Title 19—Customs Duties--Volume 1
PART 351—ANTIDUMPING AND COUNTERVAILING DUTIES
§ 351.305   Access to business proprietary information.
(a) The administrative protective order. The Secretary will place an administrative protective order on the record as follows: within two business days after the day on which a petition is filed or an investigation is self-initiated; within five business days after the day on which a request for a new shipper review is properly filed in accordance with §§ 351.214 and 351.303, an application for a scope ruling is properly filed in accordance with §§ 351.225 and 351.303, or a request for a circumvention inquiry is properly filed in accordance with §§ 351.226 and 351.303; within five business days after the day on which a request for a changed circumstances review is properly filed in accordance with §§ 351.216 and 351.303 or a changed circumstances review is self-initiated; or within five business days after initiating any other segment of a proceeding. The administrative protective order will require the authorized applicant to:
(1) Establish and follow procedures to ensure that no employee of the authorized applicant's firm releases business proprietary information to any person other than the submitting party, an authorized applicant, or an appropriate Department official identified in section 777(b) of the Act;
(2) Notify the Secretary of any changes in the facts asserted by the authorized applicant in its administrative protective order application;
(3) Destroy business proprietary information by the time required under the terms of the administrative protective order;
(4) Immediately report to the Secretary any apparent violation of the administrative protective order; and
(5) Acknowledge that any unauthorized disclosure may subject the authorized applicant, the firm of which the authorized applicant is a partner, associate, or employee, and any partner, associate, or employee of the authorized applicant's firm to sanctions listed in part 354 of this chapter (19 CFR part 354).
(b) Application for access under administrative protective order. (1) Generally, no more than two independent representatives of a party to the proceeding may have access to business proprietary information under an administrative protective order. A party must designate a lead firm if the party has more than one independent authorized applicant firm.
(2) A representative of a party to the proceeding may apply for access to business proprietary information under the administrative protective order by submitting an electronic application available in ACCESS at https://access.trade.gov (Form ITA-367) to the Secretary. The electronic application will be filed and served in ACCESS upon submission. Form ITA-367 must identify the applicant and the segment of the proceeding involved, state the basis for eligibility of the applicant for access to business proprietary information, and state the agreement of the applicant to be bound by the administrative protective order. Form ITA-367 must be accompanied by a certification that the application is consistent with Form ITA-367 and an acknowledgment that any discrepancies will be interpreted in a manner consistent with Form ITA-367. An applicant must apply to receive all business proprietary information on the record of the segment of a proceeding in question but may waive service of business proprietary information it does not wish to receive from other parties to the proceeding.
(3) To minimize the disruption caused by late applications, an application should be filed before the first response to the initial questionnaire has been submitted. Where justified, however, applications may be filed up to the date on which the case briefs are due.
(c) Approval of access under administrative protective order; administrative protective order service list; service of earlier-filed business proprietary submissions. (1) The Secretary will grant access to a qualified applicant by including the name of the applicant on an administrative protective order service list. Access normally will be granted within five days of receipt of the application unless there is a question regarding the eligibility of the applicant to receive access. In that case, the Secretary will decide whether to grant the applicant access within 30 days of receipt of the application. The Secretary will provide by the most expeditious means available the administrative protective order service list to parties to the proceeding on the day the service list is issued or amended.
(2) After the Secretary approves an application, the authorized applicant may request service of earlier-filed business proprietary submissions of the other parties that are no longer available in ACCESS.
(i) For an application that is approved before the first response to the initial questionnaire is submitted, the submitting party must serve the authorized applicant those submissions within two business days of the request. Service must be made in accordance with section 351.303(f)(1)(iii). A certificate of service is not required.
(ii) For an application that is approved after the first response to the initial questionnaire is submitted, the submitting party must serve the authorized applicant those submissions within five business days of the request. Service must be made in accordance with section 351.303(f)(1)(iii). A certificate of service is not required. Any authorized applicant who filed the application after the first response to the initial questionnaire is submitted will be liable for costs associated with the additional production and service of business proprietary information already on the record.
(d) Additional filing requirements for importers. If an applicant represents a party claiming to be an interested party by virtue of being an importer, then the applicant shall submit, along with the Form ITA-367, documentary evidence demonstrating that during the applicable period of investigation or period of review the interested party imported subject merchandise. For a scope segment of a proceeding pursuant to § 351.225 or a circumvention segment of a proceeding pursuant to § 351.226, the applicant must present documentary evidence that the interested party imported subject merchandise, or that it has taken steps towards importing the merchandise subject to the scope or circumvention inquiry. For a covered merchandise referral segment of a proceeding pursuant to § 351.227, an applicant representing an interested party that has been identified by U.S. Customs and Border Protection as the importer in a covered merchandise referral is exempt from the requirements of providing documentary evidence to demonstrate that it is an importer for purposes of that segment of a proceeding.
§ 351.306   Use of business proprietary information.
(a) By the Secretary. The Secretary may disclose business proprietary information submitted to the Secretary only to:
(1) An authorized applicant;
(2) An employee of the Department of Commerce or the International Trade Commission directly involved in the proceeding in which the information is submitted;
(3) An employee of U.S. Customs and Border Protection directly involved in conducting an investigation regarding negligence, gross negligence, or fraud relating to an antidumping or countervailing duty proceeding;
(4) The U.S. Trade Representative as provided by 19 U.S.C. 3571(i);
(5) Any person to whom the submitting person specifically authorizes disclosure in writing; and
(6) A charged party or counsel for the charged party under 19 CFR part 354.
(b) By an authorized applicant. (1) An authorized applicant may retain business proprietary information for the time authorized by the terms of the administrative protective order (APO).
(2) An authorized applicant may use business proprietary information for purposes of the segment of the proceeding in which the information was submitted.
(3) If business proprietary information that was submitted to a segment of the proceeding is relevant to an issue in a different segment of the same proceeding, an authorized applicant may place such information on the record of the subsequent segment as authorized by the APO of the segment where the business proprietary information was submitted.
(4) If business proprietary information that was submitted to a countervailing duty segment of the proceeding is relevant to a subsequent scope, circumvention, or covered merchandise inquiry conducted on the record of the companion antidumping duty segment of the proceeding pursuant to § 351.225(m)(2), § 351.226(m)(2), or § 351.227(m)(2), an authorized applicant may place such information on the record of the companion antidumping duty segment of the proceeding as authorized by the APO of the countervailing duty segment where the business proprietary information was submitted.
(5) If business proprietary information that was submitted to a scope, circumvention, or covered merchandise inquiry conducted on the record of a companion antidumping duty segment of the proceeding pursuant to § 351.225(m)(2), § 351.226(m)(2), or § 351.227(m)(2) is relevant to a subsequent countervailing duty segment of the proceeding, an authorized applicant may place such information on the record of the companion countervailing duty segment of the proceeding as authorized by the APO of the antidumping duty segment where the business proprietary information was submitted.
(c) Identifying parties submitting business proprietary information. (1) If a party submits a document containing business proprietary information of another person, the submitting party must identify, contiguously with each item of business proprietary information, the person that originally submitted the item (e.g., Petitioner, Respondent A, Respondent B). Business proprietary information not identified will be treated as information of the person making the submission. If the submission contains business proprietary information of only one person, it shall so state on the first page and identify the person that originally submitted the business proprietary information on the first page.
(2) If a party to a proceeding is not represented, or its representative is not an authorized applicant, the submitter of a document containing that party's business proprietary information must serve that party or its representative, if applicable, with a version of the document that contains only that party's business proprietary information consistent with § 351.303(f)(1)(iii). The document must not contain the business proprietary information of other parties.
(d) Disclosure to parties not authorized to receive business proprietary information. No person, including an authorized applicant, may disclose the business proprietary information of another person to any other person except another authorized applicant or a Department official described in paragraph (a)(2) of this section. Any person that is not an authorized applicant and that is served with business proprietary information must return it to the sender immediately, to the extent possible without reading it, and must notify the Department. An allegation of an unauthorized disclosure will subject the person that made the alleged unauthorized disclosure to an investigation and possible sanctions under 19 CFR part 354.
§ 351.307   Verification of information.
(a) Introduction. Prior to making a final determination in an investigation or issuing final results of review, the Secretary may verify relevant factual information. This section clarifies when verification will occur, the contents of a verification report, and the procedures for verification.
(b) In general. (1) Subject to paragraph (b)(4) of this section, the Secretary will verify factual information upon which the Secretary relies in:
(i) A final determination in a continuation of a previously suspended countervailing duty investigation (section 704(g) of the Act), countervailing duty investigation, continuation of a previously suspended antidumping investigation (section 705(a) of the Act), or antidumping investigation;
(ii) The final results of an expedited antidumping review;
(iii) A revocation under section 751(d) of the Act;
(iv) The final results of an administrative review, new shipper review, or changed circumstances review, if the Secretary decides that good cause for verification exists; and
(v) The final results of an administrative review if:
(A) A domestic interested party, not later than 100 days after the date of publication of the notice of initiation of review, submits a written request for verification; and
(B) The Secretary conducted no verification under this paragraph during either of the two immediately preceding administrative reviews.
(2) The Secretary may verify factual information upon which the Secretary relies in a proceeding or a segment of a proceeding not specifically provided for in paragraph (b)(1) of this section.
(3) If the Secretary decides that, because of the large number of exporters or producers included in an investigation or administrative review, it is impractical to verify relevant factual information for each person, the Secretary may select and verify a sample.
(4) The Secretary may conduct verification of a person if that person agrees to verification and the Secretary notifies the government of the affected country and that government does not object. If the person or the government objects to verification, the Secretary will not conduct verification and may disregard any or all information submitted by the person in favor of use of the facts available under section 776 of the Act and § 351.308.
(c) Verification report. The Secretary will report the methods, procedures, and results of a verification under this section prior to making a final determination in an investigation or issuing final results in a review.
(d) Procedures for verification. The Secretary will notify the government of the affected country that employees of the Department will visit with the persons listed below in order to verify the accuracy and completeness of submitted factual information. The notification will, where practicable, identify any member of the verification team who is not an officer of the U.S. Government. As part of the verification, employees of the Department will request access to all files, records, and personnel which the Secretary considers relevant to factual information submitted of:
(1) Producers, exporters, or importers;
(2) Persons affiliated with the persons listed in paragraph (d)(1) of this section, where applicable;
(3) Unaffiliated purchasers, or
(4) The government of the affected country as part of verification in a countervailing duty proceeding.
§ 351.308   Determinations on the basis of the facts available.
(a) Introduction. The Secretary may make determinations on the basis of the facts available whenever necessary information is not available on the record, an interested party or any other person withholds or fails to provide information requested in a timely manner and in the form required or significantly impedes a proceeding, or the Secretary is unable to verify submitted information. If the Secretary finds that an interested party “has failed to cooperate by not acting to the best of its ability to comply with a request for information,” the Secretary may use an inference that is adverse to the interests of that party in selecting from among the facts otherwise available. This section lists some of the sources of information upon which the Secretary may base an adverse inference and explains the actions the Secretary will take with respect to corroboration of information.
(b) In general. The Secretary may make a determination under the Act and this part based on the facts otherwise available in accordance with section 776(a) of the Act.
(c) Adverse inferences. For purposes of section 776(b) of the Act, an adverse inference may include reliance on:
(1) Secondary information, such as information derived from:
(i) The petition;
(ii) A final determination in a countervailing duty investigation or an antidumping investigation;
(iii) Any previous administrative review, new shipper review, expedited antidumping review, section 753 review, or section 762 review; or
(2) Any other information placed on the record.
(d) Corroboration of secondary information. Under section 776(c) of the Act, when the Secretary relies on secondary information, the Secretary will, to the extent practicable, corroborate that information from independent sources that are reasonably at the Secretary's disposal. Independent sources may include, but are not limited to, published price lists, official import statistics and customs data, and information obtained from interested parties during the instant investigation or review. Corroborate means that the Secretary will examine whether the secondary information to be used has probative value. The fact that corroboration may not be practicable in a given circumstance will not prevent the Secretary from applying an adverse inference as appropriate and using the secondary information in question.
(e) Use of certain information. In reaching a determination under the Act and this part, the Secretary will not decline to consider information that is submitted by an interested party and is necessary to the determination but does not meet all the applicable requirements established by the Secretary if the conditions listed under section 782(e) of the Act are met.
(f) Use of facts available in a sunset review. Where the Secretary determines to issue final results of sunset review on the basis of facts available, the Secretary normally will rely on:
(1) Calculated countervailing duty rates or dumping margins, as applicable, from prior Department determinations; and
(2) Information contained in parties' substantive responses to the Notice of Initiation filed under § 351.218(d)(3), consistent with section 752(b) or 752(c) of the Act, as applicable.
(g) Partial or total facts available. In accordance with section 776(a) of the Act, if the Secretary determines to apply facts available, regardless of the use of an adverse inference under section 776(b) of the Act, the Secretary may apply facts available to only a portion of its antidumping or countervailing duty analysis and calculations, referred to as partial facts available, or to all of its analysis and calculations, referred to as total facts available, as appropriate on a case-specific basis.
(h) Segment-specific dumping and countervailable subsidy rates. If the Secretary has determined dumping margins or countervailable subsidy rates in separate segments of the same proceeding in which the Secretary is applying facts available, in accordance with section 776(c)(2) of the Act the Secretary may apply those margins or rates as facts available without being required to conduct a corroboration analysis.
(i) Selection of adverse facts available. If the Secretary determines to apply adverse facts available, in accordance with sections 776(d)(1), (2), and (3) of the Act, the following applies:
(1) In an antidumping proceeding, the Secretary may use a dumping margin from any segment of the proceeding as adverse facts, including the highest dumping margin available. The Secretary may use the highest dumping margin available if the Secretary determines that such an application is warranted after evaluating the situation that resulted in an adverse inference;
(2) In a countervailing duty segment of the proceeding, in accordance with the hierarchy set forth in paragraph (j) of this section, the Secretary may use a countervailing subsidy rate applied to the same or similar program in a countervailing duty proceeding involving the same country or, if there is no same or similar program, use a countervailing subsidy rate from a proceeding that the Secretary determines is reasonable to use. The Secretary will normally apply the highest calculated above- de minimis countervailing duty rate available if the Secretary determines that such an application is warranted after evaluating the situation that resulted in an adverse inference; and
(3) In applying adverse facts available, the Secretary will not be required to:
(i) Estimate what a countervailable subsidy or dumping margin would have been if an interested party that was found to have failed to cooperate under section 776(b)(1) of the Act had cooperated; or
(ii) Demonstrate that the countervailable subsidy rate or dumping margin used by the Secretary as adverse facts available reflects an alleged “commercial reality” of the interested party.
(j) Adverse facts available hierarchy in countervailing duty proceedings. In accordance with sections 776(d)(1)(A) and 776(d)(2) of the Act, when the Secretary applies an adverse inference in selecting a countervailable subsidy rate on the basis of facts otherwise available in a countervailing duty proceeding, the Secretary will normally select the highest program rate available using a hierarchical analysis as follows:
(1) For investigations, conducted pursuant to section 701 of the Act, the hierarchy will be applied in the following sequence:
(i) If there are cooperating respondents in the investigation, the Secretary will determine if a cooperating respondent used an identical program in the investigation and apply the highest calculated above- de minimis rate for the identical program;
(ii) If no rate exists which the Secretary is able to apply under paragraph (j)(1)(i), the Secretary will determine if an identical program was used in another countervailing duty proceeding involving the same country and apply the highest calculated above- de minimis rate for the identical program;
(iii) If no rate exists which the Secretary is able to apply under paragraph (j)(1)(ii), the Secretary will determine if there is a similar or comparable program in any countervailing duty proceeding involving the same country and apply the highest calculated above- de minimis rate for the similar or comparable program; and
(iv) If no rate exists which the Secretary is able to apply under paragraph (j)(1)(iii), the Secretary will apply the highest calculated above- de minimis rate from any non-company-specific program in a countervailing duty proceeding involving the same country that the Secretary considers the company's industry could possibly use.
(2) For administrative reviews, conducted pursuant to section 751 of the Act, the hierarchy will be applied in the following sequence:
(i) The Secretary will determine if an identical program has been used in any segment of the proceeding and apply the highest calculated above- de minimis rate for any respondent for the identical program;
(ii) If no rate exists which the Secretary is able to apply under paragraph (j)(2)(i), the Secretary will determine if there is a similar or comparable program within any segment of the same proceeding and apply the highest calculated above- de minimis rate for the similar or comparable program;
(iii) If no rate exists which the Secretary is able to apply under paragraph (j)(2)(ii), the Secretary will determine if there is an identical program in any countervailing duty proceeding involving the same country and apply the highest calculated above- de minimis rate for the identical program or, if there is no identical program or above- de minimis rate available, determine if there is a similar or comparable program in any countervailing duty proceeding involving the same country and apply the highest calculated above- de minimis rate for the similar or comparable program; and
(iv) If no rate exists which the Secretary is able to apply under paragraph (j)(2)(iii), the Secretary will apply the highest calculated rate for any non-company-specific program from any countervailing duty proceeding involving the same country that the Secretary considers the company's industry could possibly use.
