[Federal Register: May 19, 1997 (Rules and Regulations)]
[Page 27346-27396]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19my97-17]
[[pp. 27346-27396]] Antidumping Duties; Countervailing Duties
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affiliated producers. In our view, these determinations are very much
fact-specific in nature, requiring a case-by-case analysis, as
reflected in the Department's determinations in actual cases, which are
published in the Federal Register.
With respect to the suggestion that not all of the factors
identified in paragraph (f) need be present in order to collapse
affiliated producers, to the extent that this suggestion is directed at
the factors relating to a significant potential for manipulation, we
agree. However, we believe that this principle already is clearly
reflected in proposed paragraph (f), and that an additional change is
not necessary.
On the other hand, the factors concerning a significant potential
for manipulation relate to only one of the two elements that must be
present in order to collapse affiliated producers. In addition to
finding a significant potential for manipulation, the Secretary also
must find the requisite type of production facilities. To clarify this
point, we have revised paragraph (f) so that paragraph (f)(1) refers to
the two basic elements, while paragraph (f)(2) contains the non-
exhaustive list of factors that the Secretary will consider in
determining whether there is a significant potential for manipulation.
With respect to the suggestion that the regulations clarify that
the Department will consider future manipulation as well as actual
manipulation in the past, we agree that the Department must consider
future manipulation. However, we believe the proposed regulation was
sufficiently clear on this point. In this regard, we selected the
standard of ``significant potential'' to deal with precisely this
point. In the past, the Department at times had used a standard of
``possible manipulation.'' As recognized recently by the Court of
International Trade, this latter standard may require evidence of
actual manipulation, whereas a standard based on the potential for
manipulation focuses on what may transpire in the future. FAG
Kugelfischer Georg Schafer KGaA v. United States, slip op. 96-108 at 23
(July 10, 1996).
In addition to the changes described above, the Department also has
changed what is now paragraph (f)(2)(ii) to clarify that the Department
will examine not only whether affiliated producers share management or
board members, but also whether they share board members or management
with, for example, a common parent.
Allocation of expenses and price adjustments: Proposed paragraph
(g) dealt with the treatment of expenses that are reported on an
allocated basis. In response to the substantial number of comments we
received concerning the subject of allocation, we have revised
paragraph (g) to provide greater clarity with respect to the allocation
of expenses. In addition, we have expanded the coverage of paragraph
(g) to include the allocation of price adjustments, and we have revised
the heading of paragraph (g) accordingly. Also, we have renumbered
proposed paragraph (g) as paragraph (g)(1).
By way of background, neither the pre-URAA statute nor the
Department's prior regulations addressed allocation methods, although
issues relating to allocation methods arose in almost every AD
investigation and review. Instead, the Department and the courts
resolved these issues on a case-by-case basis. The resulting absence of
guidelines has been responsible for a considerable amount of litigation
that increased the costs of AD proceedings for all parties involved,
including the Department. Therefore, the Department believes that its
administration of the AD law would be enhanced by the adoption of some
general guidelines on allocation methods that provide a greater measure
of certainty and predictability.
The statute, as amended by the URAA, continues to be silent on the
question of allocation methods. However, the SAA at 823-24 states that
``[t]he 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.'' Although this statement was made in the context of
deductions from constructed export price for direct selling expenses,
we believe that the principle embodied in the statement applies equally
to price adjustments and other types of selling expenses, as well.
The commenters disagreed with respect to the Department's treatment
of allocated expenses and price adjustments and the interpretation to
be accorded the language in the SAA. Several commenters argued that all
allocations result in the attribution of expenses and price adjustments
to some sales that did not incur them, and remove them from some sales
that did. These commenters essentially argued that, as compared to
transaction-specific reporting, all allocation methods are defective.
Therefore, they asserted, the Department should consider all allocation
methods to be inaccurate or distortive within the meaning of the SAA.
With respect to these comments, the Department agrees that
allocated expenses or price adjustments may not be as exact as expenses
or price adjustments reported on a transaction-specific basis. However,
in our view, the drafters of the URAA and the SAA could not have
intended that all allocations are inherently distortive or inaccurate
for purposes of the AD law. Under such an interpretation (1) Congress
and the Administration permitted something less than transaction-
specific reporting, but (2) because allocation methods are per se
inaccurate and distortive, only transaction-specific reporting is
acceptable.
In our view, the drafters of the URAA and the SAA were not dealing
with abstract concepts, but instead were dealing with issues concerning
the application of a law to real life factual scenarios. As the Federal
Circuit stated many years ago in connection with this very issue: ``In
a purely metaphysical sense, Smith-Corona is correct in that the ad
expense cannot be directly correlated with specific sales. Yet, the
statute does not deal in imponderables.'' Smith-Corona Group v. United
States, 713 F.2d 1568, 1581 (1983). Therefore, when the drafters
referred to allocation methods as causing ``inaccuracies or
distortions,'' they must have been referring to allocation methods that
result in inaccuracies or distortions that are unreasonable in light of
the objectives of the AD law.
General rule: With the preceding discussion in mind, we now turn to
a discussion of the specific provisions of paragraph (g). Paragraph
(g)(1) contains the basic principle that the Department will follow in
dealing with allocated expenses and price adjustments, and continues to
establish a preference for transaction-specific reporting. There are
two principal changes from proposed paragraph (g).
First, we have revised paragraph (g)(1) to provide that the
Secretary will consider allocated expenses and price adjustments if the
Secretary is satisfied that the allocation method used ``does not cause
inaccuracies or distortions.'' As discussed above, because all
allocation methods are, in some sense, inexact, the Department intends
to reject only those allocations methods that produce unreasonable
inaccuracies or distortions.
Second, we have revised paragraph (g)(1) to cover the allocation of
price adjustments. As discussed in connection with Sec. 351.102(b) and
the new definition of the term ``price adjustments,'' price adjustments
are distinguishable from expenses.
[[Page 27347]]
In this regard, we received several comments that addressed the
relevance of Torrington v. United States, 82 F.3d 1039 (Fed. Cir.
1996), to the allocation of price adjustments. In that case, although
the Court appeared to question whether price adjustments constituted
expenses at all, id., at 1050, note 15, it held that assuming that the
price adjustments in question were expenses, they had to be treated as
direct selling expenses rather than indirect selling expenses.
According to the Court, ``[t]he allocation of expenses . . . does not
alter the relationship between the expenses and the sales under
consideration.'' Id., at 1051.
In our view, Torrington is of limited relevance to the instant
issue, because the Court did not address the propriety of the
allocation methods used in reporting the price adjustments in question.
Instead, it simply stated that regardless of the allocation methods
used, the Department could not treat the price adjustments as indirect
selling expenses. Moreover, these regulations are consistent with the
holding of the case, because, by distinguishing price adjustments from
expenses, we have ensured that the Department will not treat price
adjustments as any selling expenses, including indirect selling
expenses.
Reporting allocated expenses and price adjustments: Paragraph
(g)(2) deals with the information that a party must provide when
reporting an expense or a price adjustment on an allocated basis. One
commenter expressed concern that proposed paragraph (g) placed too much
emphasis on the Department's responsibility to verify an allocation
method, and insufficient emphasis on a respondent's obligation to
demonstrate its entitlement to an adjustment based on a particular
allocation method. We agree with the commenter, and have added
paragraph (g)(2) in order to address the commenter's concern.
First, the party must demonstrate to the Secretary's satisfaction
that it is not feasible to report the expense or price adjustment on a
more specific basis. Such a demonstration should include an explanation
of accounting systems, the manner in which the expenses or price
adjustments are incurred or granted, and an explanation of the
accounting practices in the industry in question.
In addition, paragraph (g)(2) also requires a party to explain why
the allocation method used does not cause inaccuracies or distortions.
With respect to this latter requirement, it is not our intent to
require a party to ``prove a negative'' or demonstrate what the amount
of the expense or price adjustment would have been if transaction-
specific reporting had been used. However, the party must provide a
sufficiently detailed explanation of the allocation method used so that
the Department can make an initial judgment at the time when
information is submitted as to the reasonableness of the method and, if
necessary, issue a supplemental questionnaire. Of course, allocation
methods, like any other type of factual information, are subject to
verification.
In this regard, we have not identified in paragraph (g) itself
specific types of allocation methods that the Department would consider
as acceptable. Before doing so, we first would like to gain more
experience in applying paragraph (g) in actual cases. However, there
are certain types of allocation methods that we believe would be
acceptable.
One such allocation method applies to cases where the Department
uses averages, such as when using the average-to-average price
comparison method under section 777A(d)(1)(A)(i) of the Act and
Sec. 351.414(d). In such instances, we would consider as acceptable an
allocation method that allocates total expenses incurred, or total
price adjustments made, in connection with sales included within an
averaging group over those sales.
For example, assume that an averaging group consists of sales of
products X, Y, and Z. The respondent in question is able to identify
the warranty expenses incurred in connection with sales of X, Y, and Z
in the aggregate, but cannot identify the warranty expenses incurred on
a product-specific basis. In this situation, it would be acceptable for
the respondent to allocate the total warranty expenses over total sales
of products X, Y, and Z. Because the sales of products X, Y, and Z will
be averaged together, transaction-specific reporting, if it were
feasible, would achieve the same result as the allocation method just
described.
In addition, while not addressed in paragraph (g), the Department
normally will accept an allocation method that calculates expenses or
price adjustments on the same basis as the expenses were incurred or
the price adjustments granted. Thus, for example, where a producer
offers a rebate conditioned on the purchase of a certain amount of
merchandise, it would not be inaccurate or distortive to spread the
value of the rebate over the purchases needed to earn the rebate.
Similarly, if a producer granted a $100 rebate for a particular month,
it would not be inaccurate or distortive to apportion that $100 over
all sales made during that month. Such a method merely apportions the
price adjustment over the sales on which it was actually earned.
Feasibility: Paragraph (g)(3) deals with the factors the Secretary
will take into account in determining (1) whether transaction-specific
reporting is not feasible under paragraph (g)(1); or (2) whether an
allocation is calculated on as specific a basis as is feasible under
paragraph (g)(2). Paragraph (g)(3) provides that among the factors the
Secretary will take into account are: (i) the records maintained by the
firm in the ordinary course of its business; (ii) normal accounting
practices in the country and industry in question; and (iii) the number
of sales made by the firm during the period of investigation or review.
In this regard, one commenter suggested that the Department should
clarify that it will accept allocated expenses or price adjustments
where transaction-specific reporting is neither appropriate nor
``reasonably feasible.'' In response, another commenter objected to any
departure from the language of the SAA, which refers to ``feasible''
rather than ``reasonably feasible.''
With respect to these comments, the Department agrees with the
second commenter that the standard in the SAA is ``feasible,'' not
``reasonably feasible.'' On the other hand, the feasibility of
reporting transaction-specific information is not something that the
Department can analyze in the abstract, but instead is something that
the Department must consider on a case-by-case basis. For example, what
may be feasible for firms in one industry may not be feasible for firms
in another. In our view, paragraph (g)(3) appropriately reflects these
types of considerations.
Some commenters suggested that in assessing the feasibility of
transaction-specific reporting, the Department should look solely to
the records of the party in question to determine what level of
detailed reporting is feasible. The Department has not adopted this
suggestion, because it might provide an incentive for firms that are
(or are likely to be) subject to an AD proceeding to maintain their
records in a less specific manner than they otherwise would. Although
the Department will accept allocated expenses or price adjustments in
certain circumstances, the regulations still retain a preference for
transaction-specific information.
Allocation methods involving ``out-of-scope'' merchandise:
Paragraph (g)(4) deals with the issue of allocation methods that
involve ``out-of-scope'' merchandise. Specifically, paragraph (g)(4)
deals with situations in which an allocation includes expenses or price
[[Page 27348]]
adjustments that were incurred or made in connection with sales of
merchandise that is not ``subject merchandise'' or a ``foreign like
product.'' In some cases, the inclusion of ``out-of-scope'' merchandise
per se has been considered as rendering an allocation method as
distortive and, thus, automatically unacceptable.
In our view, such a position is too extreme. An allocation method
that includes ``out-of-scope'' merchandise is distortive only where the
expenses or price adjustments likely are incurred or granted
disproportionately on the out-of-scope or the in-scope merchandise.
However, based on our experience, there is no basis for irrebuttably
presuming such disproportionality without regard to the facts of a
specific case.
Therefore, paragraph (g)(4) provides that the Secretary will not
reject an allocation method solely because the method includes ``out-
of-scope'' merchandise. Instead, the Secretary will apply the standards
of paragraph (g) to ensure that the allocation method used is not
inaccurate or distortive. However, in the case of these types of
allocation methods, it will be particularly important that a party
claiming an adjustment provide the explanation required under paragraph
(g)(2) as to why the allocation method used is not inaccurate or
distortive. In addition, the Secretary will pay special attention to
the extent to which the out-of-scope merchandise included in the
allocation pool is different from the in-scope merchandise in terms of
value, physical characteristics, and the manner in which it is sold.
Such information will be important in determining whether it is more or
less likely that expenses were incurred, or price adjustments were
made, in proportionate amounts with respect to sales of out-of-scope
and in-scope merchandise.
Additional comments: In connection with the topic of allocation
methods, many commenters made suggestions as to the manner in which the
Department should classify expenses and price adjustments as direct or
indirect. The Department has not adopted these suggestions for the
following reasons. First, insofar as expenses are concerned, the method
of allocating an expense does not dictate the nature of the expense.
Torrington, supra, at 1051. Second, with respect to price adjustments,
as discussed above, price adjustments are neither direct nor indirect
expenses, but rather are additions or deductions necessary to arrive at
the actual price paid by the customer.
Several commenters stated that the Department must be careful in
evaluating (1) a respondent's procedures for granting price
adjustments, and (2) the extent to which allocations used by a
respondent in its normal business records are non-distortive. According
to these commenters, if the Department sets standards that, in
practice, result in the rejection of most or all allocated price
adjustments and expenses, the result will be distorted comparisons.
The Department agrees with the notion that it should attempt to use
allocations that are based on the most precise information available in
light of a respondent's books and records. Such an approach helps to
avoid comparisons that do not reflect the actual prices paid by
customers or the actual expenses incurred by respondents. On the other
hand, the Department cannot allow a respondent's accounting procedures
to dictate the Department's methodology in a particular case. The
Department always must balance the reporting burdens of respondents
against the objective of obtaining accurate results. If a particular
allocation method is unreasonably inaccurate or distortive, the
Department cannot rely on that method simply because it is the only
method that the respondent's records will allow.
Another commenter stated that the professed ``need'' to allocate
price adjustments often flows from artificially narrow agency
determinations regarding the scope of a proceeding. In addition, this
commenter contended that the Department should expect foreign companies
found guilty of injuring an American industry to adjust their
accounting and bookkeeping practices to conform to the requirements of
the AD law.
With respect to this comment, we are not persuaded that there is
any relationship between the need to allocate adjustments and the
Department's alleged narrowing of the scope of a proceeding. Moreover,
the commenter appeared to be arguing more against the wisdom of
narrowing subject merchandise than the propriety of accepting
allocations. In our view, questions concerning the narrowness or
breadth of the scope of a particular proceeding are more appropriately
addressed on a case-by-case basis in actual AD proceedings. Finally,
with respect to the comment regarding changes in respondents' record
keeping practices, if the Department denies an adjustment because a
firm's record keeping practices do not permit it to use an acceptable
allocation method, we would expect that the firm would revise those
practices if it hopes to have the Department grant the adjustment in
some future segment of the particular proceeding.
Date of sale: Paragraph (i) deals with the identification of the
date of sale for sales of the subject merchandise and foreign like
product. Paragraph (i) continues to provide that the Secretary normally
will consider the date of invoice, as recorded in a firm's records kept
in the ordinary course of business, to be the date of sale.
Use of uniform date of sale: Several commenters supported the
notion of using a uniform date for purposes of identifying the date of
sale, and specifically endorsed the use of invoice date. According to
these commenters, the use of a uniform date of sale would promote
predictability.
Other commenters, however, opposed the use of a uniform date.
According to these commenters, the use of a uniform date of sale is
inconsistent with Article 2.4.1, note 8 of the AD Agreement. They also
suggested that a reasonable reading of the statute does not support
using the date of invoice, because that is not necessarily the date on
which price and quantity are established, and, thus is not the date on
which the domestic industry lost the ability to make a sale to a U.S.
customer. In addition, some of these commenters argued that in
situations where exchange rates fluctuate between the date on which the
terms of sale are established and the date of invoice, the results of
the Department's calculations will become less, rather than more,
predictable.
In these final regulations, we have retained the preference for
using a single date of sale for each respondent, rather than a
different date of sale for each sale. Contrary to suggestions made by
some of the commenters, this has been the Department's practice in the
past.
Moreover, there are several valid reasons for this practice. First,
by simplifying the reporting and verification of information, the use
of a uniform date of sale makes more efficient use of the Department's
resources and enhances the predictability of outcomes.
Second, as a matter of commercial reality, the date on which the
terms of a sale are first agreed is not necessarily the date on which
those terms are finally established. In the Department's experience,
price and quantity are often subject to continued negotiation between
the buyer and the seller until a sale is invoiced. The existence of an
enforceable sales agreement between the buyer and the seller does not
alter the fact that, as a practical matter, customers frequently change
their
[[Page 27349]]
minds and sellers are responsive to those changes. The Department also
has found that in many industries, even though a buyer and seller may
initially agree on the terms of a sale, those terms remain negotiable
and are not finally established until the sale is invoiced. Thus, the
date on which the buyer and seller appear to agree on the terms of a
sale is not necessarily the date on which the terms of sale actually
are established. The Department also has found that in most industries,
the negotiation of a sale can be a complex process in which the details
often are not committed to writing. In such situations, the Department
lacks a firm basis for determining when the material terms were
established. In fact, it is not uncommon for the buyer and seller
themselves to disagree about the exact date on which the terms became
final. However, for them, this theoretical date usually has little, if
any, relevance. From their perspective, the relevant issue is that the
terms be fixed when the seller demands payment (i.e., when the sale is
invoiced).
Finally, with respect to the arguments that the date on which
material terms are established is the date on which the domestic
industry is injured and the date on which respondents rely for exchange
rate purposes, in our view, these arguments beg the question of ``when
are material terms established?'' In paragraph (i), we merely have
provided that, absent satisfactory evidence that the terms of sale were
finally established on a different date, the Department will presume
that the date of sale is the date of invoice.
Therefore, for the foregoing reasons, we have continued to provide
for the use of a uniform date of sale, which normally will be the date
of invoice. However, we have revised paragraph (i) in response to
suggestions that the Department clarify its authority to use a date
other than date of invoice in appropriate cases. In some cases, it may
be inappropriate to rely on the date of invoice as the date of sale,
because the evidence may indicate that, for a particular respondent,
the material terms of sale usually are established on some date other
than the date of invoice. In proposed paragraph (i), we had intended
this type of flexible approach through our use of the word
``normally.'' In light of the comments, however, we have revised
paragraph (i) to provide that ``the Secretary may use a date other than
the date of invoice if the Secretary is satisfied that a different date
better reflects the date on which the exporter or producer establishes
the material terms of sale.''
Although the date of invoice will be the presumptive date of sale
under paragraph (i), the Department intends to continue to require that
a respondent provide a full description of its selling processes. Among
other things, this information will permit domestic interested parties
to submit comments concerning the selection of the date of sale in
individual cases. Of course, a respondent also will be free to argue
that the Department should use some date other than the date of
invoice, but the respondent must submit information that supports the
use of a different date. Finally, a respondent's description of its
selling processes, like any other item of information, will be subject
to verification.
If the Department is presented with satisfactory evidence that the
material terms of sale are finally established on a date other than the
date of invoice, the Department will use that alternative date as the
date of sale. For example, in situations involving large custom-made
merchandise in which the parties engage in formal negotiation and
contracting procedures, the Department usually will use a date other
than the date of invoice. However, the Department emphasizes that in
these situations, the terms of sale must be firmly established and not
merely proposed. A preliminary agreement on terms, even if reduced to
writing, in an industry where renegotiation is common does not provide
any reliable indication that the terms are truly ``established'' in the
minds of the buyer and seller. This holds even if, for a particular
sale, the terms were not renegotiated.
Date of invoice versus date of shipment: Several commenters argued
that if the Department uses a uniform date of sale, it should use date
of shipment rather than date of invoice. These commenters claimed that
because respondents can control the timing of invoice issuance, they
will be able to manipulate the Department's dumping calculations by
manipulating the date of sale. According to these commenters, date of
shipment is ``manipulation-proof,'' because the date on which
merchandise is shipped is largely determined by the needs of the
customer.
For several reasons, the Department has not adopted this
suggestion. First, date of shipment is not among the possible dates of
sale specified in note 8 of the AD Agreement. Second, based on the
Department's experience, date of shipment rarely represents the date on
which the material terms of sale are established. Third, unlike
invoices, which can usually be tied to a company's books and records,
firms rarely use shipment documents as the basis for preparation of
financial reports. Thus, reliance on date of shipment would make
verification more difficult.
Finally, with respect to the commenters' concerns regarding
possible manipulation, we do not believe that these concerns warrant
substituting date of shipment for date of invoice as the presumptive
date of sale. As explained above, the Department will continue to
require respondents to provide a full description of their sales
processes. Moreover, these descriptions will be subject to
verification, and we are confident that we will be able to uncover,
through verification, attempts at manipulation. For example, the
Department can verify the average length of time between invoice date
and shipment date, and can scrutinize deviations from the norm. In
addition, most firms have a standard invoicing practice (e.g., three
days after shipment, every two weeks). Where a firm does not have such
a practice, or where it changes that practice, the Department will be
particularly attentive to the possibility of manipulation of dates of
sale.
Early resolution of date of sale issues: One commenter suggested
that because issues surrounding date of sale must be resolved in the
early stages of an investigation or review, the regulations should
provide a mechanism under which the Department consults with the
parties and decides these issues prior to the issuance of a request for
information. This commenter was concerned that unilateral judgments by
a respondent as to the appropriate date of sale can result in the
unfair and prejudicial use of ``facts available'' should the Department
ultimately disagree with that judgment.
The Department has not adopted this suggestion. While we recognize
that it is preferable to settle issues regarding the date of sale early
in an investigation or review, we believe that the mechanisms in place
are adequate. First, the response to the section of the Department's
questionnaire that addresses general selling practices, including
selling processes, is due to the Department earlier than those sections
that require information pertaining to specific sales, thereby allowing
parties an early opportunity to comment on date of sale. Second,
paragraph (i) will put parties on notice that, in the absence of
information to the contrary, the Department will use date of invoice as
the date of sale.
Finally, there is a limit on the Department's ability to guarantee
that date of sale issues are always resolved
[[Page 27350]]
definitively at the outset of an investigation or review. Among other
things, domestic interested parties must have an opportunity to comment
on information describing a respondent's selling processes. In
addition, the Department also must verify this information. In some
cases, the Department may be persuaded by the arguments of domestic
interested parties or the results of verification that its initial
identification of the date of sale was in error.
Indirect export price: One commenter proposed that the Department
make clear that its method for identifying the date of sale will not
change the determination of when a sale constitutes an ``indirect
export price'' sale. Although the Department has not revised the final
regulations in light of this comment, we agree that the method for
identifying the date of sale does not affect the method for determining
whether a particular sale constitutes an ``indirect export price''
sale.
Long-term contracts: Several commenters raised issues concerning
long-term contracts. One commenter suggested that the Department codify
in the regulations its statement in the AD Proposed Regulations, 61 FR
at 7330-7331, that the Department will continue to determine the date
of sale for long-term contracts on a case-by-case basis, without
presuming that date of invoice is the date of sale. Another commenter
suggested that the Department should presume that the date of invoice
is the date of sale in the case of long-term contracts.
The Department has not adopted either of these suggestions. Because
of the unusual nature of long-term contracts, whereby merchandise may
not enter the United States until long after the date of contract, the
Department will continue to review these situations carefully on a
case-by-case basis. In our view, paragraph (i) is sufficiently flexible
so as to eliminate the need for a separate provision addressing long-
term contracts. We should note, however, that date of invoice normally
would not be an appropriate date of sale for such contracts. The date
on which the material terms of sale are finally set would be the
appropriate date of sale for such contracts.
Effect on reviews: One commenter argued that in implementing
paragraph (i), the Department should ensure that, in conducting
administrative reviews, it does not omit sales in those proceedings
where some date other than invoice date was used as the date of sale in
prior segments of the proceeding. Another commenter suggested that the
Department should permit parties to continue to use the date of sale
method established in prior segments.
Although we have not revised the regulations in light of these
comments, the Department will be particularly attentive to the
possibility that sales may be missed in administrative reviews in which
the date of sale changes due to the implementation of paragraph (i).
The Department will address these types of issues on a case-by-case
basis to ensure that all sales are reviewed.
Currency conversions: One commenter proposed that the Department
retain its prior practice, without adopting the date of invoice
presumption, for purposes of establishing the date on which currency
will be converted. Essentially, this commenter suggested that the
Department establish two dates of sale, one for purposes of determining
which sales to report, and a different one for exchange rate purposes.
We have not adopted this suggestion. There is no indication in the
statute, the SAA, or the AD Agreement that the Department should use
different dates of sale for different purposes. For all purposes, the
date of sale is the date on which the material terms of sale are
established. In promulgating paragraph (i), the Department merely has
adopted a rebuttable presumption that this date is the date of invoice.
The Department cannot adopt a system under which two different dates
are identified as being the date on which the material terms of sale
were established.
Other Comments Concerning Sec. 351.401
Fair comparison: Two commenters contended that the AD Agreement and
the URAA require that a dumping margin be based on a ``fair
comparison.'' They believed that this requirement for a fair comparison
should be carried forward into the regulations, which should state
clearly that the Department will apply this principle to all aspects of
its AD methodology, including decisions regarding the prices to be
compared and the type and amount of adjustments to make to those
prices. Another commenter suggested that the regulations, or at least
the preamble, refer to a ``fair comparison'' as a fundamental
requirement.
In response, another commenter, while agreeing that the purpose of
the AD law is to reach a ``fair comparison'' between the sales being
compared, argued that there is no reason to insert into the agency's
regulations a requirement that, in the commenter's view, was vague.
According to the commenter, in the statute Congress identified in
detail the method for accomplishing a ``fair comparison.''
In our view, the regulations do not require any further
clarification on this particular issue. Congress dealt explicitly with
this question in the statute itself. Specifically, section 773(a) of
the Act provides: ``In determining under this title whether subject
merchandise is being, or is likely to be, sold at less than fair value,
a fair comparison shall be made between the export price or constructed
export price and normal value. In order to achieve a fair comparison
with the export price or constructed export price, normal value shall
be determined as follows: [i.e., in accordance with the provisions
discussing the calculation of normal value].'' The House Report on the
URAA provided further clarification by stating: ``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 new section 773.'' H.R. Rep. No. 826, Pt. 1, 103d
Cong., 2d Sess. 82 (1994) (emphasis added). Given the clarity of the
statute and the legislative history on this point, we do not believe
that additional elaboration in the regulations is necessary.
Indirect export price: One commenter suggested that the Department
codify in the regulations its four-factor test for determining whether
sales made through an affiliate located in the United States are
classifiable as ``export price'' (formerly ``purchase price'')
transactions. According to the commenter, this test for identifying so-
called ``indirect export price sales'' is firmly rooted in Department
practice, has been repeatedly approved by the courts, and was endorsed
by Congress in the URAA. The commenter argued that because this test
involves a fundamental issue in AD proceedings, the public would
benefit from the codification of the test in the regulations.
A second commenter, however, objected to codification of the test.
According to this commenter, because the four factors of the indirect
export price test continue to be subject to interpretation, the
Department should not restrict its discretion at this time by issuing a
regulation. This commenter also disagreed specifically with the first
commenter's articulation of some of the factors. Finally, referring to
the factor dealing with inventory, this commenter suggested that if the
Department should include the test in the regulations, the Department
should clarify that the merchandise need only be included in inventory,
not physical inventory.
[[Page 27351]]
We have not adopted the suggestion of the first commenter that we
codify the ``indirect export price'' test in the regulations. While we
do not disagree with the commenter's characterization of the test's
pedigree, we have not attempted in these regulations to codify all
aspects of the Department's AD methodology that are well-established.
We generally have refrained from codifying principles that are clearly
set forth in the statute and/or the legislative history. In our view,
the ``indirect export price'' test is one of these principles. As for
the suggestions of the second commenter, these suggestions are moot in
light of our decision to refrain from codifying the ``indirect export
price'' test.
Section 351.402
Section 351.402 deals with the calculation of export price and
constructed export price under section 772 of the Act.
Adjustments to constructed export price: Proposed paragraph (b)
addressed the expenses that the Department will deduct from the
starting price in calculating constructed export price (``CEP'') under
section 772(d) of the Act. In addition to a stylistic change, we have
made one substantive revision to paragraph (b), as discussed below.
In proposed paragraph (b), the Department stated that it would
adjust for ``expenses associated with commercial activities in the
United States, no matter where incurred.'' Noting that this language
only required a deduction for expenses associated with United States
selling activities, several commenters argued that the Department
should adjust for all expenses incurred on CEP sales, including
expenses incurred in the foreign market. These commenters contended
that proposed paragraph (b) was inconsistent with: (1) The plain
language of section 772(d); (2) judicial precedent interpreting the
pre-URAA version of the statute, which contained language identical to
that of section 772(d); and (3) established Department practice.
A second set of commenters argued in response that, in calculating
constructed export price, the Department may deduct from the starting
price only those expenses associated with activities occurring in the
United States. According to these commenters, expenses incurred in the
exporting country that are directly attributable to United States sales
(i.e., that are not indirect expenses) are subject to adjustment under
the circumstances of sale provision of section 773(a)(6)(C)(iii) of the
Act.
In these final regulations, we have clarified that the Secretary
will deduct only expenses associated with a sale to an unaffiliated
customer in the United States. With respect to the suggestion of the
first group of commenters that we deduct all expenses incurred in
connection with the CEP sale, we do not believe such an approach is
consistent with the statute. Although section 772(d)(1) is ambiguous on
this particular point, section 772(f), which deals with the deduction
of profit from CEP, refers to the expenses to be deducted under section
772(d)(1) as ``United States expenses,'' thereby suggesting that the
coverage of section 772(d)(1) is limited to those expenses incurred in
connection with a sale in the United States. In addition, the SAA makes
clear that only those expenses associated with economic activities in
the United States should be deducted from CEP. In discussing section
772(d)(1), the SAA states that the deduction of expenses in calculating
CEP relates to ``expenses (and profit) associated with economic
activities occurring in the United States.'' SAA at 823 (emphasis
added).
In addition to conflicting with the SAA, the suggestion that we
deduct all expenses would disrupt the statutory scheme with respect to
the level-of-trade (``LOT'') adjustment. The statute clearly
anticipates that an adjustment for differences in levels of trade will
not be necessary every time the Department uses CEP. However, under the
proposed interpretation, because the Department always would calculate
CEP exclusive of all expenses and normal value inclusive of such
expenses, CEP and normal value always would be at different levels of
trade. Thus, an adjustment for differences in levels of trade would be
necessary in almost every case. This would frustrate the legislative
intent that the Department make comparisons at the same level of trade
to the extent possible, and that the Department make level of trade
adjustments only when such comparisons are not possible.
Finally, the Department believes that the deduction of all expenses
from CEP would conflict with Article 2.4 of the AD Agreement. Article
2.4, on which section 772(d) is based, requires the deduction of costs
``incurred between importation and resale.'' The suggestion of the
first group of commenters would call for the deduction of expenses that
are incurred before importation and that do not relate to activities
between importation and resale.
With regard to the argument concerning judicial and administrative
precedents under the pre-URAA version of the statute, the Department
notes that the URAA changed the manner in which CEP (formerly
``exporter's sales price'') is calculated. Because of this change, and
in light of the clear intent expressed in the SAA, we do not believe
that these old law precedents govern the interpretation of section
772(d)(1) with respect to this particular point.
Although we have not adopted the suggestion that we deduct all
expenses from CEP, we have revised paragraph (b) to clarify its
meaning. In the first sentence of paragraph (b), we have deleted the
phrase ``no matter where incurred'' and have replaced it with the
phrase ``that relate to the sale to the unaffiliated purchaser, no
matter where or when paid.'' In addition, we have added the following
new sentence: ``The Secretary will not make an adjustment for any
expense that is related solely to the sale to an affiliated importer in
the United States, although the Secretary may make an adjustment to
normal value for such expenses under section 773(a)(6)(C)(iii) of the
Act.''
The purpose of these changes is to distinguish between selling
expenses incurred on the sale to the unaffiliated customer, which may
be deducted under 772(d)(1), and those associated with the sale to the
affiliated customer in the United States, which may not be deducted. In
addition, the phrase ``no matter where or when paid'' is intended to
indicate that if commercial activities occur in the United States and
relate to the sale to an unaffiliated purchaser, expenses associated
with those activities will be deducted from CEP even if, for example,
the foreign parent of the affiliated U.S. importer pays those expenses.
Finally, the reference to adjustments to normal value reflects our
agreement with the comment that the Secretary may adjust for direct
selling expenses (as well as assumed expenses) associated with the sale
to the affiliated importer under the circumstance of sale provision,
discussed below.
One commenter urged the Department to define ``selling expenses''
to exclude ``general and administrative expenses.'' The Department has
not adopted this suggested change. Typically, the primary, if not sole,
function of an affiliated U.S. importer is to sell. Therefore, many or
all general and administrative expenses of such firms are properly
considered as selling expenses and must be deducted under section
772(d)(1)(D).
Another commenter stated that, in the past, the Department would
not deduct selling expenses in calculating CEP (formerly ESP) in AD
proceedings involving nonmarket economies. According to the commenter,
the
[[Page 27352]]
Department's stated reason for not making a deduction was its inability
to make an offsetting circumstance-of-sale adjustment to normal value
(formerly foreign market value). The commenter stated that the
Department has reevaluated this particular practice, and now recognizes
that the statute requires CEP deductions in nonmarket economy cases
irrespective of whether a circumstance-of-sale adjustment is possible.
The commenter suggests that the agency's regulations should reflect
this change in practice, and should make clear that CEP deductions are
required in nonmarket economy cases.
With respect to this suggestion, the commenter is correct
concerning the Department's reevaluation of its practice. In a recent
determination, the Department stated: ``Regarding the necessity of
making CEP deductions, we have reevaluated our practice in this area
and have concluded that CEP deductions are required by the plain
language of the statute, which states in section 772(d)(2)(D) that CEP
`shall be reduced' by the selling expenses associated with economic
activity in the United States. Consequently, we have made deductions to
CEP for all selling expenses associated with economic activities in the
United States in accordance with our practice.'' Bicycles from the
People's Republic of China, 61 FR 19026, 19031 (April 30, 1996).
However, because the statute is clear on this point, we do not believe
that a change to paragraph (b) is necessary.
