHN.............................................. 0.86
HIED......................................................... 3.72
Minmetals.................................................... 4.36
PRC-wide Rate................................................ 143.32
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our final determination is affirmative,
the ITC will determine whether these imports are causing material
injury, or threat of material injury to the industry in the United
States, within 45 days. If the ITC determines that material injury, or
threat of material injury, does not exist, the proceeding will be
terminated and all securities posted will be refunded or canceled. If
the ITC determines that such injury does exist, the Department will
issue an Antidumping Duty Order directing Customs officials to assess
antidumping duties on all imports of the subject merchandise entered,
or withdrawn from warehouse, for consumption on or after the effective
date of the suspension of liquidation.
This determination is published pursuant to section 735(d) of the
Act and 19 CFR 353.20(a)(4).
Dated: October 27, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-27369 Filed 11-3-95; 8:45 am]
BILLING CODE 3510-DS-P