(3) When the Secretary uses an adverse facts available countervailing duty hierarchy, the following will apply:
(i) The Secretary will treat rates less than 0.5 percent as de minimis;
(ii) The Secretary will normally determine a program to be a similar or comparable program based on the Secretary's treatment of the program's benefit;
(iii) The Secretary will normally select the highest program rate available in accordance with the hierarchical sequence, unless the Secretary determines that such a rate is otherwise inappropriate; and
(iv) When applicable, the Secretary will determine an adverse facts available rate selected using the hierarchy to be corroborated in accordance with section 776(c)(1) of the Act.
§ 351.309   Written argument.
(a) Introduction. Written argument may be submitted during the course of an antidumping or countervailing duty proceeding. This section sets forth the time limits for submission of case and rebuttal briefs and provides guidance on what should be contained in these documents.
(b) Written argument —(1) In general. In making the final determination in a countervailing duty investigation or antidumping investigation or the final results of an administrative review, new shipper review, expedited antidumping review, section 753 review, or section 762 review, the Secretary will consider written arguments in case or rebuttal briefs filed within the time limits in this section.
(2) Written argument on request. Notwithstanding paragraph (b)(1) of this section, the Secretary may request written argument on any issue from any person or U.S. Government agency at any time during a proceeding.
(c) Case brief. (1) Any interested party or U.S. Government agency may submit a “case brief” within:
(i) For a final determination in a countervailing duty investigation or antidumping investigation, or for the final results of a full sunset review, 50 days after the date of publication of the preliminary determination or results of review, as applicable, unless the Secretary alters the time limit;
(ii) For the final results of an administrative review, new shipper review, changed circumstances review, or section 762 review, 30 days after the date of publication of the preliminary results of review, unless the Secretary alters the time limit; or
(iii) For the final results of an expedited sunset review, expedited antidumping review, Article 8 violation review, Article 4/Article 7 review, or section 753 review, a date specified by the Secretary.
(2) The case brief must present all arguments that continue in the submitter's view to be relevant to the Secretary's final determination or final results, including any arguments presented before the date of publication of the preliminary determination or preliminary results. As part of the case brief, parties are requested to provide the following:
(i) A table of contents listing each issue;
(ii) A table of authorities, including statutes, regulations, administrative cases, dispute panel decisions and court holdings cited; and
(iii) A public executive summary for each argument raised in the brief. Executive summaries should be no more than 450 words in length, not counting supporting citations.
(d) Rebuttal brief. (1) Any interested party or U.S. Government agency may submit a “rebuttal brief” within five days after the time limit for filing the case brief, unless the Secretary alters this time limit.
(2) The rebuttal brief may respond only to arguments raised in case briefs, should identify the arguments raised in case briefs, and should identify the arguments to which it is responding. As part of the rebuttal brief, parties are requested to provide the following:
(i) A table of contents listing each issue;
(ii) A table of authorities, including statutes, regulations, administrative cases, dispute panel decisions and court holdings cited; and
(iii) A public executive summary for each argument raised in the rebuttal brief. Executive summaries should be no more than 450 words in length, not counting supporting citations.
(e) Comments on adequacy of response and appropriateness of expedited sunset review —(i) In general. Where the Secretary determines that respondent interested parties provided inadequate response to a Notice of Initiation ( see § 351.218(e)(1)(ii)) and has notified the International Trade Commission as such under § 351.218(e)(1)(ii)(C), interested parties (and industrial users and consumer organizations) that submitted a complete substantive response to the Notice of Initiation under § 351.218(d)(3) may file comments on whether an expedited sunset review under section 751(c)(3)(B) of the Act and § 351.218(e)(1)(ii)(B) or 351.218(e)(1)(ii)(C) is appropriate based on the adequacy of responses to the notice of initiation. These comments may not include any new factual information or evidence (such as supplementation of a substantive response to the notice of initiation) and are limited to five pages.
(ii) Time limit for filing comments. Comments on adequacy of response and appropriateness of expedited sunset review must be filed not later than 70 days after the date publication in the Federal Register of the notice of initiation.
§ 351.310   Hearings.
(a) Introduction. This section sets forth the procedures for requesting a hearing, indicates that the Secretary may consolidate hearings, and explains when the Secretary may hold closed hearing sessions.
(b) Pre-hearing conference. The Secretary may conduct a telephone pre-hearing conference with representatives of interested parties to facilitate the conduct of the hearing.
(c) Request for hearing. Any interested party may request that the Secretary hold a public hearing on arguments to be raised in case or rebuttal briefs within 30 days after the date of publication of the preliminary determination or preliminary results of review, unless the Secretary alters this time limit, or in a proceeding where the Secretary will not issue a preliminary determination, not later than a date specified by the Secretary. To the extent practicable, a party requesting a hearing must identify arguments to be raised at the hearing. At the hearing, an interested party may make an affirmative presentation only on arguments included in that party's case brief and may make a rebuttal presentation only on arguments included in that party's rebuttal brief.
(d) Hearings in general. (1) If an interested party submits a request under paragraph (c) of this section, the Secretary will hold a public hearing on the date stated in the notice of the Secretary's preliminary determination or preliminary results of administrative review (or otherwise specified by the Secretary in an expedited antidumping review), unless the Secretary alters the date. Ordinarily, the hearing will be held two days after the scheduled date for submission of rebuttal briefs.
(2) The hearing is not subject to 5 U.S.C. §§ 551-559, and § 702 (Administrative Procedure Act). Witness testimony, if any, will not be under oath or subject to cross-examination by another interested party or witness. During the hearing, the chair may question any person or witness and may request persons to present additional written argument.
(e) Consolidated hearings. At the Secretary's discretion, the Secretary may consolidate hearings in two or more cases.
(f) Closed hearing sessions. An interested party may request a closed session of the hearing no later than the date the case briefs are due in order to address limited issues during the course of the hearing. The requesting party must identify the subjects to be discussed, specify the amount of time requested, and justify the need for a closed session with respect to each subject. If the Secretary approves the request for a closed session, only authorized applicants and other persons authorized by the regulations may be present for the closed session ( see § 351.305).
(g) Transcript of hearing. The Secretary will place a verbatim transcript of the hearing in the public and official records of the proceeding and will announce at the hearing how interested parties may obtain copies of the transcript.
§ 351.311   Countervailable subsidy practice discovered during investigation or review.
(a) Introduction. During the course of a countervailing duty investigation or review, Department officials may discover or receive notice of a practice that appears to provide a countervailable subsidy. This section explains when the Secretary will examine such a practice.
(b) Inclusion in proceeding. If during a countervailing duty investigation or a countervailing duty administrative review the Secretary discovers a practice that appears to provide a countervailable subsidy with respect to the subject merchandise and the practice was not alleged or examined in the proceeding, or if, pursuant to section 775 of the Act, the Secretary receives notice from the United States Trade Representative that a subsidy or subsidy program is in violation of Article 8 of the Subsidies Agreement, the Secretary will examine the practice, subsidy, or subsidy program if the Secretary concludes that sufficient time remains before the scheduled date for the final determination or final results of review.
(c) Deferral of examination. If the Secretary concludes that insufficient time remains before the scheduled date for the final determination or final results of review to examine the practice, subsidy, or subsidy program described in paragraph (b) of this section, the Secretary will:
(1) During an investigation, allow the petitioner to withdraw the petition without prejudice and resubmit it with an allegation with regard to the newly discovered practice, subsidy, or subsidy program; or
(2) During an investigation or review, defer consideration of the newly discovered practice, subsidy, or subsidy program until a subsequent administrative review, if any.
(d) Notice. The Secretary will notify the parties to the proceeding of any practice the Secretary discovers, or any subsidy or subsidy program with respect to which the Secretary receives notice from the United States Trade Representative, and whether or not it will be included in the then ongoing proceeding.
§ 351.312   Industrial users and consumer organizations.
(a) Introduction. The URAA provides for opportunity for comment by consumer organizations and industrial users on matters relevant to a particular determination of dumping, subsidization, or injury. This section indicates under what circumstances such persons may submit relevant information and argument.
(b) Opportunity to submit relevant information and argument. In an antidumping or countervailing duty proceeding under title VII of the Act and this part, an industrial user of the subject merchandise or a representative consumer organization, as described in section 777(h) of the Act, may submit relevant factual information and written argument to the Department under paragraphs (d)(3)(ii), and (d)(3)(vi), and (d)(4) of § 351.218, paragraphs (b), (c)(1), and (c)(3) of § 351.301, and paragraphs (c), (d), and (e) of § 351.309 concerning dumping or a countervailing subsidy. All such submissions must be filed in accordance with § 351.303.
(c) Business proprietary information. Persons described in paragraph (b) of this section may request business proprietary treatment of information under § 351.304, but will not be granted access under § 351.305 to business proprietary information submitted by other persons.
§ 351.313   Attorneys or representatives.
In general. No register of attorneys or representatives who may practice before the Department is maintained. No application for admission to practice is required. Any person desiring to appear as attorney or representative before the Department may be required to show to the satisfaction of the Secretary his acceptability in that capacity. Any attorney or representative practicing before the Department, or desiring so to practice, may for good cause shown be suspended or barred from practicing before the Department, or have imposed on him such lesser sanctions (e.g., public or private reprimand) as the Secretary deems appropriate, but only after he has been accorded an opportunity to present his views in the matter. The Department will maintain a public register of attorneys and representatives suspended or barred from practice. “Attorney” pursuant to this subpart and “legal counsel” in § 351.303(g) have the same meaning. “Representative” pursuant to this subpart and in § 351.303(g) has the same meaning.
§ 351.401   In general.
(a) Introduction. In general terms, an antidumping analysis involves a comparison of export price or constructed export price in the United States with normal value in the foreign market. This section establishes certain general rules that apply to the calculation of export price, constructed export price and normal value. ( See section 772, section 773, and section 773A of the Act.)
(b) Adjustments in general. In making adjustments to export price, constructed export price, or normal value, the Secretary will adhere to the following principles:
(1) The interested party that is in possession of the relevant information has the burden of establishing to the satisfaction of the Secretary the amount and nature of a particular adjustment; and
(2) The Secretary will not double-count adjustments.
(c) Use of price net of price adjustments. In calculating export price, constructed export price, and normal value (where normal value is based on price), the Secretary normally will use a price that is net of price adjustments, as defined in § 351.102(b), that are reasonably attributable to the subject merchandise or the foreign like product (whichever is applicable). The Secretary will not accept a price adjustment that is made after the time of sale unless the interested party demonstrates, to the satisfaction of the Secretary, its entitlement to such an adjustment.
(d) Delayed payment or pre-payment of expenses. Where cost is the basis for determining the amount of an adjustment to export price, constructed export price, or normal value, the Secretary will not factor in any delayed payment or pre-payment of expenses by the exporter or producer.
(e) Adjustments for movement expenses —(1) Original place of shipment. In making adjustments for movement expenses to establish export price or constructed export price under section 772(c)(2)(A) of the Act, or normal value under section 773(a)(6)(B)(ii) of the Act, the Secretary normally will consider the production facility as being the “original place of shipment. However, where the Secretary bases export price, constructed export price, or normal value on a sale by an unaffiliated reseller, the Secretary may treat the original place from which the reseller shipped the merchandise as the “original place of shipment.”
(2) Warehousing. The Secretary will consider warehousing expenses that are incurred after the subject merchandise or foreign like product leaves the original place of shipment as movement expenses.
(f) Treatment of affiliated parties in antidumping proceedings —(1) In general. In an antidumping proceeding under this part, the Secretary will normally treat two or more affiliated parties as a single entity if the Secretary concludes that there is a significant potential for manipulation of prices, production, or other export decisions.
(2) Significant potential for manipulation. In identifying a significant potential for the manipulation of price, production or other export decisions, the factors the Secretary may consider for all affiliated parties include:
(i) The level of common ownership;
(ii) The extent to which managerial employees or board members of one firm sit on the board of directors of an affiliated firm; and
(iii) Whether operations are intertwined, such as through the sharing of sales and export information; involvement in production, pricing, and other commercial decisions; the sharing of facilities or employees; or significant transactions between the affiliated parties.
(3) Additional considerations for affiliated parties with access to production facilities in determining the significant potential for manipulation. In determining whether there is a significant potential for manipulation, if the Secretary determines that affiliated parties have, or will have, access to production facilities for similar or identical products, the Secretary shall consider if any of those facilities would require substantial retooling in order to restructure manufacturing priorities.
(4) Exceptions. If the following affiliated parties do not produce similar or identical products to the subject merchandise or export subject merchandise to the United States, the Secretary will normally not treat those parties as part of a single entity for purposes of the Secretary's calculations under this provision:
(i) Input suppliers;
(ii) Sellers of the foreign like product in the home market; and
(iii) Affiliated entities for which the Secretary determines that treating those parties as a single entity would be otherwise inappropriate based on record information.
(g) Allocation of expenses and price adjustments —(1) In general. The Secretary may consider allocated expenses and price adjustments when transaction-specific reporting is not feasible, provided the Secretary is satisfied that the allocation method used does not cause inaccuracies or distortions.
(2) Reporting allocated expenses and price adjustments. Any party seeking to report an expense or a price adjustment on an allocated basis must demonstrate to the Secretary's satisfaction that the allocation is calculated on as specific a basis as is feasible, and must explain why the allocation methodology used does not cause inaccuracies or distortions.
(3) Feasibility. In determining the feasibility of transaction-specific reporting or whether an allocation is calculated on as specific a basis as is feasible, the Secretary will take into account the records maintained by the party in question in the ordinary course of its business, as well as such factors as the normal accounting practices in the country and industry in question and the number of sales made by the party during the period of investigation or review.
(4) Expenses and price adjustments relating to merchandise not subject to the proceeding. The Secretary will not reject an allocation method solely because the method includes expenses incurred, or price adjustments made, with respect to sales of merchandise that does not constitute subject merchandise or a foreign like product (whichever is applicable).
(h) [Reserved]
(i) Date of sale. In identifying the date of sale of the subject merchandise or foreign like product, the Secretary normally will use the date of invoice, as recorded in the exporter or producer's records kept in the ordinary course of business. However, the Secretary may use a date other than the date of invoice if the Secretary is satisfied that a different date better reflects the date on which the exporter or producer establishes the material terms of sale.
§ 351.402   Calculation of export price and constructed export price; reimbursement of antidumping and countervailing duties.
(a) Introduction. In order to establish export price, constructed export price, and normal value, the Secretary must make certain adjustments to the price to the unaffiliated purchaser (often called the “starting price”) in both the United States and foreign markets. This regulation clarifies how the Secretary will make certain of the adjustments to the starting price in the United States that are required by section 772 of the Act.
(b) Additional adjustments to constructed export price. In establishing constructed export price under section 772(d) of the Act, the Secretary will make adjustments for expenses associated with commercial activities in the United States that relate to the sale to an unaffiliated purchaser, no matter where or when paid. 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.
(c) Special rule for merchandise with value added after importation —(1) Merchandise imported by affiliated persons. In applying section 772(e) of the Act, merchandise imported by and value added by a person affiliated with the exporter or producer includes merchandise imported and value added for the account of such an affiliated person.
(2) Estimation of value added. The Secretary normally will determine that the value added in the United States by the affiliated person is likely to exceed substantially the value of the subject merchandise if the Secretary estimates the value added to be at least 65 percent of the price charged to the first unaffiliated purchaser for the merchandise as sold in the United States. The Secretary normally will estimate the value added based on the difference between the price charged to the first unaffiliated purchaser for the merchandise as sold in the United States and the price paid for the subject merchandise by the affiliated person. The Secretary normally will base this determination on averages of the prices and the value added to the subject merchandise.
(3) Determining dumping margins. For purposes of determining dumping margins under paragraphs (1) and (2) of section 772(e) of the Act, the Secretary may use the weighted-average dumping margins calculated on sales of identical or other subject merchandise sold to unaffiliated persons.
(d) Special rule for determining profit. This paragraph sets forth rules for calculating profit in establishing constructed export price under section 772(f) of the Act.