``Special rule'' for merchandise with value added after
importation: Proposed paragraph (c) addressed the ``special rule'' of
section 772(e) of the Act that is applicable in situations where
imported merchandise is subject to further manufacture or assembly in
the United States before it is sold to an unaffiliated customer. Except
for the modification of the percentage threshold normally used to
determine when the special rule applies (discussed below), we have not
changed paragraph (c).
By way of background, prior to the enactment of the URAA, section
772(e)(3) of the Act required that the Department calculate ESP (now
CEP) by deducting the amount of any increased value resulting from a
process of manufacture or assembly performed on imported merchandise
prior to its sale to an unaffiliated customer. In situations where the
amount of value added in the United States was very large, the process
of calculating this deduction was very difficult and time-consuming for
the Department. In addition, the legislative history of section
772(e)(3) provided that if the final product sold did not contain a
significant amount of the subject merchandise, the Department was to
refrain from assessing antidumping duties, even though the merchandise
may have been dumped.
Congress retained the U.S. value-added adjustment, in modified
form, in section 772(d)(2) of the Act. However, in the URAA, Congress
addressed the problems described in the preceding paragraph by
providing an alternative method for dealing with imported merchandise
for which a large amount of value is added in the United States. Under
section 772(e), the merchandise no longer is excepted from the
assessment of duties. In addition, instead of requiring that the
Department calculate and deduct the precise amount of value added in
the United States from the price of the finished product, section
772(e) permits the Department, in certain circumstances, to determine
the dumping margin for value-added merchandise on some other basis,
such as by relying on the dumping margins calculated on sales to
unaffiliated customers for which no value was added in the United
States. Under section 772(e), the Department may use an alternative
method where the value added to the subject merchandise ``is likely to
exceed substantially'' the value of the subject merchandise as
imported. The SAA at 826 explains that this ``special rule'' does not
require the Department to make a precise calculation of the value
added. Instead, the phrase ``exceed substantially'' means that the
Department estimates that the value added in the United States is
``substantially more than half'' of the price of the merchandise as
sold to the unaffiliated customer. The SAA at 825-826 further explains
that the intent of the new rule is to avoid requiring the Department to
calculate and back out large amounts of value added, while also
avoiding the undesirable result of subject merchandise escaping the
assessment of antidumping duties entirely.
Threshold for applying the ``special rule'' and use of transfer
prices: In proposed paragraph (c)(2), the Department provided that if
the Secretary estimated the value added in the United States to be at
least 60 percent of the price charged to the first unaffiliated
purchaser, the Secretary normally would determine that the value added
in the United States was likely to exceed substantially the value of
the subject merchandise; i.e., that the special rule applied. The
Department reasoned that a 60 percent threshold met the SAA's
requirement of ``substantially more than half.'' See AD Proposed
Regulations at 7331. In addition, in estimating the value added,
proposed paragraph (c)(2) called for the use of transfer prices between
the foreign exporter/producer and the affiliated U.S. importer.
Several commenters argued against the adoption of a bright-line
test for determining whether the estimated value added is
``substantially more than half,'' the finding that triggers the
application of the special rule. These commenters argued that a bright-
line test was inappropriate and inconsistent with the SAA. In addition,
these commenters argued that if the Department insisted upon using a
bright-line test, it should use a threshold higher than 60 percent.
Finally, these commenters argued that the Department should not
estimate the U.S. value added by relying on transfer prices, because of
the risk that exporters might manipulate these prices to their
advantage. Instead, they asserted, the Department should compare the
price charged to unaffiliated customers for the finished goods to the
constructed value (cost) of the imported merchandise.
A different group of commenters supported the use of a bright-line
test and transfer prices. While most of these commenters also supported
a 60 percent value-added standard, one commenter argued that in
proceedings where the absolute volume of merchandise is large, the
standard should be 50 percent value added. This latter commenter argued
that a 50 percent standard is warranted because of (1) the heavy burden
of reporting value added information in these types of cases, and (2)
the alleged distortions in dumping margins caused by the value-added
calculations.
With respect to the comments concerning the use of a bright-line
test, the Department continues to believe that such a test is
appropriate and desirable. Neither the SAA nor the statute indicates
that the Department may not adopt guidelines in this area, and there
are sound policy reasons for having a bright-line test. First, if the
Department did not adopt a standard in these final regulations, the
burden of establishing on a case-by-case basis the amount of value
added that constitutes ``significantly more than half'' would erase the
administrative savings that Congress intended section 772(e) to
generate. Second, a bright-line standard enables the Department to
inform respondents early in an investigation or review as to whether
they will have to provide detailed value-added information.
We must emphasize, however, that the Department does not intend
that its bright-line standard operate as an
[[Page 27353]]
irrebuttable presumption for all cases. The Department may use a
different threshold where it is satisfied, based on the facts, that a
different threshold is more appropriate in a particular case. In
addition, the Department retains the discretion to refrain from
applying the special rule in situations where there are an insufficient
number of sales to unaffiliated customers to use as an alternative
basis for determining the dumping margin on value added sales. Finally,
because the purpose of section 772(e) is to reduce the administrative
burden on the Department, the Department retains the authority to
refrain from applying the special rule in those situations where the
value added, while large, is simple to calculate.
With respect to the issue of transfer prices, paragraph (c)(2)
continues to provide for the use of transfer prices in estimating U.S.
value added. Section 772 and the SAA are silent on the precise manner
by which the Department is to estimate the amount of value added.
However, in discussing the alternate methods that the Department may
use to determine CEP once the Department has determined that the
special rule applies, the SAA at 826 states that the Department may use
transfer prices. This suggests to us that, had the drafters of the
statute and the SAA focussed on the matter, they would have permitted
the use of transfer prices in estimating U.S. value added.
While the Department appreciates the arguments raised concerning
the possible manipulation of transfer prices, in our view, there are
several factors that minimize this danger. First, because a respondent
does not control the selection of the alternative method used in
situations where the special rule applies, a respondent will not know
in advance whether it would be better or worse off through the
application of the special rule. Thus, if a respondent chose to
manipulate transfer prices, it would do so at its peril. Second, while
transfer prices may be suspect, there are some independent constraints
on transfer pricing, such as the transfer pricing rules of the U.S.
Internal Revenue Service and the valuation rules of the Customs
Service. Finally, as discussed below, to guard against the misuse of
transfer prices, the Department has raised the bright-line threshold to
account for the fact that any estimate of U.S. value added might be
inflated due to artificial transfer prices.
We have balanced the dangers of using transfer prices against the
alternatives. In our view, absent reliance on transfer prices, there is
no other reasonable way to measure the amount of value added that
accomplishes the burden-reducing objective of the special rule. The
alternative suggested by the commenters (use of constructed value of
the subject merchandise) would be as complex and burdensome a method as
the method that section 772(e) was intended to replace.
Having explained our retention of a bright-line test based on the
use of transfer prices, this brings us to the issue of the precise test
that the Department should apply. The Department has reviewed proposed
paragraph (c)(2), and agrees with the commenters that by increasing the
threshold, the Department would ensure that the special rule applies
only in appropriate circumstances. While the Department continues to
believe that 60 percent is ``substantially more than half,'' the
Department recognizes that section 772(e) requires an imprecise
``estimate,'' an estimate which, as discussed above, the Department
must base in part on transfer prices. Because of the imprecision
inherent in any estimate, in these final regulations we have adopted a
standard of 65 percent, thereby providing additional assurance that the
actual value added is substantially greater than half.
We have not adopted the suggestion that we use a 50 percent
standard. As discussed above, the SAA states that the Department will
apply the special rule only where the U.S. value added is
``substantially more than half'' of the total value of the finished
product. Therefore, the Department cannot adopt a standard that would
trigger the use of the special rule when the U.S. value added is only
one half on the total value. Moreover, while the commenter making this
suggestion cited the need to reduce the burden on respondents, the SAA
indicates that the focus of section 772(e) was on reducing the burden
on the Department. Finally, we do not agree with the commenter that the
value added calculation is distortive or that the special rule was
motivated by a concern over distorted calculations. While the
legislative history demonstrates a recognition that the value added
calculation is complex and time-consuming, there is no indication that
Congress or the Administration considered the calculation to be
distortive.
One commenter proposed that the regulations contain a presumption
against use of the ``special rule'' when: (a) The final goods are
trademarked; (b) an essential feature or characteristic of the further
manufactured good exists at importation; (c) the transfer price to an
affiliated person is less than the sales price of the imported
component to an unaffiliated person; (d) sales to unaffiliated persons
of identical or similar merchandise are not in significant quantity; or
(e) the Secretary believes that the circumstances preclude use of the
special rule. The Department has not incorporated this suggestion into
the final regulations. However, we believe that under section 772(e)
and paragraph (c), the Department has sufficient flexibility to refrain
from applying the special rule where the circumstances so warrant. As
for the specific circumstances identified by the commenter, whether
these circumstances would justify a departure from the special rule
would depend upon the facts of a particular case.
One commenter proposed that the Department calculate the amount of
value added by comparing the price at which subject merchandise
(without value added) is sold to unaffiliated customers to the price at
which merchandise (with value added) is sold to unaffiliated customers.
Although we believe that this method would be permissible, given our
lack of experience in applying section 772(e), we have not codified
this method in these final regulations.
Application of alternative methods to determine dumping margins:
One commenter argued that under proposed paragraph (c)(3), the
Department might assign dumping margins to special rule entries in
situations where no dumping margins should be found at all. This
commenter suggested that the Department should provide in its final
regulation that its preferred approach in applying the special rule
will be to determine the export price for sales subject to the rule
based on the most similar sales of subject merchandise, and that such
an export price will be used to compare to normal value. This commenter
urged the Department to give careful consideration to all relevant
differences between the ``special rule'' sales and the sales used in
applying the ``special rule.''
We have not adopted this suggestion. In the Department's view, the
methodology set forth in proposed paragraph (c)(3) for determining
dumping margins on merchandise to which the special rule applies is in
accordance with section 772(e). Section 772(e) authorizes the
Department to use an alternative means of calculating the dumping
margin where merchandise has a substantial amount of U.S. value added,
including reliance on the dumping margins calculated on sales for which
there is no U.S. value added. In adopting section 772(e), Congress and
the Administration were aware that the dumping margins determined by
use of these alternative means might not be
[[Page 27354]]
identical to those that would be determined if the Department were to
calculate the precise amount of U.S. value added and deduct that amount
from the price. However, they concluded that the burden on the
Department of performing the value added calculations far outweighed
any marginal increase in accuracy gained by such calculations.
Finally, with respect to the sales from which the Department will
derive dumping margins to apply to special rule sales, we must
emphasize that the Department has little experience with this new
methodology. Therefore, the Department is not in a position at this
time to provide a great deal of guidance beyond what is contained in
section 772(e) and the SAA. However, we do believe that whether
merchandise is identical may be a factor to consider in selecting the
sales to be substituted for the value added sales. We do not believe,
however, that most similar in the United States is a consideration, and
have not, therefore, incorporated this comment in the rule.
Another commenter asked the Department to clarify that in applying
the special rule, it will base surrogate margins on sales to
unaffiliated persons only if those sales have been made in sufficient
quantities. While the Department agrees with the substance of this
comment, we do not believe that a regulation is necessary, because
section 772(e) expressly requires that sales to an unaffiliated person
be in ``a sufficient quantity.''
One commenter suggested that the Department clarify that, when the
special rule applies, the Department will base its alternative methods
for calculating a dumping margin exclusively on a producer's own
information, as opposed to information pertaining to another exporter
or producer. We have not adopted this suggestion. While the Department
agrees that it should rely on a respondent's own data where possible,
section 772(e) does not impose such a limitation. In some cases, it may
be necessary for the Department to rely on another respondent's data,
such as in situations where all of a particular respondent's sales have
U.S. value added and are subject to the special rule.
One commenter proposed that the Department reflect in the final
regulations the statement in the AD Proposed Regulations that the
Department normally will base dumping margins for merchandise to which
the special rule applies on margins calculated on other merchandise.
The final regulation reflects the particular requirements of section
772(e) of the Act. As the Department explained in the AD Proposed
Regulations, in situations in which the special rule applies, the
Department normally will apply the methodology described in paragraph
(c)(3); i.e., assigning a margin equal to the weighted-average margin
calculated based upon the prices of identical or other subject
merchandise sold to unaffiliated parties.
CEP profit deduction: Proposed paragraph (d) dealt with the
deduction of profit from CEP. Although we received several comments
concerning the CEP profit deduction, for the reasons set forth below,
we have left paragraph (d) unchanged.
Several commenters suggested that the Department clarify that the
amount of profit to be deducted in calculating CEP may never be less
than zero. In addition, these commenters contended that in calculating
the total actual profit used to derive the CEP profit deduction, the
Department must ignore all home market sales made at prices below the
cost of production.
The Department has not adopted these suggestions. With respect to
the first suggestion, we believe that section 772(f) and the SAA at 825
clearly provide that the profit deduction never may be less than zero.
Therefore, we do not believe that a regulation is necessary on this
point.
Regarding the suggestion concerning the treatment of below-cost
sales, in order to determine the total actual profit earned by a
respondent on the relevant sales, the Department must take into account
sales made at a profit and sales made at a loss. As we stated in the AD
Proposed Regulations, 61 FR at 7332, ``there is no provision in the
statute for disregarding sales below cost in this context, and doing so
would conflict with the statutory requirement to use `actual profit.'
''
Several commenters urged the Department to retain the flexibility
to calculate the CEP profit deduction on the basis of something less
than all sales of the subject merchandise and the foreign like product
throughout the period of investigation or review (e.g., on the basis of
a specific model or sales channel, or on a time period less than a full
year). We have not adopted this suggestion, because we believe that
paragraph (d)(1) provides the Department with sufficient flexibility to
use such approaches in those instances where the facts so warrant.
However, we believe that such instances should be the exception,
rather than the rule, because the suggested approaches would add yet
another layer of complexity to an already complicated exercise and
would be more susceptible to manipulation, which the Department wishes
to safeguard against, as suggested by the Senate Report.
One commenter suggested that the Department provide further
guidance regarding the calculation of the CEP profit deduction in
situations where there are no useable home market or third country
sales. We have not adopted this suggestion, because, as stated in the
AD Proposed Regulations, 61 FR at 7332, the Department currently does
not have enough experience to provide further guidance on this issue.
Another commenter, alleging that the Department generally
calculates profit by deducting expenses from revenues, argued that to
avoid double-counting, the Department should deduct all expenses,
including imputed expenses, in calculating the CEP profit deduction. We
have not adopted this suggestion, because the Department does not take
imputed expenses into account in calculating cost. Moreover, normal
accounting principles permit the deduction of only actual booked
expenses, not imputed expenses, in calculating profit.
Other commenters proposed that the Department should (1) cap the
CEP profit deduction by the amount of actual profit accruing on CEP
sales, and (2) make a corresponding deduction from normal value. We
have not adopted these suggestions. With respect to the first
suggestion, as the Department stated in the AD Proposed Regulations, 61
FR at 7332, the statute does not authorize a cap on the amount of
profit deducted from CEP. Moreover, the SAA at 825 states that the
transfer price between the producer and the affiliated importer should
not be used to determine the profit. In our view, this indicates that
Congress and the Administration did not intend that there be a cap.
With respect to the deduction of profit from normal value, we discuss
this suggestion below in connection with Sec. 351.410.
Finally, one commenter argued that the Department is required to
calculate the CEP profit deduction on a transaction-specific basis. The
final regulations do not reflect this approach. In our view, section
772(f), through its references to ``total actual profit'' and ``total
expenses,'' clearly does not contemplate the calculation of the CEP
profit deduction on a transaction-specific basis.
Reimbursement of antidumping duties and countervailing duties:
Paragraph (f) deals with the deduction from export price or CEP of the
amount of any reimbursed antidumping duties or countervailing duties.
Although we
[[Page 27355]]
received several comments concerning duty reimbursement, for the
reasons set forth below, we have left paragraph (f) unchanged.
Reimbursement of countervailing duties: In proposed paragraph (f),
the Department expanded the scope of former 19 CFR Sec. 353.26 to
include the reimbursement of countervailing duties in situations where
imported merchandise is subject to both AD and CVD orders. As the
Department explained in the AD Proposed Regulations, 61 FR at 7332, the
reimbursement of countervailing duties effectively is nothing more than
a reduction in the price paid by the importer. Absent the
reimbursement, the effective price paid by the importer would increase
by the amount of any such duties. As such, a deduction for reimbursed
countervailing duties is a necessary price adjustment in AD
calculations.
Several commenters objected to the proposed change, asserting that
the Department lacks statutory authority to deduct reimbursed
countervailing duties. In addition, these commenters argued that such a
deduction would violate Article 19.4 of the SCM Agreement, which
prohibits the levying of countervailing duties in excess of the amount
of subsidization found. They also claimed that the deduction could
violate section 772(c)(1)(C) of the Act by permitting the imposition of
both antidumping and countervailing duties to offset the same situation
of dumping or export subsidization. Other commenters, however,
supported a deduction for reimbursed countervailing duties, asserting
that such a deduction is consistent with the SCM Agreement and the Act.
In these final regulations, we have retained the deduction for
reimbursed countervailing duties. In the Department's view, this
deduction is consistent with the SCM Agreement and the Act. A deduction
for reimbursed countervailing duties neither increases the amount of
countervailing duties assessed nor imposes duties for the same
situation of dumping and export subsidization. The deduction simply
recognizes that the reimbursement of countervailing duties constitutes
a reduction in the price paid by the purchaser. Moreover, any
reimbursement of countervailing duties on specific sales is directly
tied to such sales and is no different in substance from any of the
other types of price adjustments that the Department routinely factors
into its calculations. Because antidumping duties are reduced by the
amount of any countervailing duties attributable to an export subsidy,
no double assessment is involved.
Finally, we do not believe that the absence of a statutory
provision expressly dealing with the reimbursement of countervailing
duties is fatal. The courts have long recognized the Department's
ability to develop methodologies to deal with situations not expressly
addressed by the statute. As the Federal Circuit stated in Melamine
Chemicals, Inc. v. United States, 732 F.2d 924, 930 (1984), ``there is
no stultifying requirement that [the Department] cite a statute
detailing in haec verba the specific action it may take when confronted
with a particular set of circumstances among the myriad that may
occur.''
Reimbursement in general: Referring to situations involving
affiliated importers, several commenters urged the Department to
automatically investigate whether the foreign affiliate reimbursed the
importer for antidumping or countervailing duties. Other commenters
went even further, arguing that in cases involving affiliated
importers, the Department should make an irrebuttable presumption that
reimbursement has occurred, or, at a minimum, a rebuttable presumption.
They alleged that because the Department treats affiliated exporters
and importers as a single entity for virtually all other purposes,
there is no reason to treat them differently for purposes of analyzing
reimbursement.
We have not adopted these suggestions, because we do not believe
that they are necessary or justifiable. As under former 19 CFR
Sec. 353.26, paragraph (f) applies to affiliated importers, and
requires that they certify that they have not been reimbursed by the
exporter. Should an affiliated importer fail to make this
certification, the Department would deduct the appropriate amount of
antidumping duties or countervailing duties to establish the EP or the
CEP, just as it would in the case of an unaffiliated importer.
Moreover, in our view, it is not justifiable to presume that the
existence of an affiliation will result in reimbursement or that an
affiliated U.S. importer, because of its affiliation, is more likely to
file a false certification.
Section 351.403
Section 351.403 deals with sales and offers for sale and the use of
sales to or through an affiliated party. Comments on this section
addressed paragraph (c) and the approach the Department should take in
determining whether sales to an affiliated party are an appropriate
basis for determining normal value (the ``arm's length test'').
Comments also addressed paragraph (d) and the issue of when the
Department should require the reporting of sales made by affiliated
customers (``downstream sales'').
Arm's length test: The Department's current policy is to treat
prices to an affiliated purchaser as ``arm's length'' prices if the
prices to affiliated purchasers are on average at least 99.5 percent of
the prices charged to unaffiliated purchasers. We received several
comments asking that we codify the current 99.5 percent test. We also
received several comments asking that we refrain from codifying the
99.5 percent test, and that we instead develop and codify a new
methodology for testing affiliated prices.
After considering the comments received on this issue, we have
decided not to codify an arm's length test at this time. We believe
that, while the 99.5 percent test has functioned adequately in numerous
cases, there may be other methods available. We will continue to apply
the current 99.5 percent test unless and until we develop a new method.
If we develop a new methodology, the Department will describe that
methodology in a policy bulletin. We will also publicly announce the
issuance of policy bulletins and ensure that they are easily accessible
to the public.
One commenter asked that the Department adopt a separate test for
situations where the vast majority of a firm's sales are to affiliated
parties. We have not adopted this suggestion, because we believe that,
in this context, the appropriate means to make this determination is by
comparison to known arm's length prices. In order to perform such an
arm's length test, the Department first must establish that sales to
unaffiliated purchasers are sufficient in number or quantity sold to
serve as a benchmark for testing affiliated party transactions. If
sales to unaffiliated purchasers are insufficient, we simply will not
use sales to affiliated purchasers to determine normal value.
One commenter argued that in determining whether sales are at arm's
length, the Department should consider normal business practices, such
as volume discounts, preferences for longstanding customers, and
differences due to level of trade. Many other commenters stated that
under the 99.5 percent test, the Department correctly limits its
examination to a comparison of prices.
The Department agrees that a proper comparison focuses on the
comparability of prices charged to affiliated and unaffiliated
purchasers. However, the Department also agrees
[[Page 27356]]
that it should take into account differences in levels of trade,
quantities, and other factors that affect price. For example, in
comparing prices charged to affiliated and unaffiliated purchasers, we
would attempt to make comparisons on the basis of sales made at the
same level of trade.
Several commenters argued that the Department should disregard not
only affiliated party sales that fall below 99.5 percent, but also
sales that fall above 100.5 percent. We have not adopted this
suggestion. The purpose of an arm's length test is to eliminate prices
that are distorted. We test sales between two affiliated parties to
determine if prices may have been manipulated to lower normal value. We
do not consider home market sales to affiliates at prices above the
threshold to have been depressed due to the affiliation. Therefore, the
Department should treat such sales in the same manner as sales to
unaffiliated customers. However, if a party wishes to argue that sales
at high prices to an affiliate are outside the ordinary course of
trade, the Department would consider such arguments on a case-by-case
basis.
Downstream sales: With respect to paragraph (d) and the use of
``downstream sales,'' certain commenters asked that the regulations
provide that the Department normally will require a respondent to
report downstream sales by an affiliated party to the first
unaffiliated customer. Other commenters argued that the Department
should require a respondent to report downstream sales only if the
sales to the affiliated party are not made at arm's length.
The Department does not believe it necessary or appropriate to
require the reporting of downstream sales in all instances. Questions
concerning the reporting of downstream sales are complicated, and the
resolution of such questions depends on a number of considerations,
including the nature of the merchandise sold to and by the affiliate,
the volume of sales to the affiliate, the levels of trade involved, and
whether sales to affiliates were made at arm's length.
However, we have decided to codify the Department's current
practice regarding the reporting of downstream sales when the volume of
sales to affiliates is small. Under our current practice, we normally
do not require the reporting of downstream sales if total sales of the
foreign like product by a firm to all affiliated customers account for
five percent or less of the firm's total sales of the foreign like
product. In such situations, the Department calculates normal value on
the basis of sales to unaffiliated customers and arm's-length sales to
affiliated customers. In addition, in certain cases, the Department may
decide that a percentage higher than five percent is an appropriate
benchmark, and, in such cases, the Department will not require the
reporting of downstream sales. Also, while the Department normally will
calculate this percentage on the basis of total sales value, there may
be cases where it is more appropriate to use total volume or sales
quantity.
If the Department determines that an affiliate made downstream
sales of a foreign like product, the Department usually will not
require the reporting of both the sales to the affiliate and the
downstream sales by the affiliate. We will examine the sales between
the affiliated parties under paragraph (c). If sales to the affiliate
fail the arm's-length test, the Department will require the respondent
to report that affiliate's downstream sales. If sales to the affiliate
pass the arm's-length test, the Department normally will not require
the respondent to report the affiliate's downstream sales and will
calculate normal value based on sales to the affiliate.
The Department will require a respondent to demonstrate in each
segment of an AD proceeding that the reporting of downstream sales is
not necessary. Similarly, the Department will analyze affiliated party
transactions in each segment. In other words, the fact that the
Department may have determined in an investigation or review that
affiliated party transactions are at arm's length does not mean that
the Department automatically will treat such transactions as being at
arm's length in subsequent segments of a proceeding.
One commenter stated that the quantity of sales sold in the foreign
market to an affiliated customer is not necessarily relevant to the
calculation of a dumping margin, because the Department may compare
those sales to a large number of sales in the U.S. market. Other
commenters stated that all home market sales should be reported so that
Department can address each situation on its facts. Another commenter
stated that section 771(16) of the Act requires the reporting of all
downstream sales of the foreign like product.
With respect to these comments, the Department believes that
imposing the burden of reporting small numbers of downstream sales
often is not warranted, and that the accuracy of determinations
generally is not compromised by the absence of such sales. Even if a
respondent demonstrates that its sales to affiliated parties account
for less than five percent of its total sales, the Department still
will require the respondent to report its sales to the affiliated
parties. Where all sales to all affiliates represent less than 5
percent of total sales, and where the only match for a U.S. sale is a
downstream sale, the Department normally will base normal value on
constructed value, as opposed to requiring that a respondent report
downstream sales.
In our view, this methodology does not conflict with section
771(16) of the Act, because section 771(16) deals with the type of
merchandise for which the Department needs to obtain sales information.
Section 771(16) does not require that the Department obtain information
on all possible sales of the foreign like product.
Some commenters argued that where certain types of affiliation are
involved, such as long-term supplier relationships, the Department
should not require the reporting of downstream sales under paragraph
(d), nor should the Department conduct an arm's-length test analysis
under paragraph (c). We have not adopted this suggestion, because the
Department believes that it should apply these provisions whenever
there are transactions between parties that are affiliated within the
meaning of section 771(33) of the Act. Therefore, if two parties are
affiliated, any transactions between those parties are subject to
paragraphs (c) and (d). However, in instances where a respondent does
not report downstream sales, the Department will consider the nature of
the affiliation in deciding how to apply facts available.
Section 351.404
Section 351.404 deals with the selection of the market to be used
in establishing normal value. We have not made any changes from
proposed Sec. 351.404.
Viability, particular market situation, and representative price:
In proposed paragraph (c)(1), the Department provided that decisions
concerning the calculation of a price-based normal value generally will
be governed by the Secretary's determination as to whether the market
in a particular country is ``viable'' (i.e., whether sales in that
country constitute 5 percent or more of a firm's sales to the United
States). In proposed paragraph (c)(2), however, the Department provided
that the Secretary may decline to calculate normal value based on sales
in a particular market if it is established to the satisfaction of the
Secretary that (1) a particular market situation exists that does not
permit a proper comparison, or (2) in the case of a third country, the
price is not
[[Page 27357]]
representative. In addition, in the preamble to the AD Proposed
Regulations, 61 FR at 7334, the Department stated that a party would
have to submit ``convincing evidence'' in order to overcome a
determination, based on an application of the 5 percent standard, that
a particular market is an appropriate basis for calculating normal
value.
Several commenters objected to the Department's proposed approach
to the ``particular market situation'' criterion. According to these
commenters, section 773(a)(1) of the Act identifies the ``particular
market situation'' in the exporting country or in a third country as
one of three coequal factors that the Department must consider in
determining whether it may use sales in that country as the basis for
calculating normal value. Therefore, they argued, it is improper for
the Department to require that parties present ``convincing evidence''
of the extraordinary nature of a particular market situation before the
Department will invoke this statutory provision. Consistent with the
statute and the SAA, the Department's proposed regulations should not
impose a higher evidentiary standard for determinations regarding the
``particular market situation'' than for other determinations that the
Department makes during the course of an AD proceeding.
The Department has not revised paragraph (c) in light of these
comments. There are a variety of analyses called for by section 773
that the Department typically does not engage in unless it receives a
timely and adequately substantiated allegation from a party. For
example, the Department does not engage in a fictitious market analysis
under section 773(a)(2) absent an adequate allegation from a party.
See, e.g., Tubeless Steel Disc Wheels from Brazil, 56 FR 14083 (1991);
and Porcelain-on-Steel Cooking Ware from Mexico, 58 FR 32095 (1993).
Likewise, the Department does not automatically request information
relevant to a multinational corporation analysis under section 773(d)
of the Act in the absence of an adequate allegation. See, e.g., Certain
Small Business Telephone Systems and Subassemblies Thereof from Taiwan,
54 FR 31987 (1989); and Appendix B, Antifriction Bearings from the
Federal Republic of Germany, 54 FR 18993, 19027 (1989). Also, as
discussed above, the Department and the courts have held that the party
claiming that a sale is not in the ``ordinary course of trade'' has the
burden of proof. Significantly, both the ``ordinary course of trade''
and the ``particular market situation'' criteria appear in section
773(a)(1).
In short, the Department's AD methodology contains presumptions
that certain provisions of section 773 do not apply unless adequately
alleged by a party or unless the Department uncovers relevant
information on its own. In our view, this is an eminently reasonable
approach. A common feature of these provisions is that they call for
analyses based on information that is quantitatively and/or
qualitatively different from the information normally gathered by the
Department as part of its standard AD analysis. If the Department were
to routinely seek the information called for by these provisions in
every case, the Department's ability to comply with its statutory
deadlines would be significantly impaired. Moreover, in many instances,
the exercise would prove to be pointless and a waste of resources for
both the Department and the parties involved. For example, absent an
adequate allegation, it would not make much sense to routinely
investigate whether Japan is a nonmarket economy country merely to
ensure that section 773(c) of the Act does not apply.
In the Department's view, the criteria of a ``particular market
situation'' and the ``representativeness'' of prices fall into the
category of issues that the Department need not, and should not,
routinely consider. In this regard, we note that the SAA at 822,
through its repeated use of the words ``may'' and ``might,'' appears to
treat the ``particular market situation'' criterion as a discretionary
criterion that is subordinate to the primary criterion of
``viability.'' In addition, the SAA at 821 recognizes that the
Department must inform exporters at an early stage of a proceeding as
to which sales they must report. This objective would be frustrated if
the Department routinely analyzed the existence of a ``particular
market situation'' or the ``representativeness'' of third country
sales.
Having said this, however, we believe that the language in the
preamble concerning ``convincing evidence'' was not consistent with
proposed paragraph (c)(2) and was unartful, at best. It was not the
Department's intent to establish an entirely new evidentiary standard,
such as the ``clear and convincing evidence'' standard that is
sometimes used in civil matters. Instead, by using the phrase ``if it
is established to the satisfaction of the Secretary'' in paragraph
(c)(2), we merely were attempting to provide that the party alleging
the existence of a ``particular market situation'' or that sales are
not ``representative'' has the burden of demonstrating that there is a
reasonable basis for believing that a ``particular market situation''
exists or that sales are not ``representative.''
One commenter proposed that the Department recognize that
significant sales to affiliated parties constitute a ``particular
market situation'' that may cause a specific market to be
``inappropriate as a basis for determining normal value.'' The
Department has not adopted this recommendation, because under the
statute and these regulations, the Department may use affiliated party
sales if they are made at arm's-length prices. If affiliated party
sales are made at arm's-length prices, there is no basis for concluding
that the mere fact of affiliation precludes a proper comparison. By
definition, such sales are equivalent to sales to unaffiliated parties.
Another commenter suggested that the Department revise Sec. 351.404
to allow the Department to reject a given third-country market if
prices to that country are ``not representative for reasons other than
for supporting dumping.'' In other words, if high prices in a third
country support dumping to the United States, the Department should not
disregard those prices as ``not representative.'' This commenter also
argued that it would be useful for the regulations to contain a
definition of ``representative,'' and that ``representative prices''
are market-set prices, as opposed to fictitious or artificial prices.
The Department has not included a definition of representative
prices in these regulations, because the Department does not yet have
sufficient experience with this new statutory term to provide
meaningful guidance. However, the Department does not agree with the
implication in the comment that ``not representative'' can mean only
that the prices are unrepresentatively low, nor does the Department
agree with the suggestion that it must identify the reasons for a
particular respondent's pricing scheme.
Another commenter, referring to the Department's explanation of
proposed Sec. 351.404, proposed that the final regulation provide that
the Department will interpret the term ``quantity'' in a broad manner.
In addition, this commenter argued, the final rule should clarify that
the Department always will determine quantity on the basis of the
``aggregate'' sales of the foreign like product. This commenter also
urged the Department to define the terms ``representative,''
``particular market situation,'' and ``proper comparison,''
[[Page 27358]]
and to use narrow definitions based on the language in the SAA.
Finally, with regard to selection of a third country market, this
commenter suggested that the Department elaborate on the ``other
relevant factors'' it will consider under Sec. 351.404(e)(3), and that
the final regulation include a statement that all of the criteria do
not have to be present in order to select a market and that no one
criterion is dispositive.
The Department has not adopted these suggestions. First, with
respect to ``quantity,'' because the SAA at 821 is clear that the term
quantity is to be interpreted broadly, there is no need for a
regulation. Second, regarding ``aggregate sales,'' the final regulation
adopts the language of the proposed Sec. 351.404(b)(2), which states
that the Secretary ``normally'' will determine whether sales are in
sufficient quantity based on ``aggregate'' sales of the foreign like
product. We have retained the word ``normally'' in order to provide the
Department with the flexibility to deal with unusual situations. Third,
regarding definitions of terms, as suggested previously, ``particular
market situation'', ``representative'' prices, and ``proper
comparisons'' are new concepts added to the Act by the URAA. The
Department does not have sufficient experience in applying these new
terms to provide any additional guidance at this time. Finally, with
respect to the selection of a third country market, in proposed
Sec. 351.404(e)(3), we left the term ``other relevant factors''
undefined precisely because we cannot foresee all of the possible
factual scenarios that we may encounter in future cases. In addition,
we believe that Sec. 351.404(e) is sufficiently clear that (1) not all
of the three criteria need be present in order to justify the selection
of a particular market, and (2) no single criterion is dispositive.
Time limits: Proposed paragraph (d) cross-referenced proposed
Sec. 351.301(d)(1), in which the Department provided that allegations
regarding viability, including allegations regarding a particular
market situation or the unrepresentativeness of prices, must be
submitted within 40 days after the date on which the initial AD
questionnaire was transmitted. Section 351.301(d)(1) also authorized
the Secretary to alter the 40-day time limit. We have addressed
comments regarding Sec. 351.301(d)(1) below in connection with our
discussion of that section.
One commenter proposed that the regulations explicitly state that
the Department will make its viability determination early in a
proceeding. The Department has not adopted this suggestion. We agree
that the Department should strive to make viability determinations
early in an investigation or review, and, as noted above, we have
drafted Sec. 351.404 with this objective in mind. However, there may be
instances in which the Department must delay or reconsider a decision
on viability.
Section 351.405
Section 351.405 deals with the calculation of normal value based on
constructed value (``CV'').
Appropriate market for determining profit: Subparagraph (A) of
section 773(e)(2) of the Act sets forth the preferred method for
determining the amount of selling, general, and administrative
(``SG&A'') expenses and profit to be included in constructed value.