(1) Basis for total expenses and total actual profit. In calculating total expenses and total actual profit, the Secretary normally will use the aggregate of expenses and profit for all subject merchandise sold in the United States and all foreign like products sold in the exporting country, including sales that have been disregarded as being below the cost of production. ( See section 773(b) of the Act (sales at less than cost of production).)
(2) Use of financial reports. For purposes of determining profit under section 772(d)(3) of the Act, the Secretary may rely on any appropriate financial reports, including public, audited financial statements, or equivalent financial reports, and internal financial reports prepared in the ordinary course of business.
(3) Voluntary reporting of costs of production. The Secretary will not require the reporting of costs of production solely for purposes of determining the amount of profit to be deducted from the constructed export price. The Secretary will base the calculation of profit on costs of production if such costs are reported voluntarily by the date established by the Secretary, and provided that it is practicable to do so and the costs of production are verifiable.
(e) Treatment of payments between affiliated persons. Where a person affiliated with the exporter or producer incurs any of the expenses deducted from constructed export price under section 772(d) of the Act and is reimbursed for such expenses by the exporter, producer or other affiliate, the Secretary normally will make an adjustment based on the actual cost to the affiliated person. If the Secretary is satisfied that information regarding the actual cost to the affiliated person is unavailable to the exporter or producer, the Secretary may determine the amount of the adjustment on any other reasonable basis, including the amount of the reimbursement to the affiliated person if the Secretary is satisfied that such amount reflects the amount usually paid in the market under consideration.
(f) Reimbursement of antidumping duties and countervailing duties —(1) In general. (i) In calculating the export price (or the constructed export price), the Secretary will deduct the amount of any antidumping duty or countervailing duty which the exporter or producer:
(A) Paid directly on behalf of the importer; or
(B) Reimbursed to the importer.
(ii) The Secretary will not deduct the amount of any antidumping duty or countervailing duty paid or reimbursed if the exporter or producer granted to the importer before initiation of the antidumping investigation in question a warranty of nonapplicability of antidumping duties or countervailing duties with respect to subject merchandise which was:
(A) Sold before the date of publication of the Secretary's order applicable to the merchandise in question; and
(B) Exported before the date of publication of the Secretary's final antidumping determination.
(iii) Ordinarily, under paragraph (f)(1)(i) of this section, the Secretary will deduct the amount reimbursed only once in the calculation of the export price (or constructed export price).
(2) Reimbursement certification. (i) The importer must certify with U.S. Customs and Border Protection prior to liquidation (except as provided for in paragraph (f)(2)(iii) of this section) whether the importer has or has not been reimbursed or entered into any agreement or understanding for the payment or for the refunding to the importer by the manufacturer, producer, seller, or exporter for all or any part of the antidumping and countervailing duties, as appropriate. Such certifications should identify the commodity and country and contain the information necessary to link the certification to the relevant entry or entry line number(s).
(ii) The reimbursement certification may be filed either electronically or in paper in accordance with the U.S. Customs and Border Protection's requirements, as applicable.
(iii) If an importer does not provide its reimbursement certification prior to liquidation, U.S. Customs and Border Protection may accept the reimbursement certification in accordance with its protest procedures under 19 U.S.C. 1514, unless otherwise directed.
(iv) Reimbursement certifications are required for entries of the relevant commodity that have been imported on or after the date of publication of the antidumping notice in the Federal Register that first suspended liquidation in that proceeding.
(3) Presumption. The Secretary may presume from an importer's failure to file the certificate required in paragraph (f)(2) of this section that the exporter or producer paid or reimbursed the antidumping duties or countervailing duties.
§ 351.403   Sales used in calculating normal value; transactions between affiliated parties.
(a) Introduction. This section clarifies when the Secretary may use offers for sale in determining normal value. Additionally, this section clarifies the authority of the Secretary to use sales to or through an affiliated party as a basis for normal value. ( See section 773(a)(5) of the Act (indirect sales or offers for sale).)
(b) Sales and offers for sale. In calculating normal value, the Secretary normally will consider offers for sale only in the absence of sales and only if the Secretary concludes that acceptance of the offer can be reasonably expected.
(c) Sales to an affiliated party. If an exporter or producer sold the foreign like product to an affiliated party, the Secretary may calculate normal value based on that sale only if satisfied that the price is comparable to the price at which the exporter or producer sold the foreign like product to a person who is not affiliated with the seller.
(d) Sales through an affiliated party. If an exporter or producer sold the foreign like product through an affiliated party, the Secretary may calculate normal value based on the sale by such affiliated party. However, the Secretary normally will not calculate normal value based on the sale by an affiliated party if sales of the foreign like product by an exporter or producer to affiliated parties account for less than five percent of the total value (or quantity) of the exporter's or producer's sales of the foreign like product in the market in question or if sales to the affiliated party are comparable, as defined in paragraph (c) of this section.
§ 351.404   Selection of the market to be used as the basis for normal value.
(a) Introduction. Although in most circumstances sales of the foreign like product in the home market are the most appropriate basis for determining normal value, section 773 of the Act also permits use of sales to a third country or constructed value as the basis for normal value. This section clarifies the rules for determining the basis for normal value.
(b) Determination of viable market —(1) In general. The Secretary will consider the exporting country or a third country as constituting a viable market if the Secretary is satisfied that sales of the foreign like product in that country are of sufficient quantity to form the basis of normal value.
(2) Sufficient quantity. “Sufficient quantity” normally means that the aggregate quantity (or, if quantity is not appropriate, value) of the foreign like product sold by an exporter or producer in a country is 5 percent or more of the aggregate quantity (or value) of its sales of the subject merchandise to the United States.
(c) Calculation of price-based normal value in viable market —(1) In general. Subject to paragraph (c)(2) of this section:
(i) If the exporting country constitutes a viable market, the Secretary will calculate normal value on the basis of price in the exporting country ( see section 773(a)(1)(B)(i) of the Act (price used for determining normal value)); or
(ii) If the exporting country does not constitute a viable market, but a third country does constitute a viable market, the Secretary may calculate normal value on the basis of price to a third country ( see section 773(a)(1)(B)(ii) of the Act (use of third country prices in determining normal value)).
(2) Exception. The Secretary may decline to calculate normal value in a particular market under paragraph (c)(1) of this section if it is established to the satisfaction of the Secretary that:
(i) In the case of the exporting country or a third country, a particular market situation exists that does not permit a proper comparison with the export price or constructed export price ( see section 773(a)(1)(B)(ii)(III) or section 773(a)(1)(C)(iii) of the Act); or
(ii) In the case of a third country, the price is not representative ( see section 773(a)(1)(B)(ii)(I) of the Act).
(d) Allegations concerning market viability and the basis for determining a price-based normal value. In an antidumping investigation or review, allegations regarding market viability or the exceptions in paragraph (c)(2) of this section, must be filed, with all supporting factual information, in accordance with § 351.301(c)(2)(i).
(e) Selection of third country. For purposes of calculating normal value based on prices in a third country, where prices in more than one third country satisfy the criteria of section 773(a)(1)(B)(ii) of the Act and this section, the Secretary generally will select the third country based on the following criteria:
(1) The foreign like product exported to a particular third country is more similar to the subject merchandise exported to the United States than is the foreign like product exported to other third countries;
(2) The volume of sales to a particular third country is larger than the volume of sales to other third countries;
(3) Such other factors as the Secretary considers appropriate.
(f) Third country sales and constructed value. The Secretary normally will calculate normal value based on sales to a third country rather than on constructed value if adequate information is available and verifiable ( see section 773(a)(4) of the Act (use of constructed value)).
(g) Special rule for certain multinational corporations. In the course of an antidumping investigation, if the Secretary determines that the factors listed in section 773(d) of the Act are present, the Secretary will apply the special rule for certain multinational corporations and determine the normal value of the subject merchandise by reference to the normal value at which the foreign like product is sold in substantial quantities from one or more facilities outside the exporting country. In making a determination under this provision, the following will apply:
(1) Interested parties alleging that the Secretary should apply the special rule for certain multinational corporations must submit the allegation in accordance with the filing requirements set forth in § 351.301(c)(2)(i).
(2) If the Secretary determines that the non-exporting country at issue is a nonmarket economy country and, in accordance with § 351.408, normal value would be determined using a factors of production methodology if the special rule for certain multinational corporations was applied, the Secretary will not apply the special rule for certain multinational corporations.
§ 351.405   Calculation of normal value based on constructed value.
(a) Introduction. In certain circumstances, the Secretary may determine normal value by constructing a value based on the cost of manufacturing, selling, general and administrative expenses and profit. The Secretary may use constructed value as the basis for normal value when: neither the home market nor a third country market is viable; sales below the cost of production are disregarded; sales outside the ordinary course of trade or sales for which the prices are otherwise unrepresentative are disregarded; sales used to establish a fictitious market are disregarded; no contemporaneous sales of comparable merchandise are available; or in other circumstances where the Secretary determines that home market or third country prices are inappropriate. (See section 773(e) and (f) of the Act.) This section clarifies the meaning of certain terms and sets forth certain information which the Secretary will normally consider in determining a constructed value.
(b) Profit and selling, general, and administrative expenses. In determining the amount to be added to constructed value for profit and for selling, general, and administrative expenses, the following rules will apply:
(1) Under section 773(e)(2)(A) of the Act, “foreign country” means the country in which the merchandise is produced or a third country selected by the Secretary under § 351.404(e), as appropriate.
(2) Under section 773(e)(2)(B) of the Act, “foreign country” means the country in which the merchandise is produced.
(3) Under section 773(e)(2)(B)(iii) of the Act, the Secretary will normally consider the following criteria in selecting sources for selling, general and administrative expenses, as well as profit, in calculating constructed value:
(i) The similarity of the potential surrogate companies' business operations and products to the examined producer's or exporter's business operations and products;
(ii) The extent to which the financial data of the surrogate company reflects sales in the home market and does not reflect sales to the United States;
(iii) The contemporaneity of the surrogate company's data to the period of investigation or review; and
(iv) The extent of similarity between the customer base of the surrogate company and the customer base of the examined producer or exporter.
§ 351.406   Calculation of normal value if sales are made at less than cost of production.
(a) Introduction. In determining normal value, the Secretary may disregard sales of the foreign like product made at prices that are less than the cost of production of that product. However, such sales will be disregarded only if they are made within an extended period of time, in substantial quantities, and are not at prices which permit recovery of costs within a reasonable period of time. ( See section 773(b) of the Act.) This section clarifies the meaning of the term “extended period of time” as used in the Act.
(b) Extended period of time. The “extended period of time” under section 773(b)(1)(A) of the Act normally will coincide with the period in which the sales under consideration for the determination of normal value were made.
§ 351.407   Calculation of constructed value and cost of production.
(a) Introduction. This section sets forth certain rules that are common to the calculation of constructed value and the cost of production. ( See section 773(f) of the Act.)
(b) Determination of value under the major input rule. For purposes of section 773(f)(3) of the Act, the Secretary normally will determine the value of a major input purchased from an affiliated person based on the higher of:
(1) The price paid by the exporter or producer to the affiliated person for the major input;
(2) The amount usually reflected in sales of the major input in the market under consideration; or
(3) The cost to the affiliated person of producing the major input.
(c) Allocation of costs. In determining the appropriate method for allocating costs among products, the Secretary may take into account production quantities, relative sales values, and other quantitative and qualitative factors associated with the manufacture and sale of the subject merchandise and the foreign like product.
(d) Startup costs. (1) In identifying startup operations under section 773(f)(1)(C)(ii) of the Act:
(i) “New production facilities” includes the substantially complete retooling of an existing plant. Substantially complete retooling involves the replacement of nearly all production machinery or the equivalent rebuilding of existing machinery.
(ii) A “new product” is one requiring substantial additional investment, including products which, though sold under an existing nameplate, involve the complete revamping or redesign of the product. Routine model year changes will not be considered a new product.
(iii) Mere improvements to existing products or ongoing improvements to existing facilities will not be considered startup operations.
(iv) An expansion of the capacity of an existing production line will not qualify as a startup operation unless the expansion constitutes such a major undertaking that it requires the construction of a new facility and results in a depression of production levels due to technical factors associated with the initial phase of commercial production of the expanded facilities.
(2) In identifying the end of the startup period under clauses (ii) and (iii) of section 773(f)(1)(C) of the Act:
(i) The attainment of peak production levels will not be the standard for identifying the end of the startup period, because the startup period may end well before a company achieves optimum capacity utilization.
(ii) The startup period will not be extended to cover improvements and cost reductions that may occur over the entire life cycle of a product.
(3) In determining when a producer reaches commercial production levels under section 773(f)(1)(C)(ii) of the Act:
(i) The Secretary will consider the actual production experience of the merchandise in question, measuring production on the basis of units processed.
(ii) To the extent necessary, the Secretary will examine factors in addition to those specified in section 773(f)(1)(C)(ii) of the Act, including historical data reflecting the same producer's or other producers' experiences in producing the same or similar products. A producer's projections of future volume or cost will be accorded little weight.
(4) In making an adjustment for startup operations under section 773(f)(1)(C)(iii) of the Act:
(i) The Secretary will determine the duration of the startup period on a case-by-case basis.
(ii) The difference between actual costs and the costs of production calculated for startup costs will be amortized over a reasonable period of time subsequent to the startup period over the life of the product or machinery, as appropriate.
(iii) The Secretary will consider unit production costs to be items such as depreciation of equipment and plant, labor costs, insurance, rent and lease expenses, material costs, and factory overhead. The Secretary will not consider sales expenses, such as advertising costs, or other general and administrative or non-production costs (such as general research and development costs), as startup costs.
§ 351.408   Calculation of normal value of merchandise from nonmarket economy countries.
(a) Introduction. In identifying dumping from a nonmarket economy country, the Secretary normally will calculate normal value by valuing the nonmarket economy producers' factors of production in a market economy country. ( See section 773(c) of the Act.) This section clarifies when and how this special methodology for nonmarket economies will be applied.
(b) Selecting surrogate countries —(1) Determining comparable economies. The Secretary is directed by sections 773(c)(2)(B) and 773(c)(4)(A) of the Act to select surrogate countries which are at a level of economic development comparable to that of the nonmarket economy country at issue.
(i) Measuring economic comparability. In determining whether market economy countries are at a level of economic development comparable to the nonmarket economy at issue, the Secretary will place primary emphasis on per capita gross domestic product (GDP).
(ii) Additional considerations in determining economic comparability. When the Secretary determines that such an analysis is warranted, the Secretary may consider additional factors in determining whether certain market economy countries are at a level of economic development comparable to the nonmarket economy at issue. If the Secretary considers additional factors in its analysis, the Secretary will identify those factors and provide the reason it considered those factors along with the list of comparable market economies issued under paragraph (b)(1)(iii) of this section.
(iii) Annual listing of comparable economies. On an annual basis, the Secretary will determine market economies comparable to individual nonmarket economies and list those market economies on the Secretary's website.
(2) Determining significant producers of comparable merchandise. In selecting a surrogate country from those countries which the Secretary determines are economically comparable, the Secretary will consider, in accordance with section 773(c)(2)(A) and (c)(4)(B) of the Act, those countries that are significant producers of merchandise comparable to the subject merchandise.
(3) Selecting between surrogate countries which are economically comparable and significant producers of comparable merchandise. If more than one economically comparable country produces comparable merchandise, the Secretary will consider the totality of the information on the record in selecting a surrogate country. Among the criteria the Secretary may consider in selecting a surrogate country are the availability, accessibility, and quality of data from those countries and the similarity of products manufactured in the potential surrogate countries in comparison to the subject merchandise.
(c) Valuation of Factors of Production. For purposes of valuing the factors of production, general expenses, profit, and the cost of containers, coverings, and other expenses (referred to collectively as “factors”) under section 773(c)(1) of the Act the following rules will apply:
(1) Information used to value factors. The Secretary normally will use publicly available information to value factors. However, where a factor is produced in one or more market economy countries, purchased from one or more market economy suppliers and paid for in market economy currency, the Secretary normally will use the price(s) paid to the market economy supplier(s) if substantially all of the total volume of the factor is purchased from the market economy supplier(s). For purposes of this provision, the Secretary defines the term “substantially all” to be 85 percent or more of the total volume purchased of the factor used in the production of subject merchandise. In those instances where less than substantially all of the total volume of the factor is produced in one or more market economy countries and purchased from one or more market economy suppliers, the Secretary normally will weight-average the actual price(s) paid for the market economy portion and the surrogate value for the nonmarket economy portion by their respective quantities.
(2) Valuation in a single country. The Secretary normally will value all factors in a single surrogate country.
(3) Manufacturing overhead, general expenses, and profit. For manufacturing overhead, general expenses, and profit, the Secretary normally will use non-proprietary information gathered from producers of identical or comparable merchandise in the surrogate country.
(d) A determination that certain surrogate value information is not otherwise appropriate —(1) In general. Notwithstanding the factors considered under paragraph (c) of this section, the Secretary may disregard a proposed market economy country value for consideration as a surrogate value if the Secretary determines that evidence on the record reflects that the use of such a value would be inappropriate.
(i) In accordance with section 773(c)(5), the Secretary may disregard a proposed surrogate value if the Secretary determines that the value is derived from a country that provides broadly available export subsidies, if particular instances of subsidization occurred with respect to that proposed surrogate value, or if that proposed surrogate value was subject to an antidumping order.
(ii) In addition, the Secretary may disregard a proposed surrogate value if the Secretary determines based on record evidence that the value is derived from a facility, party, industry, intra-country region or a country with weak, ineffective, or nonexistent property (including intellectual property), human rights, labor, or environmental protections.
(2) Requirements to disregard a proposed surrogate value based on weak, ineffective, or nonexistent protections. For purposes of paragraph (d)(1)(ii) of this section, the Secretary will only consider disregarding a proposed market economy country value as a surrogate value of production if the Secretary determines the following:
(i) The proposed surrogate value at issue is for a significant input or labor;
(ii) The proposed surrogate value is derived from one country or an average of values from a limited number of countries; and
(iii) The information on the record supports a claim that the identified weak, ineffective, or nonexistent property (including intellectual property), human rights, labor, or environmental protections undermine the appropriateness of using that value as a surrogate value.
(3) The use of a surrogate value located in a country which is not at a level of economic development comparable to that of the nonmarket economy. If the Secretary determines, pursuant to this section, after reviewing all proposed values on the record derived from market economy countries which are at a level of economic development comparable to the nonmarket economy, that no such proposed value is appropriate to value a specific factor of production, the Secretary may use a value on the record derived from a market economy country which is not at a level of economic development comparable to that of the nonmarket economy country as a surrogate to value that specific factor of production.
(4) The use of a surrogate value not located in a country which is a significant producer of comparable merchandise. If the Secretary determines, pursuant to this section, after reviewing all proposed surrogate values on the record derived from market economy countries which are significant producers of merchandise comparable to the subject merchandise, that no such proposed value is appropriate to value a specific factor of production, the Secretary may use a value on the record derived from a market economy country which is not a significant producer of merchandise comparable to the subject merchandise as a surrogate to value that specific factor of production.
§ 351.409   Differences in quantities.
(a) Introduction. Because the quantity of merchandise sold may affect the price, in comparing export price or constructed export price with normal value, the Secretary will make a reasonable allowance for any difference in quantities to the extent the Secretary is satisfied that the amount of any price differential (or lack thereof) is wholly or partly due to that difference in quantities. ( See section 773(a)(6)(C)(i) of the Act.)
(b) Sales with quantity discounts in calculating normal value. The Secretary normally will calculate normal value based on sales with quantity discounts only if:
(1) During the period examined, or during a more representative period, the exporter or producer granted quantity discounts of at least the same magnitude on 20 percent or more of sales of the foreign like product for the relevant country; or
(2) The exporter or producer demonstrates to the Secretary's satisfaction that the discounts reflect savings specifically attributable to the production of the different quantities.
(c) Sales with quantity discounts in calculating weighted-average normal value. If the exporter or producer does not satisfy the conditions of paragraph (b) of this section, the Secretary will calculate normal value based on weighted-average prices that include sales at a discount.
(d) Price lists. In determining whether a discount has been granted, the existence or lack of a published price list reflecting such a discount will not be controlling. Ordinarily, the Secretary will give weight to a price list only if, in the line of trade and market under consideration, the exporter or producer demonstrates that it has adhered to its price list.
(e) Relationship to level of trade adjustment. If adjustments are claimed for both differences in quantities and differences in level of trade, the Secretary will not make an adjustment for differences in quantities unless the Secretary is satisfied that the effect on price comparability of differences in quantities has been identified and established separately from the effect on price comparability of differences in the levels of trade.
§ 351.410   Differences in circumstances of sale
(a) Introduction. In calculating normal value the Secretary may make adjustments to account for certain differences in the circumstances of sales in the United States and foreign markets. ( See section 773(a)(6)(C)(iii) of the Act.) This section clarifies certain terms used in the statute regarding circumstances of sale adjustments and describes the adjustment when commissions are paid only in one market.
(b) In general. With the exception of the allowance described in paragraph (e) of this section concerning commissions paid in only one market, the Secretary will make circumstances of sale adjustments under section 773(a)(6)(C)(iii) of the Act only for direct selling expenses and assumed expenses.
(c) Direct selling expenses. “Direct selling expenses” are expenses, such as commissions, credit expenses, guarantees, and warranties, that result from, and bear a direct relationship to, the particular sale in question.
(d) Assumed expenses. Assumed expenses are selling expenses that are assumed by the seller on behalf of the buyer, such as advertising expenses.
(e) Commissions paid in one market. The Secretary normally will make a reasonable allowance for other selling expenses if the Secretary makes a reasonable allowance for commissions in one of the markets under considerations, and no commission is paid in the other market under consideration. The Secretary will limit the amount of such allowance to the amount of the other selling expenses incurred in the one market or the commissions allowed in the other market, whichever is less.
(f) Reasonable allowance. In deciding what is a reasonable allowance for any difference in circumstances of sale, the Secretary normally will consider the cost of such difference to the exporter or producer but, if appropriate, may also consider the effect of such difference on the market value of the merchandise.
§ 351.411   Differences in physical characteristics.
(a) Introduction. In comparing United States sales with foreign market sales, the Secretary may determine that the merchandise sold in the United States does not have the same physical characteristics as the merchandise sold in the foreign market, and that the difference has an effect on prices. In calculating normal value, the Secretary will make a reasonable allowance for such differences. ( See section 773(a)(6)(C)(ii) of the Act.)
(b) Reasonable allowance. In deciding what is a reasonable allowance for differences in physical characteristics, the Secretary will consider only differences in variable costs associated with the physical differences. Where appropriate, the Secretary may also consider differences in the market value. The Secretary will not consider differences in cost of production when compared merchandise has identical physical characteristics.
§ 351.412   Levels of trade; adjustment for difference in level of trade; constructed export price offset.
(a) Introduction. In comparing United States sales with foreign market sales, the Secretary may determine that sales in the two markets were not made at the same level of trade, and that the difference has an effect on the comparability of the prices. The Secretary is authorized to adjust normal value to account for such a difference. ( See section 773(a)(7) of the Act.)
(b) Adjustment for difference in level of trade. The Secretary will adjust normal value for a difference in level of trade if:
(1) The Secretary calculates normal value at a different level of trade from the level of trade of the export price or the constructed export price (whichever is applicable); and
(2) The Secretary determines that the difference in level of trade has an effect on price comparability.
(c) Identifying levels of trade and differences in levels of trade —(1) Basis for identifying levels of trade. The Secretary will identify the level of trade based on:
(i) In the case of export price, the starting price;
(ii) In the case of constructed export price, the starting price, as adjusted under section 772(d) of the Act; and
(iii) In the case of normal value, the starting price or constructed value.
(2) Differences in levels of trade. The Secretary will determine that sales are made at different levels of trade if they are made at different marketing stages (or their equivalent). Substantial differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stage of marketing. Some overlap in selling activities will not preclude a determination that two sales are at different stages of marketing.
(d) Effect on price comparability —(1) In general. The Secretary will determine that a difference in level of trade has an effect on price comparability only if it is established to the satisfaction of the Secretary that there is a pattern of consistent price differences between sales in the market in which normal value is determined:
(i) At the level of trade of the export price or constructed export price (whichever is appropriate); and
(ii) At the level of trade at which normal value is determined.
(2) Relevant sales. Where possible, the Secretary will make the determination under paragraph (d)(1) of this section on the basis of sales of the foreign like product by the producer or exporter. Where this is not possible, the Secretary may use sales of different or broader product lines, sales by other companies, or any other reasonable basis.
(e) Amount of adjustment. The Secretary normally will calculate the amount of a level of trade adjustment by:
(1) Calculating the weighted-averages of the prices of sales at the two levels of trade identified in paragraph (d), after making any other adjustments to those prices appropriate under section 773(a)(6) of the Act and this subpart;
(2) Calculating the average of the percentage differences between those weighted-average prices; and
(3) Applying the percentage difference to normal value, where it is at a different level of trade from the export price or constructed export price (whichever is applicable), after making any other adjustments to normal value appropriate under section 773(a)(6) of the Act and this subpart.
(f) Constructed export price offset —(1) In general. The Secretary will grant a constructed export price offset only where:
(i) Normal value is compared to constructed export price;
(ii) Normal value is determined at a more advanced level of trade than the level of trade of the constructed export price; and
(iii) Despite the fact that a person has cooperated to the best of its ability, the data available do not provide an appropriate basis to determine under paragraph (d) of this section whether the difference in level of trade affects price comparability.
(2) Amount of the offset. The amount of the constructed export price offset will be the amount of indirect selling expenses included in normal value, up to the amount of indirect selling expenses deducted in determining constructed export price. In making the constructed export price offset, “indirect selling expenses” means selling expenses, other than direct selling expenses or assumed selling expenses ( see § 351.410), that the seller would incur regardless of whether particular sales were made, but that reasonably may be attributed, in whole or in part, to such sales.
(3) Where data permit determination of affect on price comparability. Where available data permit the Secretary to determine under paragraph (d) of this section whether the difference in level of trade affects price comparability, the Secretary will not grant a constructed export price offset. In such cases, if the Secretary determines that price comparability has been affected, the Secretary will make a level of trade adjustment. If the Secretary determines that price comparability has not been affected, the Secretary will not grant either a level of trade adjustment or a constructed export price offset.
§ 351.413   Disregarding insignificant adjustments.
Ordinarily, under section 777A(a)(2) of the Act, an “insignificant adjustment” is any individual adjustment having an ad valorem effect of less than 0.33 percent, or any group of adjustments having an ad valorem effect of less than 1.0 percent, of the export price, constructed export price, or normal value, as the case may be. Groups of adjustments are adjustments for differences in circumstances of sale under § 351.410, adjustments for differences in the physical characteristics of the merchandise under § 351.411, and adjustments for differences in the levels of trade under § 351.412.
§ 351.414   Comparison of normal value with export price (constructed export price).
(a) Introduction. This section explains when and how the Secretary will average prices in making comparisons of export price or constructed export price with normal value. ( See section 777A(d) of the Act.)
(b) Description of methods of comparison —(1) Average-to-average method. The “average-to-average” method involves a comparison of the weighted average of the normal values with the weighted average of the export prices (and constructed export prices) for comparable merchandise.
(2) Transaction-to-transaction method. The “transaction-to-transaction” method involves a comparison of the normal values of individual transactions with the export prices (or constructed export prices) of individual transactions for comparable merchandise.
(3) Average-to-transaction method. The “average-to-transaction” method involves a comparison of the weighted average of the normal values to the export prices (or constructed export prices) of individual transactions for comparable merchandise.
(c) Choice of method. (1) In an investigation or review, the Secretary will use the average-to-average method unless the Secretary determines another method is appropriate in a particular case.
(2) The Secretary will use the transaction-to-transaction method only in unusual situations, such as when there are very few sales of subject merchandise and the merchandise sold in each market is identical or very similar or is custom-made.
(d) Application of the average-to-average method —(1) In general. In applying the average-to-average method, the Secretary will identify those sales of the subject merchandise to the United States that are comparable, and will include such sales in an “averaging group.” The Secretary will calculate a weighted average of the export prices and the constructed export prices of the sales included in the averaging group, and will compare this weighted average to the weighted average of the normal values of such sales.
(2) Identification of the averaging group. 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. In identifying sales to be included in an averaging group, 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 the Secretary considers relevant.
(3) Time period over which weighted average is calculated. When applying the average-to-average method in an investigation, the Secretary normally will calculate weighted averages for the entire period of investigation. However, when normal values, export prices, or constructed export prices differ significantly over the course of the period of investigation, the Secretary may calculate weighted averages for such shorter period as the Secretary deems appropriate. When applying the average-to-average method in a review, the Secretary normally will calculate weighted averages on a monthly basis and compare the weighted-average monthly export price or constructed export price to the weighted-average normal value for the contemporaneous month.
(e) Application of the average-to-transaction method —In applying the average-to-transaction method in a review, when normal value is based on the weighted average of sales of the foreign like product, the Secretary will limit the averaging of such prices to sales incurred during the contemporaneous month.
(f) Contemporaneous Month. Normally, the Secretary will select as the contemporaneous month the first of the following months which applies:
(1) The month during which the particular U.S. sales under consideration were made;
(2) If there are no sales of the foreign like product during this month, the most recent of the three months prior to the month of the U.S. sales in which there was a sale of the foreign like product.
(3) If there are no sales of the foreign like product during any of these months, the earlier of the two months following the month of the U.S. sales in which there was a sale of the foreign like product.
§ 351.415   Conversion of currency.
(a) In general. In an antidumping proceeding, the Secretary will convert foreign currencies into United States dollars using the rate of exchange on the date of sale of the subject merchandise.
(b) Exception. If the Secretary establishes that a currency transaction on forward markets is directly linked to an export sale under consideration, the Secretary will use the exchange rate specified with respect to such foreign currency in the forward sale agreement to convert the foreign currency.
(c) Exchange rate fluctuations. The Secretary will ignore fluctuations in exchange rates.
(d) Sustained movement in foreign currency value. In an antidumping investigation, if there is a sustained movement increasing the value of the foreign currency relative to the United States dollar, the Secretary will allow exporters 60 days to adjust their prices to reflect such sustained movement.
§ 351.416   Determination of a particular market situation.
(a) Particular market situation defined. A particular market situation is a circumstance or set of circumstances that does the following as determined by the Secretary:
(1) Prevents or does not permit a proper comparison of sales prices in the home market or third country market with export prices and constructed export prices; or
(2) Contributes to the distortion of the cost of materials and fabrication or other processing of any kind, such that the cost of production of merchandise subject to an investigation, suspension agreement, or antidumping order does not accurately reflect the cost of production in the ordinary course of trade.
(b) Submission requirements when alleging the existence of a particular market situation. When an interested party submits a timely allegation as to the existence of a particular market situation in an antidumping duty proceeding, relevant information reasonably available to that interested party supporting the claim must accompany the allegation. If the particular market situation being alleged is similar to an allegation of a particular market situation made in a previous or ongoing segment of the same or another proceeding, the interested party must identify the facts and arguments in the submission which are distinguishable from those provided in the other segment or proceeding.
(c) A determination that a particular market situation prevented or did not permit a proper comparison of prices existed during the period of investigation or review. The Secretary may determine that a particular market situation, identified in paragraph (a)(1) of this section, existed during the period of investigation or review if a circumstance or set of circumstances prevented or did not permit a proper comparison between sales prices in the home market or third country market of the foreign like product and export prices or constructed export prices of subject merchandise for purposes of an antidumping analysis.
(1) Examples of particular market situations in the home market that may prevent or do not permit a proper comparison with U.S. price. Examples of a circumstance or set of circumstances in the home market that may prevent or not permit a proper comparison of prices, and are therefore particular market situations, include, but are not limited to, the following:
(i) The imposition of an export tax on subject merchandise;
(ii) Limitations on exports of subject merchandise from the subject country;
(iii) The issuance and enforcement of anticompetitive regulations that confer a unique status on favored producers or that create barriers to new entrants to an industry; and
(iv) Direct government control over pricing of subject merchandise to such an extent that home market prices for subject merchandise cannot be considered competitively set.
(2) Examples of particular market situations in a third country market that may prevent or not permit a proper comparison of prices. In situations where third country prices may be needed to calculate normal value in a dumping calculation, the Secretary may determine that third country prices cannot be properly compared to export prices or constructed export prices for reasons similar to those listed in paragraph (c)(1) of this section.
(3) The use of constructed value may be warranted if a proper comparison of prices is prevented or not permitted. If the Secretary determines that a particular market situation prevented or did not permit a proper comparison of sales prices in the home market or third country market with export prices or constructed export prices during the period of investigation or review, the Secretary may conclude that it is necessary to determine normal value by constructing a value in accordance with section 773(e) of the Act and § 351.405.