Subparagraph (B) of that section sets forth three alternative methods.
In proposed Sec. 351.405(b), the Department defined the term ``foreign
country'' differently for purposes of subparagraphs (A) and (B).
With respect to these definitions, one commenter argued that well-
established rules of statutory construction preclude the Department
from defining the term ``foreign country'' differently in different
subparagraphs of the same statutory provision. This commenter observed
that section 773(e)(2) provides that for both the preferred method
under subparagraph (A) and the alternative methods under subparagraph
(B), the Department must determine SG&A expenses and profit on the
basis of sales of the foreign like product ``for consumption in the
foreign country.'' The commenter further noted that the phrase ``for
consumption in the foreign country'' appears in the statute with
respect to each of the four methods for computing SG&A and profit.
Thus, according to the commenter, there is no basis for the Department
to construe the phrase ``foreign country'' to mean either the home
market or a third country for purposes of subparagraph (A), while at
the same time interpreting the identical phrase to mean only the home
market for purposes of subparagraph (B). The commenter believed that
the Department should compute SG&A and profit for CV exclusively by
reference to home market sales.
Another commenter also argued that the Department should not
interpret the term ``foreign country'' differently for purposes of
subparagraphs (A) and (B). However, unlike the prior commenter, this
commenter believed that the correct interpretation allows the
Department to compute SG&A and profit on the basis of either home
market or third country sales, as appropriate, under any of the methods
listed in section 773(e)(2). In this commenter's view, to limit the
alternative SG&A and profit methods to home market experience, as the
Department proposed, would be inconsistent with the intent of the
drafters of the URAA and the AD Agreement. Moreover, this commenter
noted, such an interpretation would be logically inconsistent in
circumstances where, because the Department has found the home market
to be non-viable, the Department uses third country data for normal
value. Accordingly, the commenter suggested, the Department should
revise proposed paragraph (b) in order to retain flexibility to use
third country profit and SG&A experience in computing CV under the
alternative methods of subparagraph (B), as well as under the preferred
method of subparagraph (A).
The Department has not adopted the suggestions of either commenter.
With respect to the three alternative methods, the SAA and the AD
Agreement expressly indicate that profit and SG&A are to be based on
home market sales. Thus, the Department cannot adopt the proposal to
use third country profit and SG&A under the alternative methods. By
contrast, with respect to the preferred method, the SAA and the AD
Agreement are silent as to the market on which SG&A and profit should
be based. The absence of any express intent in the SAA or other
legislative history with respect to the preferred method--in contrast
to the express intent set forth in these same documents regarding the
alternative methods--indicates that, in the case of this particular
issue, the drafters did not intend that the preferred and alternative
methods be identical.
The Department believes that in situations where an exporter's
third country sales form the basis for normal value, but the Department
resorts to CV (because, for example, third country sales are below
cost), third country sales constitute the most reasonable and accurate
basis for calculating profit and SG&A. In such situations, because the
Department already has rejected a respondent's home market sales as a
basis for normal value, the Department also must reject SG&A and profit
based on those sales. Further, where a respondent reports third country
COP data, use of third country sales is the most practical basis for
deriving profit and SG&A for both the Department and the respondent,
because the respondent already will have reported the necessary data.
Determination of product categories for calculation of SG&A and
profit: In the AD Proposed Regulations, 61 FR at 7335, the Department
stated that it would calculate SG&A and profit on the
[[Page 27359]]
basis of aggregate figures for all covered foreign like products. A
number of commenters disagreed with this approach. Although differing
somewhat in their respective statutory interpretations and suggestions,
all of the commenters generally agreed that the Act requires the
Department to compute SG&A and profit on a basis narrower than that
contemplated by the Department. In this regard, some of the commenters
recommended that the regulations provide for the calculation of SG&A
and profit on the basis of different product groupings, and that such
groupings be limited to those models of the foreign like products
capable of comparison to each model of the subject merchandise. Other
commenters suggested an even narrower, model-specific basis for
computing SG&A and profit; i.e., when the Department disregards all
home market sales of a particular model of the foreign like product, it
would select the next most similar model as the basis for computing
SG&A and profit.
The Department recognizes that there are other methods available
for computing SG&A and profit for CV under section 773(e)(2)(A) of the
Act, including those suggested by the commenters. We continue to
believe, however, that an aggregate calculation that encompasses all
foreign like products under consideration for normal value represents a
reasonable interpretation of the statute. This approach is consistent
with the Department's method of computing SG&A and profit under the
pre-URAA version of the statute, and, while the URAA revised certain
aspects of the SG&A and profit calculation, we do not believe that
Congress intended to change this particular aspect of our practice.
Moreover, the Department believes that in applying the preferred
method for computing SG&A and profit under section 773(e)(2)(A), the
use of aggregate data results in a reasonable and practical measure of
profit that the Department can apply consistently in each case. By
contrast, a method based on varied groupings of foreign like products,
each defined by a minimum set of matching criteria shared with a
particular model of the subject merchandise, would add an additional
layer of complexity and uncertainty to AD proceedings without
generating more accurate results.
Inclusion of below-cost sales in the calculation of profit: One
commenter argued that, in calculating CV profit, the Department should
exclude all below-cost sales, whether or not the Department disregarded
such sales as being outside the ordinary course of trade under section
773(b) of the Act. This commenter believed that the SAA at 840 supports
this position in that it provides for the use of profitable sales as
the basis for calculating CV profit in most cases. In the commenter's
view, the Department's regulations should implement the legislative and
administrative intent by providing that the loss resulting from any
below-cost sale will not enter into the profit calculation for CV.
Another commenter disagreed with the proposal that the Department
automatically exclude all below-cost sales from the profit calculation,
arguing that the statutory directive for computing CV profit (as well
as SG&A expenses) requires that the Department use sales ``in the
ordinary course of trade'' in making its profit calculations. This
commenter contended that if, under its below-cost test, the Department
does not disregard below-cost sales of a foreign like product, those
sales are in the ordinary course of trade, notwithstanding that they
are at below-cost prices. Thus, according to the commenter, the
Department should account for such sales in the CV profit calculation.
The commenter further noted that the statute provides no restriction on
using home market sales in the ordinary course of trade in the first
and third alternative profit methods under section 773(e)(2)(B) of the
Act. Accordingly, the commenter maintained, the Department must use all
home market sales to compute profit under these alternative profit
methods.
The Department believes that, in computing profit for CV, the
automatic exclusion of below-cost sales would be contrary to the
statute. In computing profit under the preferred and second alternative
methods, the statute allows for the exclusion of sales outside the
ordinary course of trade. The statutory definition of ordinary course
of trade, in turn, provides that only those below-cost sales that are
``disregarded under section 773(b)(1)'' of the Act are automatically
considered to be outside the ordinary course of trade. In other words,
the fact that sales of the foreign like product are below cost does not
automatically trigger their exclusion. Instead, such sales must have
been disregarded under the cost test before the Department will exclude
from the calculation of CV profit.
In addition, we believe that the SAA at 840 supports this position.
The SAA states that unlike the Department's old law practice (under
which the Department accounted for all sales, including sales
disregarded as being below-cost, in the computation of profit), the new
statute precludes the Department from including in its calculation of
profit any below-cost sales that the Department disregards under
section 773(b)(1) of the Act. Consequently, under the new law and as
described in the SAA, profitable sales would constitute the majority of
the transactions used to compute profit for CV under the preferred and
second alternative methods.
With respect to the other alternative profit methods authorized by
section 773(e)(2)(B), the Department believes that the absence of any
ordinary course of trade restrictions under the first alternative is a
clear indication that the Department normally should calculate profit
under this method on the basis of all home market sales, without regard
to whether such sales were made at below-cost prices. However, the same
cannot be said of the third alternative method, which provides for the
use of ``any other reasonable method'' in determining CV profit. The
SAA at 841 makes it clear that, given the absence of any comparable
standard under the prior statute, it would be inappropriate to
establish methods and benchmarks for applying this alternative. Thus,
depending on the circumstances and the availability of data, there may
be instances in which the Department would consider it necessary to
exclude certain home market sales that are outside the ordinary course
of trade in order to compute a reasonable measure of profit for CV
under the third alternative method.
Abnormally high profits: One commenter recommended that the
regulations state that above-cost sales are not ``in the ordinary
course of trade'' for purposes of determining CV profit when the use of
those sales would lead to irrational or unrepresentative results. This
commenter noted that the SAA at 834 and 840 refers to sales with
``abnormally high profits'' and merchandise sold at ``aberrational
prices'' as examples of transactions that the Department may consider
as being ``outside the ordinary course of trade'' for purposes of
determining CV profit. Based on these examples, the commenter posited
that if the Department excluded the vast majority of a respondent's
sales from the profit calculation because they were below cost, the few
remaining above-cost sales, by definition, would be sold at
aberrational prices. As such, the Department also would have to exclude
those sale from the CV profit calculation.
Another commenter suggested that the regulations stringently define
the phrase ``abnormally high profits.'' This
[[Page 27360]]
commenter argued that the fact that profit margins are relatively high
is an insufficient basis for determining that profits are ``abnormal.''
Instead, the commenter argued, the burden of establishing that a given
profit amount is ``abnormal'' should be very high, and should be based
on express economic assumptions.
The Department agrees that the sales used as the basis for CV
profit should not lead to irrational or unrepresentative results.
However, we have not adopted the first commenter's recommendation,
because there may be instances in which it would be appropriate to base
profit on a small number of above-cost sales. Specifically, where the
Department finds a majority of sales of a foreign like product to be at
below-cost prices (and, thus, excludes those sales from the calculation
of profit), the fact that only a few sales remain at above-cost prices
does not, by itself, render such sales outside the ordinary course of
trade. Rather, it is the below-cost sales that are outside the ordinary
course of trade. Whether the few remaining above-cost sales are also
outside the ordinary course of trade is a separate issue that depends
on the facts and circumstances surrounding these transactions.
In this regard, the Department believes that the burden of showing
that profits earned from above-cost sales are ``abnormal'' (or
otherwise unusable as the basis for CV profit) rests with the party
making the claim. We do not consider it appropriate, however, to
establish a stringent evidentiary burden in the regulations, as
suggested by the second commenter. In most instances, proof that the
profits earned by respondent on specific sales are abnormal will depend
on a number of factors, including the type of merchandise under
investigation or review and the normal business practices of the
respondent and of the industry in which the merchandise is sold. Thus,
the Department believes it appropriate to make such ordinary course of
trade determinations on a case-by-case basis.
Profit ceiling: One commenter proposed that the regulations impose
a ceiling on the amount of profit to be used in those cases where no or
too few foreign market sales are found to be made ``in the ordinary
course of trade.'' For such a ceiling, the commenter suggested that the
Department use the average profit rate for the industry that produces/
sells the subject merchandise.
The Department does not believe that there is a statutory basis for
imposing a profit ceiling. Consistent with our position in the
preceding comment, where there are only a few sales made by a
respondent in the ordinary course of trade, such sales would form the
basis for CV profit, because they would fulfill the requirement for
actual profits under section 773(e)(2)(A) of the Act. It would
contradict the plain language of the statute (which calls for the use
of respondent's actual profits for a foreign like product) were the
Department to impose an industry-wide ceiling on the profit used for
CV.
Moreover, in instances where there are no sales in the ordinary
course of trade from which to compute profit, section 773(e)(2)(B) of
the Act does not provide that a profit ceiling be imposed for each of
the alternative methodologies. Instead, only the third alternative
method (i.e., amounts realized under any other reasonable method)
requires that the Department consider a ``ceiling'' on the amount
calculated for CV profit. Here too, however, the Department believes
that the commenter's recommended industry-wide average profit ceiling
does not conform to the statutory requirement. Section
773(e)(2)(B)(iii) of the Act provides that the so-called ``profit cap''
be determined based on amounts realized by other exporters or producers
in the foreign country in connection with sales of merchandise that is
the same general category as the subject merchandise. This differs from
the commenter's suggestion in two important respects. First, the
statutory profit cap is to be derived from sales in the general
category of products and, thus, encompasses a group of products that is
broader than the subject merchandise. Second, where it relies on the
third alternative method, the Department is required to determine the
profit cap figure based on sales in the foreign country exclusive of
profits realized by the exporter or producer under investigation or
review. By contrast, the proposed average industry-wide profit figure
presumably would include sales by all exporters and producers in all
markets, including sales by the exporter and producer in question and
sales to the United States. In our view, the statute prohibits the use
of such sales for this purpose.
Finally, it is important to note that the SAA at 841 anticipates
situations in which the Department will be unable to determine a profit
cap due to an absence of the appropriate data. In these instances, the
Department may apply the third alternative profit method on the basis
of facts available. However, the Department will not make adverse
inferences in applying facts available, unless the respondent did not
cooperate to the best of its ability during the course of the
investigation or review.
Use of other producer's profit data: One commenter suggested that
the regulations state that, when calculating a respondent's profit for
CV under section 773(e)(2)(B) of the Act, the Department will resort to
the second alternative method (other producers' profits for the foreign
like product) only in exceptional circumstances. The commenter
contended that the adoption of this principle will help to ensure
fairness and predictability in AD proceedings.
In our view, the SAA at 840 makes clear that there is no hierarchy
or preference among the three alternative methods for calculating
profit under section 773(e)(2)(B). Rather, the SAA provides that the
Department's selection of an alternative profit calculation method will
be made on a case-by-case basis, and will depend, to an extent, on the
data available with regard to profits earned in the foreign market. For
this reason, we have not adopted the commenter's recommendation to
limit the use of the second alternative method to exceptional
circumstances, because such an approach would impose a preference in
favor of the first and third alternative methods.
Section 351.406
Section 351.406 deals with the analysis of whether to disregard
certain sales as below the cost of production under section 773(b) of
the Act.
Extended period of time: Several commenters made suggestions
regarding the ``extended period of time'' criterion for below-cost
sales under section 773(b)(1)(A) of the Act. Two of these commenters
disagreed with the statement in the AD Proposed Regulations, 61 FR at
7336, that the Department would exclude below-cost sales made during
only one month of the period of investigation or review. These
commenters maintained that because one-month's worth of sales do not
represent the pricing practices of a company over a full investigation
or review period, the Department should not consider such sales to have
been made within an extended period of time. Similarly, another
commenter recommended that the Department establish criteria for
determining when sales of ``custom'' products (products not
manufactured continuously throughout the period of investigation or
review) have been made ``within an extended period of time in
substantial quantities.''
The Department has not adopted these suggestions, because we
believe that the SAA is clear as to when below-
[[Page 27361]]
cost sales have occurred ``within an extended period of time.'' The
SAA at 831-832 states that ``below-cost sales need occur only within
(rather than over) an extended period of time.'' According to the SAA,
this means that the Department ``no longer must find that below-cost
sales occurred in a minimum number of months before excluding such
sales from its analysis.'' Thus, for example, where a particular model
is sold at prices below the cost of production during one month of the
period of investigation or review (and where such sales are in
substantial quantities and are not at prices that would permit cost
recovery), the Department may disregard these sales in its
determination of normal value.
Another commenter made two recommendations regarding the language
in proposed paragraph (b) that an extended period of time ``normally
will coincide with the period in which the sales under consideration
for the determination of normal value were made.'' First, the commenter
cited the statutory requirement that the substantial quantity of below-
cost sales occur ``within'' the extended period of time, and not
``over'' that period. Based on this requirement, the commenter argued,
paragraph (b) should not state that the period required to satisfy the
``extended period of time'' criterion must be as long as, or
``coincide'' with, the period of investigation or review. Second, this
commenter noted that under proposed paragraph (b), the period in which
``sales under consideration'' are made could vary by model or part
number. For example, according to this commenter, if a model was
discontinued only a few months into the period of review, paragraph
(b), as drafted, would limit the ``extended period of time'' to the
duration of sales of that model. The commenter suggested that if the
Department intends that the entire period of investigation or review
constitute the ``extended period of time,'' it should make this clear
in the final regulations.
It was not the Department's intention (nor do we believe it to be
the case) that the use of the word ``coincide'' in proposed paragraph
(b) changes the clear language of section 773(b)(1)(A) from ``within an
extended period of time'' to ``over'' such a period. Instead, proposed
paragraph (b) merely establishes the duration of that interval which
the Department normally will consider as being ``an extended period of
time'' for purposes of determining whether below-cost sales were made
in substantial quantities under section 773(b)(1) of the Act. Below-
cost sales need only occur within that period in order to be counted
toward the substantial quantities threshold.
The Department does not believe it appropriate to redraft paragraph
(b) to refer to sales within the period of investigation or review. The
commenter making this suggestion presented a scenario in which a firm
sells a particular model of a foreign like product only during the
first few months of a review period. This commenter argued that
paragraph (b) could be construed in such a way as to limit the extended
period of time to the duration of sales of that model. We do not
believe this to be the case, however, because the extended period of
time is based on the period during which all foreign market sales were
made, not merely sales of individual models. In other words, although
it has been the Department's practice to conduct the sales below cost
analysis on a model-specific basis, the extended period of time
interval is generally the same for all models of the foreign like
product that are under consideration for normal value. The fact that a
firm makes sales of a particular model in only a few months does not
alter the defined ``extended period of time.''
This being the case, it is important to note that paragraph (b)
allows the Department to adhere to the statutory requirement that an
extended period of time normally be one year. At the same time,
however, it recognizes that the foreign market sales used as the basis
for determining normal value (and that may become the subject of a
sales below cost analysis) can occur over a period that is longer or
shorter than one year. For example, in an administrative review,
because of our practice of looking to ``contemporaneous'' sales in
months other than the month in which the sale of the subject
merchandise took place, the Department often requests a respondent to
submit data regarding contemporaneous sales of foreign like products
for specific months prior to and after the normal one-year period of
review. In this instance, the extended period of time would be longer
than twelve months. Likewise, the extended period of time could be
shorter than one year if, for example, the subject merchandise
consisted of highly perishable agricultural products with growing and
selling seasons that are shorter than one year.
Section 351.407
Section 351.407 contains rules regarding the allocation of costs,
the application of the major input rule under section 773(f)(3) of the
Act, and the application of the startup adjustment to CV and COP under
section 773(f)(1)(C) of the Act.
Affiliated party transactions/major input rule: In response to a
number of comments, the Department has added a new paragraph (b) to
Sec. 351.407 that clarifies the Department's practice with respect to
the determination of the value of major inputs purchased from
affiliated suppliers in cases involving cost of production and/or CV.
(We have redesignated proposed paragraphs (b) and (c) as paragraphs (c)
and (d), respectively.) The new paragraph provides that, when the
Department applies the major input rule, the Department normally will
use the transfer price paid by the producer for a major input so long
as that price is not below the input's market price or the supplier's
cost of production for the input. In addition, if both the transfer
price and the market price for a major input are less than the
supplier's cost of production for the input, the Department normally
will use production costs as the appropriate value for the major input
under section 773(f)(3) of the Act.
Several commenters made recommendations regarding the Department's
treatment of production inputs purchased from affiliated parties under
section 773(f)(2) and (3) of the Act (affiliated party transactions
disregarded and the major input rule). In general, these commenters
suggested that, in determining the value of production inputs, the
Department should place greater reliance on transfer prices between
producers and their affiliated suppliers, especially where the
reporting burden on respondents outweighs the value of conducting an
arm's length test for every input. More specifically, two commenters
suggested that the regulations establish an arm's-length test for
inputs obtained from affiliated parties. One commenter believed that
only significant differences--for instance, plus or minus 10 percent--
between the average price charged to affiliated parties and the average
price charged to unaffiliated parties should cause the Department to
reject the affiliated party transactions as not being at arm's-length
prices. As an alternative, this commenter suggested that the
regulations provide that affiliated party prices are at arm's length if
they do not deviate from the average non-affiliated party prices by
substantially more than the deviation of non-affiliated party prices
from that average. The other commenter suggested that if record
evidence demonstrates that a producer cannot manipulate the price of
inputs purchased from an affiliated party, the Department should
[[Page 27362]]
conclude that the producer purchased the input at arm's length.
We have not adopted the proposal to include in the regulations an
arm's-length test for inputs sourced from affiliated suppliers.
Although a test along these lines may be appropriate in some instances,
it may not be in others. For instance, where a particular input
represents a significant portion of the cost of the merchandise under
investigation, a 10 percent difference between the price charged to the
affiliated producer and the price charged to unaffiliated producers
could have a significant effect on the results of the Department's AD
analysis. In other instances, where inputs sourced from an affiliated
party represent an immaterial part of the overall manufacturing costs
of the merchandise, the Department may find it appropriate to accept a
producer's transfer prices (or to test those prices on a sample basis)
without conducting a full-blown arm's-length test based on the prices
paid for all such inputs. Thus, instead of implementing a single arm's-
length test applicable to all situations involving affiliated party
inputs, we think it is important that the Department consider the facts
of each case in order to determine the appropriate level of scrutiny it
should give to affiliated party transactions.
With respect to the recommendation that the Department consider the
ability of a producer to manipulate the price of inputs purchased from
an affiliated party, we do not think that the potential price
manipulation standard described by the commenter is appropriate for
purposes of examining the arm's-length nature of input transfer prices.
The indeterminate nature of such a standard would make it
unadministrable and impractical. Instead, the Department believes that
the appropriate standard for determining whether input prices are at
arm's length is its normal practice of comparing actual affiliated
party prices with prices to or from unaffiliated parties. This practice
is the most reasonable and objective basis for testing the arm's length
nature of input sales between affiliated parties, and is consistent
with section 773(f)(2) of the Act.
With respect to the major input rule, two of the commenters
recommended that the regulations establish a threshold for determining
when an input will be considered ``major.'' These commenters suggested
that normally the Department should not consider affiliated party
inputs to be ``major'' if they represent less than 20 percent of the
cost of production. Two commenters added that where a producer cannot
obtain cost data from an affiliated supplier, the Department should
allow the producer to report transfer prices.
Another commenter opposed these suggestions, noting that the only
substantive change made by the URAA with respect to the issue of input
dumping was to clarify that section 773(f) applies to the calculation
of both cost of production and CV. Thus, the commenter argued, the
Department should reject as inappropriate the suggestions of the other
commenters.
The Department has not adopted the suggested definitions of ``major
input.'' We continue to believe that the determination of whether an
affiliated party input constitutes a ``major input'' in a particular
case depends on several factors, including the nature of the input and
the product under investigation. The determination also may depend on
the nature of the transactions and operations between the producer and
its affiliated supplier. For example, a producer could purchase a
number of significant inputs from an affiliated supplier that
individually account for a small percentage of the total cost of
production for the subject merchandise, but, when considered in the
aggregate, comprise a substantial portion of the total cost of
production. In this instance, it may be appropriate for the Department
to consider the inputs to be major inputs for purposes of examining the
affiliated supplier's production costs under section 773(f)(3) of the
Act. Similarly, the Department may find it necessary to analyze, on a
sample basis, the production costs incurred for affiliated party inputs
where a large number of such inputs are purchased from various
affiliated suppliers and the combined value of the inputs purchased
represents a significant portion of the total manufacturing cost of the
subject merchandise.
These examples illustrate the difficulties inherent in relying on a
single, all-encompassing definition of ``major input.'' There also is
an additional problem associated with using a single numerical
standard. In identifying ``major input,'' the Department generally must
rely on the transfer price charged by the affiliated supplier. However,
because the transfer price itself may be below cost, it may not
constitute an appropriate basis on which to measure the significance of
the input. Because of this problem, we do not believe that the
Department would have sufficient flexibility to examine affiliated
party transactions were we to adopt the 20 percent-of-cost definition
or any other specific threshold for major inputs suggested by the
commenters.
Nonrecurring costs: One commenter suggested that the Department add
a new paragraph to its regulations to clarify the treatment of
nonrecurring costs under section 773(f)(1)(B) of the Act. Specifically,
this commenter recommended that the regulations establish a rebuttable
presumption that all nonrecurring costs benefit current and/or future
production, and that the Department either will (1) expense such costs
to current production, or (2) allocate the costs over current and
future production, as appropriate.
As the Department stated in the AD Proposed Regulations, 61 FR at
7342, the allocation of nonrecurring costs, such as research and
development costs, for purposes of computing COP and CV is dependent on
case-specific factors. Section 773(f)(1)(B) recognizes the fact-
specific nature of these allocation issues by providing only that the
Department adjust costs appropriately to take account of any benefit
that may accrue to a respondent's current and/or future production as a
result of incurring such costs. Thus, in these final regulations, we
have not elaborated on the allocation of nonrecurring costs. Instead,
the Department will continue to determine the appropriate allocation of
non-recurring costs on a case-by-case basis.
Reliance on generally accepted accounting principles: With respect
to the allocation of costs, one commenter recommended that the
regulations provide that the Department normally will allocate costs in
accordance with the generally accepted accounting principles (GAAP) of
the country of exportation.
The Department has not adopted this suggestion, because it would
establish a standard for computing COP and CV different from the
standard contemplated by the Act. Section 773(f)(1)(A) provides that
the Department normally will calculate costs ``based on the records of
the exporter or producer of the merchandise, if such records are kept
in accordance with generally accepted accounting principles of the
exporting country (or the producing country, where appropriate) and
reasonably reflect the costs associated with the production and sale of
the merchandise.'' Thus, the statute expresses a preference for
computing costs on the basis of foreign country GAAP only when those
practices measure costs in a reasonable manner. In addition, where a
producer does not keep its normal accounting records in accordance with
foreign country GAAP, the statute does not require that such records be
made to conform with foreign GAAP.
We do not mean to suggest that the Department would not look to the
[[Page 27363]]
GAAP of the foreign country (or to U.S. or international accounting
principles) in establishing whether the normal accounting practices of
the producer reasonably reflect the costs associated with the
production of the merchandise in question. Instead, we mean only that,
for AD purposes, the fact that a producer does not follow its national
accounting principles does not automatically mean that the producer's
accounting practices do not reasonably reflect costs.
Startup adjustment: We received several comments concerning various
aspects of proposed paragraph (c) (now paragraph (d)) and the new
startup adjustment.
Definition of startup: One commenter, stating that the definition
of terms in proposed paragraph (c) seemed to conform to the statute and
the AD Agreement, urged the Department to apply paragraph (c) in a
manner consistent with the SAA and the URAA. Specifically, this
commenter maintained that the Department should allow for a startup
adjustment in those instances where a semiconductor producer can
demonstrate that a substantial investment was required to change a
design, significantly reduce wafer size, or produce other new types of
products that fall within a current chip generation.
Another commenter contended that the definitions of ``new
products'' and ``new production facilities'' in proposed paragraph
(c)(1) were exceedingly narrow. This commenter asked the Department to
confirm that improvements to products or production facilities that
entail substantial costs and that involve significant decreases in
productivity will qualify for the startup adjustment.
Two commenters oppose the suggestions described above. One
commenter argued that the startup adjustment does not apply to the
semiconductor design changes described. In support, this commenter
cited the SAA at 836, which states that ``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.''
The other commenter opposing the suggestions argued that the
definition of ``new products'' in proposed paragraph (c)(1)(ii) was too
broad, and suggested that the regulations provide examples that would
limit the circumstances under which the ``complete revamping or
redesign'' of products would be eligible for a startup cost adjustment.
This commenter noted that in many industries, firms continually revamp
or redesign products in order to obtain incremental improvements in
performance or to reduce production costs, or both. In the commenter's
view, however, such process or performance improvements that do not
change the dimensions and construction of an article are not sufficient
to result in a ``new product.'' The commenter recognized that in
proposed paragraph (c)(1)(ii), the Department sought to distinguish
``mere improvements'' to products from the ``complete revamping or
redesign'' of such products. However, the commenter believed that this
paragraph was unduly vague and that the Department should clarify it by
means of specific, narrowly defined examples of ``new products.''
The Department has not incorporated the suggestions made by these
commenters in the regulations. Nor do we consider this explanatory
preamble an appropriate vehicle for making determinations as to whether
situations specific to the semiconductor industry would warrant a
startup adjustment under section 773(f)(1)(C). Instead, paragraph
(d)(1) continues to set forth the definitions contained in the SAA at
836. Given the variety of products and industries with which the
Department deals and the fact that the startup provision is new to the
statute, we believe that these examples are well-suited to the task of
providing guidance to parties without unintentionally expanding or
limiting the availability of a startup adjustment.
Standard for granting a startup adjustment: One commenter noted
that proposed paragraph (c) correctly recognized that the standard for
granting a startup adjustment is no more or less stringent than those
applicable to other types of adjustments under the Act. This commenter
added that because there are numerous situations that may call for some
form of startup adjustment, proposed paragraph (c) properly left the
Department wide latitude in analyzing and granting startup adjustments.
Another commenter, however, argued that the Department should
strengthen paragraph (c) to ensure that respondents are not encouraged
to file meritless claims for startup adjustments. To achieve this, the
commenter recommended that the regulations provide that a respondent
must submit substantial evidence demonstrating that the expenses for
which a startup adjustment is sought can be directly tied to a startup
phase of production.
A third commenter suggested that, because respondents bear the
burden of proof in demonstrating they are entitled to a startup
adjustment, the regulations should clarify the information necessary to
obtain the adjustment. This commenter asked that the Department give
specific examples of the types of documentation that will be sufficient
to meet its requirements.
With respect to these suggestions, the Department notes that the
SAA at 838 provides that the burden of establishing entitlement to a
startup adjustment rests with the party seeking the adjustment. Among
other things, the claimant must demonstrate that the costs for which an
adjustment is claimed are directly associated with the startup phase of
operations. Having said this, however, we have not adopted the
suggestion that we establish a special burden of proof for startup
adjustments, because we believe that the burden of establishing
eligibility for a startup adjustment is the same as that applicable to
any other AD adjustment. However, as in the case of any other
adjustment, the Department intends to seek the case-specific
information and documentation necessary to establish whether a startup
adjustment is appropriate.
We also have chosen not to implement the suggestion that the
Department provide specific examples of the documentation required in
order to qualify for a startup adjustment. The SAA indicates that
startup inquiries will be based on the specific facts of each case. For
example, the SAA at 838 states that ``companies must demonstrate that,
for the period of 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.'' Here, the SAA clearly contemplates a fact-based inquiry
that includes consideration of a respondent's specific production
situation and the unique technical difficulties that led to decreases
in its normal production output. Moreover, other portions of the SAA
further support the conclusion that the Department must conduct a fact-
based examination of claims for a startup adjustment. Thus, it would be
inappropriate, as well as impractical, for the Department to impose a
mandatory set of information requirements that would apply to all
cases.
[[Page 27364]]
Duration of startup period: One commenter recommended that the
regulations refer expressly to the quality of merchandise produced as a
criterion to be considered in determining the length of the startup
period. The commenter argued that where merchandise, although in
production, is not yet of a quality sufficient for sale, some startup
adjustment would be appropriate. Another commenter, however, opposed
this proposal, arguing that the ``quality of a product'' is an
amorphous concept that respondents could manipulate.
The Department has not adopted the suggestion to make product
quality a criterion in determining the length of the startup period,
because we believe that this suggestion is inconsistent with the
statute and the SAA. Section 773(f)(1)(C)(ii) of the Act provides that
the Department will consider startup as having ended as of the time the
producer achieves a level of commercial production that is
characteristic of the merchandise, producer, or industry concerned. The
SAA at 836 states that in making a determination as to when a producer
reaches commercial production levels, the Department will measure the
producer's actual production levels based on the number of units
processed. The SAA also provides that, to the extent necessary, the
Department will examine other factors (such as historical data
reflecting the same producer's or other producer's experiences in
producing the same or similar products) in determining the end of the
startup period.
We note also that the SAA does not refer to quality of merchandise
as a criterion for measuring the length of the startup period, but
instead relies strictly on the number of units processed as a primary
indicator of the end of the startup period. In fact, the SAA at 836
states that the Department will not extend the startup period in a
manner that would cover product improvements and cost reductions that
may occur over the life cycle of a product. The Department believes
this to be a clear reference to product quality and yield improvements
that may continue to exist long after startup has ended and, if taken
into consideration, could result in extending the startup period beyond
the point at which commercial production is achieved.
Startup costs: One commenter suggested revisions to proposed
paragraph (c)(4) (now paragraph (d)(4)) regarding the types of costs
that are eligible for a startup adjustment under the Act. According to
this commenter, these revisions would help to clarify the legislative
intent that, in making a startup adjustment, the Department may
consider only those costs that are tied directly to manufacturing of
the merchandise.
We have adopted the revisions suggested by the commenter. These
changes provide additional clarification regarding the types of non-
production costs that the Department will consider as ineligible for a
startup adjustment. These costs include general and administrative
(``G&A'') expenses and general research and development costs that the
Department normally considers to be part of G&A.
Amortization of startup costs: One commenter disagreed with the
Department's position that it should amortize over a reasonable period
of time any excess between a respondent's actual costs and the costs
adjusted and calculated for startup costs. In this commenter's view,
there is no basis under the AD Agreement for such an approach. In
addition, the commenter maintained that any adjustments for startup
costs are isolated adjustments that the Department reasonably can take
into account during the period of investigation or review.
Another commenter recommended that the Department provide that
amortized expenses related to prior startup operations be included as
part of respondent's startup costs during the period under
investigation or review. This commenter maintained that its
recommendation was consistent with sound accounting principles and
would preclude a respondent from receiving an unintended and improper
benefit as a result of a startup adjustment.
The Department believes that its position concerning the
amortization of unrecognized startup costs is fully consistent with the
URAA and the AD Agreement. As a result of making a startup adjustment
under section 773(f)(1)(C), the difference between actual production
costs during the startup phase and costs at the end of the startup
phase are not accounted for during the startup phase. Because this
difference represents actual costs incurred by the producer, it is
reasonable to expect that the producer recoup these costs over an
appropriate time period. Failing to consider these costs would mean
ignoring a portion of the actual costs incurred by the producer in
manufacturing subject merchandise.
Moreover, as described in the SAA at 837, the difference between
actual and adjusted startup costs is recouped through amortization over
a reasonable period of time (subsequent to the startup phase) based on
the life of the product or production machinery, as appropriate.
Because the amortization period is based on the estimated life cycle of
a product or machinery, this period may extend beyond the period of
investigation or review. Therefore, it is not possible for the
Department, in all instances, to account for startup costs within the
investigation or review period.
The Department also has not adopted the recommendation that
respondents be required to account for startup operations that may have
taken place prior to the period of investigation. The Department
believes that only where respondents have adjusted for startup costs in
an investigation or review period would they be required to account for
(through amortization in periods subsequent to the startup phase) the
difference between actual costs and costs computed for startup. As
noted above, this practice ensures that respondents account for all
actual costs incurred to produce the merchandise. Where merchandise was
produced, or production facilities have been in place, prior to the
period of investigation, the Department considers it unnecessarily
burdensome to require that respondents account for previously incurred
startup costs in the same manner as for startup operations that
occurred during the investigation or review period. Nor is such a
requirement contemplated under the statute as a condition for granting
a startup adjustment.
Section 351.408
Section 351.408 implements section 773(c) of the Act, which creates
a special methodology for calculating normal value in AD proceedings
involving a nonmarket economy (``NME'') country. We received numerous
comments on this section.
Market-oriented industry test: Section 773(c)(1) of the Act permits
the Department, in certain circumstances, to use the ``market economy''
methodology set forth in section 773(a) to determine normal value in an
NME case. To identify those situations where we would apply the market
economy methodology and calculate normal value based on domestic prices
or costs in the NME, we developed our so-called ``market oriented
industry'' or ``MOI'' test. However, we elected not to codify the MOI
test in the AD Proposed Regulations because of our concern that the
test did not succeed in ``identifying situations where it would be
appropriate to use domestic prices or cost in an NME as the basis for
normal value * * *.'' 61 FR at 7343.
Several comments were filed concerning the MOI test and whether the
Department should codify its
[[Page 27365]]
current test or an amended version of the MOI test. One commenter put
forward numerous arguments against the current MOI test. First, this
commenter argued that the third leg of the MOI test is unrealistic.
(The third leg of the test requires that market-determined prices must
be paid for virtually all inputs before the Department will find a
particular industry to be an MOI.) In this commenter's view, this third
leg extends the Department's inquiry beyond the pricing of the input
itself to factors that only remotely impact the price of the input,
such as land use and energy policies. Because of the breadth of this
inquiry, this commenter believed that the Department effectively
requires an examination of the entire NME economy, an approach that
contravenes the stated purpose of the MOI test; i.e., to determine
whether a particular input or sector in the NME is sufficiently subject
to market forces.
According to this commenter, another indication that the MOI test
is unreasonable is that few, if any, market economy countries have
industries in which every single input is 100 percent subject to market
forces. To make the MOI test more reasonable, this commenter suggested
amending the third leg of the test to require only that a reasonable
portion of inputs be subject to market forces.
This commenter also questioned the Department's all-or-nothing
approach under the third leg of the MOI test. Specifically, this
commenter contended that the Department's requirement that all inputs
sourced in the NME be obtained at market-determined prices overlooks
the fact that certain inputs may be purchased at market prices. Where
certain inputs are purchased at market prices, this commenter argued,
the Department should use those prices. Moreover, in this commenter's
view, doing so would be consistent with the Department's policy of
using the actual input prices paid by an NME producer when the producer
purchases the input from a market economy supplier and pays for the
input in a market economy currency. The all-or-nothing approach also
leads to anomalous results, in this commenter's view. When an NME
industry is unable to meet the burden of showing that virtually all of
its inputs are purchased at market-determined prices, the Department
uses the NME methodology and values the NME producers' inputs in a
surrogate market economy country that, according to this commenter,
would itself fail the MOI test.
This same commenter also questioned the second leg of the MOI test,
particularly as it applies to the People's Republic of China (``PRC'').
(In order to qualify under the second leg of the test, the industry
producing the merchandise should be characterized by private or
collective ownership.) In this commenter's view, government ownership
should not be dispositive of whether an industry is subject to market
forces. The Department investigates many state-owned companies in
market economy countries, and government ownership of those companies
does not lead the Department to apply a different AD methodology.
Moreover, based on its experience in administering the separate rates
test (see Sec. 351.102(b)), the Department has found on numerous
occasions that PRC companies ``owned by the people'' operate
independently of the government. Hence, in this commenter's view,
ownership by the people should not preclude a PRC industry from
achieving MOI status.
On a more general level, this commenter urged the Department to
apply the MOI test on a company-specific basis rather than to all
companies within a given industry. The failure of particular companies
to provide evidence that market forces are at work should not, in this
commenter's view, work unfairly against those companies that are able
to satisfy the test. Similarly, according to this commenter, the
regional nature of certain economic reforms in the PRC argues for a
company-specific approach.
Two commenters raised various policy arguments against the rigidity
of the MOI test. In their view, the MOI test should be applied in such
a way as to encourage market reforms in NMEs. Instead, they claimed
that the current MOI test sends a signal to NMEs that the Department
will not recognize their reforms. Additionally, in the view of one
commenter, NME producers and exporters would be more willing to
cooperate in AD proceedings if the Department changed the MOI test,
because they would have an opportunity to avoid the unfairly high
margins generated by the NME methodology.
Two commenters suggested amendments to the current MOI test to make
it meaningful and fair for ``economies in transition'' to market
economies. Specifically, they urged the Department to adopt a
presumption that when the first two legs of the current MOI test are
met (i.e., there is no government involvement in setting the prices or
production quantities of the product, and the industry is characterized
by private and collective ownership), the Department will perform a
market economy AD analysis. Under their proposal, the presumption could
be rebutted by evidence showing that the central government set the
prices paid for inputs constituting a substantial value of the final
product.
One commenter urged the Department either to (1) retain the current
MOI test (on the grounds that it does succeed in identifying those
situations where it would be appropriate to use prices or costs in the
NME), or (2) abandon the notion of MOIs altogether. In this commenter's
view, it is not possible to reconcile the notion that a country is an
NME with the notion that the prices or costs of some participants in
that economy are immune from that economy's influences.
We have not codified the current MOI test in our final regulations.
Nor have we adopted a modified version of the MOI test. Given the
changing conditions in NMEs, we believe that we should continue to
develop our policy in this area through the resolution of individual
cases, and the comments that were submitted will help us in that
process. This area of the law continues to be extremely important to
the agency and will receive the Department's careful attention.
Surrogate selection: In applying the NME AD methodology, the first
step is to identify the so-called ``surrogate country'' to be used for
valuing the NME producers' factors of production. Under section
773(c)(4) of the Act, the surrogate should be a country (or countries)
at a level of economic development comparable to the NME and a
significant producer of merchandise comparable to the merchandise being
investigated. In proposed paragraph (b), we stated that we would place
primary emphasis on per capita GDP as the measure of economic
comparability. More generally with respect to surrogate selection, we
explained that the relative weights we would place on the two selection
criteria (i.e., economic comparability and significant production of
comparable merchandise) would vary based on the specific facts
presented by individual cases.
We received two comments on the issue of surrogate selection. One
commenter suggested that where other economic indicators (e.g., growth
rates, distribution of labor between the manufacturing, agricultural
and service sectors) reflect disparities in economic comparability, the
Department should take this into account. The second commenter agreed
with the Department's position that surrogate selection should be made
on the basis of the particular circumstances presented by each case.
[[Page 27366]]
Regarding the comment on economic comparability, we believe that
paragraph (b) provides the Department with adequate flexibility to take
into account economic indicators other than per capita GDP. While
similar levels of per capita GDP would always be considered the primary
indicator of comparability, other measures of comparability could
outweigh it where the circumstances so warranted.
Valuation of the factors of production: Once the Department
identifies an appropriate surrogate country, the next step in an AD
proceeding involving an NME is to value the NME producers' factors of
production. Proposed paragraph (c) contained rules for determining
these values. In general, under proposed paragraph (c), we would value
inputs using publicly available information regarding prices in a
single surrogate country. However, we articulated certain exceptions to
this general rule. First, where the NME producer purchases inputs from
a market economy producer and these inputs are paid for in a market
economy currency, we would use the price paid by the NME producer to
value that input. Second, we proposed valuing the NME producer's labor
input by reference to a regression-derived calculation that effectively
includes wage information from a number of countries, rather than a
single country.
We received several comments on the proposed factor valuation
rules. One commenter called for the Department to seek internal
coherence among the factor values by obtaining them from a single
source. In this commenter's view, the goals espoused by the Department
(i.e., to achieve accuracy, fairness and predictability) would be
better served if where there were a tight interrelationship among the
surrogate values. Moreover, because the Department calculates certain
values (such as manufacturing overhead, general expenses, and profit)
relative to labor and material costs, this commenter believed the
Department should derive all of these amounts from the same source.
We have not adopted this suggestion. In order to derive
``internally consistent'' values, as the commenter used the term, it
would be necessary to obtain valuation data from a single producer in
the surrogate country. We have tried this approach in the past and it
has not worked well. Frequently, we have been unable to obtain a
surrogate producer willing to share this type of information with the
Department. Moreover, even when we have been able to obtain data, this
approach is much less transparent than use of publicly available input
values, because while a surrogate producer might share data with the
U.S. government, it would be less likely to make it available to a U.S.
petitioner or an NME producer. Finally, we question the accuracy of
this approach as it applies to individual input prices. When compared
to a publicly available price that reflects numerous transactions
between many buyers and sellers, a single input price reported by a
surrogate producer may be less representative of the cost of that input
in the surrogate country. For these reasons, we have continued the
general schema put forward in the proposed paragraph (c) of relying on
publicly available data (which will not normally be producer-specific)
for material inputs, while relying on producer- or industry-specific
data for manufacturing overhead, general expenses, and profit.
Two commenters discussed the proposal in paragraph (c)(1) regarding
the use of prices paid by NME producers when they import the input from
a market economy and pay for the input in a market economy currency.
One commenter objected to the Department's approach on the grounds that
(1) such prices are not publicly available, and (2) they are not
internally coherent with other values included in the calculation (see
discussion above). In this commenter's view, if the Department does use
the prices paid by NME producers, it should ensure that those prices
are free of any distorting effects attributable to barter transactions
or savings achieved through centralized purchasing. Moreover, this
commenter continued, the Department should not use those input values
except for the specific transactions to which they pertain. Thus, if an
NME producer sourced some of the input from market economy suppliers
and the remainder from domestic sources, then the value for the
domestically-sourced inputs should be based on surrogate values and not
on the price paid by the NME producers to the market economy suppliers.
In support, this commenter stated that: (1) relying solely on the price
paid to the market economy supplier to value the input is inappropriate
because it assumes that the NME producer could purchase all of its
needs at this price, and (2) it ignores the statutory requirement that
the NME producer's factors of production be valued in a surrogate
market economy country to the extent possible. The second commenter
supported the Department's proposal to use the price paid by the NME
producer to a market economy supplier in these situations, because that
price is a more reasonable and accurate indicator of the value of the
input than a surrogate price would be.
We have not adopted the suggestions put forward by the first
commenter. While we acknowledge that prices paid by the NME producer to
a market economy supplier will not be publicly available, we have
weighed this consideration against the increased accuracy achieved by
our proposal. We note that the Federal Circuit has upheld our practice
of using prices paid for inputs imported from market economies instead
of surrogate values. Lasko Metal Products, Inc. v. United States, 43
F.3d. 1442 (1994) (``Lasko''). While we certainly do not view this
decision as permitting us to use distorted (i.e., non-arm's length)
prices, we believe that the Court's emphasis on ``accuracy, fairness
and predictability'' does provide us with the ability to rely on prices
paid by the NME producer to market economy suppliers, in lieu of
surrogate values, for the portion of the input that is sourced
domestically in the NME. Moreover, as noted in the AD Proposed
Regulations, 61 FR at 7345, we would not rely on the price paid by an
NME producer to a market economy supplier if the quantity of the input
purchased was insignificant. Because the amounts purchased from the
market economy supplier must be meaningful, this requirement goes some
way in addressing the commenter's concern that the NME producer may not
be able to fulfill all its needs at that price.
Another commenter suggested that the Department should ``test''
surrogate values for reasonableness. For example, if the Department has
two values for a particular input that are very different, but one is
closer to the price paid by the NME producer in the NME, the Department
should select the price that is closer to the price paid by the NME
producer. More generally, this commenter urged the Department to apply
the law as fairly as possible by closely matching the characteristics
of the input used by the NME producer with the input selected in the
surrogate country for valuation purposes.
We agree that ``aberrational'' surrogate input values should be
disregarded (see, e.g., Certain Cased Pencils from the People's
Republic of China, 59 FR 55625, 55630 (1994)). However, we have not
accepted this commenter's benchmark for determining whether a
particular surrogate value is reasonable. Use of an NME price as a
benchmark is inappropriate because it is the unreliability of NME
prices that drives us to use the special NME methodology in the first
place. The Department does attempt to match the surrogate product
[[Page 27367]]
used for valuation purposes closely with the input used by the NME
producer. This practice is reflected in paragraph (c), wherein the
Department elected to codify a preference for publicly available
information rather than publicly available published information. This
approach allows us to use input-specific data instead of the aggregated
data that frequently appear in published statistics. See AD Proposed
Regulations, 61 FR at 7344.
Finally, we received a comment regarding factor valuation in
general. This commenter urged the Department to add to the regulations
an illustrative list of the factors of production that are included in
calculating the normal value of an import from an NME. The commenter
believed that including such a list will increase the likelihood that
all the appropriate factors of production will be identified. We have
not adopted this proposal, because, in our view, the statute is
sufficiently clear regarding the identify of the factors of production
to be valued. If a party to a particular proceeding believes that
certain factors are not being reported, it should raise its concerns
with the Department in the context of that proceeding.
Valuation of the labor input: Proposed paragraph (c)(3) included a
proposal for valuing the labor input in NME cases. Rather than relying
on the wage rate in the selected surrogate country, under this proposal
the Department would have valued the labor input using a wage rate
developed through a regression analysis of wages and per capita GDP.
After a further review of paragraph (c)(3) and the comments relating
thereto, we have left paragraph (c)(3) unchanged.
Three commenters submitted views on the Department's proposal. One
commenter noted that the proposal did not provide different wage levels
for skilled and unskilled labor. The second commenter urged the
Department to allow itself the flexibility to use other types of wage
data if the record indicated that the other data would be better. Also,
to value NME labor inputs, this commenter urged the Department to
include full labor costs rather than simply wages, and to use industry-
specific data because wages can vary dramatically from industry to
industry within a single surrogate country.
We agree with the first commenter that the regression-based
calculation fails to provide differentiated wage rates for skilled and
unskilled labor. However, this results from limitations on the
available data, not from the proposed approach. Even using a single
country as a surrogate, it has been rare for the Department to find
different wage rates for skilled and unskilled labor. Limitations on
available data also prevent us from considering whether we should be
using full labor costs or industry-specific wages, as suggested by the
second commenter.
The third commenter also urged the Department not to adopt the
regression-based wage rate. First, in this commenter's view, the
proposal ignored the statutory requirement that factors be valued in a
country that is economically comparable to the NME and is a significant
producer of comparable merchandise. More specifically, this commenter
pointed out that because the regression was based on wage rates and per
capita GDP, the Department would have calculated NME wage values
without regard to the significant production criterion. In a related
argument, this commenter stated that the regression-based wage value
was inconsistent with the intent of Congress that the Department select
a surrogate country where input prices allow significant production to
occur. Third, this commenter claimed that the proposal was contrary to
standard and accepted economic theory on the grounds that when a
producer locates in a country, that producer will choose the
appropriate mix of capital and labor based on their relative prices. By
applying a theoretical wage rate, the Department's proposal would have
upset that relative price structure with the result that NME
calculations would be less accurate and less related to real economic
conditions. Finally, this commenter contended that the premise
underlying the Department's proposal was unsound. In this commenter's
view, because many potential factor valuations vary significantly
between and among eligible surrogate countries, there is no reason for
singling out labor as a factor to be valued under a regression approach
while using single values for other inputs.
Addressing these comments in reverse order, we do not share the
commenter's concern that the premise underlying our wage rate proposal
was unsound because values for other factors of production are not
similarly averaged. In general, we believe that more data is better
than less data, and that averaging of multiple data points (or
regression analysis) should lead to more accurate results in valuing
any factor of production. However, it is only for labor that we have a
relatively consistent and complete database covering many countries. To
employ a parallel approach for other factors of production, the
Department would have to develop a comparable database. Even if we were
to limit our search for data to those countries that meet both the
economic comparability criterion and the significant production
criterion, the burden imposed on the Department in compiling such a
database normally would outweigh any gains in accuracy.
Regarding the commenter's point that the proposed approach violates
standard economic theory, we do not dispute that the relative prices of
labor and capital are important and that relatively cheap labor usually
will be substituted for relatively expensive capital. However, in order
to capture the precise tradeoff between labor and capital that this
commenter is seeking, we would have to value all factors using
information from a single surrogate producer. As discussed above, we
have not adopted that general approach to factor valuation.
Finally, regarding the argument that proposed paragraph (c)(3)
ignores the significant manufacturer criterion for surrogate selection,
we believe that the regression-based wage rate significantly enhances
the accuracy, fairness, and predictability of our AD calculations in
NME cases, all of which were attributes highlighted by the Court in
Lasko. As we stated in the AD Proposed Regulations, for some inputs
there is no direct correspondence between significant levels of
production and input price or availability. When looking at a surrogate
country to obtain labor rates, we believe it is appropriate to place
less weight on the significant producer criterion, because economic
comparability is more indicative of appropriate labor rates. As
discussed above in connection with the calculation of average values
for other factors, by combining data from more than one country, the
regression-based approach will yield a more accurate result. It also is
fairer, because the valuation of labor will not vary depending on which
country the Department selects as the economically comparable surrogate
economy. Finally, the results of the regression are available to all
parties, thus making the labor value in all NME cases entirely
predictable. Given these attributes of the regression-based wage rate,
we believe that paragraph (c)(3) is fully consistent with the statute.
Manufacturing overhead, general expenses, and profit: Regarding
these factors of production, proposed paragraph (c)(4) stated that the
Department normally will use information from producers of identical or
comparable merchandise in the surrogate country.
One commenter suggested that the Department should rigorously check
the information it uses to value
[[Page 27368]]
manufacturing overhead, general expense and profit. Specifically, the
Department should make sure the data are reliable and that they do not
double-count items such as electricity and water. In this commenter's
view, the Department could check the reasonableness of these values
against the experience of the NME producers under investigation.
For the reasons explained above, we do not believe it is
appropriate to check surrogate values against the NME respondents'
experience. Regarding the reliability of the surrogate values for
manufacturing overhead, general expenses and profit, we do attempt to
obtain good data and avoid double-counting where possible. Parties to
the proceeding are encouraged to submit data on these factor values and
to identify areas where the data are questionable.
Section 351.409
Section 351.409 sets forth the guidelines for making adjustments to
normal value for differences in quantities. We have made a few
revisions in light of the comments received.
One commenter proposed that the Department liberalize its policy
regarding quantity adjustments, noting that the Department typically
ignores the requirement in former 19 CFR 353.55(a) that the Secretary
normally will use sales of comparable quantities of merchandise.
Because the statute itself does not require that the Department use
sales of comparable quantities, but instead merely authorizes an
adjustment when the Department compares sales in different quantities,
we have decided to delete this requirement from paragraph (a).
In addition, we also have deleted the last sentence of proposed
paragraph (a), which refers to the consideration of industry practice
in determining whether to make a quantity adjustment. Upon further
consideration, the Department believes that the granting of an
adjustment should depend more on the pricing behavior of the individual
firm in question, and not on whether other firms in the industry engage
in similar behavior.
As a matter of calculation mechanics, the Secretary may adjust for
differences in quantities by deducting from all prices used to
calculate normal value quantity discounts even if all sales did not
receive the quantity discount. Paragraph (b) contains standards that
must be satisfied before the Secretary will calculate normal value in
this manner.
One commenter stated that under paragraph (b), the two situations
in which the Department will make a quantity adjustment are so narrow
that it is virtually impossible for a respondent to meet the applicable
standards. The commenter argued that the 20 percent threshold is
excessively high, that it is not required by section 773(a)(6)(C)(i) of
the Act, and that there is no rationale to support it. Moreover,
according to the commenter, the requirement that the discounts be ``of
at least the same magnitude'' violates the statutory directive that the
adjustment be made whether the price difference is ``wholly or partly
due to differences in quantities.'' The commenter suggested that the
Department provide for additional situations where it will make
quantity-based adjustments, such as when the exporter or producer can
correlate quantity levels and prices.
While the Department does not agree with all of the arguments made
by the commenter, we agree that former 19 CFR Sec. 353.55(b), which
formed the basis of paragraph (b), should be modified so as to allow
other methods of establishing entitlement to a quantity adjustment.
Therefore, in proposed paragraph (b), the Department added the word
``normally'' to indicate that the two methods described in paragraph
(b) are not exclusive.
Under proposed paragraph (e), the Department stated that it will
not make both a quantity adjustment and a level of trade adjustment
unless it is established that the difference in quantities has an
effect on price comparability that is separate from the difference in
level of trade. One commenter argued that paragraph (e) was superfluous
in light of Sec. 351.401(b)(2), which contains a general prohibition
against the double-counting of adjustments. In addition, this commenter
contended that the proposed paragraph (e) did not provide any guidance
(beyond what normally would be required for any claimed adjustment) as
to the kind of showing necessary to establish the difference in the
effects of each type of adjustment on price comparability. Third, the
commenter argued that because the Department will identify level of
trade differences by focusing primarily on the selling functions, to
the extent that the quantity sold is one factor in a claimed level of
trade difference, the Department can determine on a case-by-case basis
whether an additional claimed quantity adjustment would be duplicative.
The Department recognizes that the prohibition against double-
counting adjustments in Sec. 351.401(b)(2) applies to situations in
which a party claims a level of trade adjustment and an adjustment for
differences in quantities. However, the Department believes that it is
appropriate to emphasize that, in this specific area, it is
particularly concerned about the possibility of double-counting. Based
on our experience, firms tend to sell in different quantities to
different levels of trade, thereby increasing the possibility of
double-counting where both adjustments are claimed. This concern is
expressed in the SAA at 830, where, in discussing the effect on price
comparability necessary for a level of trade adjustment, the
Administration stated: ``Commerce will ensure that a percentage
difference in price is not more appropriately attributable to
differences in the quantities purchased in individual sales.''
With respect to the commenter's suggestion that the Department
provide additional guidance as to the showing necessary to establish
the individual effect of each adjustment, the Department does not have
enough experience to provide additional guidance at this time.
Essentially, we agree with the commenter that the Department, at least
initially, will have to resolve these issues on a case-by-case basis.
Section 351.410
Section 351.410 clarifies aspects of the Department's practice
concerning adjustments to normal value for differences in the
circumstances of sale (``COS'').
One commenter, noting that proposed Sec. 351.410 did not indicate
the types of expenses eligible for a COS adjustment, suggested that the
final regulation clarify, in accordance with the SAA, that the
Department will make a COS adjustment only for direct selling expenses
and assumed expenses, as opposed to indirect selling expenses.
We agree with the commenter that in proposed Sec. 351.410, we
failed to connect the definitions of ``direct selling expenses'' and
``assumed expenses'' in paragraphs (b) and (c) to the COS adjustment
itself. Therefore, we have revised this section by (1) redesignating
proposed paragraphs (b) and (c) as paragraphs (c) and (d),
respectively; (2) redesignating proposed paragraph (d) as paragraph
(f); and (3) adding a new paragraph (b) that indicates the expenses
eligible for a COS adjustment. In this regard, however, in paragraph
(e) we have maintained the special ``commission offset'' rule,
previously codified in 19 CFR Sec. 353.56(b)(1).
Another commenter suggested that the Department clarify that it may
treat allocated expenses as direct selling
[[Page 27369]]
expenses eligible for a COS adjustment. We have not revised
Sec. 351.410 in light of this comment. However, as stated above in
connection with Sec. 351.401(g), the Department will accept the
allocation of direct selling expenses, subject to certain conditions.
One commenter noted that under proposed Sec. 351.412, the
Department would establish the level of trade for CEP sales only after
having made the adjustments required under 772(d) of the Act; i.e.,
after having converted the CEP sale to the equivalent of an export
price sale. However, this commenter argued, because U.S. resale prices
are the starting point for calculating CEP, and because such prices may
differ substantially from one distribution channel to another, some
sales cannot be compared logically to home market sales at the relevant
level of trade, absent some appropriate adjustment. Accordingly, this
commenter maintained, if the Department retains proposed Sec. 351.412,
the Department should clarify in Sec. 351.410 that it normally will
compare sales made in the same distribution channels. In this regard,
the commenter asserted that the new law ``requires Commerce to make
fair comparisons of price, 19 U.S.C. 1677b(a), and Commerce has
traditionally used COS to achieve this all-important objective.''
The Department has not adopted this suggestion. First, as discussed
below, section 773(a) of the Act specifies the adjustments that are
required in order to achieve a ``fair comparison.'' Moreover, under the
statute, the COS adjustment is not a vehicle for identifying sales
matches. Instead, the Department makes a COS adjustment only after it
first has identified appropriate sales matches. Finally, the
commenter's proposal would require the Department to match sales on the
basis of a level of trade other than the level of trade of the CEP.
However, section 773(a)(1)(B)(i) of the Act requires the Department to
identify the level of trade of the CEP (which the SAA at 829 defines as
a starting price to which the Department has made adjustments), and to
determine normal value at the same level as the CEP, if possible. If
the Department must rely on sales in the foreign market that are at a
level of trade different from the level of trade of the CEP sale, and
if the level of trade difference is reflected in different selling
functions and a pattern of consistent price differences, then the
Department must make an adjustment for the different levels of trade.
Nevertheless, as discussed in connection with Sec. 351.412, the
Department has modified the methodology it will use to identify
different levels of trade. Under Sec. 351.412, as revised, the
Department will not rely solely on selling activities to identify
levels of trade, but instead will evaluate differences in selling
activities in the context of a seller's whole scheme of marketing. This
new methodology will deal with the problem identified by the commenter.
One commenter argued that the Department should provide for a COS
adjustment to normal value for resale profit in situations where the
Department makes a profit deduction to CEP. The commenter stated that
``[t]he Department rightly notes in its explanations that the statute
does not `provide for an adjustment to normal value' '' for resale
profit. However, the commenter argued that this is a ``grossly
inadequate rationale'' for refusing to make such an adjustment, because
neither the statute nor the SAA prohibits such an adjustment, and
because such an adjustment is necessary ``for proceedings to be fair.''
The commenter contended that because the CEP profit deduction will be
based on profit earned in both the United States and the home market,
the deduction amounts to double-counting. According to the commenter,
this is unfair, and it will have the perverse effect of discouraging
foreign investment in the United States and adding value to imported
products in the United States.
Another commenter argued that any time a home market producer sells
the foreign like product through an affiliated reseller, either in the
home market or in the third country, a reseller profit will exist.
However, under the proposed regulations, the Department will deduct
profit only from CEP sales, and not from sales used to calculate normal
value. To achieve a fair comparison, the Department should add a new
provision to Sec. 351.402(d) (special rule for determining profit) and
deduct this affiliated reseller profit from normal value whenever it
compares normal value to CEP.
The Department has not adopted these suggestions. First, with
respect to the argument concerning a double-deduction of profit, we
disagree. Under section 772(f), the Department does not deduct the CEP
profit earned in both the United States and the home market from the
price in the United States. Instead, because transfer prices cannot be
relied upon for this purpose, section 772(f) provides for the
allocation of total profit in the United States and the home market to
CEP sales based upon the proportion of expenses incurred in the U.S.
market vis-a-vis total expenses.
In addition, the statute specifies the adjustments that the
Department may make to normal value in order to achieve a fair
comparison between normal value and export price or CEP. Therefore,
adjustments beyond those called for by the statute (such as an
adjustment for resale profit) are not appropriate. Finally, the courts
have made it clear that where, as here, Congress has provided for an
adjustment to sales made in one market, but not for an adjustment to
sales made in the other, the Department must comply with the scheme
established by Congress. Ad Hoc Committee of AZ-NM-TX-FL Producers of
Gray Portland Cement v. United States, 13 F.3d 398, 401-02 (Fed. Cir.
1994).
One commenter stated that the Department should clarify that if
prices are reported net of any rebated or uncollected taxes, no
adjustment to normal value under this provision is required. We have
not adopted this suggestion, because the Department believes that
section 773(a)(6)(B)(iii) of the Act clearly provides that the
Department need adjust for taxes only where such taxes are included in
the price of the foreign like product that is reported to the
Department. While the topic of taxes has been fertile ground for
misinterpretation and litigation, Congress has now established
conclusively that dumping comparisons are to be tax-neutral in all
cases. SAA at 827.
Regarding the definition of direct selling expense contained in
proposed paragraph (b), one commenter suggested that the Department
specifically state that the allocation of expenses, even over non-scope
merchandise, does not automatically relieve that expense of its direct
nature. Again, the Department has addressed this and similar comments
above in connection with Sec. 351.401(g).
Section 351.411
Section 351.411 deals with adjustments for differences in physical
characteristics (also known as ``differences in merchandise'' or
``DIFMER'' adjustments).
One commenter suggested that the Department amend Sec. 351.411 to
provide that the Department will not make DIFMER adjustments when it
compares merchandise with identical control numbers, or (in the case of
comparisons involving ``identical'' or ``similar'' merchandise) for
characteristics that the Department did not select as product-matching
criteria. In addition, this commenter suggested that the regulations
state that, in reviews, the Department will use the same product
matching criteria as it used in the initial investigation, unless
revised by the Department. Another commenter agreed
[[Page 27370]]
with this commenter, and added that the Department never should base
DIFMER adjustments upon differences in the ``market value'' of
products, but instead should base such adjustments only upon
differences in variable costs. This commenter cited the SAA at 828,
which states that ``Commerce will continue its current practice of
limiting this adjustment to differences in variable costs associated
with physical differences.''
The Department has not modified Sec. 351.411 in light of these
suggestions. The final regulation follows the proposed regulation and
prior regulations in providing that ``the Secretary will not consider
differences in cost of production when compared merchandise has
identical physical characteristics.'' By comparing merchandise
considered identical, the Department can avoid the need to make DIFMER
adjustments entirely.
Regarding the proposal that the Department not alter its matching
criteria after the initial investigation, the Department agrees that
continuity and consistency from one segment of a proceeding to another
is desirable. However, the Department must have the flexibility to
revise these criteria where the facts so warrant.
Finally, the Department has retained the language concerning the
use of effect on market value in measuring the amount of a DIFMER
adjustment. This provision has been in the Department's prior
regulations, although the Department rarely has quantified a DIFMER
adjustment on the basis of value. Moreover, the Federal Circuit has
held that while the Department may maintain a methodological preference
for cost over value in making adjustments, the Department may not rely
on cost to the exclusion of value. Smith-Corona Group v. United States,
713 F.2d 1568, 1577 (1983). In addition, although the SAA discusses the
Department's practice of making DIFMER adjustments based on variable
costs, which is the usual basis for such adjustments, it is silent on
the issue of market value. Therefore, the Department believes it is
necessary to retain the discretion to use market value in appropriate
circumstances.
Another commenter noted that under proposed Sec. 351.411, the
Department would disregard fixed costs, SG&A, and profit that are
allocable to the physical differences. This commenter argued that this
approach is illogical, because the purpose of the DIFMER adjustment is
to put the price of the similar home market merchandise on the same
basis as the price of the comparison U.S. merchandise. The commenter
noted that, in the context of constructed value, the Department
includes all fixed and variable costs attributable to production of the
merchandise, plus amounts for general expenses and profit. We have not
adopted this suggestion, because the SAA at 828 is clear that when the
Department uses cost to measure the amount of a DIFMER adjustment, it
is to consider only differences in variable costs associated with
physical differences in the merchandise.
Section 351.412
Section 351.412 addresses the Department's methodology for
identifying differences in LOT and adjusting for such differences,
where appropriate. It also addresses how and when the Department will
apply the CEP offset. There have been several changes from the proposed
regulation.
First, a number of commenters suggested that the Department abandon
its efforts to regulate in this area because of the Department's lack
of experience in making LOT adjustments under new statute. They
proposed instead that Sec. 351.412 merely track section 773(a)(7)(A) of
the Act, and provide that an LOT adjustment is allowed only when the
claimant demonstrates entitlement ``to the satisfaction of Commerce.''
The Department believes that it is necessary to provide as much
guidance in this area as it can at this time. The LOT adjustment is one
of the most significant issues under the new statute and is an area in
which parties are in need of guidance. It is also an area in which
there has been considerable debate concerning the requirements of the
statute and the SAA. Therefore, while we have avoided regulating some
areas in which the Department needs more experience, such as the
definition of a ``pattern of consistent price differences,'' discussed
below, we have clarified our interpretations of the legal requirements,
and have given as much indication as possible as to how we intend to
identify, and adjust for, differences in levels of trade.
One commenter proposed that the regulations make clear that the
burden of proof is on the respondent to prove entitlement to an LOT
adjustment to its advantage, just as the burden is on a respondent to
prove any other adjustment in its favor. The commenter also suggested
that the regulations make clear that neither adjustments for LOT
differences nor the CEP offset are automatic, but may be made only
where the statutory requirements are satisfied.
While the Department generally agrees with these concepts, we do
not believe that it is necessary to incorporate them in the
regulations. The statute provides clear guidelines regarding the
conditions that must be satisfied before the Department may grant an
LOT adjustment. In addition, Sec. 351.401(b) makes clear that all
adjustments, including LOT adjustments, must be demonstrated to the
satisfaction of the Secretary. New Sec. 351.412(f) also clarifies that
the Department will grant a CEP offset only where a respondent has
succeeded in establishing that there is a difference in the levels of
trade, but, although the respondent has cooperated to the best of its
ability, the available data do not permit the Department to determine
whether that difference affects price comparability.
Section 351.412(b) generally tracks the statute in explaining the
general conditions precedent to making an LOT adjustment. Although, for
organizational clarity, we have transposed paragraphs (b) and (c), we
do not intend this modification to have any substantive impact.
Section 351.412(c) explains the basis on which the Department will
determine whether there are differences in the levels of trade of the
EP or CEP and normal value. Paragraph (c) is substantively the same as
the proposed regulation. Paragraph (c)(1) explains the basis on which
the Department will determine the LOT of sales and CV. Paragraph
(c)(1)(i) provides that the Department will determine the LOT of EP
sales on the basis of the starting prices of sales to the United
States, before any adjustments under section 772(c) of the Act.
Paragraph (c)(1)(ii) provides that the Department will base the LOT of
CEP on the U.S. affiliate's starting price in the United States, after
the CEP deductions under section 772(d) of the Act, but before the
deductions under section 772(c). Paragraph (c)(1)(iii) provides that
the Department will base the LOT of a price-based normal value on the
starting prices in the market in which normal value is determined,
before any deductions under section 773(a)(6) of the Act. The
Department will base the LOT of CV on the LOT of the sales from which
the Department derives SG&A and profit under section 773(e) of the Act.
Section 773(a)(1)(B) of the Act requires that, to the extent
practicable, the Department base normal value on sales at the same LOT
as EP or CEP. Sections 772(a) and (b) define EP and CEP, respectively,
as the starting price in the United States as adjusted under sections
772(c) and (d). The adjustments under subsection (d) normally change
the LOT, so that the Department must
[[Page 27371]]
determine the LOT of CEP sales after any deductions under subsection
(d). The adjustments under subsection (c), however, are made to both EP
and CEP. Therefore, determining the LOT on the basis of EP or CEP
before any deductions under subsection (c) yields the LOT of the EP or
CEP. Similarly, we will not make the adjustments under section
773(a)(6) before determining the LOT of normal value.
Several commenters contended that the Department's proposed
regulation, which identified the LOT of CEP sales based on the price
after adjustments under section 772(d), was contrary to the statute and
ignored commercial reality. According to these commenters, the
Department's proposed analysis would make CEP offsets virtually
automatic, contrary to the intent of Congress. These commenters
suggested that the Department revise its proposed regulation to state
that, in all situations, it will identify LOT on the basis of the
starting price.