(d) A determination that a market situation existed during the period of investigation or review such that the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade —(1) In general. For purposes of this paragraph (d)(1), the Secretary will determine that a market situation, identified in paragraph (a)(2) of this section, existed during the period of investigation or review if the Secretary determines the following, based on information on the record:
(i) A circumstance or set of circumstances existed that may have impacted the costs of producing subject merchandise, or costs or prices of inputs into the production of subject merchandise;
(ii) The cost of materials and fabrication or other processing of any kind, including the prices of inputs used to produce subject merchandise, were not in accordance with market principles or distorted, and therefore did not accurately reflect the cost of production of subject merchandise in the ordinary course of trade; and
(iii) The circumstance or set of circumstances at issue contributed to the distortion of the cost of production of subject merchandise.
(2) The Secretary will determine if it is more likely than not that a circumstance or set of circumstances contributed to distorted costs or prices. In accordance with paragraph (d)(1)(iii), the Secretary will weigh the information on the record and determine whether it is more likely than not that the circumstance or set of circumstances contributed to the distortion in the cost of production of subject merchandise during the period of investigation or review, and therefore, that a market situation existed during that period.
(3) Information the Secretary may consider in determining the existence of a market situation. In determining whether a market situation existed in the subject country such that the cost of materials and fabrication or other processing did not accurately reflect the cost of production of subject merchandise in the ordinary course of trade during the period of investigation or review, the Secretary will consider all relevant information placed on the record by interested parties, including, but not limited to, the following:
(i) Comparisons of prices paid for significant inputs used to produce subject merchandise under the alleged market situation to prices paid for the same input under market-based circumstances, either in the home country or elsewhere;
(ii) Detailed reports and other documentation issued by foreign governments or independent international, analytical, or academic organizations indicating that lower prices for a significant input in the subject country would likely result from governmental or nongovernmental actions or inactions taken in the subject country or other countries;
(iii) Detailed reports and other documentation issued by foreign governments or independent international, analytical, or academic organizations indicating that prices for a significant input have deviated from a fair market value within the subject country, as a result, in part or in whole, of governmental or nongovernmental actions or inactions;
(iv) Agency determinations or results in which the Secretary determined record information did or did not support the existence of the alleged particular market situation with regard to the same or similar merchandise in the subject country in previous proceedings or segments of the same proceeding; and
(v) Information that property (including intellectual property), human rights, labor, or environmental protections in the subject country are weak, ineffective, or nonexistent, those protections exist and are effectively enforced in other countries, and that the ineffective enforcement or lack of protections may contribute to distortions in the cost of production of subject merchandise or prices or costs of a significant input into the production of subject merchandise in the subject country. For purposes of this paragraph (d)(3)(v), the Secretary will normally look to cost effects on same or similar merchandise produced in economically comparable countries in analyzing the impact of such protections on the cost of production.
(4) No restrictions based on lack of precise quantifiable data, hypothetical prices or actions of governments and industries in other market economies. In determining whether a market situation exists in the subject country such that the cost of materials and fabrication or other processing do not accurately reflect the cost of production in the ordinary course of trade, the following will not preclude the finding of a market situation:
(i) The lack of precision in the quantifiable data relating to the distortion of prices or costs in the subject country;
(ii) The speculated cost of production of the subject merchandise, or the speculated prices or costs of a significant input into the production of the subject merchandise, unsupported by objective data, that a party claims would hypothetically exist in the subject country absent the alleged particular market situation or its contributing circumstances;
(iii) The actions taken or not taken by governments, government-controlled entities, or other public entities in other market economy countries in comparison with the actions taken or not taken by the government, state enterprise, or other public entity of the subject country, with the exception of information associated with the allegations addressed in paragraph (d)(3)(v) of this section; and
(iv) The existence of the same or similar government or nongovernment actions in the subject country that preceded the period of investigation or review.
(e) Factors to consider in determining if a market situation is particular —(1) In general. If the Secretary determines that a market situation exists under paragraph (c) or (d), the Secretary must also determine if the market situation is particular. A market situation is particular if it impacts prices or costs for only certain parties or products in the subject country. In reaching this determination, the following applies:
(i) A particular market situation may exist even if a large number of certain parties or products are impacted by the circumstance or set of circumstances. The Secretary's analysis does not concern the specific number of products or parties, but whether the market situation impacts only certain parties or products, or the general population of parties or products, in the subject country;
(ii) The same or similar market situations can exist in multiple countries or markets and still be considered particular for purposes of this paragraph (e)(1) if the Secretary determines that a market situation exists which distorts sales prices or cost of production for certain parties or products specifically in the subject country; and
(iii) There are varied circumstances in which a market situation in a subject country can be determined to be particular, and a market situation may apply only to certain producers, importers, exporters, purchasers, users, industries, or enterprises, individually or in any combination.
(2) Information the Secretary may consider in determining if a market situation is particular. In determining if a market situation in the subject country is particular in accordance with paragraph (e)(1) of this section, the Secretary will consider all relevant information placed on the record by interested parties, including, but not limited to, the following:
(i) The size and nature of the market situation;
(ii) The volume of merchandise potentially impacted by the price or cost distortions resulting from the market situation; and
(iii) The number and nature of the entities potentially affected by the price or cost distortions resulting from a market situation.
(f) The Secretary may adjust its calculations to address distortions to which a particular market situation under paragraphs (d) and (e) of this section has contributed —(1) In general. If the Secretary determines a particular market situation exists in the subject country which has contributed to a distortion in the cost of materials and fabrication or other processing, such that those costs do not accurately reflect the cost of production of subject merchandise in the ordinary course of trade, in accordance with sections 771(15) and 773(e) of the Act, the Secretary may address such distortions to the cost of production in its calculations.
(2) Imprecise quantification of the distortions. If, after consideration of the information on the record, the Secretary is unable to precisely quantify the distortions to the cost of production of subject merchandise in the ordinary course of trade to which the particular market situation has contributed, the Secretary may use any reasonable methodology based on record information to adjust its calculations to address those distortions.
(3) The Secretary may determine not to adjust its calculations. If the Secretary determines that a particular market situation exists in the subject country which has contributed to the distortions to the cost of production, but that an adjustment to its calculations of the cost of production of subject merchandise is not appropriate based on record information, the Secretary may determine not to adjust its calculations. In determining whether an adjustment is appropriate, the Secretary may consider the following:
(i) Whether the cost distortion is already sufficiently addressed in its calculations in accordance with another statutory provision, such as the transaction disregarded and major input rules of sections 773(f)(2) and (3) of the Act;
(ii) Whether a reasonable method for quantifying an adjustment to the calculations is absent from the record; and
(iii) Whether information on the record suggests that the application of an adjustment to the Secretary's calculations would otherwise be unreasonable.
(g) Examples of particular market situations which contribute to distortions in the cost of materials and fabrication or other processing of any kind, such that those costs do not accurately reflect the cost of production in the ordinary course of trade. Examples of particular market situations which may contribute to the distortion of the cost of production of subject merchandise in the subject country, alone or in conjunction with others, include, but are not limited to, the following:
(1) A significant input into the production of subject merchandise is produced in such amounts that there is considerably more supply than demand in international markets for the input and the Secretary concludes, based on record information, that regardless of the impact of such overcapacity of the significant input on other countries, such overcapacity contributed to distortions of the price or cost of that input in the subject country during the period of investigation or review;
(2) A government, government-controlled entity, or other public entity in the subject country owns or controls the predominant producer or supplier of a significant input used in the production of subject merchandise and the Secretary concludes, based on record information, that such ownership or control of the producer or supplier contributed to price or cost distortions of that input in the subject country during the period of investigation or review;
(3) A government, government-controlled entity, or other public entity in the subject country intervenes in the market for a significant input into the production of subject merchandise and the Secretary concludes, based on record information, such that the intervention contributed to price or cost distortions of that input in the subject country during the period of investigation or review;
(4) A government in the subject country limits exports of a significant input into the production of subject merchandise and the Secretary concludes, based on record information, that such export limitations contributed to price or cost distortions of that input in the subject country during the period of investigation or review;
(5) A government in the subject country imposes export taxes on a significant input into the production of subject merchandise and the Secretary concludes, based on record information, that such taxes contributed to price or cost distortions of that input in the subject country during the period of investigation or review;
(6) A government in the subject country exempts an importer, producer, or exporter of subject merchandise from paying duties or taxes associated with trade remedies established by the government relating to a significant input into the production of subject merchandise during the period of investigation or review;
(7) A government in the subject country rebates duties or taxes paid by an importer, producer or exporter of subject merchandise associated with trade remedies established by the government related to a significant input into the production of subject merchandise during the period of investigation or review;
(8) A government, government-controlled entity, or other public entity in the subject country provides financial assistance or other support to the producer or exporter of subject merchandise, or to a producer or supplier of a significant input into the production of subject merchandise and the Secretary concludes, based on record information, that such assistance or support contributed to cost distortions of subject merchandise or distortions in the price or cost of a significant input into the production of subject merchandise in the subject country during the period of investigation or review;
(9) A government, government-controlled entity, or other public entity in the subject country mandates, through law or in practice, the use of a certain percentage of domestic-manufactured inputs, the sharing or use of certain intellectual property or production processes, or the formation of certain business relationships with other entities to produce subject merchandise or a significant input into the production of subject merchandise and the Secretary concludes, based on record information, that those requirements contributed to cost distortions of subject merchandise or distortions in the price or cost of a significant input into the production of subject merchandise in the subject country during the period of investigation or review;
(10) A government, government-controlled entity, or other public entity in the subject country does not enforce its property (including intellectual property), human rights, labor, or environmental protection laws and policies, or those laws and policies are otherwise shown to be ineffective with respect to either a producer or exporter of subject merchandise, or to a producer or supplier of a significant input into the production of subject merchandise in the subject country and the Secretary concludes, based on record information, that the lack of enforcement or effectiveness of such laws and policies contributed to cost distortions of subject merchandise or distortions in the price or cost of a significant input into the production of subject merchandise during the period of investigation or review;
(11) A government, government-controlled entity, or other public entity in the subject country does not implement property (including intellectual property), human rights, labor, or environmental protection laws and policies and the Secretary concludes, based on record information, that the absence of such laws and policies contributed to cost distortions of subject merchandise, or distortions in the price or cost of a significant input into the production of subject merchandise in the subject country during the period of investigation or review; and
(12) Nongovernmental entities take actions which the Secretary concludes, based on record information, contributed to cost distortions of subject merchandise or distortions in the price or cost of a significant input into the production of subject merchandise in the subject country during the period of investigation or review. Actions that result in distortive prices and costs by nongovernmental entities covered by this example include, but are not limited to, the formation of business relationships between one or more producers of subject merchandise and suppliers of significant inputs to the production of subject merchandise, including mutually-beneficial strategic alliances or noncompetitive arrangements, as well as sales by third-country exporters of significant inputs into the subject country for prices for less than fair value.
(h) A particular market situation which contributes to distortions in the cost of materials and fabrication or other processing of any kind, such that the costs do not accurately reflect the cost of production in the ordinary course of trade, may also contribute to a particular market situation that prevents or does not permit a proper comparison of prices. If the Secretary determines that a particular market situation existed during the period of investigation or review such that the cost of materials and fabrication or other processing of any kind did not accurately reflect the cost of production of subject merchandise in the ordinary course of trade, the Secretary may consider, based on record information, whether that particular market situation also contributed to the circumstance or set of circumstances that prevented, or did not permit, a proper comparison of home market or third country sales prices with export prices or constructed export prices, in accordance with section 771(15)(C) of the Act.
§ 351.501   Scope.
The provisions of this subpart E set forth rules regarding the identification and measurement of countervailable subsidies. Where this subpart E does not expressly deal with a particular type of alleged subsidy, the Secretary will identify and measure the subsidy, if any, in accordance with the underlying principles of the Act and this subpart E.
§ 351.502   Specificity of domestic subsidies.
(a) Sequential analysis. In determining whether a subsidy is de facto specific, the Secretary will examine the factors contained in section 771(5A)(D)(iii) of the Act sequentially in order of their appearance. If a single factor warrants a finding of specificity, the Secretary will not undertake further analysis.
(b) Characteristics of a “group.” In determining whether a subsidy is being provided to a “group” of enterprises or industries within the meaning of section 751(5A)(D) of the Act, the Secretary is not required to determine whether there are shared characteristics among the enterprises or industries that are eligible for, or actually receive, a subsidy.
(c) Traded goods sector. In determining whether a subsidy is being provided to a “group” of enterprises or industries within the meaning of section 771(5A)(D) of the Act, the Secretary normally will consider enterprises that buy or sell goods internationally to comprise such a group.
(d) Disaster relief. The Secretary will not regard disaster relief including pandemic relief as being specific under section 771(5A)(D) of the Act if such relief constitutes general assistance available to anyone in the area affected by the disaster.
(e) Employment assistance. The Secretary will not regard employment assistance programs as being specific under section 771(5A)(D) if such assistance is provided solely with respect to employment of general categories of workers such as those based on age, gender, disability, long-term unemployment, veteran, rural or urban status and is available to everyone hired within those categories without any industry or enterprise restrictions.
§ 351.503   Benefit.
(a) Specific rules. In the case of a government program for which a specific rule for the measurement of a benefit is contained in this subpart E, the Secretary will measure the extent to which a financial contribution (or income or price support) confers a benefit as provided in that rule. For example, § 351.504(a) prescribes the specific rule for measurement of the benefit of grants.
(b) Other subsidies —(1) In general. For other government programs, the Secretary normally will consider a benefit to be conferred where a firm pays less for its inputs ( e.g., money, a good, or a service) than it otherwise would pay in the absence of the government program, or receives more revenues than it otherwise would earn.
(2) Exception. Paragraph (b)(1) of this section is not intended to limit the ability of the Secretary to impose countervailing duties when the facts of a particular case establish that a financial contribution (or income or price support) has conferred a benefit, even if that benefit does not take the form of a reduction in input costs or an enhancement of revenues. When paragraph (b)(1) of this section is not applicable, the Secretary will determine whether a benefit is conferred by examining whether the alleged program or practice has common or similar elements to the four illustrative examples in sections 771(5)(E)(i) through (iv) of the Act.
(3) Contingent liabilities and assets. For the provision of a contingent liability or asset not otherwise addressed under a specific rule identified under paragraph (a) of this section, the Secretary will treat the balance or value of the contingent liability or assets as an interest-free provision of funds and will calculate the benefit using, where appropriate, either a short-term or long-term commercial interest rate.
(c) Distinction from effect of subsidy —(1) In general. In determining whether a benefit is conferred, the Secretary is not required to consider the effect or impact of the government action on the firm's performance, including its costs, prices, output, or whether the firm's behavior is otherwise altered.
(2) Subsidy provided to support compliance with a government-imposed mandate. When a government provides assistance to a firm to comply with a government regulation, requirement or obligation, the Secretary, in measuring the benefit from the subsidy, will not consider whether the firm incurred a cost in complying with the government-imposed regulation, requirement, or obligation.
(d) Varying financial contribution levels —(1) In general. Where a government program provides varying levels of financial contributions based on different eligibility criteria, and one or more of such levels is not specific within the meaning of § 351.502, a benefit is conferred to the extent that a firm receives a greater financial contribution than the financial contributions provided at a non-specific level under the program. The preceding sentence shall apply only to the extent the Secretary determines that the varying levels of financial contributions are set forth in a statute, decree, regulation, or other official act; that the levels are clearly delineated and identifiable; and that the firm would have been eligible for the non-specific level of contributions.
(2) Exception. Paragraph (d)(1) of this section shall not apply where the statute specifies a commercial test for determining the benefit.
(e) Tax consequences. In calculating the amount of a benefit, the Secretary will not consider the tax consequences of the benefit.
§ 351.504   Grants.
(a) Benefit. In the case of a grant, a benefit exists in the amount of the grant.
(b) Time of receipt of benefit. In the case of a grant, the Secretary normally will consider a benefit as having been received on the date on which the firm received the grant.
(c) Allocation of a grant to a particular time period. The Secretary will allocate the benefit from a grant to a particular time period in accordance with § 351.524.
§ 351.505   Loans.
(a) Benefit —(1) In general. In the case of a loan, a benefit exists to the extent that the amount a firm pays on the government-provided loan is less than the amount the firm would pay on a comparable commercial loan(s) that the firm could actually obtain on the market. See section 771(5)(E)(ii) of the Act. In making the comparison called for in the preceding sentence, the Secretary normally will rely on effective interest rates.
(2) “Comparable commercial loan” defined —(i) “Comparable” defined. In selecting a loan that is “comparable” to the government-provided loan, the Secretary normally will place primary emphasis on similarities in the structure of the loans ( e.g., fixed interest rate v. variable interest rate), the maturity of the loans ( e.g., short-term v. long-term), and the currency in which the loans are denominated.