Other commenters contended that there is no basis for identifying
the LOT of CEP any differently than the LOT of EP and normal value.
They argued that such an approach would result in comparing a CEP that,
in reality, had been reduced to a ``factory door'' price with a normal
value at a more advanced stage of distribution, thereby necessitating
an LOT adjustment in virtually every instance. However, other
commenters argued that the Department's identification of the LOT of
CEP after adjustments was in accordance with the statute and SAA.
As discussed above, we have maintained the methodology of the
proposed regulation. The statute directs the Department to determine
normal value at the LOT of the CEP, which includes any CEP deductions
under section 772(d). We note that many of the commenters opposed to
the use of adjusted CEP appear to believe that the deductions under
section 772(d) involve all direct and indirect expenses. However, as
discussed above in connection with Sec. 351.402, the deduction under
section 772(d) removes only expenses associated with economic
activities in the United States. Thus, CEP is not a price exclusive of
all selling expenses, because it contains the same type of selling
expenses as a directly observed export price.
Paragraph (c)(2) describes how the Department will determine
whether two sales were made at different levels of trade. We have
modified the proposed regulation to provide that the Department will
not identify levels of trade based solely on selling activities. We
have made this change in order to avoid any implication that every
substantial difference in selling functions or activities constitutes a
difference in the levels of trade.
Numerous commenters stated that the proposed regulation appeared to
be inconsistent with the statute because it based the identification of
levels of trade on the identification of different selling activities.
These commenters argued that the statute requires that the Department
identify levels of trade first, and that it consider selling activities
only to determine whether an LOT adjustment is authorized.
Other commenters asserted that the proposed regulation
appropriately made differences in selling activities the test for
identifying levels of trade. These commenters argued, however, that the
Department should not merely count the number of different selling
activities, but instead should take a qualitative approach, weighing
the extent and importance of each selling activity.
In the Department's view, while neither the statute nor SAA defines
level of trade, section 773(a)(7)(A)(i) of the Act provides for LOT
adjustments where there is a difference in levels of trade and the
difference ``involves'' the performance of different selling
activities. Thus, the statute uses the term ``level of trade'' as a
concept distinct from selling activities. The SAA at 829 reinforces
this point by explaining that the Department must analyze the functions
performed by the sellers, but need not find that two levels involve no
common selling activities before finding two levels of trade. In other
words, the statute indicates that two sales with substantial
differences in selling activities nevertheless may be at the same level
of trade, and the SAA adds that two sales with some common selling
activities nevertheless may be at different levels of trade. Taken
together, the two points establish that an analysis of selling
activities alone is insufficient to establish the LOT. Rather, the
Department must analyze selling functions to determine if levels of
trade identified by a party are meaningful. In situations where some
differences in selling activities are associated with different sales,
whether that difference amounts to a difference in the levels of trade
will have to be evaluated in the context of the seller's whole scheme
of marketing.
If the Department treated every substantial difference in selling
activities as a separate LOT, the Department potentially would be
required to address dozens of levels of trade--many of which would be
artificial creations. In addition to being extremely burdensome, this
would make the Department less likely to find ``patterns of consistent
price differences'' between the apparently different levels of trade.
This would result either in denial of LOT adjustments altogether or
routine use of the CEP offset. Neither of these results was intended by
the URAA.
Section 351.412(c)(2) states that an LOT is a marketing stage ``or
the equivalent'' (which means that the merchandise does not necessarily
have to change hands twice in order to reach the more remote LOT). It
is sufficient that, at the more remote level, the seller takes on a
role comparable to that of a reseller if the merchandise had changed
hands twice. For example, a producer that normally sells to
distributors (that, in turn, resell to industrial consumers) could make
some sales directly, taking over the functions normally performed by
the distributors. Such sales would be at the same LOT as the sales
through the distributors. Each more remote level must be characterized
by an additional layer of selling activities, amounting in the
aggregate to a substantially different selling function. Substantial
differences in the amount of selling expenses associated with two
groups of sales also may indicate that the two groups are at different
levels of trade.
Although the type of customer will be an important indicator in
identifying differences in levels of trade, the existence of different
classes of customers is not sufficient to establish a difference in the
levels of trade. Similarly, while titles, such as ``original equipment
manufacturer,'' ``distributor,'' ``wholesaler,'' and ``retailer'' may
actually describe levels of trade, the fact that two sales were made by
entities with titles indicating different stages of the marketing
process is not sufficient to establish that the two sales were made at
different levels of trade.
Section 351.412(d) provides that the Department will grant an LOT
adjustment only if it is demonstrated to the satisfaction of the
Secretary that the difference between the LOT of the sales in the
United States and normal value affects price comparability, based on a
pattern of consistent price differences between sales at those two
levels of trade in the market in which normal value is determined. The
Department will develop its practice in this area in the course of
administrative proceedings, and intends to issue a policy bulletin once
its methodology is more fully developed.
Section 351.412(e) provides that the Department will calculate LOT
adjustments by determining the weighted average of the adjusted prices
[[Page 27372]]
at the two relevant levels of trade in the market in which normal value
is determined. These two levels are the level corresponding to EP or
CEP and the level at which normal value is determined. The Department
will apply the average percentage difference between these weighted
averages to normal value, as otherwise adjusted.
Several commenters contended that the Department should base the
amount of any adjustment on the pattern of consistent price
differences, rather than on a weighted average. The Department has not
adopted this proposal. The SAA at 830 clearly states that ``any
adjustment * * * 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.''
Several commenters proposed that the Department make clear that LOT
adjustments, or the CEP offset, can be applied when normal value is
based on CV, as well as when normal value is based on prices. The
Department agrees, and has revised the proposed regulation to remove
any suggestion that LOT adjustments will be made only to prices.
Section 773(a)(8) of the Act provides that the Department may adjust
CV, as appropriate, under subsection 773(a). Section 773(a)(7)(B)
provides that the CEP offset is made to ``normal value.'' There is no
limitation confining the adjustment to home market prices, or
precluding its application to CV. Therefore, it is clear that LOT
adjustments are appropriate regardless of the basis on which normal
value is determined.
Where there are sales of the foreign like product at the LOT in the
home market corresponding to the LOT of the EP or CEP, the Department
will determine normal value on the basis of those sales, and the
Department will not make an LOT adjustment. In situations where the
Department seeks to make an LOT adjustment, there may be no usable
sales of the foreign like product in the market in which normal value
is determined at the LOT of the EP or CEP. In order to calculate LOT
adjustments in such situations, the Department will examine price
differences in the home market either for sales of broader or different
product lines or for sales made by other companies.
The regulation also makes clear that the Department will make the
LOT adjustment on the basis of adjusted prices. Although neither the
statute nor the SAA stipulates whether the average prices compared to
determine the amount of the LOT adjustment should be adjusted prices,
the adjustment can accomplish its purpose only if calculated on the
basis of adjusted prices. This is because the adjustment is intended to
eliminate only differences that are: (1) attributable to a difference
in levels of trade; and (2) not otherwise adjusted for. In order to
avoid having the LOT adjustment duplicate other adjustments, the LOT
adjustment must be calculated on the basis of prices to which those
adjustments have already been made. To achieve this, the Department
will adjust prices at each level of trade in the foreign market as
appropriate under section 773(a)(6) before it determines the amount of
the LOT adjustment.
One commenter asked the Department to specify that an LOT
adjustment can have any value, positive, negative, or zero. We have not
adopted this proposal because the statute and SAA make clear that LOT
adjustments can be upwards or downwards. SAA at 830.
Section 351.412(f) describes the situations in which the Department
will grant a CEP offset. Some commenters suggested that the CEP offset
is ``automatic.'' This is not the case. The Department will calculate
CEP by deducting only selling expenses and profit associated with
selling activities in the United States. Thus, the resulting CEP will
retain an element of selling expenses and an element of profit, as do
directly observed export prices. We do not agree that there never will
be comparable sales in the foreign market.
The Department will not make a CEP offset where the sales to the
United States are EP sales or where the Department bases normal value
on home market sales at the same LOT as the CEP. The Department will
grant a CEP offset only where: (1) normal value is determined at a more
remote level of trade than CEP sales; and (2) despite the fact that a
respondent cooperated to the best of its ability, the data available do
not provide an appropriate basis to determine whether the difference in
levels of trade affects price comparability.
One commenter contended that the Department should make the CEP
offset in addition to any adjustment for differences in levels of
trade. The Department has not adopted this proposal. Section
773(a)(7)(B) of the Act authorizes the Department to make the CEP
offset only where the data available do not provide an appropriate
basis to determine an LOT adjustment. Therefore, whenever an LOT
adjustment can be calculated, the Department cannot also make the CEP
offset.
Section 351.413
Section 351.413 deals with the Department's authority to disregard
insignificant adjustments under section 777A(a)(2) of the Act. More
specifically, Sec. 351.413 defines the term ``insignificant'' with
respect to an individual adjustment and a group of adjustments.
Two commenters observed that proposed Sec. 351.413 provided that
the Department may ignore any ``group of adjustments'' with an ad
valorem effect of less than one percent. Because the proposed
regulations identify three separate ``groups of adjustments,'' it is
possible that the Department could ignore three separate groups of
``insignificant'' adjustments for which the combined ad valorem effect
could be nearly three percent. To prevent this, one commenter suggested
that the Department delete the final sentence of proposed Sec. 351.413
dealing with groups of adjustments. The other commenter suggested that
the Department make clear that the total ad valorem effect of all
disregarded adjustments can be no more than one percent.
The Department has not adopted these suggestions. In Sec. 351.413,
the percentages used and the definition of groups of adjustments
reflects the legislative history of section 777A(a)(2) of the Act, the
statutory provision on which the regulation is based. See, e.g., S. Rep
No. 249, 96th Cong., 2d Sess. 96 (1979). Moreover, with the exception
of changes in terminology (e.g., from ``foreign market value'' to
``normal value'') a revision to render this provision applicable to the
calculation of export price and constructed export price, Sec. 351.413
is unchanged from former 19 CFR Sec. 353.59(a).
We believe that part of the commenters' concerns may arise from a
misperception that the references to ``an ad valorem effect'' in
Sec. 351.413 relate to the ad valorem dumping margin, so that if the
Department ignored groups of adjustments with a total ad valorem effect
of three percent, the Department, for example, might transform a
dumping margin of 4 percent ad valorem to 1 percent ad valorem.
However, this is not what is contemplated by Sec. 351.413, because that
section clearly states that the ad valorem effect in question is the
percentage change to ``export price, constructed export price, or
normal value, as the case may be,'' and not the percentage change in
the dumping margin.
Finally, we should note that both section 777A(a)(2) and
Sec. 351.413 give the Department the flexibility to determine, on a
case-by-case basis, whether it should disregard a particular
insignificant adjustment. Given this flexibility, and given that
Sec. 351.413 is taken almost verbatim from the
[[Page 27373]]
legislative history, we do not believe there is a reason to eliminate
the guidance provided by the last sentence defining ``groups of
adjustments.''
Section 351.414
Section 351.414 implements section 777A(d) of the Act and sets
forth the three statutory methods for establishing and measuring
dumping margins. Section 351.414(c) sets forth the preference for
comparisons of average U.S. prices to average comparison market prices
in investigations, and for comparison of transaction-specific U.S.
prices to average comparison market prices in administrative reviews.
Averaging groups: In establishing the particular averaging groups
to be used for price comparisons, Sec. 351.414(d)(2) of the proposed
rule stated that an averaging group will consist of subject merchandise
that is identical or virtually identical in all physical
characteristics and that is sold to the United States at the same level
of trade. The Secretary also will take into account, where appropriate,
the region of the United States in which the merchandise is sold and
such other factors as are considered relevant.
One commenter objected to the Department's interpretation of the
statutory provision, and suggested that the true purpose of averaging
groups, as reflected in the SAA, is to identify potential targeted
dumping to certain U.S. customers or certain U.S. regions, not to
invite a similar division of the home market into such groups as a
means of thwarting the AD law. The commenter concluded that the
regulations should make clear that price averaging pertains solely to
U.S. sales and that no product averaging groups will be undertaken with
respect to normal value sales.
We disagree with the comment. The SAA provides that in an
investigation Commerce will normally establish and measure dumping
margins on the basis of a comparison of weighted-average normal values
and weighted-average export or constructed export prices. The SAA
specifically states:
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. (Emphasis added.)
SAA at 842.
In the Department's view, the language of the SAA makes clear that
Congress and the Administration contemplated the use of averaging
groups for both U.S. and normal value sales. Nothing in the statute or
SAA supports the view that normal value sales should not be averaged,
or that normal value sales should not be averaged on the same basis as
U.S. sales. Moreover, the purpose of establishing particular price
averaging groups is to make accurate and meaningful price comparisons,
not to identify (and address) potential targeted dumping.
Time period over which weighted-average is calculated: Under
Sec. 351.414(d)(3) of the proposed rule, the Department normally will
calculate averages for the entire period of investigation or review
when the average-to-average method is applied. However, the Secretary
may calculate weighted-averages for shorter periods when normal values,
export prices, or constructed export prices differ significantly over
the course of the period of investigation or review.
One commenter pointed out that there is no reason to default to the
entire period given the complete reporting requirements of the law and
the capability for analysis of prices through computer support. For
perishable products, the commenter noted that the Department should
average prices over the shortest period necessary to take account of
the perishable nature of the products, but should not average prices
over a period that would mask price trends unrelated to the perishable
nature of the product.
For products such as manufactured goods, the commenter contended
that the Department should adopt a one-month average as the standard
time period over which prices would be averaged when the Department
employs the average-to-average method. According to the commenter, use
of a one-month average time period results in a more precise comparison
of normal values and export/constructed export prices than would a
single period-wide average comparison. With a one-month standard, the
Department may allow averaging over longer periods only where it is
shown that a longer period does not distort the price-to-price
comparison.
Another commenter supported the Department's proposed rule that the
Department will rely on shorter periods in appropriate circumstances
and urges the Department to give full consideration to all relevant
circumstances in applying the rule.
In the Department's view, price averaging means establishing an
average price for all comparable sales. In general, we believe it is
appropriate to average prices across the period of investigation,
though we recognize that there are circumstances in which other
averaging periods are more appropriate. Accordingly, the proposed rule
is designed to ensure that the time periods over which price averages
and comparisons are made comports with the circumstances of the case,
while maintaining a preference for period-wide averaging. Where
perishable products are concerned, the Department has not fashioned a
rule with respect to a particular type of product because such an
approach may limit the agency's ability to address, for example, price
trends unrelated to the perishable nature of the product.
Use of the average-to-average method in administrative reviews:
Section 351.414(c)(2) of the proposed regulations states that in a
review the Secretary normally will use the transaction-to-average
method. One commenter urged the Department to expand the application of
the average-to-average price comparison method to administrative
reviews. In contrast, another commenter contended that such an
expansion is clearly impermissible. Citing the SAA, the opposing
commenter argued that both Congress and the Administration recognized
that the transaction-to-average method would continue to be used in
administrative reviews. Another commenter agreed and advocated adoption
of a final rule that would preclude application of the average-to-
average methodology in reviews, other than in exceptional
circumstances.
The Department specifically addressed these divergent positions in
the preamble to the proposed regulation. The final rule reflects the
SAA, which expressly states that the transaction-to-average method is
the preferred approach for administrative reviews. SAA at 843. However,
these regulations do not preclude the use of average-to-average price
comparisons in every review. Circumstances may exist that warrant
application of the average-to-average method and the final rule
reflects the Department's authority to apply this method where
necessary.
On the subject of the transaction-to-transaction method of price
comparisons, one commenter suggested that the final rule state that
this method be applied ``in appropriate situations,'' rather than
``only in unusual situations'' as contemplated in the proposed
regulation, Sec. 351.414(c)(1). In the commenter's view, the language
of the proposed rule establishes a strong presumption that the
transaction-to-
[[Page 27374]]
transaction method should not be used. The commenter believed that
anyone who advocates use of this alternative method should bear the
burden of providing good reason for its application, but that the final
rule should not discourage this option.
In the Department's view, the SAA makes clear that Congress did not
contemplate broad application of the transaction-to-transaction method.
SAA at 842. Specifically, the SAA recognizes the difficulties the
agency has encountered in the past with respect to this methodology and
suggests that even in situations where there are very few sales, the
merchandise in both markets should also be identical or very similar
before the agency would make transaction-to-transaction comparisons.
Accordingly, we continue to maintain that the transaction-to-
transaction methodology should only be applied in unusual situations.
Targeted dumping: Paragraph (f) of Sec. 351.414 of the proposed
regulation implemented the ``targeted dumping'' provision of section
777A(d)(1)(B) of the Act. Several parties commented that the final rule
should provide more specific guidelines as to what constitutes targeted
dumping. One commenter suggested the Department provide guidance by
establishing more specific criteria for making targeted dumping
determinations. Another commenter suggested that the Department needs
to gain more experience in order to develop the proper standard for
making such determinations, and should establish guidelines through
policy bulletins as it develops its practice in this area.
More specifically, several commenters suggested that the Department
recognize in its final rule that certain ``common commercial patterns
of pricing'' do not constitute targeted dumping, such as (1) different
pricing for larger or smaller orders, (2) seasonal pricing, and (3)
price changes associated with industry practices, such as downward
price changes pursuant to lower costs as are typical for
semiconductors, personal computers, and other technical products. In
contrast, other commenters contended that common commercial practices
in an industry can constitute targeted dumping and that such behavior
should not be excused or ignored simply because it is considered to be
a common commercial practice.
Other commenters proposed additional substantive guidance. For
example, one party suggested that targeted dumping should not be found
to exist where the pattern of prices exists in both the U.S. and the
comparison market. Another commenter suggested that the Department not
obligate itself to use ``standard statistical techniques'' in all of
its determinations. Several commenters suggested that the Department
define in the final regulations the evidentiary threshold for
initiating a targeted dumping inquiry. One commenter, in particular,
contended that the final rule establish a low threshold for an
allegation to be accepted, similar to allegations of sales below cost.
Another commenter expressed concern that the Department's brief
practice in this area already has established an arbitrarily high
initiation standard.
In the preamble to the proposed regulations, the Department
specifically avoided the adoption of any per se rules on targeted
dumping due to the Department's limited experience administering this
provision of the Act. However, the Department recognizes the need to
establish guidance in this area and thus will issue policy bulletins
setting forth more specific criteria as the Department develops its
practice in this area. Moreover, the Department plans to employ common
statistical methods in its targeted dumping determinations in order to
ensure that the test is applied on a consistent basis and in a manner
that ensures transparency and predictability to all parties concerned.
In addition, the Department will ensure that parties have an
opportunity to explain whether a particular pattern of export prices or
constructed export prices constitutes targeted dumping. A policy
bulletin setting forth some basic guidelines for applying statistical
techniques to targeted dumping questions will be issued in the near
future. As we gain more experience in this area, the bulletins will be
supplemented or replaced.
Allegation requirement: In proposed Sec. 351.414(f)(3), the
Department stated that ``the Secretary will not consider targeted
dumping absent an allegation.'' Many commenters opposed the allegation
requirement on several grounds. First, they claimed that the burden
imposed on interested domestic parties is substantial in that these
parties would have to examine multiple respondents, and then reexamine
revised responses, sometimes submitted subsequent to verification.
Second, the commenters added that the Department's proposed rule
effectively precluded self-initiation of a targeted dumping examination
by the Department. One commenter contended that the Department should
place the burden of proof on respondents to demonstrate that they did
not engage in targeted dumping, thereby removing the improper burden
placed on domestic interested parties. The commenter went on to state
that, contrary to the Department's reasoning in the preamble to the AD
Proposed Regulations, it is the Department, and not domestic interested
parties, that is in the best position to find targeted dumping.
According to the commenter, a domestic interested party's knowledge of
the market in question offers no special insight into whether a foreign
company has engaged in targeted dumping. While a domestic company may
recognize that it is losing sales to foreign competitors, it surely can
have no way of knowing the reasons behind, or pattern emanating from,
such dumping. According to the commenter, the Department, through its
power to assess margins based on facts available, is in the best
position to obtain the information necessary to make a targeted dumping
determination.
It is the Department's view that normally any targeted dumping
examination should begin with domestic interested parties. It is the
domestic industry that possesses intimate knowledge of regional
markets, types of customers, and the effect of specific time periods on
pricing in the U.S. market in general. Without the assistance of the
domestic industry, the Department would be unable to focus
appropriately any analysis of targeted dumping. For example, the
Department would not know what regions may be targeted for a particular
product, or what time periods are most significant and can impact
prices in the U.S. market. Ultimately, the domestic industry possesses
the expertise and knowledge of the product and the U.S. market.
Information on these factors are significant for both the burden aspect
and the determination itself. If the Department were required to
explore the contours of the U.S. market for every product subject to an
investigation, absent the knowledge as to how the market functions, the
Department would be compelled to conduct countless comparisons of
prices between customers, possible regions, and possibly significant
time periods in every case. Absent any guiding insight as to how the
market truly functions, such a requirement would be an enormous
undertaking. Fundamentally, the Department needs the assistance of the
domestic industry to focus the inquiry and to properly investigate the
possibility of targeted dumping.
Nevertheless, there may be instances in which the Department
recognizes targeted dumping on its own, without an allegation from
domestic interested parties. In such cases, the Department must be able
to address the targeted
[[Page 27375]]
dumping behavior regardless of whether any domestic interested party
filed a timely and sufficient allegation. Accordingly, the Department
has modified the proposed rule in order to ensure that the regulation
properly reflects the Department's authority to address instances of
targeted dumping absent an allegation. However, the final rule
anticipates that targeted dumping examinations normally will flow from
allegations of targeted dumping.
With respect to the availability of information, the Department
recognizes that parties' access to relevant information on the record
is crucial for making targeted dumping allegations of merit and will
continue to take steps to ensure that public summaries provide the
parties with adequate information. For example, the authority to
determine margins based on facts available should continue to enable
the Department to obtain the information necessary for domestic
interested parties to make targeted dumping allegations. For example,
the Department intends to calculate dumping margins using the
transaction-to-average method as facts available for any respondent who
refuses to supply the necessary data for a targeted dumping
determination.
Time in which to file targeted dumping allegations: Section
351.301(d)(4) sets forth the time in which targeted dumping allegations
must be filed. Although we received comments on the proposed regulatory
deadline for filing targeted dumping allegations, for the final rule we
have adopted the time requirement set forth in the proposed rule for
the reasons discussed below.
Under proposed Sec. 351.301(d)(4), the Department stated that an
allegation of targeted dumping must be filed ``no later than 30 days
before the scheduled date of the preliminary determination.''
Commenters pointed out that there is no reason to impose such a
deadline for submitting an allegation given that the Department will
receive the necessary information on targeted dumping in the normal
course of every investigation. Thus, unlike cost investigations, the
Department need not request additional information to conduct its
examination. Accordingly, commenters contended, the Department need not
require the stringent deadlines set forth in the proposed rule.
Commenters also contended that the proposed deadline imposed a
substantial burden in that for many cases the Department has limited,
unusable information on the record 30 days prior to the preliminary
determination. Commenters also noted that the proposed early and
inflexible time limit would impose the added burden on petitioners at a
time when the domestic industry must examine questionnaire responses
for identification of deficiencies and for potential below-cost
allegations. These commenters proposed that the final rule permit
domestic interested parties to file allegations at any time until the
deadline for the case briefs, which would allow allegations to include
information uncovered at verification.
The Department has adopted the proposed regulation relating to the
time in which to file targeted dumping allegations. To extend the
deadline would make it impossible for the Department to consider the
allegation for the preliminary determination. Furthermore, it would
make any verification of issues relative to the allegation extremly
difficult. However, the Department recognizes the burden such a
deadline may place on domestic interested parties in some situations
and intends to be flexible with respect to the deadline. For example,
if the timing of the responses does not permit adequate time for
analysis, the Department may consider that to be ``good cause'' and
extend the deadline under section 351.302.
Limited application of average-to-transaction method: Under
proposed paragraph (f)(2), the Secretary will normally limit the
application of average-to-transaction comparisons exclusively to those
sales in which the criteria for determining targeted dumping are
satisfied. The preamble to the proposed regulations states that it
would be ``unreasonable and unduly punitive'' to apply the transaction-
to-average approach to all sales where, for example, targeted dumping
accounted for only one percent of a firm's total sales. The preamble
also states that the approach would not always be limited in
application ``because there may be situations in which targeted dumping
by a firm is so pervasive that the average-to-transaction method
becomes the benchmark for gauging the fairness of that firm's pricing
practices.''
Several commenters argued that neither the AD Agreement, statute,
nor the SAA supports limited application, and advocated broad
application of the transaction-to-average approach to all of a firm's
sales once targeted dumping is found. In general, these commenters also
were concerned that limiting the application exclusively to those sales
in which the targeting criteria are met would have significant
implications for submitting allegations. One commenter, in particular,
noted that the ``hybrid approach'' proposed by the Department would
require an exhaustive recitation, rather than a representative
allegation, if all instances of targeted dumping are to be addressed.
The commenter also rejected the view that broad application would be
``punitive'' and claimed that the average-to-average method was
designed to simplify the dumping calculations, not to provide more
accurate means of calculating dumping margins. In the commenter's view,
the transaction-to-average method should be viewed as a more accurate,
not more punitive, measure of dumping. Another commenter suggested that
the targeted dumping provision is intended to prevent foreign producers
from unduly and inappropriately benefitting from an averaging of U.S.
sales. The commenter reasoned that once a party engages in targeted
dumping, it has violated the spirit of the average-to-average method
and forfeits entirely the privilege of receiving an average-to-average
calculation. In the alternative, one commenter suggested that the
Department consider application of the transaction-to-average method
for all of a firm's sales where it is established that targeted dumping
exists for 10 percent or more of that firm's sales.
The Department has considered the scope of application of the
average-to-transaction methodology raised in the comments on this
issue. Based upon our examination, the Department is adopting the
proposed regulation without modification. In the Department's view,
section 777A(d)(1) of the Act establishes a preference for average-to-
average price comparisons in investigations. The statute contemplates a
divergence from the normal average-to-average (or transaction-to-
transaction) price comparison out of concern that such a methodology
could conceal ``targeted dumping.'' SAA at 842. Accordingly, the
Department will apply the average-to-transaction approach solely to
address the practice of targeted dumping. Nevertheless, the Department
contemplates that in some instances it may be necessary to apply the
average-to-transaction method to all sales to the targeted area, such
as a region or a customer, or even all sales of a particular
respondent. For example, where the targeted dumping practice is so
widespread it may be administratively impractical to segregate targeted
dumping pricing from the normal pricing behavior of a company.
Moreover, the Department recognizes that where a firm engages
extensively in the practice of targeted dumping, the only adequate
yardstick available to measure such pricing behavior may be the
average-to-transaction methodology.
With respect to the contention that limiting the application of the
transaction-to-average method solely to
[[Page 27376]]
targeted sales would require an extensive allegation, as opposed to a
representative one, we disagree. The proposed regulation speaks to
limited application of the transaction-to-average method once targeted
dumping is found to exist. It does not address the scope of the
targeted dumping examination itself. Interested parties may make
representative targeted dumping allegations based upon prices to
purchasers, regions, or periods of time, provided they explain how the
evidence examined in the allegations is relevant to prices of other
products or models, or other companies.
Section 351.415
Section 351.415 implements section 773A of the Act, which deals
with the selection of the exchange rate used to convert foreign
currencies to U.S. dollars. For the reasons set forth below, we have
not revised Sec. 351.415.
Forward sales of currency: Section 351.415(b) creates an exception
to the general rule that the Department will use the actual exchange
rate on the date of sale to convert foreign currencies to U.S. dollars.
Under paragraph (b), if a currency transaction on forward markets is
directly linked to an export sale under consideration, the Department
will use the exchange rate specified in the forward sales agreement
instead of the actual exchange rate on the date of sale.
Two commenters made suggestions regarding the application of the
``directly linked'' standard. One commenter suggested that if an
exporter actually applies forward exchange rates to its export sales,
then the Department should use those forward exchange rates (whether
they be daily, quarterly, or quarterly averages). The second commenter
proposed that in order for the Department to use a forward exchange
rate, the forward sale of currency must relate specifically to the
export sale, i.e., the forward rate should not be allocated. According
to the second commenter, this would prevent an exporter from claiming
that its general hedging operations are directly linked to particular
export sales. This same commenter also argued that where the forward
sale agreement spans a period of time, the Department should use the
exchange rate specified in the agreement only if the date of sale of
the export transaction falls within that period.
With respect to these suggestions, while the Department believes
that it might be desirable to have more detailed rules concerning the
``directly linked'' standard, we do not have enough experience with
this standard to provide such rules at this time. Therefore, we intend
to develop our practice in the context of future investigations and
reviews.
Another commenter, noting that forward currency transactions
usually involve a fee, suggested that the Department either should
include this fee as part of the forward exchange rate or should make a
COS adjustment under Sec. 351.410 to account for the fee. We agree that
the Department should account for these types of fees, but we do not
believe that an additional regulation is necessary. In the case of
Sec. 351.410, for example, we believe that the provision is
sufficiently flexible to encompass a COS adjustment for forward
exchange rate fees.
Model for identifying and addressing fluctuations and sustained
movements in exchange rates: Several commenters made suggestions to
amend the model proposed by the Department for identifying and
addressing fluctuations and sustained movements in exchange rates. (We
described this model briefly in the AD Proposed Regulations, 61 FR at
7351, and then published a more detailed description in Policy Bulletin
(96-1): Currency Conversions, 61 FR 9434 (March 8, 1996) (``Policy
Bulletin 96-1'')). Regarding fluctuations in exchange rates, two
commenters suggested that the Department replace the 8-week rolling
average benchmark for determining fluctuations with a 17-week (120-day)
rolling average. They also suggested that the benchmark should not
include exchange rates that the Department has determined to be
fluctuations, because section 773A of the Act requires the Department
to ignore fluctuations.
Regarding sustained movements in an exchange rate, certain
commenters claimed that the Department's model is overly rigid in
identifying such movements, as evidenced by the fact that the model
only identifies one sustained movement for one currency in the period
since 1992. These commenters suggested several amendments to the model
to ensure that it would serve the purpose of protecting exporters when
the value of their currency changes faster than they can raise prices.
These suggestions included: changing the so-called ``recognition
period'' for sustained movements from 8 weeks to 13 weeks (90 days);
requiring fewer than 8 consecutive weeks of changes before recognizing
a sustained movement, or using monthly rather than weekly averages to
determine whether a sustained movement has occurred; applying an
historic rate (such as the rate from the quarter preceding the
recognition period) during the recognition period; and, using the
official exchange rate from the first day of the recognition period
during the 60-day adjustment period.
One commenter argued against the latter two suggestions on the
grounds that the purpose of section 773A(b) is to allow exporters an
adjustment period after a sustained movement in exchange rates has
occurred. Therefore, in this commenter's view, it makes no sense to use
an exchange rate that predates the sustained movement, nor would
section 773A(b) permit the use of an historic rate occurring during the
recognition period. Finally, one commenter requested that the
Department provide additional guidance on the exchange rate that it
intends to apply when a foreign currency is depreciating, as opposed to
appreciating, against the U.S. dollar.
The Department welcomes the numerous comments submitted on the
model for identifying and addressing fluctuations and sustained
movements in exchange rates. As we stated in the AD Proposed
Regulations, we intend to use the model for one year and then evaluate
its performance based on public comment. As part of that evaluation, we
will consider the comments we have received in connection with the
instant rulemaking. Moreover, as indicated in Policy Bulletin 96-1, we
will consider comments we received on the model through December 31,
1996.
At this time, however, we would like to make two points. First,
based on a preliminary review of the comments, we do not believe that
using a benchmark rate that includes past fluctuations contravenes
section 773A(a). The fluctuations identified under the model are
fluctuations that are relative to a particular number calculated at a
particular point in time; i.e., the average of the actual exchange
rates on each of the prior 40 days. The fact that a particular daily
rate fluctuates vis-a-vis that number is sufficient to disqualify that
daily rate for purposes of conversion on that date. However, the
designation of a particular daily rate as a fluctuation does not render
that rate unusable for all purposes. In particular, we believe that
actual exchange rates provide the best gauge of whether a particular
daily rate should be viewed as a fluctuation. Therefore, we consider it
appropriate to include past fluctuations in the rolling average
benchmark.
Moreover, when the Department deems a particular daily rate to be a
fluctuation, we believe we should use the benchmark (which includes
past fluctuations) in lieu of the daily rate. For
[[Page 27377]]
example, the fact that a daily rate three weeks ago is considered to be
a fluctuation means only that the daily rate varied from the historic
average as of that time. It does not mean that one should continue to
view that daily rate as a fluctuation three weeks later. Because the
designation of fluctuations is time-sensitive in this sense, the
commenters appear to be reading too much into the statutory prohibition
against the use of fluctuating exchange rates.
Second, regarding the comment on our treatment of depreciating
currencies, we note that the Department addressed this issue in Certain
Pasta from Turkey, 61 FR 30309, 30325 (June 14, 1996). In that case,
which involved a situation where the foreign currency was depreciating
against the U.S. dollar, we used actual daily exchange rates rather
than the benchmark rates generated by the model. We agree with the
commenter that we should address depreciating currencies more fully in
a final model, and we welcome further suggestions on this point.
Sustained movements: While the model discussed above identifies and
addresses sustained movements in exchange rates, paragraph (d) sets
forth a general rule that where there is a sustained movement
``increasing the value of the foreign currency relative to the U.S.
dollar,'' exporters will be given 60 days in which to adjust their
prices. Two commenters claimed that paragraph (d) is ``one-sided.''
Specifically, one commenter objected to the fact that paragraph (d)
only addresses sustained appreciations in a foreign currency relative
to the U.S. dollar. In this commenter's view, section 773A(b) does not
specify whether the sustained movement must be upward or downward. The
second commenter (presumably referring to the fact that paragraph (d)
does not address sustained depreciations in a foreign currency) pointed
out that under paragraph (d), respondents can take advantage of
favorable exchange rates when a foreign currency appreciates, but
domestic industries do not receive a comparable benefit when the
currency depreciates. The commenter suggested that the Department
should address this by establishing a special rule for situations where
exporters should be raising their U.S. prices in response to exchange
rate changes, but, instead, are lowering them.
We are not adopting the proposals put forward by these commenters.
The language contained in paragraph (d) regarding upward sustained
movements reflects the legislative intent expressed in the SAA, which
specifically discusses the granting of an adjustment period following
``a sustained increase in the value of a foreign currency relative to
the U.S. dollar.'' SAA at 842. Moreover, we do not believe that the
statute provides any authority for the Department to deny an adjustment
period when a sustained increase in the value of a foreign currency
relative to the U.S. dollar has occurred, even in the event that an
exporter is lowering U.S. prices.
Another commenter pointed out that paragraph (d) would provide an
adjustment period for sustained movements in exchange rates only in
investigations, and not in reviews. This commenter questioned whether
such a limitation was consistent with the AD Agreement. In the
Department's view, paragraph (d) is consistent with the AD Agreement,
because Article 2.4.1 specifies that the 60-day period for adjusting
prices applies ``in an investigation.''
Finally, one commenter urged the Department to use the exchange
rate in effect on the date that the price and quantity terms of a sale
are first established, rather than under the methodology used to
identify the date of sale for other purposes. We have not adopted this
suggestion because section 773A(a) of the Act directs the Department to
use the exchange rate in effect on the ``date of sale of the subject
merchandise.'' We have clarified how we will identify the date of sale
in section 351.401(i) of these regulations. The Department cannot
establish a different date of sale for currency conversion purposes
from that which is used for all other purposes. This issue is discussed
further with respect to that provision, above.
Other Comments
In addition to the comments discussed above, the Department also
received several comments that did not relate to a particular provision
in the AD Proposed Regulations. A common theme of these comments,
however, was the extent to which the Department should rely on data as
recorded in a firm's books and records.
One commenter criticized the Department's practice of requiring
that respondents submit data in the specific format established by the
Department. According to the commenter, this requirement was
unnecessary, it rendered the cost of complying with Department
information requests excessively high, and, when combined with the
Department's tight deadlines, it made the entire process extremely
onerous for a firm attempting to comply with a request for data.
Another commenter, citing the increasing convergence of accounting
standards as companies compete with one another for capital on an
international level, proposed that the Department accept data responses
in a format that conforms to the generally accepted accounting
principles of the company's home country. Another commenter supported
these proposals.
With respect to these comments, we first must note that in
enforcing the AD law, the Department must balance two different
objectives. On the one hand, the Department has a responsibility to
identify and measure dumping accurately and in accordance with the
standards set forth in the AD law. In some instances, this may mean
that the Department must seek information of a type that is not readily
retrievable from a company's accounting or financial records or that is
in a format different from the format in which a company maintains its
records. On the other hand, the Department is cognizant of the need to
avoid imposing, in the words of section 782(c) of the Act, ``an
unreasonable burden'' on respondents.
In implementing the URAA, we have reviewed our practices and
regulations in light of the two objectives described above. As a
result, we have taken several steps that we believe will make the AD
process less onerous for parties, but that, at the same time, preserve
the Department's ability to apply the standards of the AD law. For
example, the Department has revised its standard AD questionnaire to
clarify that the Department will be flexible in accepting responses
that reflect different accounting standards and systems. In addition,
as discussed above, in the final regulations relating to allocations,
date of sale, and CEP profit, we also have taken steps to accommodate
different accounting standards and systems. In our view, in addition to
making the AD process less onerous for parties, these changes will make
the Department's verifications more efficient and effective, thereby
enhancing the Department's ability to enforce the AD law.
On a somewhat related topic, one commenter stated that the
regulations should address the matter of ``model-matching''
methodology.<SUP>3</SUP> According to
[[Page 27378]]
the commenter, the Department currently instructs respondents as to the
relative importance of physical characteristics of the subject
merchandise and the foreign like product, rather than permitting
respondents to make that determination, as under traditional practice.
The commenter also alleged that there were two principal problems with
the Department's current approach: (1) the Department's manner of
identifying product characteristics, and the relative importance
assigned to those characteristics, bears no necessary relation to the
product coding system used by a respondent for commercial purposes; and
(2) the use of the product coding system formulated by the Department
in individual cases often results in inappropriate comparisons.
Therefore, the commenter argued, the Department should make clear in
the preamble to its regulations that the Department generally will use
a respondent's existing product coding system as the starting point for
identifying identical and similar merchandise. The Department then can
make modifications and additions to those codes to the extent necessary
to reflect desired model-match criteria.
---------------------------------------------------------------------------
\3\ ``Model-matching'' is a shorthand expression for the process
the Department uses to identify identical or similar home market or
third-country merchandise. In order to identify and measure dumping,
the Department must compare a U.S. sale of a particular type or
model of merchandise to a home market or third-country sale of
identical or similar merchandise. Typically, in an AD proceeding,
the Department will develop ``model-matching'' criteria for
identifying identical or similar merchandise in that particular
case.
---------------------------------------------------------------------------
We have not adopted the suggestion. Under section 771(16) of the
Act, the starting point for model-matching is always the physical
characteristics of the product. Based on our experience, a company's
internal product coding system often does not provide sufficient
information to allow the Department to match products in accordance
with their physical characteristics. Therefore, we do not believe that
it would be appropriate to establish what, in effect, would be a
rebuttable presumption that a company's internal product coding system
should be used for purposes of model-matching.
On the other hand, however, we do not intend to suggest that a
company's product coding system is irrelevant to the model-matching
exercise. We agree that the model-matching methodology used by the
Department in a particular case should reflect the most significant
physical characteristics of a product. We also agree that it often is
the case that a company's product coding system is informative, if not
dispositive, as to what those characteristics are. For example, the
fact that the product coding systems of every respondent involved in an
AD proceeding capture a particular physical characteristic usually is a
good indication that the characteristic is significant. Therefore, the
Department will continue to consider producer coding systems in
developing model-match methodologies in particular cases, and will use
these codes where such use is consistent with the standards set forth
in section 771(16).
Subpart G--Effective Dates
Subpart G consists of a single Sec. 351.701 which (1) establishes
the dates on which the new regulations contained in Part 351 will
become effective, and (2) explains the extent to which the Department's
prior regulations will govern segments of proceedings to which the new
regulations do not apply. Section 351.701 also explains the limited
role of these new regulations in proceedings to which they do not
apply.
The new regulations will apply to all investigations and other
segments of proceedings (such as scope requests), other than
administrative reviews, initiated on the basis of petitions filed or
requests made more than thirty days after the date on which the new
regulations are published. The new regulations also will apply to all
investigations or other segments of proceedings that the Department
self-initiates more than thirty days after the date on which the new
regulations are published. In addition, the new regulations will apply
to all administrative reviews initiated on the basis of requests filed
in the month following the month in which the date 30 days after
publication of this notice falls. The slight difference in effective
date for administrative reviews is to avoid confusion over whether the
new regulations apply to administrative reviews requested by different
parties on different days during the month in which the new regulations
become effective for investigations and other segments of proceedings
(in other words, during the month that includes the day thirty days
after the date on which these regulations are published).
Investigations, reviews, and other segments of proceedings to which
these regulations do not apply will continue to be governed by the old
regulations, except to the extent that those regulations were
invalidated by the URAA or were replaced by the interim final
regulations published on May 11, 1995 (60 FR 25130 (1995)).
For segments of proceedings to which these regulations do not
apply, but which are subject to the Act as amended by the URAA because
they were initiated on the basis of petitions filed or requests made
after January 1, 1995 (the effective date of the URAA), the new
regulations will serve as a restatement of the Department's
interpretation of the amended Act. In other words, the new regulations
describe the administrative practice that the Department will follow,
unless there is a reason consistent with the amended Act to depart from
that practice. The AD Proposed Regulations no longer will serve that
purpose.
Annexes to Part 351
We have revised Annexes I through V to reflect changes made in
these final regulations, as well as to correct typographical errors
identified in the annexes attached to the AD Proposed Regulations. In
addition, we have revised the charts to include certain deadlines that
were not included in the AD Proposed Regulations.
One commenter suggested that the Department should refrain from
adopting the ``inflexible deadlines'' outlined in the annexes, and
instead should adapt the timetable to the complexity of each
investigation or review. With respect to this suggestion, we must
emphasize that the tables and charts contained in Annexes I through VII
are intended to serve only as a guide to potential petitioners and
respondents, as well as other persons potentially interested or
involved in an AD/CVD proceeding. The tables themselves are not
``rules,'' and they do not represent the timetables that the Department
will follow in all proceedings. In fact, they may not represent the
timetables that the Department will follow in a majority of
proceedings. The tables and charts simply cross-reference relevant
provisions of the regulations so that parties and other persons will be
aware of when such things as extensions or postponements might occur.
As stated previously, under Sec. 351.302(b), the Secretary may, for
good cause, extend any time limit established by Part 351 unless such
an extension is expressly precluded by statute.
Classification
E.O. 12866
This final rule has been determined to be significant under E.O.
12866.
Regulatory Flexibility Act
The Assistant General Counsel for Legislation and Regulation of the
Department of Commerce certified to the Chief Counsel for Advocacy of
the Small Business Administration that this final rule will not have a
significant economic impact on a substantial number of small entities.
The Department does not believe that there will be any substantive
effect on the outcome of AD and CVD proceedings as a result of the
streamlining and
[[Page 27379]]
simplification of their administration. With respect to the substantive
amendments implementing the Uruguay Round Agreements Act, the
Department believes that these regulations benefit both petitioners and
respondents without favoring either, and, therefore, would not have a
significant economic effects. As such, a regulatory flexibility
analysis was not prepared.
Paperwork Reduction Act
Notwithstanding any other provision of law, no person is required
to respond to nor shall a person be subject to a penalty for failure to
comply with a collection of information subject to the requirements of
the Paperwork Reduction Act unless that collection of information
displays a currently valid OMB Control Number. This final rule does not
contain any new reporting or recording requirements subject to the
Paperwork Reduction Act. The collections of information contained in
this rule are currently approved by the Office of Management and Budget
under OMB Control Numbers 0625-0105, 0625-0148, and 0625-0200. The
public reporting burdens for these collections of information are
estimated to average 40 hours for the AD and CVD petition requirements,
and 15 hours for the initiation of downstream product monitoring. These
estimates include the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collections of information. Send comments
regarding these burden estimates or any other aspect of these
collections of information, including suggestions for reducing the
burden, to OMB Desk Officer, New Executive Office Building, Washington,
D.C. 20503.
E.O. 12612
This final rule does not contain federalism implications warranting
the preparation of a Federalism Assessment.
List of Subjects
19 CFR Part 351
Administrative practice and procedure, Antidumping, Business and
industry, Cheese, Confidential business information, Countervailing
duties, Investigations, Reporting and recordkeeping requirements.
19 CFR Part 353
Administrative practice and procedure, Antidumping, Business and
industry, Confidential business information, Investigations, Reporting
and recordkeeping requirements.
19 CFR Part 355
Administrative practice and procedure, Business and industry,
Cheese, Confidential business information, Countervailing duties,
Freedom of Information, Investigations, Reporting and recordkeeping
requirements.
Dated: May 2, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
For the reasons stated, 19 CFR chapter III is amended as follows:
Parts 353 and 355 [Removed]
1. Parts 353 and 355 are removed.
2. A new Part 351 is added to read as follows:
PART 351--ANTIDUMPING AND COUNTERVAILING DUTIES
Subpart A--Scope and Definitions
Sec.
351.101 Scope.
351.102 Definitions.
351.103 Central Records Unit.
351.104 Record of proceedings.
351.105 Public, business proprietary, privileged, and classified
information.
351.106 De minimis net countervailable subsidies and weighted-
average dumping margins disregarded.
351.107 Deposit rates for nonproducing exporters; rates in
antidumping proceedings involving a nonmarket economy country.
Subpart B--Antidumping and Countervailing Duty Procedures 351.201 Self-
initiation.
351.202 Petition requirements.
351.203 Determination of sufficiency of petition.
351.204 Transactions and persons examined; voluntary respondents;
exclusions.
351.205 Preliminary determination.
351.206 Critical circumstances.
351.207 Termination of investigation.
351.208 Suspension of investigation.
351.209 Violation of suspension agreement.
351.210 Final determination.
351.211 Antidumping order and countervailing duty order.
351.212 Assessment of antidumping and countervailing duties;
provisional measures deposit cap; interest on certain overpayments
and underpayments
351.213 Administrative review of orders and suspension agreements
under section 751(a)(1) of the Act.
351.214 New shipper reviews under section 751(a)(2)(B) of the Act.
351.215 Expedited antidumping review and security in lieu of
estimated duty under section 736(c) of the Act.
351.216 Changed circumstances review under section 751(b) of the
Act.
351.217 Reviews to implement results of subsidies enforcement
proceeding under section 751(g) of the Act.
351.218 Sunset reviews under section 751(c) of the Act.
351.219 Reviews of countervailing duty orders in connection with an
investigation under section 753 of the Act.
351.220 Countervailing duty review at the direction of the
President under section 762 of the Act.
351.221 Review procedures.
351.222 Revocation of orders; termination of suspended
investigations.
351.223 Procedures for initiation of downstream product monitoring.
351.224 Disclosure of calculations and procedures for the
correction of ministerial errors.
351.225 Scope rulings.
Subpart C--Information and Argument
351.301 Time limits for submission of factual information.
351.302 Extension of time limits; return of untimely filed or
unsolicited material.
351.303 Filing, format, translation, service, and certification of
documents.
351.304 Establishing business proprietary treatment of information
[Reserved].
351.305 Access to business proprietary information [Reserved].
351.306 Use of business proprietary information [Reserved].
351.307 Verification of information.
351.308 Determinations on the basis of the facts available.
351.309 Written argument.
351.310 Hearings.
351.311 Countervailable subsidy practice discovered during
investigation or review.
351.312 Industrial users and consumer organizations.
Subpart D--Calculation of Export Price, Constructed Export Price, Fair
Value, and Normal Value
351.401 In general.
351.402 Calculation of export price and constructed export price;
reimbursement of antidumping and countervailing duties.
351.403 Sales used in calculating normal value; transactions
between affiliated parties.
351.404 Selection of the market to be used as the basis for normal
value.
351.405 Calculation of normal value based on constructed value.
351.406 Calculation of normal value if sales are made at less than
the cost of production.
351.407 Calculation of constructed value and cost of production.
351.408 Calculation of normal value of merchandise from nonmarket
economy countries.
351.409 Differences in quantities.
351.410 Differences in circumstances of sale.
351.411 Differences in physical characteristics.
351.412 Levels of trade; adjustment for difference in level of
trade; constructed export price offset.
351.413 Disregarding insignificant adjustments.
[[Page 27380]]
351.414 Comparison of normal value with export price (constructed
export price).
351.415 Conversion of currency.
Subpart E--[Reserved]
Subpart F--Subsidy Determinations Regarding Cheese Subject to an In-
Quota Rate of Duty
351.601 Annual list and quarterly update of subsidies.
351.602 Determination upon request.
351.603 Complaint of price-undercutting by subsidized imports.
351.604 Access to information.
Subpart G--Applicability Dates
351.701 Applicability dates.
Annex I--Deadlines for Parties in Countervailing Investigations
Annex II--Deadlines for Parties in Countervailing Administrative
Reviews
Annex III--Deadlines for Parties in Antidumping Investigations
Annex IV--Deadlines for Parties in Antidumping Administrative
Reviews
Annex V--Comparison of Prior and New Regulations
Annex VI--Countervailing Investigations Timeline
Annex VII--Antidumping Investigations Timeline
Authority: 5 U.S.C. 301; 19 U.S.C. 1202 note; 19 U.S.C. 1303
note; 19 U.S.C. 1671 et seq.; and 19 U.S.C. 3538.
PART 351--ANTIDUMPING AND COUNTERVAILING DUTIES
Subpart A--Scope and Definitions
Sec. 351.101 Scope.
(a) In general. This part contains procedures and rules applicable
to antidumping and countervailing duty proceedings under title VII of
the Act (19 U.S.C. 1671 et seq.), and also determinations regarding
cheese subject to an in-quota rate of duty under section 702 of the
Trade Agreements Act of 1979 (19 U.S.C. 1202 note). This part reflects
statutory amendments made by titles I, II, and IV of the Uruguay Round
Agreements Act, Pub. L. 103-465, which, in turn, implement into United
States law the provisions of the following agreements annexed to the
Agreement Establishing the World Trade Organization: Agreement on
Implementation of Article VI of the General Agreement on Tariffs and
Trade 1994; Agreement on Subsidies and Countervailing Measures; and
Agreement on Agriculture.
(b) Countervailing duty investigations involving imports not
entitled to a material injury determination. Under section 701(c) of
the Act, certain provisions of the Act do not apply to countervailing
duty proceedings involving imports from a country that is not a
Subsidies Agreement country and is not entitled to a material injury
determination by the Commission. Accordingly, certain provisions of
this part referring to the Commission may not apply to such
proceedings.
(c) Application to governmental importations. To the extent
authorized by section 771(20) of the Act, merchandise imported by, or
for the use of, a department or agency of the United States Government
is subject to the imposition of countervailing duties or antidumping
duties under this part.
Sec. 351.102 Definitions.
(a) Introduction. The Act contains many technical terms applicable
to antidumping and countervailing duty proceedings. In the case of
terms that are not defined in this section or other sections of this
part, readers should refer to the relevant provisions of the Act. This
section:
(1) Defines terms that appear in the Act but are not defined in the
Act;
(2) Defines terms that appear in this Part but do not appear in the
Act; and
(3) Elaborates on the meaning of certain terms that are defined in
the Act.
(b) Definitions.
Act. ``Act'' means the Tariff Act of 1930, as amended.
Administrative review. ``Administrative review'' means a review
under section 751(a)(1) of the Act.
Affiliated persons; affiliated parties. ``Affiliated persons'' and
``affiliated parties'' have the same meaning as in section 771(33) of
the Act. In determining whether control over another person exists,
within the meaning of section 771(33) of the Act, the Secretary will
consider the following factors, among others: corporate or family
groupings; franchise or joint venture agreements; debt financing; and
close supplier relationships. The Secretary will not find that control
exists on the basis of these factors unless the relationship has the
potential to impact decisions concerning the production, pricing, or
cost of the subject merchandise or foreign like product. The Secretary
will consider the temporal aspect of a relationship in determining
whether control exists; normally, temporary circumstances will not
suffice as evidence of control.
Aggregate basis. ``Aggregate basis'' means the calculation of a
country-wide subsidy rate based principally on information provided by
the foreign government.
Anniversary month. ``Anniversary month'' means the calendar month
in which the anniversary of the date of publication of an order or
suspension of investigation occurs.
APO. ``APO'' means an administrative protective order described in
section 777(c)(1) of the Act.
Applicant. ``Applicant'' means a representative of an interested
party that has applied for access to business proprietary information
under an administrative protective order.
Article 4/Article 7 Review. ``Article 4/Article 7 review'' means a
review under section 751(g)(2) of the Act.
Article 8 violation review. ``Article 8 violation review'' means a
review under section 751(g)(1) of the Act.
Authorized applicant. ``Authorized applicant'' means an applicant
that the Secretary has authorized to receive business proprietary
information under an APO under section 777(c)(1) of the Act.
Changed circumstances review. ``Changed circumstances review''
means a review under section 751(b) of the Act.
Customs Service. ``Customs Service'' means the United States
Customs Service of the United States Department of the Treasury.
Department. ``Department'' means the United States Department of
Commerce.
Domestic interested party. ``Domestic interested party'' means an
interested party described in subparagraph (C), (D), (E), (F), or (G)
of section 771(9) of the Act.
Expedited antidumping review. ``Expedited antidumping review''
means a review under section 736(c) of the Act.
Factual information. ``Factual information'' means:
(1) Initial and supplemental questionnaire responses;
(2) Data or statements of fact in support of allegations;
(3) Other data or statements of facts; and
(4) Documentary evidence.
Fair value. ``Fair value'' is a term used during an antidumping
investigation, and is an estimate of normal value.
Importer. ``Importer'' means the person by whom, or for whose
account, subject merchandise is imported.
Investigation. Under the Act and this Part, there is a distinction
between an antidumping or countervailing duty investigation and a
proceeding. An ``investigation'' is that segment of a proceeding that
begins on the date of publication of notice of initiation of
investigation and ends on the date of publication of the earliest of:
(1) Notice of termination of investigation,
(2) Notice of rescission of investigation,
(3) Notice of a negative determination that has the effect of
terminating the proceeding, or
(4) An order.
[[Page 27381]]
New shipper review. ``New shipper review'' means a review under
section 751(a)(2) of the Act.
Order. An ``order'' is an order issued by the Secretary under
section 303, section 706, or section 736 of the Act or a finding under
the Antidumping Act, 1921.
Ordinary course of trade. ``Ordinary course of trade'' has the same
meaning as in section 771(15) of the Act. The Secretary may consider
sales or transactions to be outside the ordinary course of trade if the
Secretary determines, based on an evaluation of all of the
circumstances particular to the sales in question, that such sales or
transactions have characteristics that are extraordinary for the market
in question. Examples of sales that the Secretary might consider as
being outside the ordinary course of trade are sales or transactions
involving off-quality merchandise or merchandise produced according to
unusual product specifications, merchandise sold at aberrational prices
or with abnormally high profits, merchandise sold pursuant to unusual
terms of sale, or merchandise sold to an affiliated party at a non-
arm's length price.
Party to the proceeding. ``Party to the proceeding'' means any
interested party that actively participates, through written
submissions of factual information or written argument, in a segment of
a proceeding. Participation in a prior segment of a proceeding will not
confer on any interested party ``party to the proceeding'' status in a
subsequent segment.
Person. ``Person'' includes any interested party as well as any
other individual, enterprise, or entity, as appropriate.
Price adjustment. ``Price adjustment'' means any change in the
price charged for subject merchandise or the foreign like product, such
as discounts, rebates and post-sale price adjustments, that are
reflected in the purchaser's net outlay.
Proceeding. A ``proceeding'' begins on the date of the filing of a
petition under section 702(b) or section 732(b) of the Act or the
publication of a notice of initiation in a self-initiated investigation
under section 702(a) or section 732(a) of the Act, and ends on the date
of publication of the earliest notice of:
(1) Dismissal of petition,
(2) Rescission of initiation,
(3) Termination of investigation,
(4) A negative determination that has the effect of terminating the
proceeding,
(5) Revocation of an order, or
(6) Termination of a suspended investigation.
Rates. ``Rates'' means the individual weighted-average dumping
margins, the individual countervailable subsidy rates, the country-wide
subsidy rate, or the all-others rate, as applicable.
Respondent interested party. ``Respondent interested party'' means
an interested party described in subparagraph (A) or (B) of section
771(9) of the Act.
Sale. A ``sale'' includes a contract to sell and a lease that is
equivalent to a sale.
Secretary. ``Secretary'' means the Secretary of Commerce or a
designee. The Secretary has delegated to the Assistant Secretary for
Import Administration the authority to make determinations under title
VII of the Act and this Part.
Section 753 review. ``Section 753 review'' means a review under
section 753 of the Act.
Section 762 review. ``Section 762 review'' means a review under
section 762 of the Act.
Segment of proceeding.
(1) In general. An antidumping or countervailing duty proceeding
consists of one or more segments. ``Segment of a proceeding'' or
``segment of the proceeding'' refers to a portion of the proceeding
that is reviewable under section 516A of the Act.
(2) Examples. An antidumping or countervailing duty investigation
or a review of an order or suspended investigation, or a scope inquiry
under Sec. 351.225, each would constitute a segment of a proceeding.
Sunset review. ``Sunset review'' means a review under section
751(c) of the Act.
Suspension of liquidation. ``Suspension of liquidation'' refers to
a suspension of liquidation ordered by the Secretary under the
authority of title VII of the Act, the provisions of this Part, or
section 516a(g)(5)(C) of the Act, or by a court of the United States in
a lawsuit involving action taken, or not taken, by the Secretary under
title VII of the Act or the provisions of this Part.
Third country. For purposes of subpart D, ``third country'' means a
country other than the exporting country and the United States. Under
section 773(a) of the Act and subpart D, in certain circumstances the
Secretary may determine normal value on the basis of sales to a third
country.
URAA. ``URAA'' means the Uruguay Round Agreements Act.
Sec. 351.103 Central Records Unit.
(a) In general. Import Administration's Central Records Unit is
located at Room B-099, U.S. Department of Commerce, Pennsylvania Avenue
and 14th Street, NW., Washington, D.C. 20230. The office hours of the
Central Records Unit are between 8:30 A.M. and 5:00 P.M. on business
days. Among other things, the Central Records Unit is responsible for
maintaining an official and public record for each antidumping and
countervailing duty proceeding (see Sec. 351.104), the Subsidies
Library (see section 775(2) and section 777(a)(1) of the Act), and the
service list for each proceeding (see paragraph (c) of this section).
(b) Filing of documents with the Department. While persons are free
to provide Department officials with courtesy copies of documents, no
document will be considered as having been received by the Secretary
unless it is submitted to the Central Records Unit and is stamped by
the Central Records Unit with the date and time of receipt.
(c) Service list. The Central Records Unit will maintain and make
available a service list for each segment of a proceeding. Each
interested party that asks to be included on the service list for a
segment of a proceeding must designate a person to receive service of
documents filed in that segment. The service list for an application
for a scope ruling is described in Sec. 351.225(n).
Sec. 351.104 Record of proceedings.
(a) Official record. (1) In general. The Secretary will maintain in
the Central Records Unit an official record of each antidumping and
countervailing duty proceeding. The Secretary will include in the
official record all factual information, written argument, or other
material developed by, presented to, or obtained by the Secretary
during the course of a proceeding that pertains to the proceeding. The
official record will include government memoranda pertaining to the
proceeding, memoranda of ex parte meetings, determinations, notices
published in the Federal Register, and transcripts of hearings. The
official record will contain material that is public, business
proprietary, privileged, and classified. For purposes of section
516A(b)(2) of the Act, the record is the official record of each
segment of the proceeding.
(2) Material returned. (i) The Secretary, in making any
determination under this part, will not use factual information,
written argument, or other material that the Secretary returns to the
submitter.
(ii) The official record will include a copy of a returned
document, solely for purposes of establishing and documenting the basis
for returning the document to the submitter, if the document was
returned because:
(A) The document, although otherwise timely, contains untimely
[[Page 27382]]
filed new factual information (see Sec. 351.301(b));
(B) The submitter made a nonconforming request for business
proprietary treatment of factual information (see Sec. 351.304);
(C) The Secretary denied a request for business proprietary
treatment of factual information (see Sec. 351.304);
(D) The submitter is unwilling to permit the disclosure of business
proprietary information under APO (see Sec. 351.304).
(iii) In no case will the official record include any document that
the Secretary returns to the submitter as untimely filed, or any
unsolicited questionnaire response unless the response is a voluntary
response accepted under Sec. 351.204(d) (see Sec. 351.302(d)).
(b) Public record. The Secretary will maintain in the Central
Records Unit a public record of each proceeding. The record will
consist of all material contained in the official record (see paragraph
(a) of this section) that the Secretary decides is public information
under Sec. 351.105(b), government memoranda or portions of memoranda
that the Secretary decides may be disclosed to the general public, and
public versions of all determinations, notices, and transcripts. The
public record will be available to the public for inspection and
copying in the Central Records Unit (see Sec. 351.103). The Secretary
will charge an appropriate fee for providing copies of documents.
(c) Protection of records. Unless ordered by the Secretary or
required by law, no record or portion of a record will be removed from
the Department.
Sec. 351.105 Public, business proprietary, privileged, and classified
information.
(a) Introduction. There are four categories of information in an
antidumping or countervailing duty proceeding: public, business
proprietary, privileged, and classified. In general, public information
is information that may be made available to the public, whereas
business proprietary information may be disclosed (if at all) only to
authorized applicants under an APO. Privileged and classified
information may not be disclosed at all, even under an APO. This
section describes the four categories of information.
(b) Public information. The Secretary normally will consider the
following to be public information:
(1) Factual information of a type that has been published or
otherwise made available to the public by the person submitting it;
(2) Factual information that is not designated as business
proprietary by the person submitting it;
(3) Factual information that, although designated as business
proprietary by the person submitting it, is in a form that cannot be
associated with or otherwise used to identify activities of a
particular person or that the Secretary determines is not properly
designated as business proprietary;
(4) Publicly available laws, regulations, decrees, orders, and
other official documents of a country, including English translations;
and
(5) Written argument relating to the proceeding that is not
designated as business proprietary.
(c) Business proprietary information. The Secretary normally will
consider the following factual information to be business proprietary
information, if so designated by the submitter:
(1) Business or trade secrets concerning the nature of a product or
production process;
(2) Production costs (but not the identity of the production
components unless a particular component is a trade secret);
(3) Distribution costs (but not channels of distribution);
(4) Terms of sale (but not terms of sale offered to the public);
(5) Prices of individual sales, likely sales, or other offers (but
not components of prices, such as transportation, if based on published
schedules, dates of sale, product descriptions (other than business or
trade secrets described in paragraph (c)(1) of this section), or order
numbers);
(6) Names of particular customers, distributors, or suppliers (but
not destination of sale or designation of type of customer,
distributor, or supplier, unless the destination or designation would
reveal the name);
(7) In an antidumping proceeding, the exact amount of the dumping
margin on individual sales;
(8) In a countervailing duty proceeding, the exact amount of the
benefit applied for or received by a person from each of the programs
under investigation or review (but not descriptions of the operations
of the programs, or the amount if included in official public
statements or documents or publications, or the ad valorem
countervailable subsidy rate calculated for each person under a
program);
(9) The names of particular persons from whom business proprietary
information was obtained;
(10) The position of a domestic producer or workers regarding a
petition; and
(11) Any other specific business information the release of which
to the public would cause substantial harm to the competitive position
of the submitter.
(d) Privileged information. The Secretary will consider information
privileged if, based on principles of law concerning privileged
information, the Secretary decides that the information should not be
released to the public or to parties to the proceeding. Privileged
information is exempt from disclosure to the public or to
representatives of interested parties.
(e) Classified information. Classified information is information
that is classified under Executive Order No. 12356 of April 2, 1982 (47
FR 14874 and 15557, 3 CFR 1982 Comp. p. 166) or successor executive
order, if applicable. Classified information is exempt from disclosure
to the public or to representatives of interested parties.
Sec. 351.106 De minimis net countervailable subsidies and weighted-
average dumping margins disregarded.
(a) Introduction. Prior to the enactment of the URAA, the
Department had a well-established and judicially sanctioned practice of
disregarding net countervailable subsidies or weighted-average dumping
margins that were de minimis. The URAA codified in the Act the
particular de minimis standards to be used in antidumping and
countervailing duty investigations. This section discussed the
application of the de minimis standards in antidumping or
countervailing duty proceedings.
(b) Investigations. (1) In general. In making a preliminary or
final antidumping or countervailing duty determination in an
investigation (see sections 703(b), 733(b), 705(a), and 735(a) of the
Act), the Secretary will apply the de minimis standard set forth in
section 703(b)(4) or section 733(b)(3) of the Act (whichever is
applicable).
(2) Transition rule. (i) If:
(A) the Secretary resumes an investigation that has been suspended
(see section 704(i)(1)(B) or section 734(i)(1)(B) of the Act); and
(B) the investigation was initiated before January 1, 1995, then
(ii) The Secretary will apply the de minimis standard in effect at
the time that the investigation was initiated.
(c) Reviews and other determinations. (1) In general. In making any
determination other than a preliminary or final antidumping or
countervailing duty determination in an investigation (see paragraph
(b) of this section), the Secretary will treat as de minimis any
weighted-average dumping margin or countervailable subsidy rate that is
less
[[Page 27383]]
than 0.5 percent ad valorem, or the equivalent specific rate.
(2) Assessment of antidumping duties. The Secretary will instruct
the Customs Service to liquidate without regard to antidumping duties
all entries of subject merchandise during the relevant period of review
made by any person for which the Secretary calculates an assessment
rate under Sec. 351.212(b)(1) that is less than 0.5 percent ad valorem,
or the equivalent specific rate.
Sec. 351.107 Cash deposit rates for nonproducing exporters; rates in
antidumping proceedings involving a nonmarket economy country.
(a) Introduction. This section deals with the establishment of cash
deposit rates in situations where the exporter is not the producer of
subject merchandise, the selection of the appropriate cash deposit rate
in situations where entry documents do not indicate the producer of
subject merchandise, and the calculation of dumping margins in
antidumping proceedings involving imports from a nonmarket economy
country.
(b) Cash deposit rates for nonproducing exporters. (1) Use of
combination rates. (i) In general. In the case of subject merchandise
that is exported to the United States by a company that is not the
producer of the merchandise, the Secretary may establish a
``combination'' cash deposit rate for each combination of the exporter
and its supplying producer(s).
(ii) Example. A nonproducing exporter (Exporter A) exports to the
United States subject merchandise produced by Producers X, Y, and Z. In
such a situation, the Secretary may establish cash deposit rates for
Exporter A/Producer X, Exporter A/Producer Y, and Exporter A/Producer
Z.
(2) New supplier. In the case of subject merchandise that is
exported to the United States by a company that is not the producer of
the merchandise, if the Secretary has not established previously a
combination cash deposit rate under paragraph (b)(1)(i) of this section
for the exporter and producer in question or a noncombination rate for
the exporter in question, the Secretary will apply the cash deposit
rate established for the producer. If the Secretary has not previously
established a cash deposit rate for the producer, the Secretary will
apply the ``all-others rate'' described in section 705(c)(5) or section
735(c)(5) of the Act, as the case may be.
(c) Producer not identified. (1) In general. In situations where
entry documents do not identify the producer of subject merchandise, if
the Secretary has not established previously a noncombination rate for
the exporter, the Secretary may instruct the Customs Service to apply
as the cash deposit rate the higher of:
(i) the highest of any combination cash deposit rate established
for the exporter under paragraph (b)(1)(i) of this section;
(ii) the highest cash deposit rate established for any producer
other than a producer for which the Secretary established a combination
rate involving the exporter in question under paragraph (b)(1)(i) of
this section; or
(iii) the ``all-others rate'' described in section 705(c)(5) or
section 735(c)(5) of the Act, as the case may be.
(d) Rates in antidumping proceedings involving nonmarket economy
countries. In an antidumping proceeding involving imports from a
nonmarket economy country, ``rates'' may consist of a single dumping
margin applicable to all exporters and producers.
Subpart B--Antidumping and Countervailing Duty Procedures
Sec. 351.201 Self-initiation.
(a) Introduction. Antidumping and countervailing duty
investigations may be initiated as the result of a petition filed by a
domestic interested party or at the Secretary's own initiative. This
section contains rules regarding the actions the Secretary will take
when the Secretary self-initiates an investigation.
(b) In general. When the Secretary self-initiates an investigation
under section 702(a) or section 732(a) of the Act, the Secretary will
publish in the Federal Register notice of ``Initiation of Antidumping
(Countervailing Duty) Investigation.'' In addition, the Secretary will
notify the Commission at the time of initiation of the investigation,
and will make available to employees of the Commission directly
involved in the proceeding the information upon which the Secretary
based the initiation and which the Commission may consider relevant to
its injury determination.
(c) Persistent dumping monitoring. To the extent practicable, the
Secretary will expedite any antidumping investigation initiated as the
result of a monitoring program established under section 732(a)(2) of
the Act.
Sec. 351.202 Petition requirements.
(a) Introduction. The Secretary normally initiates antidumping and
countervailing duty investigations based on petitions filed by a
domestic interested party. This section contains rules concerning the
contents of a petition, filing requirements, notification of foreign
governments, pre-initiation communications with the Secretary, and
assistance to small businesses in preparing petitions. Petitioners are
also advised to refer to the Commission's regulations concerning the
contents of petitions, currently 19 CFR 207.11.