(ii) “Commercial” defined. In selecting a “commercial” loan, the Secretary normally will use a loan taken out by the firm from a commercial lending institution or a debt instrument issued by the firm in a commercial market. Also, the Secretary will treat a loan from a government-owned bank as a commercial loan, unless there is evidence that the loan from a government-owned bank is provided on non-commercial terms or at the direction of the government. However, the Secretary will not consider a loan provided under a government program, or a loan provided by a government-owned special purpose bank, to be a commercial loan for purposes of selecting a loan to compare with a government-provided loan.
(iii) Long-term loans. In selecting a comparable loan, if the government-provided loan is a long-term loan, the Secretary normally will use a loan the terms of which were established during, or immediately before, the year in which the terms of the government-provided loan were established.
(iv) Short-term loans. In making the comparison required under paragraph (a)(1) of this section, if the government-provided loan is a short-term loan, the Secretary normally will use an annual average of the interest rates on comparable commercial loans during the year in which the government-provided loan was taken out, weighted by the principal amount of each loan. However, if the Secretary finds that interest rates fluctuated significantly during the period of investigation or review, the Secretary will use the most appropriate interest rate based on the circumstances presented.
(3) “Could actually obtain on the market” defined —(i) In general. In selecting a comparable commercial loan that the recipient “could actually obtain on the market,” the Secretary normally will rely on the actual experience of the firm in question in obtaining comparable commercial loans for both short-term and long-term loans.
(ii) Where the firm has no comparable commercial loans. If the firm did not take out any comparable commercial loans during the period referred to in paragraph (a)(2)(iii) or (a)(2)(iv) of this section, the Secretary may use a national average interest rate for comparable commercial loans.
(iii) Exception for uncreditworthy companies. If the Secretary finds that a firm that received a government-provided long-term loan was uncreditworthy, as defined in paragraph (a)(4) of this section, the Secretary normally will calculate the interest rate to be used in making the comparison called for by paragraph (a)(1) of this section according to the following formula:
(4) Uncreditworthiness —(i) In general. The Secretary will consider a firm to be uncreditworthy if the Secretary determines that, based on information available at the time of the government-provided loan, the firm could not have obtained long-term loans from conventional commercial sources. The Secretary will determine uncreditworthiness on a case-by-case basis, and may, in appropriate circumstances, focus its creditworthiness analysis on the project being financed rather than the company as a whole. In making the creditworthiness determination, the Secretary may examine, among other factors, the following:
(A) The receipt by the firm of comparable commercial long-term loans;
(B) The present and past financial health of the firm, as reflected in various financial indicators calculated from the firm's financial statements and accounts;
(C) The firm's recent past and present ability to meet its costs and fixed financial obligations with its cash flow; and
(D) Evidence of the firm's future financial position, such as market studies, country and industry economic forecasts, and project and loan appraisals prepared prior to the agreement between the lender and the firm on the terms of the loan.
(ii) Significance of long-term commercial loans. In the case of firms not owned by the government, the receipt by the firm of comparable long-term commercial loans, unaccompanied by a government-provided guarantee, will normally constitute dispositive evidence that the firm is not uncreditworthy.
(iii) Significance of prior subsidies. In determining whether a firm is uncreditworthy, the Secretary will ignore current and prior subsidies received by the firm.
(iv) Discount rate. When the creditworthiness of a firm is considered in connection with the allocation of non-recurring benefits, the Secretary will rely on information available in the year in which the government agreed to provide the subsidy conferring a non-recurring benefit.
(5) Long-term variable rate loans —(i) In general. In the case of a long-term variable rate loan, the Secretary normally will make the comparison called for by paragraph (a)(1) of this section by relying on a comparable commercial loan with a variable interest rate. The Secretary then will compare the variable interest rates on the comparable commercial loan and the government-provided loan for the year in which the terms of the government-provided loan were established. If the comparison shows that the interest rate on the government-provided loan was equal to or higher than the interest rate on the comparable commercial loan, the Secretary will not consider the government-provided loan as having conferred a benefit. If the comparison shows that the interest rate on the government-provided loan was lower, the Secretary will consider the government-provided loan as having conferred a benefit, and, if the other criteria for a countervailable subsidy are satisfied, will calculate the amount of the benefit in accordance with paragraph (c)(4) of this section.
(ii) Exception. If the Secretary is unable to make the comparison described in paragraph (a)(5)(i) of this section or if the comparison described in paragraph (a)(5)(i) of this section would yield an inaccurate measure of the benefit, the Secretary may modify the method described in paragraph (a)(5)(i) of this section.
(6) Allegations —(i) Allegation of uncreditworthiness required. Normally, the Secretary will not consider the uncreditworthiness of a firm absent a specific allegation by the petitioner that is supported by information establishing a reasonable basis to believe or suspect that the firm is uncreditworthy.
(ii) Government-owned banks. The Secretary will not investigate a loan provided by a government-owned bank absent a specific allegation that is supported by information reasonably available to petitioners indicating that:
(A) The loan meets the specificity criteria in accordance with section 771(5A) of the Act; and
(B) A benefit exists within the meaning of paragraph (a)(1) of this section.
(iii) Initiation standard for government-owned policy banks. An interested party will normally meet the initiation threshold for specificity under paragraph (a)(6)(ii)(A) of this section with respect to section 771(5A)(D) of the Act if the party can sufficiently allege that the government-owned policy bank provides loans pursuant to government policies or directives and loan distribution information for the bank is not reasonably available. A policy bank is a government-owned special purpose bank.
(b) Time of receipt of benefit. The Secretary normally will consider a benefit as having been received in the year in which the firm otherwise would have had to make a payment on the comparable commercial loan.
(c) Allocation of benefit to a particular time period —(1) Short-term loans. The Secretary will allocate (expense) the benefit from a short-term loan to the year(s) in which the firm is due to make interest payments on the loan.
(2) Long-term loans. The Secretary normally will calculate the subsidy amount to be assigned to a particular year by calculating the difference in interest payments for that year, i.e., the difference between the interest paid by the firm in that year on the government-provided loan and the interest the firm would have paid on the comparable commercial benchmark loan.
(d) Treatment of outstanding loans as grant after three years of no payments of interest or principal. With the exception of debt forgiveness tied to a particular loan and contingent liability interest-free loans, addressed in § 351.508 and paragraph (e) of this section, the Secretary will normally treat a loan as a grant if no payments on the loan have been made in three years unless the loan recipient can demonstrate that nonpayment is consistent with the terms of a comparable commercial loan it could obtain on the market, or the payments on the loan are consistent with the terms of the loan contract.
(e) Contingent liability interest-free loans —(1) Treatment as loans. In the case of an interest-free loan for which the repayment obligation is contingent upon the company taking some future action or achieving some goal in fulfillment of the loan's requirements, the Secretary normally will treat any balance on the loan outstanding during a year as an interest-free, short-term loan in accordance with paragraphs (a), (b), and (c)(1) of this section. However, if the event upon which repayment of the loan depends will occur at a point in time more than one year after the receipt of the contingent liability loan, the Secretary will use a long-term interest rate as the benchmark in accordance with paragraphs (a), (b), and (c)(2) of this section.
(2) Treatment as grants. If at any point in time the Secretary determines that the event upon which repayment depends is not a viable contingency or the loan recipient has met the contingent action or goal and the government has not taken meaningful action to collect repayment, the Secretary will treat the outstanding balance of the loan as a grant received in the year in which this condition manifests itself.
§ 351.506   Loan guarantees.
(a) Benefit —(1) In general. In the case of a loan guarantee, a benefit exists to the extent that the total amount a firm pays for the loan with the government-provided guarantee is less than the total amount the firm would pay for a comparable commercial loan that the firm could actually obtain on the market absent the government-provided guarantee, including any difference in guarantee fees. See section 771(5)(E)(iii) of the Act. The Secretary will select a comparable commercial loan in accordance with § 351.505(a).
(2) Government acting as owner. In situations where a government, acting as the owner of a firm, provides a loan guarantee to that firm, the guarantee does not confer a benefit if the respondent provides evidence demonstrating that it is normal commercial practice in the country in question for shareholders to provide guarantees to their firms under similar circumstances and on comparable terms.
(b) Time of receipt of benefit. In the case of a loan guarantee, the Secretary normally will consider a benefit as having been received in the year in which the firm otherwise would have had to make a payment on the comparable commercial loan.
(c) Allocation of benefit to a particular time period. In allocating the benefit from a government-provided loan guarantee to a particular time period, the Secretary will use the methods set forth in § 351.505(c) regarding loans.
§ 351.507   Equity.
(a) Benefit —(1) In general. In the case of a government-provided equity infusion, a benefit exists to the extent that the investment decision is inconsistent with the usual investment practice of private investors, including the practice regarding the provision of risk capital, in the country in which the equity infusion is made. See section 771(5)(E)(i) of the Act.
(2) Private investor prices available —(i) In general. Except as provided in paragraph (a)(2)(iii) of this section, the Secretary will consider an equity infusion as being inconsistent with usual investment practice ( see paragraph (a)(1) of this section) if the price paid by the government for newly issued shares is greater than the price paid by private investors for the same (or similar form of) newly issued shares.
(ii) Timing of private investor prices. In selecting a private investor price under paragraph (a)(2)(i) of this section, the Secretary will rely on sales of newly issued shares made reasonably concurrently with the newly issued shares purchased by the government.
(iii) Significant private sector participation required. The Secretary will not use private investor prices under paragraph (a)(2)(i) of this section if the Secretary concludes that private investor purchases of newly issued shares are not significant.
(iv) Adjustments for “similar” form of equity. Where the Secretary uses private investor prices for a form of shares that is similar to the newly issued shares purchased by the government ( see paragraph (a)(2)(i) of this section), the Secretary, where appropriate, will adjust the prices to reflect the differences in the forms of shares.
(3) Actual private investor prices unavailable —(i) In general. If actual private investor prices are not available under paragraph (a)(2) of this section, the Secretary will determine whether the firm funded by the government-provided equity was equityworthy or unequityworthy at the time of the equity infusion ( see paragraph (a)(4) of this section). If the Secretary determines that the firm was equityworthy, the Secretary will apply paragraph (a)(5) of this section to determine whether the equity infusion was inconsistent with the usual investment practice of private investors. A determination by the Secretary that the firm was unequityworthy will constitute a determination that the equity infusion was inconsistent with usual investment practice of private investors, and the Secretary will apply paragraph (a)(6) of this section to measure the benefit attributable to the equity infusion.
(4) Equityworthiness —(i) In general. The Secretary will consider a firm to have been equityworthy if the Secretary determines that, from the perspective of a reasonable private investor examining the firm at the time the government-provided equity infusion was made, the firm showed an ability to generate a reasonable rate of return within a reasonable period of time. The Secretary may, in appropriate circumstances, focus its equityworthiness analysis on a project rather than the company as a whole. In making the equityworthiness determination, the Secretary may examine the following factors, among others:
(A) Objective analyses of the future financial prospects of the recipient firm or the project as indicated by, inter alia, market studies, economic forecasts, and project or loan appraisals prepared prior to the government-provided equity infusion in question;
(B) Current and past indicators of the recipient firm's financial health calculated from the firm's statements and accounts, adjusted, if appropriate, to conform to generally accepted accounting principles;
(C) Rates of return on equity in the three years prior to the government equity infusion; and
(D) Equity investment in the firm by private investors.
(ii) Significance of a pre-infusion objective analysis. For purposes of making an equityworthiness determination, the Secretary will request and normally require from the respondents the information and analysis completed prior to the infusion, upon which the government based its decision to provide the equity infusion ( see, paragraph (a)(4)(i)(A) of this section). Absent the existence or provision of an objective analysis, containing information typically examined by potential private investors considering an equity investment, the Secretary will normally determine that the equity infusion received provides a countervailable benefit within the meaning of paragraph (a)(1) of this section. The Secretary will not necessarily make such a determination if the absence of an objective analysis is consistent with the actions of reasonable private investors in the country in question.
(iii) Significance of prior subsidies. In determining whether a firm was equityworthy, the Secretary will ignore current and prior subsidies received by the firm.
(5) Benefit where firm is equityworthy. If the Secretary determines that the firm or project was equityworthy ( see paragraph (a)(4) of this section), the Secretary will examine the terms and the nature of the equity purchased to determine whether the investment was otherwise inconsistent with the usual investment practice of private investors. If the Secretary determines that the investment was inconsistent with usual private investment practice, the Secretary will determine the amount of the benefit conferred on a case-by-case basis.
(6) Benefit where firm is unequityworthy. If the Secretary determines that the firm or project was unequityworthy ( see paragraph (a)(4) of this section), a benefit to the firm exists in the amount of the equity infusion.
(7) Allegations. The Secretary will not investigate an equity infusion in a firm absent a specific allegation by the petitioner which is supported by information establishing a reasonable basis to believe or suspect that the firm received an equity infusion that provides a countervailable benefit within the meaning of paragraph (a)(1) of this section.
(b) Time of receipt of benefit. In the case of a government-provided equity infusion, the Secretary normally will consider the benefit to have been received on the date on which the firm received the equity infusion.
(c) Outside investor standard. Any analysis made under paragraph (a) of this section will be based upon the standard of a new outside private investor. The Secretary normally will consider whether an outside private investor, under its usual investment practice, would make an equity investment in the firm, and not whether a private investor who has already invested in the firm would continue to invest in the firm.
(d) Allocation of benefit to a particular time period. The benefit conferred by an equity infusion shall be allocated over a period of 12 years or the same time period as a non-recurring subsidy under § 351.524(d), whichever is longer.
§ 351.508   Debt forgiveness.
(a) Benefit. In the case of an assumption or forgiveness of a firm's debt obligation, a benefit exists equal to the amount of the principal and/or interest (including accrued, unpaid interest) that the government has assumed or forgiven. In situations where the entity assuming or forgiving the debt receives shares in a firm in return for eliminating or reducing the firm's debt obligation, the Secretary will determine the existence of a benefit under § 351.507 (equity infusions).
(b) Time of receipt of benefit. In the case of a debt or interest assumption or forgiveness, the Secretary normally will consider the benefit as having been received as of the date on which the debt or interest was assumed or forgiven.
(c) Allocation of benefit to a particular time period —(1) In general. The Secretary will treat the benefit determined under paragraph (a) of this section as a non-recurring subsidy and will allocate the benefit to a particular year in accordance with § 351.524(d), or over a period of 12 years, whichever is longer.
(2) Exception. Where an interest assumption is tied to a particular loan and where a firm can reasonably expect to receive the interest assumption at the time it applies for the loan, the Secretary will normally treat the interest assumption as a reduced-interest loan and allocate the benefit to a particular year in accordance with § 351.505(c) (loans).
§ 351.509   Direct taxes.
(a) Benefit —(1) Exemption or remission of taxes. In the case of a program that provides for a full or partial exemption or remission of a direct tax (for example, an income tax), or a reduction in the base used to calculate a direct tax, a benefit exists to the extent that the tax paid by a firm as a result of the program is less than the tax the firm would have paid in the absence of the program, including as a result of being located in an area designated by the government as being outside the customs territory of the country.
(2) Deferral of taxes. In the case of a program that provides for a deferral of direct taxes, a benefit exists to the extent that appropriate interest charges are not collected. Normally, a deferral of direct taxes will be treated as a government-provided loan in the amount of the tax deferred, according to the methodology described in § 351.505. The Secretary will use a short-term interest rate as the benchmark for tax deferrals of one year or less. The Secretary will use a long-term interest rate as the benchmark for tax deferrals of more than one year.
(b) Time of receipt of benefit —(1) Exemption or remission of taxes. In the case of a full or partial exemption or remission of a direct tax, the Secretary normally will consider the benefit as having been received on the date on which the recipient firm would otherwise have had to pay the taxes associated with the exemption or remission. For all exemptions or remissions related to income taxes, this date will be the date on which the firm filed its tax return.
(2) Deferral of taxes. In the case of a tax deferral of one year or less, the Secretary normally will consider the benefit as having been received on the date on which the deferred tax becomes due. In the case of a multi-year deferral, the Secretary normally will consider the benefit as having been received on the anniversary date(s) of the deferral.
(c) Allocation of benefit to a particular time period. The Secretary normally will allocate (expense) the benefit of a full or partial exemption, remission, or deferral of a direct tax to the year in which the benefit is considered to have been received under paragraph (b) of this section.
(d) Benefit not tied to particular markets or products. If a program provides for a full or partial exemption, reduction, credit, or remission of an income tax, the Secretary normally will consider any benefit to be not tied with respect to a particular market under § 351.525(b)(4) or to a particular product under § 351.525(b)(5).
§ 351.510   Indirect taxes and import charges (other than export programs).