(b) Contents of petition. A petition requesting the imposition of
antidumping or countervailing duties must contain the following, to the
extent reasonably available to the petitioner:
(1) The name, address, and telephone number of the petitioner and
any person the petitioner represents;
(2) The identity of the industry on behalf of which the petitioner
is filing, including the names, addresses, and telephone numbers of all
other known persons in the industry;
(3) Information relating to the degree of industry support for the
petition, including:
(i) The total volume and value of U.S. production of the domestic
like product; and
(ii) The volume and value of the domestic like product produced by
the petitioner and each domestic producer identified;
(4) A statement indicating whether the petitioner has filed for
relief from imports of the subject merchandise under section 337 of the
Act (19 U.S.C. 1337, 1671a), sections 201 or 301 of the Trade Act of
1974 (19 U.S.C. 2251 or 2411), or section 232 of the Trade Expansion
Act of 1962 (19 U.S.C. 1862);
(5) A detailed description of the subject merchandise that defines
the requested scope of the investigation, including the technical
characteristics and uses of the merchandise and its current U.S. tariff
classification number;
(6) The name of the country in which the subject merchandise is
manufactured or produced and, if the merchandise is imported from a
country other than the country of manufacture or production, the name
of any intermediate country from which the merchandise is imported;
(7) (i) In the case of an antidumping proceeding:
(A) The names and addresses of each person the petitioner believes
sells the subject merchandise at less than fair value and the
proportion of total exports to the United States that each person
accounted for during the most recent 12-month period (if numerous,
provide information at least for persons that, based on publicly
available information, individually accounted for two percent or more
of the exports);
(B) All factual information (particularly documentary evidence)
[[Page 27384]]
relevant to the calculation of the export price and the constructed
export price of the subject merchandise and the normal value of the
foreign like product (if unable to furnish information on foreign sales
or costs, provide information on production costs in the United States,
adjusted to reflect production costs in the country of production of
the subject merchandise);
(C) If the merchandise is from a country that the Secretary has
found to be a nonmarket economy country, factual information relevant
to the calculation of normal value, using a method described in
Sec. 351.408; or
(ii) In the case of a countervailing duty proceeding:
(A) The names and addresses of each person the petitioner believes
benefits from a countervailable subsidy and exports the subject
merchandise to the United States and the proportion of total exports to
the United States that each person accounted for during the most recent
12-month period (if numerous, provide information at least for persons
that, based on publicly available information, individually accounted
for two percent or more of the exports);
(B) The alleged countervailable subsidy and factual information
(particularly documentary evidence) relevant to the alleged
countervailable subsidy, including any law, regulation, or decree under
which it is provided, the manner in which it is paid, and the value of
the subsidy to exporters or producers of the subject merchandise;
(C) If the petitioner alleges an upstream subsidy under section
771A of the Act, factual information regarding:
(1) Countervailable subsidies, other than an export subsidy, that
an authority of the affected country provides to the upstream supplier;
(2) The competitive benefit the countervailable subsidies bestow on
the subject merchandise; and
(3) The significant effect the countervailable subsidies have on
the cost of producing the subject merchandise;
(8) The volume and value of the subject merchandise imported during
the most recent two-year period and any other recent period that the
petitioner believes to be more representative or, if the subject
merchandise was not imported during the two-year period, information as
to the likelihood of its sale for importation;
(9) The name, address, and telephone number of each person the
petitioner believes imports or, if there were no importations, is
likely to import the subject merchandise;
(10) Factual information regarding material injury, threat of
material injury, or material retardation, and causation;
(11) If the petitioner alleges ``critical circumstances'' under
section 703(e)(1) or section 733(e)(1) of the Act and Sec. 351.206,
factual information regarding:
(i) Whether imports of the subject merchandise are likely to
undermine seriously the remedial effect of any order issued under
section 706(a) or section 736(a) of the Act;
(ii) Massive imports of the subject merchandise in a relatively
short period; and
(iii) (A) In an antidumping proceeding, either:
(1) A history of dumping; or
(2) The importer's knowledge that the exporter was selling the
subject merchandise at less than its fair value, and that there would
be material injury by reason of such sales; or
(B) In a countervailing duty proceeding, whether the
countervailable subsidy is inconsistent with the Subsidies Agreement;
and
(12) Any other factual information on which the petitioner relies.
(c) Simultaneous filing and certification. The petitioner must file
a copy of the petition with the Commission and the Secretary on the
same day and so certify in submitting the petition to the Secretary.
Factual information in the petition must be certified, as provided in
Sec. 351.303(g). Other filing requirements are set forth in
Sec. 351.303.
(d) Business proprietary status of information. The Secretary will
treat as business proprietary any factual information for which the
petitioner requests business proprietary treatment and which meets the
requirements of Sec. 351.304.
(e) Amendment of petition. The Secretary may allow timely amendment
of the petition. The petitioner must file an amendment with the
Commission and the Secretary on the same day and so certify in
submitting the amendment to the Secretary. If the amendment consists of
new allegations, the timeliness of the new allegations will be governed
by Sec. 351.301.
(f) Notification of representative of the exporting country. Upon
receipt of a petition, the Secretary will deliver a public version of
the petition (see Sec. 351.304(c)) to a representative in Washington,
DC, of the government of any exporting country named in the petition.
(g) Petition based upon derogation of an international undertaking
on official export credits. In the case of a petition described in
section 702(b)(3) of the Act, the petitioner must file a copy of the
petition with the Secretary of the Treasury, as well as with the
Secretary and the Commission, and must so certify in submitting the
petition to the Secretary.
(h) Assistance to small businesses; additional information. (1) The
Secretary will provide technical assistance to eligible small
businesses, as defined in section 339 of the Act, to enable them to
prepare and file petitions. The Secretary may deny assistance if the
Secretary concludes that the petition, if filed, could not satisfy the
requirements of section 702(c)(1)(A) or section 732(c)(1)(A) of the Act
(whichever is applicable) (see Sec. 351.203).
(2) For additional information concerning petitions, contact the
Director for Policy and Analysis, Import Administration, International
Trade Administration, Room 3093, U.S. Department of Commerce,
Pennsylvania Avenue and 14th Street, NW, Washington, DC 20230; (202)
482-1768.
(i) Pre-initiation communications. (1) In general. During the
period before the Secretary's decision whether to initiate an
investigation, the Secretary will not consider the filing of a notice
of appearance to constitute a communication for purposes of section
702(b)(4)(B) or section 732(b)(3)(B) of the Act.
(2) Consultations with foreign governments in countervailing duty
proceedings. In a countervailing duty proceeding, the Secretary will
invite the government of any exporting country named in the petition
for consultations with respect to the petition. (The information
collection requirements in paragraph (a) of this section have been
approved by the Office of Management and Budget under control number
0625-0105.)
Sec. 351.203 Determination of sufficiency of petition.
(a) Introduction. When a petition is filed under Sec. 351.202, the
Secretary must determine that the petition satisfies the relevant
statutory requirements before initiating an antidumping or
countervailing duty investigation. This section sets forth rules
regarding a determination as to the sufficiency of a petition
(including the determination that a petition is supported by the
domestic industry), the deadline for making the determination, and the
actions to be taken once the Secretary has made the determination.
(b) Determination of sufficiency. (1) In general. Normally, not
later than 20 days after a petition is filed, the Secretary, on the
basis of sources readily
[[Page 27385]]
available to the Secretary, will examine the accuracy and adequacy of
the evidence provided in the petition and determine whether to initiate
an investigation under section 702(c)(1)(A) or section 732(c)(1)(A) of
the Act (whichever is applicable).
(2) Extension where polling required. If the Secretary is required
to poll or otherwise determine support for the petition under section
702(c)(4)(D) or section 732(c)(4)(D) of the Act, the Secretary may, in
exceptional circumstances, extend the 20-day period by the amount of
time necessary to collect and analyze the required information. In no
case will the period between the filing of a petition and the
determination whether to initiate an investigation exceed 40 days.
(c) Notice of initiation and distribution of petition. (1) Notice
of initiation. If the initiation determination of the Secretary under
section 702(c)(1)(A) or section 732(c)(1)(A) of the Act is affirmative,
the Secretary will initiate an investigation and publish in the Federal
Register notice of ``Initiation of Antidumping (Countervailing Duty)
Investigation.'' The Secretary will notify the Commission at the time
of initiation of the investigation and will make available to employees
of the Commission directly involved in the proceeding the information
upon which the Secretary based the initiation and which the Commission
may consider relevant to its injury determinations.
(2) Distribution of petition. As soon as practicable after
initiation of an investigation, the Secretary will provide a public
version of the petition to all known exporters (including producers who
sell for export to the United States) of the subject merchandise. If
the Secretary determines that there is a particularly large number of
exporters involved, instead of providing the public version to all
known exporters, the Secretary may provide the public version to a
trade association of the exporters or, alternatively, may consider the
requirement of the preceding sentence to have been satisfied by the
delivery of a public version of the petition to the government of the
exporting country under Sec. 351.202(f).
(d) Insufficiency of petition. If an initiation determination of
the Secretary under section 702(c)(1)(A) or section 732(c)(1)(A) of the
Act is negative, the Secretary will dismiss the petition, terminate the
proceeding, notify the petitioner in writing of the reasons for the
determination, and publish in the Federal Register notice of
``Dismissal of Antidumping (Countervailing Duty) Petition.''
(e) Determination of industry support. In determining industry
support for a petition under section 702(c)(4) or section 732(c)(4) of
the Act, the following rules will apply:
(1) Measuring production. The Secretary normally will measure
production over a twelve-month period specified by the Secretary, and
may measure production based on either value or volume. Where a party
to the proceeding establishes that production data for the relevant
period, as specified by the Secretary, is unavailable, production
levels may be established by reference to alternative data that the
Secretary determines to be indicative of production levels.
(2) Positions treated as business proprietary information. Upon
request, the Secretary may treat the position of a domestic producer or
workers regarding the petition and any production information supplied
by the producer or workers as business proprietary information under
Sec. 351.105(c)(10).
(3) Positions expressed by workers. The Secretary will consider the
positions of workers and management regarding the petition to be of
equal weight. The Secretary will assign a single weight to the
positions of both workers and management according to the production of
the domestic like product of the firm in which the workers and
management are employed. If the management of a firm expresses a
position in direct opposition to the position of the workers in that
firm, the Secretary will treat the production of that firm as
representing neither support for, nor opposition to, the petition.
(4) Certain positions disregarded. (i) The Secretary will disregard
the position of a domestic producer that opposes the petition if such
producer is related to a foreign producer or to a foreign exporter
under section 771(4)(B)(ii) of the Act, unless such domestic producer
demonstrates to the Secretary's satisfaction that its interests as a
domestic producer would be adversely affected by the imposition of an
antidumping order or a countervailing duty order, as the case may be;
and
(ii) The Secretary may disregard the position of a domestic
producer that is an importer of the subject merchandise, or that is
related to such an importer, under section 771(4)(B)(ii) of the Act.
(5) Polling the industry. In conducting a poll of the industry
under section 702(c)(4)(D)(i) or section 732(c)(4)(D)(i) of the Act,
the Secretary will include unions, groups of workers, and trade or
business associations described in paragraphs (9)(D) and (9)(E) of
section 771 of the Act.
(f) Time limits where petition involves same merchandise as that
covered by an order that has been revoked. Under section 702(c)(1)(C)
or section 732(c)(1)(C) of the Act, and in expediting an investigation
involving subject merchandise for which a prior order was revoked or a
suspended investigation was terminated, the Secretary will consider
``section 751(d)'' as including a predecessor provision.
Sec. 351.204 Time periods and persons examined; voluntary respondents;
exclusions.
(a) Introduction. Because the Act does not specify the precise
period of time that the Secretary should examine in an antidumping or
countervailing duty investigation, this section sets forth rules
regarding the period of investigation (``POI''). In addition, this
section includes rules regarding the selection of persons to be
examined, the treatment of voluntary respondents that are not selected
for individual examination, and the exclusion of persons that the
Secretary ultimately finds are not dumping or are not receiving
countervailable subsidies.
(b) Period of investigation. (1) Antidumping investigation. In an
antidumping investigation, the Secretary normally will examine
merchandise sold during the four most recently completed fiscal
quarters (or, in an investigation involving merchandise imported from a
nonmarket economy country, the two most recently completed fiscal
quarters) as of the month preceding the month in which the petition was
filed or in which the Secretary self-initiated an investigation.
However, the Secretary may examine merchandise sold during any
additional or alternate period that the Secretary concludes is
appropriate.
(2) Countervailing duty investigation. In a countervailing duty
investigation, the Secretary normally will rely on information
pertaining to the most recently completed fiscal year for the
government and exporters or producers in question. If the exporters or
producers have different fiscal years, the Secretary normally will rely
on information pertaining to the most recently completed calendar year.
If the investigation is conducted on an aggregate basis under section
777A(e)(2)(B) of the Act, the Secretary normally will rely on
information pertaining to the most recently completed fiscal year for
the government in question. However, the Secretary may rely on
information for
[[Page 27386]]
any additional or alternate period that the Secretary concludes is
appropriate.
(c) Exporters and producers examined. (1) In general. In an
investigation, the Secretary will attempt to determine an individual
weighted-average dumping margin or individual countervailable subsidy
rate for each known exporter or producer of the subject merchandise.
However, the Secretary may decline to examine a particular exporter or
producer if that exporter or producer and the petitioner agree.
(2) Limited investigation. Notwithstanding paragraph (c)(1) of this
section, the Secretary may limit the investigation by using a method
described in subsection (a), (c), or (e) of section 777A of the Act.
(d) Voluntary respondents. (1) In general. If the Secretary limits
the number of exporters or producers to be individually examined under
section 777A(c)(2) or section 777A(e)(2)(A) of the Act, the Secretary
will examine voluntary respondents (exporters or producers, other than
those initially selected for individual examination) in accordance with
section 782(a) of the Act.
(2) Acceptance of voluntary respondents. The Secretary will
determine, as soon as practicable, whether to examine a voluntary
respondent individually. A voluntary respondent accepted for individual
examination under subparagraph (d)(1) of this section will be subject
to the same requirements as an exporter or producer initially selected
by the Secretary for individual examination under section 777A(c)(2) or
section 777A(e)(2)(A) of the Act, including the requirements of section
782(a) of the Act and, where applicable, the use of the facts available
under section 776 of the Act and Sec. 351.308.
(3) Exclusion of voluntary respondents' rates from all-others rate.
In calculating an all-others rate under section 705(c)(5) or section
735(c)(5) of the Act, the Secretary will exclude weighted-average
dumping margins or countervailable subsidy rates calculated for
voluntary respondents.
(e) Exclusions. (1) In general. The Secretary will exclude from an
affirmative final determination under section 705(a) or section 735(a)
of the Act or an order under section 706(a) or section 736(a) of the
Act, any exporter or producer for which the Secretary determines an
individual weighted-average dumping margin or individual net
countervailable subsidy rate of zero or de minimis.
(2) Preliminary determinations. In an affirmative preliminary
determination under section 703(b) or section 733(b) of the Act, an
exporter or producer for which the Secretary preliminarily determines
an individual weighted-average dumping margin or individual net
countervailable subsidy of zero or de minimis will not be excluded from
the preliminary determination or the investigation. However, the
exporter or producer will not be subject to provisional measures under
section 703(d) or section 733(d) of the Act.
(3) Exclusion of nonproducing exporter. (i) In general. In the case
of an exporter that is not the producer of subject merchandise, the
Secretary normally will limit an exclusion of the exporter to subject
merchandise of those producers that supplied the exporter during the
period of investigation.
(ii) Example. During the period of investigation, Exporter A
exports to the United States subject merchandise produced by Producer
X. Based on an examination of Exporter A, the Secretary determines that
the dumping margins with respect to these exports are de minimis, and
the Secretary excludes Exporter A. Normally, the exclusion of Exporter
A would be limited to subject merchandise produced by Producer X. If
Exporter A began to export subject merchandise produced by Producer Y,
this merchandise would be subject to the antidumping duty order, if
any.
(4) Countervailing duty investigations conducted on an aggregate
basis and requests for exclusion from countervailing duty order. Where
the Secretary conducts a countervailing duty investigation on an
aggregate basis under section 777A(e)(2)(B) of the Act, the Secretary
will consider and investigate requests for exclusion to the extent
practicable. An exporter or producer that desires exclusion from an
order must submit:
(i) A certification by the exporter or producer that it received
zero or de minimis net countervailable subsidies during the period of
investigation;
(ii) If the exporter or producer received a countervailable
subsidy, calculations demonstrating that the amount of net
countervailable subsidies received was de minimis during the period of
investigation;
(iii) If the exporter is not the producer of the subject
merchandise, certifications from the suppliers and producers of the
subject merchandise that those persons received zero or de minimis net
countervailable subsidies during the period of the investigation; and
(iv) A certification from the government of the affected country
that the government did not provide the exporter (or the exporter's
supplier) or producer with more than de minimis net countervailable
subsidies during the period of investigation.
Sec. 351.205 Preliminary determination.
(a) Introduction. A preliminary determination in an antidumping or
countervailing duty investigation constitutes the first point at which
the Secretary may provide a remedy if the Secretary preliminarily finds
that dumping or countervailable subsidization has occurred. The remedy
(sometimes referred to as ``provisional measures'') usually takes the
form of a bonding requirement to ensure payment if antidumping or
countervailing duties ultimately are imposed. Whether the Secretary's
preliminary determination is affirmative or negative, the investigation
continues. This section contains rules regarding deadlines for
preliminary determinations, postponement of preliminary determinations,
notices of preliminary determinations, and the effects of affirmative
preliminary determinations.
(b) Deadline for preliminary determination. The deadline for a
preliminary determination under section 703(b) or section 733(b) of the
Act will be:
(1) Normally not later than 140 days in an antidumping
investigation (65 days in a countervailing duty investigation) after
the date on which the Secretary initiated the investigation (see
section 703(b)(1) or section 733(b)(1)(A) of the Act);
(2) Not later than 190 days in an antidumping investigation (130
days in a countervailing duty investigation) after the date on which
the Secretary initiated the investigation if the Secretary postpones
the preliminary determination at petitioner's request or because the
Secretary determines that the investigation is extraordinarily
complicated (see section 703(c)(1) or section 733(c)(1) of the Act);
(3) In a countervailing duty investigation, not later than 250 days
after the date on which the proceeding began if the Secretary postpones
the preliminary determination due to an upstream subsidy allegation (up
to 310 days if the Secretary also postponed the preliminary
determination at the request of the petitioner or because the Secretary
determined that the investigation is extraordinarily complicated) (see
section 703(c)(1) and section 703(g)(1) of the Act);
(4) Within 90 days after initiation in an antidumping
investigation, and on an expedited basis in a countervailing duty
investigation, where verification has
[[Page 27387]]
been waived (see section 703(b)(3) or section 733(b)(2) of the Act);
(5) In a countervailing duty investigation, on an expedited basis
and within 65 days after the date on which the Secretary initiated the
investigation if the sole subsidy alleged in the petition was the
derogation of an international undertaking on official export credits
(see section 702(b)(3) and section 703(b)(2) of the Act);
(6) In a countervailing duty investigation, not later than 60 days
after the date on which the Secretary initiated the investigation if
the only subsidy under investigation is a subsidy with respect to which
the Secretary received notice from the United States Trade
Representative of a violation of Article 8 of the Subsidies Agreement
(see section 703(b)(5) of the Act); and
(7) In an antidumping investigation, within the deadlines set forth
in section 733(b)(1)(B) of the Act if the investigation involves short
life cycle merchandise (see section 733(b)(1)(B) and section 739 of the
Act).
(c) Contents of preliminary determination and publication of
notice. A preliminary determination will include a preliminary finding
on critical circumstances, if appropriate, under section 703(e)(1) or
section 733(e)(1) of the Act (whichever is applicable). The Secretary
will publish in the Federal Register notice of ``Affirmative (Negative)
Preliminary Antidumping (Countervailing Duty) Determination,''
including the rates, if any, and an invitation for argument consistent
with Sec. 351.309.
(d) Effect of affirmative preliminary determination. If the
preliminary determination is affirmative, the Secretary will take the
actions described in section 703(d) or section 733(d) of the Act
(whichever is applicable). In making information available to the
Commission under section 703(d)(3) or section 733(d)(3) of the Act, the
Secretary will make available to the Commission and to employees of the
Commission directly involved in the proceeding the information upon
which the Secretary based the preliminary determination and which the
Commission may consider relevant to its injury determination.
(e) Postponement at the request of the petitioner. A petitioner
must submit a request for postponement of the preliminary determination
(see section 703(c)(1)(A) or section 733(c)(1)(A) of the Act) 25 days
or more before the scheduled date of the preliminary determination, and
must state the reasons for the request. The Secretary will grant the
request, unless the Secretary finds compelling reasons to deny the
request.
(f) Notice of postponement. (1) If the Secretary decides to
postpone the preliminary determination at the request of the petitioner
or because the investigation is extraordinarily complicated, the
Secretary will notify all parties to the proceeding not later than 20
days before the scheduled date of the preliminary determination, and
will publish in the Federal Register notice of ``Postponement of
Preliminary Antidumping (Countervailing Duty) Determination,'' stating
the reasons for the postponement (see section 703(c)(2) or section
733(c)(2) of the Act).
(2) If the Secretary decides to postpone the preliminary
determination due to an allegation of upstream subsidies, the Secretary
will notify all parties to the proceeding not later than the scheduled
date of the preliminary determination and will publish in the Federal
Register notice of ``Postponement of Preliminary Countervailing Duty
Determination,'' stating the reasons for the postponement.
Sec. 351.206 Critical circumstances.
(a) Introduction. Generally, antidumping or countervailing duties
are imposed on entries of merchandise made on or after the date on
which the Secretary first imposes provisional measures (most often the
date on which notice of an affirmative preliminary determination is
published in the Federal Register). However, if the Secretary finds
that ``critical circumstances'' exist, duties may be imposed
retroactively on merchandise entered up to 90 days before the
imposition of provisional measures. This section contains procedural
and substantive rules regarding allegations and findings of critical
circumstances.
(b) In general. If a petitioner submits to the Secretary a written
allegation of critical circumstances, with reasonably available factual
information supporting the allegation, 21 days or more before the
scheduled date of the Secretary's final determination, or on the
Secretary's own initiative in a self-initiated investigation, the
Secretary will make a finding whether critical circumstances exist, as
defined in section 705(a)(2) or section 735(a)(3) of the Act (whichever
is applicable).
(c) Preliminary finding. (1) If the petitioner submits an
allegation of critical circumstances 30 days or more before the
scheduled date of the Secretary's final determination, the Secretary,
based on the available information, will make a preliminary finding
whether there is a reasonable basis to believe or suspect that critical
circumstances exist, as defined in section 703(e)(1) or section
733(e)(1) of the Act (whichever is applicable).
(2) The Secretary will issue the preliminary finding:
(i) Not later than the preliminary determination, if the allegation
is submitted 20 days or more before the scheduled date of the
preliminary determination; or
(ii) Within 30 days after the petitioner submits the allegation, if
the allegation is submitted later than 20 days before the scheduled
date of the preliminary determination. The Secretary will notify the
Commission and publish in the Federal Register notice of the
preliminary finding.
(d) Suspension of liquidation. If the Secretary makes an
affirmative preliminary finding of critical circumstances, the
provisions of section 703(e)(2) or section 733(e)(2) of the Act
(whichever is applicable) regarding the retroactive suspension of
liquidation will apply.
(e) Final finding. For any allegation of critical circumstances
submitted 21 days or more before the scheduled date of the Secretary's
final determination, the Secretary will make a final finding on
critical circumstances, and will take appropriate action under section
705(c)(4) or section 735(c)(4) of the Act (whichever is applicable).
(f) Findings in self-initiated investigations. In a self-initiated
investigation, the Secretary will make preliminary and final findings
on critical circumstances without regard to the time limits in
paragraphs (c) and (e) of this section.
(g) Information regarding critical circumstances. The Secretary may
request the Commissioner of Customs to compile information on an
expedited basis regarding entries of the subject merchandise if, at any
time after the initiation of an investigation, the Secretary makes the
findings described in section 702(e) or section 732(e) of the Act
(whichever is applicable) regarding the possible existence of critical
circumstances.
(h) Massive imports. (1) In determining whether imports of the
subject merchandise have been massive under section 705(a)(2)(B) or
section 735(a)(3)(B) of the Act, the Secretary normally will examine:
(i) The volume and value of the imports;
(ii) Seasonal trends; and
(iii) The share of domestic consumption accounted for by the
imports.
(2) In general, unless the imports during the ``relatively short
period'' (see
[[Page 27388]]
paragraph (i) of this section) have increased by at least 15 percent
over the imports during an immediately preceding period of comparable
duration, the Secretary will not consider the imports massive.
(i) Relatively short period. Under section 705(a)(2)(B) or section
735(a)(3)(B) of the Act, the Secretary normally will consider a
``relatively short period'' as the period beginning on the date the
proceeding begins and ending at least three months later. However, if
the Secretary finds that importers, or exporters or producers, had
reason to believe, at some time prior to the beginning of the
proceeding, that a proceeding was likely, then the Secretary may
consider a period of not less than three months from that earlier time.
Sec. 351.207 Termination of investigation.
(a) Introduction. ``Termination'' is a term of art that refers to
the end of an antidumping or countervailing duty proceeding in which an
order has not yet been issued. The Act establishes a variety of
mechanisms by which an investigation may be terminated, most of which
are dealt with in this section. For rules regarding the termination of
a suspended investigation following a review under section 751 of the
Act, see Sec. 351.222.
(b) Withdrawal of petition; self-initiated investigations. (1) In
general. The Secretary may terminate an investigation under section
704(a)(1)(A) or section 734(a)(1)(A) (withdrawal of petition) or under
section 704(k) or section 734(k) (self-initiated investigation) of the
Act, provided that the Secretary concludes that termination is in the
public interest. If the Secretary terminates an investigation, the
Secretary will publish in the Federal Register notice of ``Termination
of Antidumping (Countervailing Duty) Investigation,'' together with,
when appropriate, a copy of any correspondence with the petitioner
forming the basis of the withdrawal and the termination. (For the
treatment in a subsequent investigation of records compiled in an
investigation in which the petition was withdrawn, see section
704(a)(1)(B) or section 734(a)(1)(B) of the Act.)
(2) Withdrawal of petition based on acceptance of quantitative
restriction agreements. In addition to the requirements of paragraph
(b)(1) of this section, if a termination is based on the acceptance of
an understanding or other kind of agreement to limit the volume of
imports into the United States of the subject merchandise, the
Secretary will apply the provisions of section 704(a)(2) or section
734(a)(2) of the Act (whichever is applicable) regarding public
interest and consultations with consuming industries and producers and
workers.
(c) Lack of interest. The Secretary may terminate an investigation
based upon lack of interest (see section 782(h)(1) of the Act). Where
the Secretary terminates an investigation under this paragraph, the
Secretary will publish the notice described in paragraph (b)(1) of this
section.
(d) Negative determination. An investigation terminates
automatically upon publication in the Federal Register of the
Secretary's negative final determination or the Commission's negative
preliminary or final determination.
(e) End of suspension of liquidation. When an investigation
terminates, if the Secretary previously ordered suspension of
liquidation, the Secretary will order the suspension ended on the date
of publication of the notice of termination referred to in paragraph
(b) of this section or on the date of publication of a negative
determination referred to in paragraph (d) of this section, and will
instruct the Customs Service to release any cash deposit or bond.
Sec. 351.208 Suspension of investigation.
(a) Introduction. In addition to the imposition of duties, the Act
also permits the Secretary to suspend an antidumping or countervailing
duty investigation by accepting a suspension agreement (referred to in
the WTO Agreements as an ``undertaking''). Briefly, in a suspension
agreement, the exporters and producers or the foreign government agree
to modify their behavior so as to eliminate dumping or subsidization or
the injury caused thereby. If the Secretary accepts a suspension
agreement, the Secretary will ``suspend'' the investigation and
thereafter will monitor compliance with the agreement. This section
contains rules for entering into suspension agreements and procedures
for suspending an investigation.
(b) In general. The Secretary may suspend an investigation under
section 704 or section 734 of the Act and this section.
(c) Definition of ``substantially all.'' Under section 704 and
section 734 of the Act, exporters that account for ``substantially
all'' of the merchandise means exporters and producers that have
accounted for not less than 85 percent by value or volume of the
subject merchandise during the period for which the Secretary is
measuring dumping or countervailable subsidization in the investigation
or such other period that the Secretary considers representative.
(d) Monitoring. In monitoring a suspension agreement under section
704(c), section 734(c), or section 734(l) of the Act (agreements to
eliminate injurious effects or to restrict the volume of imports), the
Secretary will not be obliged to ascertain on a continuing basis the
prices in the United States of the subject merchandise or of domestic
like products.
(e) Exports not to increase during interim period. The Secretary
will not accept a suspension agreement under section 704(b)(2) or
section 734(b)(1) of the Act (the cessation of exports) unless the
agreement ensures that the quantity of the subject merchandise exported
during the interim period set forth in the agreement does not exceed
the quantity of the merchandise exported during a period of comparable
duration that the Secretary considers representative.
(f) Procedure for suspension of investigation. (1) Submission of
proposed suspension agreement. (i) In general. As appropriate, the
exporters and producers or, in an antidumping investigation involving a
nonmarket economy country or a countervailing duty investigation, the
government, must submit to the Secretary a proposed suspension
agreement within:
(A) In an antidumping investigation, 15 days after the date of
issuance of the preliminary determination, or
(B) In a countervailing duty investigation, 7 days after the date
of issuance of the preliminary determination.
(ii) Postponement of final determination. Where a proposed
suspension agreement is submitted in an antidumping investigation, an
exporter or producer or, in an investigation involving a nonmarket
economy country, the government, may request postponement of the final
determination under section 735(a)(2) of the Act (see Sec. 351.210(e)).
Where the final determination in a countervailing duty investigation is
postponed under section 703(g)(2) or section 705(a)(1) of the Act (see
Sec. 351.210(b)(3) and Sec. 351.210(i)), the time limits in paragraphs
(f)(1)(i), (f)(2)(i), (f)(3), and (g)(1) of this section applicable to
countervailing duty investigations will be extended to coincide with
the time limits in such paragraphs applicable to antidumping
investigations.
(iii) Special rule for regional industry determination. If the
Commission makes a regional industry determination in its final
affirmative determination under
[[Page 27389]]
section 705(b) or section 735(b) of the Act but not in its preliminary
affirmative determination under section 703(a) or section 733(a) of the
Act, the exporters and producers or, in an antidumping investigation
involving a nonmarket economy country or a countervailing duty
investigation, the government, must submit to the Secretary any
proposed suspension agreement within 15 days of the publication in the
Federal Register of the antidumping or countervailing duty order.
(2) Notification and consultation. In fulfilling the requirements
of section 704 or section 734 of the Act (whichever is applicable), the
Secretary will take the following actions:
(i) In general. The Secretary will notify all parties to the
proceeding of the proposed suspension of an investigation and provide
to the petitioner a copy of the suspension agreement preliminarily
accepted by the Secretary (the agreement must contain the procedures
for monitoring compliance and a statement of the compatibility of the
agreement with the requirements of section 704 or section 734 of the
Act) within:
(A) In an antidumping investigation, 30 days after the date of
issuance of the preliminary determination, or
(B) In a countervailing duty investigation, 15 days after the date
of issuance of the preliminary determination; or
(ii) Special rule for regional industry determination. If the
Commission makes a regional industry determination in its final
affirmative determination under section 705(b) or section 735(b) of the
Act but not in its preliminary affirmative determination under section
703(a) or section 733(a) of the Act, the Secretary, within 15 days of
the submission of a proposed suspension agreement under paragraph
(f)(1)(iii) of this section, will notify all parties to the proceeding
of the proposed suspension agreement and provide to the petitioner a
copy of the agreement preliminarily accepted by the Secretary (such
agreement must contain the procedures for monitoring compliance and a
statement of the compatibility of the agreement with the requirements
of section 704 or section 734 of the Act); and
(iii) Consultation. The Secretary will consult with the petitioner
concerning the proposed suspension of the investigation.
(3) Opportunity for comment. The Secretary will provide all
interested parties, an industrial user of the subject merchandise or a
representative consumer organization, as described in section 777(h) of
the Act, and United States government agencies an opportunity to submit
written argument and factual information concerning the proposed
suspension of the investigation within:
(i) In an antidumping investigation, 50 days after the date of
issuance of the preliminary determination,
(ii) In a countervailing duty investigation, 35 days after the date
of issuance of the preliminary determination, or
(iii) In a regional industry case described in paragraph
(f)(1)(iii) of this section, 35 days after the date of issuance of an
order.
(g) Acceptance of suspension agreement. (1) The Secretary may
accept an agreement to suspend an investigation within:
(i) In an antidumping investigation, 60 days after the date of
issuance of the preliminary determination,
(ii) In a countervailing duty investigation, 45 days after the date
of issuance of the preliminary determination, or
(iii) In a regional industry case described in paragraph
(f)(1)(iii) of this section, 45 days after the date of issuance of an
order.
(2) If the Secretary accepts an agreement to suspend an
investigation, the Secretary will take the actions described in section
704(f), section 704(m)(3), section 734(f), or section 734(l)(3) of the
Act (whichever is applicable), and will publish in the Federal Register
notice of ``Suspension of Antidumping (Countervailing Duty)
Investigation,'' including the text of the agreement. If the Secretary
has not already published notice of an affirmative preliminary
determination, the Secretary will include that notice. In accepting an
agreement, the Secretary may rely on factual or legal conclusions the
Secretary reached in or after the affirmative preliminary
determination.
(h) Continuation of investigation. (1) A request to the Secretary
under section 704(g) or section 734(g) of the Act for the continuation
of the investigation must be made in writing. In addition, the request
must be simultaneously filed with the Commission, and the requester
must so certify in submitting the request to the Secretary.
(2) If the Secretary and the Commission make affirmative final
determinations in an investigation that has been continued, the
suspension agreement will remain in effect in accordance with the
factual and legal conclusions in the Secretary's final determination.
If either the Secretary or the Commission makes a negative final
determination, the agreement will have no force or effect.
(i) Merchandise imported in excess of allowed quantity. (1) The
Secretary may instruct the Customs Service not to accept entries, or
withdrawals from warehouse, for consumption of subject merchandise in
excess of any quantity allowed by a suspension agreement under section
704 or section 734 of the Act, including any quantity allowed during
the interim period (see paragraph (e) of this section).
(2) Imports in excess of the quantity allowed by a suspension
agreement, including any quantity allowed during the interim period
(see paragraph (e) of this section), may be exported or destroyed under
Customs Service supervision, except that if the agreement is under
section 704(c)(3) or section 734(l) of the Act (restrictions on the
volume of imports), the excess merchandise, with the approval of the
Secretary, may be held for future opening under the agreement by
placing it in a foreign trade zone or by entering it for warehouse.
Sec. 351.209 Violation of suspension agreement.
(a) Introduction. A suspension agreement remains in effect until
the underlying investigation is terminated (see Secs. 351.207 and
351.222). However, if the Secretary finds that a suspension agreement
has been violated or no longer meets the requirements of the Act, the
Secretary may either cancel or revise the agreement. This section
contains rules regarding cancellation and revision of suspension
agreements.