(a) Benefit —(1) Exemption or remission of taxes. In the case of a program other than an export program that provides for the full or partial exemption or remission of an indirect tax or an import charge, a benefit exists to the extent that the taxes or import charges paid by a firm as a result of the program are less than the taxes the firm would have paid in the absence of the program, including as a result of being located in an area designated by the government as being outside the customs territory of the country.
(2) Deferral of taxes. In the case of a program, other than an export program, that provides for a deferral of indirect taxes or import charges, a benefit exists to the extent that appropriate interest charges are not collected. Normally, a deferral of indirect taxes or import charges will be treated as a government-provided loan in the amount of the taxes deferred, according to the methodology described in § 351.505. The Secretary will use a short-term interest rate as the benchmark for tax deferrals of one year or less. The Secretary will use a long-term interest rate as the benchmark for tax deferrals of more than one year.
(b) Time of receipt of benefit —(1) Exemption or remission of taxes. In the case of a full or partial exemption or remission of an indirect tax or import charge, the Secretary normally will consider the benefit as having been received at the time the recipient firm otherwise would be required to pay the indirect tax or import charge.
(2) Deferral of taxes. In the case of the deferral of an indirect tax or import charge of one year or less, the Secretary normally will consider the benefit as having been received on the date on which the deferred tax becomes due. In the case of a multi-year deferral, the Secretary normally will consider the benefit as having been received on the anniversary date(s) of the deferral.
(c) Allocation of benefit to a particular time period. The Secretary normally will allocate (expense) the benefit of a full or partial exemption, remission, or deferral described in paragraph (a) of this section to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.511   Provision of goods or services.
(a) Benefit —(1) In general. In the case where goods or services are provided, a benefit exists to the extent that such goods or services are provided for less than adequate remuneration. See section 771(5)(E)(iv) of the Act.
(2) “ Adequate Remuneration” defined —(i) In general. The Secretary will normally seek to measure the adequacy of remuneration by comparing the government price to a market-determined price for the good or service resulting from actual transactions in the country in question. Such a price could include prices stemming from actual transactions between private parties or actual imports. In choosing such transactions or sales, the Secretary will consider product similarity; quantities sold or imported; and other factors affecting comparability.
(ii) Actual market-determined price unavailable. If there is no useable market-determined price with which to make the comparison under paragraph (a)(2)(i) of this section, the Secretary will seek to measure the adequacy of remuneration by comparing the government price to a world market price where it is reasonable to conclude that such price would be available to purchasers in the country in question. Where there is more than one commercially available world market price, the Secretary will average such prices to the extent practicable, making due allowance for factors affecting comparability.
(iii) World market price unavailable. If there is no world market price available to purchasers in the country in question, the Secretary will normally measure the adequacy of remuneration by assessing whether the government price is consistent with market principles. In making an assessment of whether a government price is consistent with market principles under this provision, the Secretary may assess such factors as costs (including rates of return sufficient to ensure future operations), the government's price setting methodology, possible price discrimination, or a government price derived from actual sales from competitively run government auctions if the government auction:
(A) Uses competitive bid procedures that are open without restriction on the use of the good or service;
(B) Is open without restriction to all bidders, including foreign enterprises, and protects the confidentiality of the bidders;
(C) Accounts for the substantial majority of the actual government provision of the good or service in the jurisdiction in question; and
(D) Determines the winner based solely on price.
(iv) Use of delivered prices. In measuring adequate remuneration under paragraph (a)(2)(i) or (a)(2)(ii) of this section, the Secretary will adjust the comparison price to reflect the price that a firm actually paid or would pay if it imported the product. This adjustment will include delivery charges and import duties.
(v) Exclusion of certain prices. In measuring the adequacy of remuneration under this section, the Secretary may exclude certain prices from its analysis if interested parties have demonstrated, with sufficient information, that those prices are derived from countries with weak, ineffective, or nonexistent property (including intellectual property), human rights, labor, or environmental protections, and that the lack of such protections would likely impact such prices.
(b) Time of receipt of benefit. In the case of the provision of a good or service, the Secretary normally will consider a benefit as having been received as of the date on which the firm pays or, in the absence of payment, was due to pay for the government-provided good or service.
(c) Allocation of benefit to a particular time period. In the case of the provision of a good or service, the Secretary will normally allocate (expense) the benefit to the year in which the benefit is considered to have been received under paragraph (b) of this section. In the case of the provision of infrastructure, the Secretary will normally treat the benefit as non-recurring and will allocate the benefit to a particular year in accordance with § 351.524(d).
(d) Exception for general infrastructure. A financial contribution does not exist in the case of the government provision of general infrastructure. General infrastructure is defined as infrastructure that is created for the broad societal welfare of a country, region, state or municipality.
§ 351.512   Purchase of goods.
(a) Benefit —(1) In general. In the case where goods are purchased by the government from a firm, in accordance with section 771(5)(E)(iv) of the Act a benefit exists to the extent that such goods are purchased for more than adequate remuneration.
(2) Adequate remuneration defined —(i) In general. The Secretary will normally seek to measure the adequacy of remuneration by comparing the price paid to the firm for the good by the government to a market-determined price for the good based on actual transactions, including imports, between private parties in the country in question, but if such prices are not available, then to a world market price or prices for the good.
(ii) Actual market-determined prices unavailable. If there are no market-determined domestic or world market prices available, the Secretary may measure the adequacy of remuneration by analyzing any premium in the request for bid or government procurement regulations provided to domestic suppliers of the good or use any other methodology to assess whether the price paid to the firm for the good by the government is consistent with market principles.
(iii) Exclusion of certain prices. In measuring the adequacy of remuneration under this section, the Secretary may exclude certain prices from a particular country from its analysis if the Secretary determines that interested parties have demonstrated, with sufficient information, that certain actions, including government laws or policies, such as price or production mandates or controls, likely impact such prices.
(iv) Use of ex-factory or ex-works price. In measuring adequate remuneration under paragraph (a)(2)(i) or (ii) of this section, the Secretary will use an ex-factory or ex-works comparison price and price paid to the firm for the good by the government in order to measure the benefit conferred to the recipient within the meaning of section 771(5)(E) of the Act. The Secretary will, if necessary, adjust the comparison price and the price paid to the firm by the government to remove all delivery charges, import duties, and taxes to derive an ex-factory or ex-works price.
(3) Exception when the government is both a provider and purchaser of the good. When the government is both a provider and a purchaser of the good, such as electricity, the Secretary will normally measure the benefit to the recipient firm by comparing the price at which the government provided the good to the price at which the government purchased the same good from the firm.
(b) Time of receipt of benefit. In the case of the purchase of a good, the Secretary normally will consider a benefit as having been received as of the date on which the firm receives payment for the purchased good.
(c) Allocation of benefit to a particular time period. In the case of the purchase of a good, the Secretary will normally allocate (expense) the benefit to the year in which the benefit is considered to have been received under paragraph (b) of this section. However, if the Secretary considers this purchase to be for or tied to capital assets such as land, buildings, or capital equipment, the benefit will normally be allocated over time as defined in § 351.524(d)(2).
§ 351.513   Worker-related subsidies.
(a) Benefit. In the case of a program that provides assistance to workers, a benefit exists to the extent that the assistance relieves a firm of an obligation that it normally would incur.
(b) Time of receipt of benefit. In the case of assistance provided to workers, the Secretary normally will consider the benefit as having been received by the firm on the date on which the payment is made that relieves the firm of the relevant obligation.
(c) Allocation of benefit to a particular time period. Normally, the Secretary will allocate (expense) the benefit from assistance provided to workers to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.514   Export subsidies.
(a) In general. The Secretary will consider a subsidy to be an export subsidy if the Secretary determines that eligibility for, approval of, or the amount of, a subsidy is contingent upon export performance. In applying this section, the Secretary will consider a subsidy to be contingent upon export performance if the provision of the subsidy is, in law or in fact, tied to actual or anticipated exportation or export earnings, alone or as one of two or more conditions.
(b) Exception. In the case of export promotion activities of a government, a benefit does not exist if the Secretary determines that the activities consist of general informational activities that do not promote particular products over others.
§ 351.515   Internal transport and freight charges for export shipments.
(a) Benefit —(1) In general. In the case of internal transport and freight charges on export shipments, a benefit exists to the extent that the charges paid by a firm for transport or freight with respect to goods destined for export are less than what the firm would have paid if the goods were destined for domestic consumption. The Secretary will consider the amount of the benefit to equal the difference in amounts paid.
(2) Exception. For purposes of paragraph (a)(1) of this section, a benefit does not exist if the Secretary determines that:
(i) Any difference in charges is the result of an arm's-length transaction between the supplier and the user of the transport or freight service; or
(ii) The difference in charges is commercially justified.
(b) Time of receipt of benefit. In the case of internal transport and freight charges for export shipments, the Secretary normally will consider the benefit as having been received by the firm on the date on which the firm paid, or in the absence of payment was due to pay, the charges.
(c) Allocation of benefit to a particular time period. Normally, the Secretary will allocate (expense) the benefit from internal transport and freight charges for export shipments to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.516   Price preferences for inputs used in the production of goods for export.
(a) Benefit —(1) In general. In the case of a program involving the provision by governments or their agencies, either directly or indirectly through government-mandated schemes, of imported or domestic products or services for use in the production of exported goods, a benefit exists to the extent that the Secretary determines that the terms or conditions on which the products or services are provided are more favorable than the terms or conditions applicable to the provision of like or directly competitive products or services for use in the production of goods for domestic consumption unless, in the case of products, such terms or conditions are not more favorable than those commercially available on world markets to exporters.
(2) Amount of benefit. In the case of products provided under such schemes, the Secretary will determine the amount of the benefit by comparing the price of products used in the production of exported goods to the commercially available world market price of such products, inclusive of delivery charges.
(3) Commercially available. For purposes of paragraph (a)(2) of this section, commercially available means that the choice between domestic and imported products is unrestricted and depends only on commercial considerations.
(b) Time of receipt of benefit. In the case of a benefit described in paragraph (a)(1) of this section, the Secretary normally will consider the benefit to have been received as of the date on which the firm paid, or in the absence of payment was due to pay, for the product.
(c) Allocation of benefit to a particular time period. Normally, the Secretary will allocate (expense) benefits described in paragraph (a)(1) of this section to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.517   Exemption or remission upon export of indirect taxes.
(a) Benefit. In the case of the exemption or remission upon export of indirect taxes, a benefit exists to the extent that the Secretary determines that the amount remitted or exempted exceeds the amount levied with respect to the production and distribution of like products when sold for domestic consumption.
(b) Time of receipt of benefit. In the case of the exemption or remission upon export of an indirect tax, the Secretary normally will consider the benefit as having been received as of the date of exportation.
(c) Allocation of benefit to a particular time period. Normally, the Secretary will allocate (expense) the benefit from the exemption or remission upon export of indirect taxes to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.518   Exemption, remission, or deferral upon export of prior-stage cumulative indirect taxes.
(a) Benefit —(1) Exemption of prior-stage cumulative indirect taxes. In the case of a program that provides for the exemption of prior-stage cumulative indirect taxes on inputs used in the production of an exported product, a benefit exists to the extent that the exemption extends to inputs that are not consumed in the production of the exported product, making normal allowance for waste, or if the exemption covers taxes other than indirect taxes that are imposed on the input. If the Secretary determines that the exemption of prior-stage cumulative indirect taxes confers a benefit, the Secretary normally will consider the amount of the benefit to be the prior-stage cumulative indirect taxes that otherwise would have been paid on the inputs not consumed in the production of the exported product, making normal allowance for waste, and the amount of charges other than import charges covered by the exemption.
(2) Remission of prior-stage cumulative indirect taxes. In the case of a program that provides for the remission of prior-stage cumulative indirect taxes on inputs used in the production of an exported product, a benefit exists to the extent that the amount remitted exceeds the amount of prior-stage cumulative indirect taxes paid on inputs that are consumed in the production of the exported product, making normal allowance for waste. If the Secretary determines that the remission of prior-stage cumulative indirect taxes confers a benefit, the Secretary normally will consider the amount of the benefit to be the difference between the amount remitted and the amount of the prior-stage cumulative indirect taxes on inputs that are consumed in the production of the export product, making normal allowance for waste.
(3) Deferral of prior-stage cumulative indirect taxes. In the case of a program that provides for a deferral of prior-stage cumulative indirect taxes on an exported product, a benefit exists to the extent that the deferral extends to inputs that are not consumed in the production of the exported product, making normal allowance for waste, and the government does not charge appropriate interest on the taxes deferred. If the Secretary determines that a benefit exists, the Secretary will normally treat the deferral as a government-provided loan in the amount of the tax deferred, according to the methodology described in § 351.505. The Secretary will use a short-term interest rate as the benchmark for tax deferrals of one year or less. The Secretary will use a long-term interest rate as the benchmark for tax deferrals of more than one year.
(4) Exception. Notwithstanding the provisions in paragraphs (a)(1), (a)(2), and (a)(3) of this action, the Secretary will consider the entire amount of the exemption, remission or deferral to confer a benefit, unless the Secretary determines that:
(i) The government in question has in place and applies a system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts, and to confirm which indirect taxes are imposed on these inputs, and the system or procedure is reasonable, effective for the purposes intended, and is based on generally accepted commercial practices in the country of export; or
(ii) If the government in question does not have a system or procedure in place, if the system or procedure is not reasonable, or if the system or procedure is instituted and considered reasonable, but is found not to be applied or not to be applied effectively, the government in question has carried out an examination of actual inputs involved to confirm which inputs are consumed in the production of the exported product, in what amounts, and which indirect taxes are imposed on the inputs.
(b) Time of receipt of benefit. In the case of the exemption, remission, or deferral of priorstage cumulative indirect taxes, the Secretary normally will consider the benefit as having been received:
(1) In the case of an exemption, as of the date of exportation;
(2) In the case of a remission, as of the date of exportation;
(3) In the case of a deferral of one year or less, on the date the deferred tax became due; and
(4) In the case of a multi-year deferral, on the anniversary date(s) of the deferral.
(c) Allocation of benefit to a particular time period. The Secretary normally will allocate (expense) the benefit of the exemption, remission or deferral of prior-stage cumulative indirect taxes to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.519   Remission or drawback of import charges upon export.
(a) Benefit —(1) In general. The term “remission or drawback” includes full or partial exemptions and deferrals of import charges.
(i) Remission or drawback of import charges. In the case of the remission or drawback of import charges upon export, a benefit exists to the extent that the Secretary determines that the amount of the remission or drawback exceeds the amount of import charges on imported inputs that are consumed in the production of the exported product, making normal allowances for waste.
(ii) Exemption of import charges. In the case of an exemption of import charges upon export, a benefit exists to the extent that the exemption extends to inputs that are not consumed in the production of the exported product, making normal allowances for waste, or if the exemption covers charges other than import charges that are imposed on the input.
(iii) Deferral of import charges. In the case of a deferral, a benefit exists to the extent that the deferral extends to inputs that are not consumed in the production of the exported product, making normal allowance for waste, and the government does not charge appropriate interest on the import charges deferred.
(2) Substitution drawback. “Substitution drawback” involves a situation in which a firm uses a quantity of home market inputs equal to, and having the same quality and characteristics as, the imported inputs as a substitute for them. Substitution drawback does not necessarily result in the conferral of a benefit. However, a benefit exists if the Secretary determines that:
(i) The import and the corresponding export operations both did not occur within a reasonable time period, not to exceed two years; or
(ii) The amount drawn back exceeds the amount of the import charges levied initially on the imported inputs for which drawback is claimed.
(3) Amount of the benefit —(i) Remission or drawback of import charges. If the Secretary determines that the remission or drawback, including substitution drawback, of import charges confers a benefit under paragraph (a)(1) or (a)(2) of this section, the Secretary normally will consider the amount of the benefit to be the difference between the amount of import charges remitted or drawn back and the amount paid on imported inputs consumed in production for which remission or drawback was claimed.
(ii) Exemption of import charges. If the Secretary determines that the exemption of import charges upon export confers a benefit, the Secretary normally will consider the amount of the benefit to be the import charges that otherwise would have been paid on the inputs not consumed in the production of the exported product, making normal allowance for waste, and the amount of charges other than import charges covered by the exemption.
(iii) Deferral of import charges. If the Secretary determines that the deferral of import charges upon export confers a benefit, the Secretary will normally treat a deferral as a government-provided loan in the amount of the import charges deferred on the inputs not consumed in the production of the exported product, making normal allowance for waste, according to the methodology described in § 351.505. The Secretary will use a short-term interest rate as the benchmark for deferrals of one year or less. The Secretary will use a long-term interest rate as the benchmark for deferrals of more than one year.