(b) Immediate determination. If the Secretary determines that a
signatory has violated a suspension agreement, the Secretary, without
providing interested parties an opportunity to comment, will:
(1) Order the suspension of liquidation in accordance with section
704(i)(1)(A) or section 734(i)(1)(A) of the Act (whichever is
applicable) of all entries of the subject merchandise entered, or
withdrawn from warehouse, for consumption on or after the later of:
(i) 90 days before the date of publication of the notice of
cancellation of the agreement; or
(ii) The date of first entry, or withdrawal from warehouse, for
consumption of the merchandise the sale or export of which was in
violation of the agreement;
(2) If the investigation was not completed under section 704(g) or
section 734(g) of the Act, resume the investigation as if the Secretary
had made an affirmative preliminary determination on the date of
publication
[[Page 27390]]
of the notice of cancellation and impose provisional measures by
instructing the Customs Service to require for each entry of the
subject merchandise suspended under paragraph (b)(1) of this section a
cash deposit or bond at the rates determined in the affirmative
preliminary determination;
(3) If the investigation was completed under section 704(g) or
section 734(g) of the Act, issue an antidumping order or countervailing
duty order (whichever is applicable) and, for all entries subject to
suspension of liquidation under paragraph (b)(1) of this section,
instruct the Customs Service to require for each entry of the
merchandise suspended under this paragraph a cash deposit at the rates
determined in the affirmative final determination;
(4) Notify all persons who are or were parties to the proceeding,
the Commission, and, if the Secretary determines that the violation was
intentional, the Commissioner of Customs; and
(5) Publish in the Federal Register notice of ``Antidumping
(Countervailing Duty) Order (Resumption of Antidumping (Countervailing
Duty) Investigation); Cancellation of Suspension Agreement.''
(c) Determination after notice and comment. (1) If the Secretary
has reason to believe that a signatory has violated a suspension
agreement, or that an agreement no longer meets the requirements of
section 704(d)(1) or section 734(d) of the Act, but the Secretary does
not have sufficient information to determine that a signatory has
violated the agreement (see paragraph (b) of this section), the
Secretary will publish in the Federal Register notice of ``Invitation
for Comment on Antidumping (Countervailing Duty) Suspension
Agreement.''
(2) After publication of the notice inviting comment and after
consideration of comments received the Secretary will:
(i) Determine whether any signatory has violated the suspension
agreement; or
(ii) Determine whether the suspension agreement no longer meets the
requirements of section 704(d)(1) or section 734(d) of the Act.
(3) If the Secretary determines that a signatory has violated the
suspension agreement, the Secretary will take appropriate action as
described in paragraphs (b)(1) through (b)(5) of this section.
(4) If the Secretary determines that a suspension agreement no
longer meets the requirements of section 704(d)(1) or section 734(d) of
the Act, the Secretary will:
(i) Take appropriate action as described in paragraphs (b)(1)
through (b)(5) of this section; except that, under paragraph (b)(1)(ii)
of this section, the Secretary will order the suspension of liquidation
of all entries of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the later of:
(A) 90 days before the date of publication of the notice of
suspension of liquidation; or
(B) The date of first entry, or withdrawal from warehouse, for
consumption of the merchandise the sale or export of which does not
meet the requirements of section 704(d)(1) of the Act;
(ii) Continue the suspension of investigation by accepting a
revised suspension agreement under section 704(b) or section 734(b) of
the Act (whether or not the Secretary accepted the original agreement
under such section) that, at the time the Secretary accepts the revised
agreement, meets the applicable requirements of section 704(d)(1) or
section 734(d) of the Act, and publish in the Federal Register notice
of ``Revision of Agreement Suspending Antidumping (Countervailing Duty)
Investigation''; or
(iii) Continue the suspension of investigation by accepting a
revised suspension agreement under section 704(c), section 734(c), or
section 734(l) of the Act (whether or not the Secretary accepted the
original agreement under such section) that, at the time the Secretary
accepts the revised agreement, meets the applicable requirements of
section 704(d)(1) or section 734(d) of the Act, and publish in the
Federal Register notice of ``Revision of Agreement Suspending
Antidumping (Countervailing Duty) Investigation.'' If the Secretary
continues to suspend an investigation based on a revised agreement
accepted under section 704(c), section 734(c), or section 734(l) of the
Act, the Secretary will order suspension of liquidation to begin. The
suspension will not end until the Commission completes any requested
review of the revised agreement under section 704(h) or section 734(h)
of the Act. If the Commission receives no request for review within 20
days after the date of publication of the notice of the revision, the
Secretary will order the suspension of liquidation ended on the 21st
day after the date of publication, and will instruct the Customs
Service to release any cash deposit or bond. If the Commission
undertakes a review under section 704(h) or section 734(h) of the Act,
the provisions of sections 704(h)(2) and (3) and sections 734(h)(2) and
(3) of the Act will apply.
(5) If the Secretary decides neither to consider the suspension
agreement violated nor to revise the agreement, the Secretary will
publish in the Federal Register notice of the Secretary's decision
under paragraph (c)(2) of this section, including a statement of the
factual and legal conclusions on which the decision is based.
(d) Additional signatories. If the Secretary decides that a
suspension agreement no longer will completely eliminate the injurious
effect of exports to the United States of subject merchandise under
section 704(c)(1) or section 734(c)(1) of the Act, or that the
signatory exporters no longer account for substantially all of the
subject merchandise, the Secretary may revise the agreement to include
additional signatory exporters.
(e) Definition of ``violation.'' Under this section, ``violation''
means noncompliance with the terms of a suspension agreement caused by
an act or omission of a signatory, except, at the discretion of the
Secretary, an act or omission which is inadvertent or inconsequential.
Sec. 351.210 Final determination.
(a) Introduction. A ``final determination'' in an antidumping or
countervailing duty investigation constitutes a final decision by the
Secretary as to whether dumping or countervailable subsidization is
occurring. If the Secretary's final determination is affirmative, in
most instances the Commission will issue a final injury determination
(except in certain countervailing duty investigations). Also, if the
Secretary's preliminary determination was negative but the final
determination is affirmative, the Secretary will impose provisional
measures. If the Secretary's final determination is negative, the
proceeding, including the injury investigation conducted by the
Commission, terminates. This section contains rules regarding deadlines
for, and postponement of, final determinations, contents of final
determinations, and the effects of final determinations.
(b) Deadline for final determination. The deadline for a final
determination under section 705(a)(1) or section 735(a)(1) of the Act
will be:
(1) Normally, not later than 75 days after the date of the
Secretary's preliminary determination (see section 705(a)(1) or section
735(a)(1) of the Act);
(2) In an antidumping investigation, not later than 135 days after
the date of publication of the preliminary
[[Page 27391]]
determination if the Secretary postpones the final determination at the
request of:
(i) The petitioner, if the preliminary determination was negative
(see section 735(a)(2)(B) of the Act); or
(ii) Exporters or producers who account for a significant
proportion of exports of the subject merchandise, if the preliminary
determination was affirmative (see section 735(a)(2)(A) of the Act);
(3) In a countervailing duty investigation, not later than 165 days
after the preliminary determination, if, after the preliminary
determination, the Secretary decides to investigate an upstream subsidy
allegation and concludes that additional time is needed to investigate
the allegation (see section 703(g)(2) of the Act); or
(4) In a countervailing duty investigation, the same date as the
date of the final antidumping determination, if:
(i) In a situation where the Secretary simultaneously initiated
antidumping and countervailing duty investigations on the subject
merchandise (from the same or other countries), the petitioner requests
that the final countervailing duty determination be postponed to the
date of the final antidumping determination; and
(ii) If the final countervailing duty determination is not due on a
later date because of postponement due to an allegation of upstream
subsidies under section 703(g) of the Act (see section 705(a)(1) of the
Act).
(c) Contents of final determination and publication of notice. The
final determination will include, if appropriate, a final finding on
critical circumstances under section 705(a)(2) or section 735(a)(3) of
the Act (whichever is applicable). The Secretary will publish in the
Federal Register notice of ``Affirmative (Negative) Final Antidumping
(Countervailing Duty) Determination,'' including the rates, if any.
(d) Effect of affirmative final determination. If the final
determination is affirmative, the Secretary will take the actions
described in section 705(c)(1) or section 735(c)(1) of the Act
(whichever is applicable). In addition, in the case of a countervailing
duty investigation involving subject merchandise from a country that is
not a Subsidies Agreement country, the Secretary will instruct the
Customs Service to require a cash deposit, as provided in section
706(a)(3) of the Act, for each entry of the subject merchandise
entered, or withdrawn from warehouse, for consumption on or after the
date of publication of the order under section 706(a) of the Act.
(e) Request for postponement of final antidumping determination.
(1) In general. A request to postpone a final antidumping determination
under section 735(a)(2) of the Act (see paragraph (b)(2) of this
section) must be submitted in writing within the scheduled date of the
final determination. The Secretary may grant the request, unless the
Secretary finds compelling reasons to deny the request.
(2) Requests by exporters. In the case of a request submitted under
paragraph (e)(1) of this section by exporters who account for a
significant proportion of exports of subject merchandise (see section
735(a)(2)(A) of the Act), the Secretary will not grant the request
unless those exporters also submit a request described in the last
sentence of section 733(d) of the Act (extension of provisional
measures from a 4-month period to not more than 6 months).
(f) Deferral of decision concerning upstream subsidization to
review. Notwithstanding paragraph (b)(3) of this section, if the
petitioner so requests in writing and the preliminary countervailing
duty determination was affirmative, the Secretary, instead of
postponing the final determination, may defer a decision concerning
upstream subsidization until the conclusion of the first administrative
review of a countervailing duty order, if any (see section
703(g)(2)(B)(i) of the Act).
(g) Notification of postponement. If the Secretary postpones a
final determination under paragraph (b)(2), (b)(3), or (b)(4) of this
section, the Secretary will notify promptly all parties to the
proceeding of the postponement, and will publish in the Federal
Register notice of ``Postponement of Final Antidumping (Countervailing
Duty) Determination,'' stating the reasons for the postponement.
(h) Termination of suspension of liquidation in a countervailing
duty investigation. If the Secretary postpones a final countervailing
duty determination, the Secretary will end any suspension of
liquidation ordered in the preliminary determination not later than 120
days after the date of publication of the preliminary determination,
and will not resume it unless and until the Secretary publishes a
countervailing duty order.
(i) Postponement of final countervailing duty determination for
simultaneous investigations. A request by the petitioner to postpone a
final countervailing duty determination to the date of the final
antidumping determination must be submitted in writing within five days
of the date of publication of the preliminary countervailing duty
determination (see section 705(a)(1) and paragraph (b)(4) of this
section).
(j) Commission access to information. If the final determination is
affirmative, the Secretary will make available to the Commission and to
employees of the Commission directly involved in the proceeding the
information upon which the Secretary based the final determination and
that the Commission may consider relevant to its injury determination
(see section 705(c)(1)(A) or section 735(c)(1)(A) of the Act).
(k) Effect of negative final determination. An investigation
terminates upon publication in the Federal Register of the Secretary's
or the Commission's negative final determination, and the Secretary
will take the relevant actions described in section 705(c)(2) or
section 735(c)(2) of the Act (whichever is applicable).
Sec. 351.211 Antidumping order and countervailing duty order.
(a) Introduction. The Secretary issues an order when both the
Secretary and the Commission (except in certain countervailing duty
investigations) have made final affirmative determinations. The
issuance of an order ends the investigative phase of a proceeding.
Generally, upon the issuance of an order, importers no longer may post
bonds as security for antidumping or countervailing duties, but instead
must make a cash deposit of estimated duties. An order remains in
effect until it is revoked. This section contains rules regarding the
issuance of orders in general, as well as special rules for orders
where the Commission has found a regional industry to exist.
(b) In general. Not later than seven days after receipt of notice
of an affirmative final injury determination by the Commission under
section 705(b) or section 735(b) of the Act, or, in a countervailing
duty proceeding involving subject merchandise from a country not
entitled to an injury test (see Sec. 351.101(b)), simultaneously with
publication of an affirmative final countervailing duty determination
by the Secretary, the Secretary will publish in the Federal Register an
``Antidumping Order'' or ``Countervailing Duty Order'' that:
(1) Instructs the Customs Service to assess antidumping duties or
countervailing duties (whichever is applicable) on the subject
merchandise, in accordance with the Secretary's instructions at the
completion of each review requested under Sec. 351.213(b)
(administrative review), Sec. 351.214(b) (new shipper review), or
Sec. 351.215(b) (expedited antidumping review), or if a
[[Page 27392]]
review is not requested, in accordance with the Secretary's assessment
instructions under Sec. 351.212(c);
(2) Instructs the Customs Service to require a cash deposit of
estimated antidumping or countervailing duties at the rates included in
the Secretary's final determination; and
(3) Orders the suspension of liquidation ended for all entries of
the subject merchandise entered, or withdrawn from warehouse, for
consumption before the date of publication of the Commission's final
determination, and instructs the Customs Service to release the cash
deposit or bond on those entries, if in its final determination, the
Commission found a threat of material injury or material retardation of
the establishment of an industry, unless the Commission in its final
determination also found that, absent the suspension of liquidation
ordered under section 703(d)(2) or section 733(d)(2) of the Act, it
would have found material injury (see section 706(b) or section 736(b)
of the Act).
Sec. 351.212 Assessment of antidumping and countervailing duties;
provisional measures deposit cap; interest on certain overpayments and
underpayments.
(a) Introduction. Unlike the systems of some other countries, the
United States uses a ``retrospective'' assessment system under which
final liability for antidumping and countervailing duties is determined
after merchandise is imported. Generally, the amount of duties to be
assessed is determined in a review of the order covering a discrete
period of time. If a review is not requested, duties are assessed at
the rate established in the completed review covering the most recent
prior period or, if no review has been completed, the cash deposit rate
applicable at the time merchandise was entered. This section contains
rules regarding the assessment of duties, the provisional measures
deposit cap, and interest on over- or undercollections of estimated
duties.
(b) Assessment of antidumping and countervailing duties as the
result of a review. (1) Antidumping duties. If the Secretary has
conducted a review of an antidumping order under Sec. 351.213
(administrative review), Sec. 351.214 (new shipper review), or
Sec. 351.215 (expedited antidumping review), the Secretary normally
will calculate an assessment rate for each importer of subject
merchandise covered by the review. The Secretary normally will
calculate the assessment rate by dividing the dumping margin found on
the subject merchandise examined by the entered value of such
merchandise for normal customs duty purposes. The Secretary then will
instruct the Customs Service to assess antidumping duties by applying
the assessment rate to the entered value of the merchandise.
(2) Countervailing duties. If the Secretary has conducted a review
of a countervailing duty order under Sec. 351.213 (administrative
review) or Sec. 351.214 (new shipper review), the Secretary normally
will instruct the Customs Service to assess countervailing duties by
applying the rates included in the final results of the review to the
entered value of the merchandise.
(c) Automatic assessment of antidumping and countervailing duties
if no review is requested. (1) If the Secretary does not receive a
timely request for an administrative review of an order (see paragraph
(b)(1), (b)(2), or (b)(3) of Sec. 351.213), the Secretary, without
additional notice, will instruct the Customs Service to:
(i) Assess antidumping duties or countervailing duties, as the case
may be, on the subject merchandise described in Sec. 351.213(e) at
rates equal to the cash deposit of, or bond for, estimated antidumping
duties or countervailing duties required on that merchandise at the
time of entry, or withdrawal from warehouse, for consumption; and
(ii) To continue to collect the cash deposits previously ordered.
(2) If the Secretary receives a timely request for an
administrative review of an order (see paragraph (b)(1), (b)(2), or
(b)(3) of Sec. 351.213), the Secretary will instruct the Customs
Service to assess antidumping duties or countervailing duties, and to
continue to collect cash deposits, on the merchandise not covered by
the request in accordance with paragraph (c)(1) of this section.
(3) The automatic assessment provisions of paragraphs (c)(1) and
(c)(2) of this section will not apply to subject merchandise that is
the subject of a new shipper review (see Sec. 351.214) or an expedited
antidumping review (see Sec. 351.215).
(d) Provisional measures deposit cap. This paragraph applies to
subject merchandise entered, or withdrawn from warehouse, for
consumption before the date of publication of the Commission's notice
of an affirmative final injury determination or, in a countervailing
duty proceeding that involves merchandise from a country that is not
entitled to an injury test, the date of the Secretary's notice of an
affirmative final countervailing duty determination. If the amount of
duties that would be assessed by applying the rates included in the
Secretary's affirmative preliminary or affirmative final antidumping or
countervailing duty determination (``provisional duties'') is different
from the amount of duties that would be assessed by applying the
assessment rate under paragraphs (b)(1) and (b)(2) of this section
(``final duties''), the Secretary will instruct the Customs Service to
disregard the difference to the extent that the provisional duties are
less than the final duties, and to assess antidumping or countervailing
duties at the assessment rate if the provisional duties exceed the
final duties.
(e) Interest on certain overpayments and underpayments. Under
section 778 of the Act, the Secretary will instruct the Customs Service
to calculate interest for each entry on or after the publication of the
order from the date that a cash deposit is required to be deposited for
the entry through the date of liquidation of the entry.
(f) Special rule for regional industry cases. (1) In general. If
the Commission, in its final injury determination, found a regional
industry under section 771(4)(C) of the Act, the Secretary may direct
that duties not be assessed on subject merchandise of a particular
exporter or producer if the Secretary determines that:
(i) The exporter or producer did not export subject merchandise for
sale in the region concerned during or after the Department's period of
investigation;
(ii) The exporter or producer has certified that it will not export
subject merchandise for sale in the region concerned in the future so
long as the antidumping or countervailing duty order is in effect; and
(iii) No subject merchandise of the exporter or producer was
entered into the United States outside of the region and then sold into
the region during or after the Department's period of investigation.
(2) Procedures for obtaining an exception from the assessment of
duties. (i) Request for exception. An exporter or producer seeking an
exception from the assessment of duties under paragraph (f)(1) of this
section must request, subject to the provisions of Sec. 351.213 or
Sec. 351.214, an administrative review or a new shipper review to
determine whether subject merchandise of the exporter or producer in
question should be excepted from the assessment of duties under
paragraph (f)(1) of this section. The exporter or producer making the
request may request that the review be limited to a determination as to
whether the requirements of paragraph (f)(1) of this section are
satisfied. The request for a review must be accompanied by:
[[Page 27393]]
(A) A certification by the exporter or producer that it did not
export subject merchandise for sale in the region concerned during or
after the Department's period of investigation, and that it will not do
so in the future so long as the antidumping or countervailing duty
order is in effect; and
(B) A certification from each of the exporter's or producer's U.S.
importers of the subject merchandise that no subject merchandise of
that exporter or producer was entered into the United States outside
such region and then sold into the region during or after the
Department's period of investigation.
(ii) Limited review. If the Secretary initiates an administrative
review or a new shipper review based on a request for review that
includes a request for an exception from the assessment of duties under
paragraph (f)(2)(i) of this section, the Secretary, if requested, may
limit the review to a determination as to whether an exception from the
assessment of duties should be granted under paragraph (f)(1) of this
section.
(3) Exception granted. If, in the final results of the
administrative review or the new shipper review, the Secretary
determines that the requirements of paragraph (f)(1) of this section
are satisfied, the Secretary will instruct the Customs Service to
liquidate, without regard to antidumping or countervailing duties
(whichever is appropriate), entries of subject merchandise of the
exporter or producer concerned.
(4) Exception not granted. If, in the final results of the
administrative review or the new shipper review, the Secretary
determines that the requirements of paragraph (f)(1) are not satisfied,
the Secretary:
(i) Will issue assessment instructions to the Customs Service in
accordance with paragraph (b) of this section; or
(ii) If the review was limited to a determination as to whether an
exception from the assessment of duties should be granted, the
Secretary will instruct the Customs Service to assess duties in
accordance with paragraph (f)(1) or (f)(2) of this section, whichever
is appropriate (automatic assessment if no review is requested).
Sec. 351.213 Administrative review of orders and suspension agreements
under section 751(a)(1) of the Act.
(a) Introduction. As noted in Sec. 351.212(a), the United States
has a ``retrospective'' assessment system under which final liability
for antidumping and countervailing duties is determined after
merchandise is imported. Although duty liability may be determined in
the context of other types of reviews, the most frequently used
procedure for determining final duty liability is the administrative
review procedure under section 751(a)(1) of the Act. This section
contains rules regarding requests for administrative reviews and the
conduct of such reviews.
(b) Request for administrative review. (1) Each year during the
anniversary month of the publication of an antidumping or
countervailing duty order, a domestic interested party or an interested
party described in section 771(9)(B) of the Act (foreign government)
may request in writing that the Secretary conduct an administrative
review under section 751(a)(1) of the Act of specified individual
exporters or producers covered by an order (except for a countervailing
duty order in which the investigation or prior administrative review
was conducted on an aggregate basis), if the requesting person states
why the person desires the Secretary to review those particular
exporters or producers.
(2) During the same month, an exporter or producer covered by an
order (except for a countervailing duty order in which the
investigation or prior administrative review was conducted on an
aggregate basis) may request in writing that the Secretary conduct an
administrative review of only that person.
(3) During the same month, an importer of the merchandise may
request in writing that the Secretary conduct an administrative review
of only an exporter or producer (except for a countervailing duty order
in which the investigation or prior administrative review was conducted
on an aggregate basis) of the subject merchandise imported by that
importer.
(4) Each year during the anniversary month of the publication of a
suspension of investigation, an interested party may request in writing
that the Secretary conduct an administrative review of all producers or
exporters covered by an agreement on which the suspension of
investigation was based.
(c) Deferral of administrative review. (1) In general. The
Secretary may defer the initiation of an administrative review, in
whole or in part, for one year if:
(i) The request for administrative review is accompanied by a
request that the Secretary defer the review, in whole or in part; and
(ii) None of the following persons objects to the deferral: the
exporter or producer for which deferral is requested, an importer of
subject merchandise of that exporter or producer, a domestic interested
party and, in a countervailing duty proceeding, the foreign government.
(2) Timeliness of objection to deferral. An objection to a deferral
of the initiation of administrative review under paragraph (c)(1)(ii)
of this section must be submitted within 15 days after the end of the
anniversary month in which the administrative review is requested.
(3) Procedures and deadlines. If the Secretary defers the
initiation of an administrative review, the Secretary will publish
notice of the deferral in the Federal Register. The Secretary will
initiate the administrative review in the month immediately following
the next anniversary month, and the deadline for issuing preliminary
results of review (see paragraph (h)(1) of this section) and submitting
factual information (see Sec. 351.302(b)(2)) will run from the last day
of the next anniversary month.
(d) Rescission of administrative review. (1) Withdrawal of request
for review. The Secretary will rescind an administrative review under
this section, in whole or in part, if a party that requested a review
withdraws the request within 90 days of the date of publication of
notice of initiation of the requested review. The Secretary may extend
this time limit if the Secretary decides that it is reasonable to do
so.
(2) Self-initiated review. The Secretary may rescind an
administrative review that was self-initiated by the Secretary.
(3) No shipments. The Secretary may rescind an administrative
review, in whole or only with respect to a particular exporter or
producer, if the Secretary concludes that, during the period covered by
the review, there were no entries, exports, or sales of the subject
merchandise, as the case may be.
(4) Notice of rescission. If the Secretary rescinds an
administrative review (in whole or in part), the Secretary will publish
in the Federal Register notice of ``Rescission of Antidumping
(Countervailing Duty) Administrative Review'' or, if appropriate,
``Partial Rescission of Antidumping (Countervailing Duty)
Administrative Review.''
(e) Period of review. (1) Antidumping proceedings. (i) Except as
provided in paragraph (e)(1)(ii) of this section, an administrative
review under this section normally will cover, as appropriate, entries,
exports, or sales of the subject merchandise during the 12 months
immediately preceding the most recent anniversary month.
(ii) For requests received during the first anniversary month after
publication of an order or suspension of investigation, an
administrative review
[[Page 27394]]
under this section will cover, as appropriate, entries, exports, or
sales during the period from the date of suspension of liquidation
under this part or suspension of investigation to the end of the month
immediately preceding the first anniversary month.
(2) Countervailing duty proceedings. (i) Except as provided in
paragraph (e)(2)(ii) of this section, an administrative review under
this section normally will cover entries or exports of the subject
merchandise during the most recently completed calendar year. If the
review is conducted on an aggregate basis, the Secretary normally will
cover entries or exports of the subject merchandise during the most
recently completed fiscal year for the government in question.
(ii) For requests received during the first anniversary month after
publication of an order or suspension of investigation, an
administrative review under this section will cover entries or exports,
as appropriate, during the period from the date of suspension of
liquidation under this part or suspension of investigation to the end
of the most recently completed calendar or fiscal year as described in
paragraph (e)(2)(i) of this section.
(f) Voluntary respondents. In an administrative review, the
Secretary will examine voluntary respondents in accordance with section
782(a) of the Act and Sec. 351.204(d).
(g) Procedures. The Secretary will conduct an administrative review
under this section in accordance with Sec. 351.221.
(h) Time limits. (1) In general. The Secretary will issue
preliminary results of review (see Sec. 351.221(b)(4)) within 245 days
after the last day of the anniversary month of the order or suspension
agreement for which the administrative review was requested, and final
results of review (see Sec. 351.221(b)(5)) within 120 days after the
date on which notice of the preliminary results was published in the
Federal Register.
(2) Exception. If the Secretary determines that it is not
practicable to complete the review within the time specified in
paragraph (h)(1) of this section, the Secretary may extend the 245-day
period to 365 days and may extend the 120-day period to 180 days. If
the Secretary does not extend the time for issuing preliminary results,
the Secretary may extend the time for issuing final results from 120
days to 300 days.
(i) Possible cancellation or revision of suspension agreement. If
during an administrative review the Secretary determines or has reason
to believe that a signatory has violated a suspension agreement or that
the agreement no longer meets the requirements of section 704 or
section 734 of the Act (whichever is applicable), the Secretary will
take appropriate action under section 704(i) or section 734(i) of the
Act and Sec. 351.209. The Secretary may suspend the time limit in
paragraph (h) of this section while taking action under Sec. 351.209.
(j) Absorption of antidumping duties. (1) During any administrative
review covering all or part of a period falling between the first and
second or third and fourth anniversary of the publication of an
antidumping order under Sec. 351.211, or a determination under
Sec. 351.218(d) (sunset review), the Secretary, if requested by a
domestic interested party within 30 days of the date of publication of
the notice of initiation of the review, will determine whether
antidumping duties have been absorbed by an exporter or producer
subject to the review if the subject merchandise is sold in the United
States through an importer that is affiliated with such exporter or
producer. The request must include the name(s) of the exporter or
producer for which the inquiry is requested.
(2) For transition orders defined in section 751(c)(6) of the Act,
the Secretary will apply paragraph (j)(1) of this section to any
administrative review initiated in 1996 or 1998.
(3) In determining under paragraph (j)(1) of this section whether
antidumping duties have been absorbed, the Secretary will examine the
antidumping duties calculated in the administrative review in which the
absorption inquiry is requested.
(4) The Secretary will notify the Commission of the Secretary's
determination if:
(i) In the case of an administrative review other than one to which
paragraph (j)(2) of this section applies, the administrative review
covers all or part of a time period falling between the third and
fourth anniversary month of an order; or
(ii) In the case of an administrative review to which paragraph
(j)(2) of this section applies, the Secretary initiated the
administrative review in 1998.
(k) Administrative reviews of countervailing duty orders conducted
on an aggregate basis. (1) Request for zero rate. Where the Secretary
conducts an administrative review of a countervailing duty on an
aggregate basis under section 777A(e)(2)(B) of the Act, the Secretary
will consider and review requests for individual assessment and cash
deposit rates of zero to the extent practicable. An exporter or
producer that desires a zero rate must submit:
(i) A certification by the exporter or producer that it received
zero or de minimis net countervailable subsidies during the period of
review;
(ii) If the exporter or producer received a countervailable
subsidy, calculations demonstrating that the amount of net
countervailable subsidies received was de minimis during the period of
review;
(iii) If the exporter is not the producer of the subject
merchandise, certifications from the suppliers and producers of the
subject merchandise that those persons received zero or de minimis net
countervailable subsidies during the period of the review; and
(iv) A certification from the government of the affected country
that the government did not provide the exporter (or the exporter's
supplier) or producer with more than de minimis net countervailable
subsidies during the period of review.
(2) Application of country-wide subsidy rate. With the exception of
assessment and cash deposit rates of zero determined under paragraph
(k)(1) of this section, if, in the final results of an administrative
review under this section of a countervailing duty order, the Secretary
calculates a single country-wide subsidy rate under section
777A(e)(2)(B) of the Act, that rate will supersede, for cash deposit
purposes, all rates previously determined in the countervailing duty
proceeding in question.
(l) Exception from assessment in regional industry cases. For
procedures relating to a request for the exception from the assessment
of antidumping or countervailing duties in a regional industry case,
see Sec. 351.212(f).
Sec. 351.214 New shipper reviews under section 751(a)(2)(B) of the
Act.
(a) Introduction. The URAA established a new procedure by which so-
called ``new shippers'' can obtain their own individual dumping margin
or countervailable subsidy rate on an expedited basis. In general, a
new shipper is an exporter or producer that did not export, and is not
affiliated with an exporter or producer that did export, to the United
States during the period of investigation. This section contains rules
regarding requests for new shipper reviews and procedures for
conducting such reviews. In addition, this section contains rules
regarding requests for expedited reviews by noninvestigated exporters
in certain countervailing duty proceedings and procedures for
conducting such reviews.
[[Page 27395]]
(b) Request for new shipper review. (1) Requirement of sale or
export. Subject to the requirements of section 751(a)(2)(B) of the Act
and this section, an exporter or producer may request a new shipper
review if it has exported, or sold for export, subject merchandise to
the United States.
(2) Contents of request. A request for a new shipper review must
contain the following:
(i) If the person requesting the review is both the exporter and
producer of the merchandise, a certification that the person requesting
the review did not export subject merchandise to the United States (or,
in the case of a regional industry, did not export the subject
merchandise for sale in the region concerned) during the period of
investigation;
(ii) If the person requesting the review is the exporter, but not
the producer, of the subject merchandise:
(A) The certification described in paragraph (b)(2)(i) of this
section; and
(B) A certification from the person that produced or supplied the
subject merchandise to the person requesting the review that that
producer or supplier did not export the subject merchandise to the
United States (or, in the case of a regional industry, did not export
the subject merchandise for sale in the region concerned) during the
period of investigation;
(iii)(A) A certification that, since the investigation was
initiated, such exporter or producer has never been affiliated with any
exporter or producer who exported the subject merchandise to the United
States (or in the case of a regional industry, who exported the subject
merchandise for sale in the region concerned) during the period of
investigation, including those not individually examined during the
investigation;
(B) In an antidumping proceeding involving imports from a nonmarket
economy country, a certification that the export activities of such
exporter or producer are not controlled by the central government;
(iv) Documentation establishing:
(A) The date on which subject merchandise of the exporter or
producer making the request was first entered, or withdrawn from
warehouse, for consumption, or, if the exporter or producer cannot
establish the date of first entry, the date on which the exporter or
producer first shipped the subject merchandise for export to the United
States;
(B) The volume of that and subsequent shipments; and
(C) The date of the first sale to an unaffiliated customer in the
United States; and
(v) In the case of a review of a countervailing duty order, a
certification that the exporter or producer has informed the government
of the exporting country that the government will be required to
provide a full response to the Department's questionnaire.
(c) Deadline for requesting review. An exporter or producer may
request a new shipper review within one year of the date referred to in
paragraph (b)(2)(iv)(A) of this section.
(d) Time for new shipper review. (1) In general. The Secretary will
initiate a new shipper review under this section in the calendar month
immediately following the anniversary month or the semiannual
anniversary month if the request for the review is made during the 6-
month period ending with the end of the anniversary month or the
semiannual anniversary month (whichever is applicable).
(2) Semiannual anniversary month. The semiannual anniversary month
is the calendar month which is 6 months after the anniversary month.
(3) Example. An order is published in January. The anniversary
month would be January, and the semiannual anniversary month would be
July. If the Secretary received a request for a new shipper review at
any time during the period February-July, the Secretary would initiate
a new shipper review in August. If the Secretary received a request for
a new shipper review at any time during the period August-January, the
Secretary would initiate a new shipper review in February.
(e) Suspension of liquidation; posting bond or security. When the
Secretary initiates a new shipper review under this section, the
Secretary will direct the Customs Service to suspend liquidation of any
unliquidated entries of the subject merchandise from the relevant
exporter or producer, and to allow, at the option of the importer, the
posting, until the completion of the review, of a bond or security in
lieu of a cash deposit for each entry of the subject merchandise.
(f) Rescission of new shipper review. (1) Withdrawal of request for
review. The Secretary may rescind a new shipper review under this
section, in whole or in part, if a party that requested a review
withdraws its request not later than 60 days after the date of
publication of notice of initiation of the requested review.
(2) Absence of entry and sale to an unaffiliated customer. The
Secretary may rescind a new shipper review, in whole or in part, if the
Secretary concludes that:
(i) As of the end of the normal period of review referred to in
paragraph (g) of this section, there has not been an entry and sale to
an unaffiliated customer in the United States of subject merchandise;
and
(ii) An expansion of the normal period of review to include an
entry and sale to an unaffiliated customer in the United States of
subject merchandise would be likely to prevent the completion of the
review within the time limits set forth in paragraph (i) of this
section.
(3) Notice of Rescission. If the Secretary rescinds a new shipper
review (in whole or in part), the Secretary will publish in the Federal
Register notice of ``Rescission of Antidumping (Countervailing Duty)
New Shipper Review'' or, if appropriate, ``Partial Rescission of
Antidumping (Countervailing Duty) New Shipper Review.''
(g) Period of review. (1) Antidumping proceeding. (i) In general.
Except as provided in paragraph (g)(1)(ii) of this section, in an
antidumping proceeding, a new shipper review under this section
normally will cover, as appropriate, entries, exports, or sales during
the following time periods:
(A) If the new shipper review was initiated in the month
immediately following the anniversary month, the twelve-month period
immediately preceding the anniversary month; or
(B) If the new shipper review was initiated in the month
immediately following the semiannual anniversary month, the period of
review will be the six-month period immediately preceding the
semiannual anniversary month.
(ii) Exceptions. (A) If the Secretary initiates a new shipper
review under this section in the month immediately following the first
anniversary month, the review normally will cover, as appropriate,
entries, exports, or sales during the period from the date of
suspension of liquidation under this part to the end of the month
immediately preceding the first anniversary month.
(B) If the Secretary initiates a new shipper review under this
section in the month immediately following the first semiannual
anniversary month, the review normally will cover, as appropriate,
entries, exports, or sales during the period from the date of
suspension of liquidation under this part to the end of the month
immediately preceding the first semiannual anniversary month.
[[Continued on page 27396]]