(4) Exception. Notwithstanding paragraph (a)(3) of this section, the Secretary will consider the entire amount of an exemption, deferral, remission or drawback to confer a benefit, unless the Secretary determines that:
(i) The government in question has in place and applies a system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts, and the system or procedure is reasonable, effective for the purposes intended, and is based on generally accepted commercial practices in the country of export; or
(ii) If the government in question does not have a system or procedure in place, if the system or procedure is not reasonable, or if the system or procedure is instituted and considered reasonable, but is found not to be applied or not to be applied effectively, the government in question has carried out an examination of actual inputs involved to confirm which inputs are consumed in the production of the exported product, and in what amounts.
(b) Time of receipt of benefit. In the case of the exemption, deferral, remission or drawback, including substitution drawback, of import charges, the Secretary normally will consider the benefit as having been received:
(1) In the case of remission or drawback, as of the date of exportation;
(2) In the case of an exemption, as of the date of the exportation;
(3) In the case of a deferral of one year or less, on the date the import charges became due; and (4) In the case of a multi-year deferral, on the anniversary date(s) of the deferral.
(c) Allocation of benefit to a particular time period. The Secretary normally will allocate (expense) the benefit from the exemption, deferral, remission or drawback of import charges to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.520   Export insurance.
(a) Benefit —(1) In general. In the case of export insurance, a benefit exists if the premium rates charged are inadequate to cover the long-term operating costs and losses of the program normally over a five-year period.
(2) Amount of the benefit. If the Secretary determines under paragraph (a)(1) of this section that premium rates are inadequate, the Secretary normally will calculate the amount of the benefit as the difference between the amount of premiums paid by the firm and the amount received by the firm under the insurance program during the period of investigation or review.
(b) Time of receipt of benefit. In the case of export insurance, the Secretary normally will consider the benefit as having been received in the year in which the difference described in paragraph (a)(2) of this section occurs.
(c) Allocation of benefit to a particular time period. The Secretary normally will allocate (expense) the benefit from export insurance to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.521   Indirect taxes and import charges on capital goods and equipment (export programs).
(a) Benefit —(1) Exemption or remission of taxes and import charges. In the case of a program determined to be an export subsidy that provides for the full or partial exemption or remission of an indirect tax or an import charge on the purchase or import of capital goods and equipment, a benefit exists to the extent that the taxes or import charges paid by a firm as a result of the program are less than the taxes the firm would have paid in the absence of the program, including as a result of being located in an area designated by the government as being outside the customs territory of the country.
(2) Deferral of taxes and import charges. In the case that the program provides for a deferral of indirect taxes or import charges, a benefit exists to the extent that appropriate interest charges are not collected. Normally, a deferral of indirect taxes or import charges will be treated as a government-provided loan in the amount of the taxes deferred, according to the methodology described in § 351.505. The Secretary will use a short-term interest rate as the benchmark for tax deferrals of one year or less. The Secretary will use a long-term interest rate as the benchmark for tax deferrals of more than one year.
(b) Time of receipt of benefit —(1) Exemption or remission of taxes and import charges. In the case of a full or partial exemption or remission of an indirect tax or import charge, the Secretary normally will consider the benefit as having been received at the time the recipient firm otherwise would be required to pay the indirect tax or import charge.
(2) Deferral of taxes and import charges. In the case of the deferral of an indirect tax or import charge of one year or less, the Secretary normally will consider the benefit as having been received on the date on which the deferred tax becomes due. In the case of a multi-year deferral, the Secretary normally will consider the benefit as having been received on the anniversary date(s) of the deferral.
(c) Allocation of benefit to a particular time period. The Secretary normally will allocate (expense) the benefit of a full or partial exemption, remission or deferral of taxes or import charges described in paragraph (a) of this section to the year in which the benefit is considered to have been received under paragraph (b) of this section.
§ 351.522   [Reserved]
§ 351.523   Upstream subsidies.
(a) Investigation of upstream subsidies —(1) In general. Before investigating the existence of an upstream subsidy ( see section 771A of the Act), the Secretary must have a reasonable basis to believe or suspect that all of the following elements exist:
(i) A countervailable subsidy, other than an export subsidy, is provided with respect to an input product;
(ii) One of the following conditions exists:
(A) The supplier of the input product and the producer of the subject merchandise are affiliated;
(B) The price for the subsidized input product is lower than the price that the producer of the subject merchandise otherwise would pay another seller in an arm's-length transaction for an unsubsidized input product; or
(C) The government sets the price of the input product so as to guarantee that the benefit provided with respect to the input product is passed through to producers of the subject merchandise; and
(iii) The ad valorem countervailable subsidy rate on the input product, multiplied by the proportion of the total production costs of the subject merchandise accounted for by the input product, is equal to, or greater than, one percent.
(b) Input product. For purposes of this section, “input product” means any product used in the production of the subject merchandise.
(c) Competitive benefit —(1) In general. In evaluating whether a competitive benefit exists under section 771A(b) of the Act, the Secretary will determine whether the price for the subsidized input product is lower than the benchmark input price. For purposes of this section, the Secretary will use as a benchmark input price the following, in order of preference:
(i) The actual price paid by, or offered to, the producer of the subject merchandise for an unsubsidized input product, including an imported input product;
(ii) An average price for an unsubsidized input product, including an imported input product, based upon publicly available data;
(iii) The actual price paid by, or offered to, the producer of the subject merchandise for a subsidized input product, including an imported input product, that is adjusted to account for the countervailable subsidy;
(iv) An average price for a subsidized input product, including an imported input product, based upon publicly available data, that is adjusted to account for the countervailable subsidy; or
(v) An unadjusted price for a subsidized input product or any other surrogate price deemed appropriate by the Secretary.
For purposes of this section, such prices must be reflective of a time period that reasonably corresponds to the time of the purchase of the input.
(2) Use of delivered prices. The Secretary will use a delivered price whenever the Secretary uses the price of an input product under paragraph (c)(1) of this section.
(d) Significant effect —(1) Presumptions. In evaluating whether an upstream subsidy has a significant effect on the cost of manufacturing or producing the subject merchandise ( see section 771A(a)(3) of the Act), the Secretary will multiply the ad valorem countervailable subsidy rate on the input product by the proportion of the total production cost of the subject merchandise that is accounted for by the input product. If the product of that multiplication exceeds five percent, the Secretary will presume the existence of a significant effect. If the product is less than one percent, the Secretary will presume the absence of a significant effect. If the product is between one and five percent, there will be no presumption.
(2) Rebuttal of presumptions. A party to the proceeding may present information to rebut these presumptions. In evaluating such information, the Secretary will consider the extent to which factors other than price, such as quality differences, are important determinants of demand for the subject merchandise.
§ 351.524   Allocation of benefit to a particular time period.
Unless otherwise specified in §§ 351.504-351.523, the Secretary will allocate benefits to a particular time period in accordance with this section.
(a) Recurring benefits. The Secretary will allocate (expense) a recurring benefit to the year in which the benefit is received.
(b) Non-recurring benefits —(1) In general. The Secretary will normally allocate a non-recurring benefit to a firm over the number of years corresponding to the average useful life (“AUL”) of renewable physical assets as defined in paragraph (d)(2) of this section.
(2) Exception. The Secretary will normally allocate (expense) non-recurring benefits provided under a particular subsidy program to the year in which the benefits are received if the total amount approved under the subsidy program is less than 0.5 percent of relevant sales ( e.g., total sales, export sales, the sales of a particular product, or the sales to a particular market) of the firm in question during the year in which the subsidy was approved.
(c) “Recurring” versus “non-recurring” benefits —(1) Non-binding iIlustrative lists of recurring and non-recurring benefits. The Secretary normally will treat the following types of subsidies as providing recurring benefits: Direct tax exemptions and deductions; exemptions and excessive rebates of indirect taxes or import duties; provision of goods and services for less than adequate remuneration; price support payments; discounts on electricity, water, and other utilities; freight subsidies; export promotion assistance; early retirement payments; worker assistance; worker training; wage subsidies; and upstream subsidies. The Secretary normally will treat the following types of subsidies as providing non-recurring benefits: equity infusions, grants, plant closure assistance, debt forgiveness, coverage for operating losses, debt-to-equity conversions, provision of non-general infrastructure, and provision of plant and equipment.
(2) The test for determining whether a benefit is recurring or non-recurring. If a subsidy is not on the illustrative lists, or is not addressed elsewhere in these regulations, or if a party claims that a subsidy on the recurring list should be treated as non-recurring or a subsidy on the non-recurring list should be treated as recurring, the Secretary will consider the following criteria in determining whether the benefits from the subsidy should be considered recurring or non-recurring:
(i) Whether the subsidy is exceptional in the sense that the recipient cannot expect to receive additional subsidies under the same program on an ongoing basis from year to year;
(ii) Whether the subsidy required or received the government's express authorization or approval ( i.e., receipt of benefits is not automatic), or
(iii) Whether the subsidy was provided for, or tied to, the capital structure or capital assets of the firm.
(d) Process for allocating non-recurring benefits over time —(1) In general. For purposes of allocating a non-recurring benefit over time and determining the annual benefit amount that should be assigned to a particular year, the Secretary will use the following formula:
(2) AUL —(i) In general. The Secretary will presume the allocation period for non-recurring subsidies to be the AUL of renewable physical assets for the industry concerned as listed in the Internal Revenue Service's (“IRS”) 1977 Class Life Asset Depreciation Range System (Rev. Proc. 77-10, 1977-1, C.B. 548 (RR-38)), as updated by the Department of Treasury. The presumption will apply unless a party claims and establishes that the IRS tables do not reasonably reflect the company-specific AUL or the country-wide AUL for the industry under investigation, subject to the requirement, in paragraph (d)(2)(ii) of this section, that the difference between the company-specific AUL or country-wide AUL for the industry under investigation and the AUL in the IRS tables is significant. If this is the case, the Secretary will use company-specific or country-wide AULs to allocate non-recurring benefits over time ( see paragraph (d)(2)(iii) of this section).
(ii) Definition of “significant.” For purposes of this paragraph (d), significant means that a party has demonstrated that the company-specific AUL or country-wide AUL for the industry differs from AUL in the IRS tables by one year or more.
(iii) Calculation of a company-specific or country-wide AUL. A calculation of a company-specific AUL will not be accepted by the Secretary unless it satisfies the following requirements: the company must base its depreciation on an estimate of the actual useful lives of assets and it must use straight-line depreciation or demonstrate that its calculation is not distorted through irregular or uneven additions to the pool of fixed assets. A company-specific AUL is calculated by dividing the aggregate of the annual average gross book values of the firm's depreciable productive fixed assets by the firm's aggregated annual charge to accumulated depreciation, for a period considered appropriate by the Secretary, subject to appropriate normalizing adjustments. A country-wide AUL for the industry under investigation will not be accepted by the Secretary unless the respondent government demonstrates that it has a system in place to calculate AULs for its industries, and that this system provides a reliable representation of AUL.
(iv) Exception. Under certain extraordinary circumstances, the Secretary may consider whether an allocation period other than AUL is appropriate or whether the benefit stream begins at a date other than the date the subsidy was bestowed.
(3) Selection of a discount rate. (i) In general. The Secretary will select a discount rate based upon data for the year in which the government agreed to provide the subsidy. The Secretary will use as a discount rate the following, in order of preference:
(A) The cost of long-term, fixed-rate loans of the firm in question, excluding any loans that the Secretary has determined to be countervailable subsidies;
(B) The average cost of long-term, fixed-rate loans in the country in question; or
(C) A rate that the Secretary considers to be most appropriate.
(ii) Exception for uncreditworthy firms. In the case of a firm considered by the Secretary to be uncreditworthy ( see § 351.505(a)(4)), the Secretary will use as a discount rate the interest rate described in § 351.505(a)(3)(iii).
§ 351.525   Calculation ofad valoremsubsidy rate and attribution of subsidy to a product.
(a) Calculation of ad valorem subsidy rate. The Secretary will calculate an ad valorem subsidy rate by dividing the amount of the benefit allocated to the period of investigation or review by the sales value during the same period of the product or products to which the Secretary attributes the subsidy under paragraph (b) of this section. Normally, the Secretary will determine the sales value of a product on an f.o.b. (port) basis (if the product is exported) or on an f.o.b. (factory) basis (if the product is sold for domestic consumption). However, if the Secretary determines that countervailable subsidies are provided with respect to the movement of a product from the port or factory to the place of destination ( e.g., freight or insurance costs are subsidized), the Secretary may make appropriate adjustments to the sales value used in the denominator.
(b) Attribution of subsidies —(1) In general. In attributing a subsidy to one or more products, the Secretary will apply the rules set forth in paragraphs (b)(2) through (9) of this section. The Secretary may determine to limit the number of cross-owned corporations examined under this section based on record information and resource availability.
(2) Export subsidies. The Secretary will normally attribute an export subsidy only to products exported by a firm.
(3) Domestic subsidies. The Secretary will normally attribute a domestic subsidy to all products sold by a firm, including products that are exported.
(4) Subsidies tied to a particular market. If a subsidy is tied to sales to a particular market, the Secretary will attribute the subsidy only to products sold by the firm to that market.
(5) Subsidies tied to a particular product —(i) In general. If a subsidy is tied to the production or sale of a particular product, the Secretary will attribute the subsidy only to that product.
(ii) Exception. If a subsidy is tied to production of an input product, then the Secretary will attribute the subsidy to both the input and downstream products produced by a corporation.
(6) Corporations with cross-ownership —(i) In general. The Secretary normally will attribute a subsidy to the products produced by the corporation that received the subsidy.
(ii) Corporations producing the same product. If two (or more) corporations with cross-ownership produce the subject merchandise, the Secretary will attribute the subsidies received by either or both corporations to the products produced by both corporations.
(iii) Holding or parent companies. If the firm that received a subsidy is a holding company, including a parent company with its own business operations, the Secretary will attribute the subsidy to the consolidated sales of the holding company and its subsidiaries.
(iv) Input producer —(A) In general. If there is cross-ownership between an input producer that supplies, either directly or indirectly, a downstream producer and production of the input product is primarily dedicated to production of the downstream products, the Secretary will attribute subsidies received by the input producer to the combined sales of the input and downstream products produced by both corporations (excluding the sales between the two corporations).
(B) Primarily dedicated. In determining whether the input product is primarily dedicated to production of the downstream product, the Secretary will determine, as a threshold matter, whether the input could be used in the production of a downstream product including subject merchandise. The Secretary may also consider the following factors, which are not in hierarchical order: whether the input is a link in the overall production chain; whether the input provider's business activities are focused on providing the input to the downstream producer; whether the input is a common input used in the production of a wide variety of products and industries; whether the downstream producers in the overall production chain are the primary users of the inputs produced by the input producer; whether the inputs produced by the input producer are primarily reserved for use by the downstream producer until the downstream producer's needs are met; whether the input producer is dependent on the downstream producers for the purchases of the input product; whether the downstream producers are dependent on the input producer for their supply of the input; the coordination, nature and extent of business activities between the input producer and the downstream producers whether directly between the input producer and the downstream producers or indirectly through other cross-owned corporations; and any other factor deemed relevant by the Secretary based upon the case-specific facts.
(v) Providers of utility products. If there is cross-ownership between a corporation providing electricity, natural gas or other similar utility product and a producer of subject merchandise, the Secretary will attribute subsidies received by that provider to the combined sales of that provider and the sales of products sold by the producer of subject merchandise if at least one of the following two conditions are met:
(A) A substantial percentage, normally defined as 25 percent or more, of the production of the cross-owned utility provider is provided to the producer of subject merchandise, or
(B) The producer of subject merchandise purchases a substantial percentage, normally defined as 25 percent or more, of its electricity, natural gas, or other similar utility product from the cross-owned provider.
(vi) Transfer of subsidy between corporations with cross-ownership. If a cross-owned corporation received a subsidy and transferred the subsidy to a producer of subject merchandise, the Secretary will only attribute the subsidy to products produced by the recipient of the transferred subsidy. When the cross-owned corporation that transferred the subsidy could fall under two or more of the paragraphs under paragraph (b)(6) of this section the transferred subsidy will be attributed solely under this paragraph.
(vii) Cross-ownership defined. Cross-ownership exists between two or more corporations when one corporation can use or direct the individual assets of the other corporation(s) in essentially the same ways it can use its own assets. Normally, this standard will be met when there is a majority voting ownership interest between two corporations or through common ownership of two (or more) corporations.
(7) Multinational firms. If the firm that received a subsidy has production facilities in two or more countries, the Secretary will attribute the subsidy to products produced by the firm within the country of the government that granted the subsidy. However, if it is demonstrated that the subsidy was tied to more than domestic production, the Secretary will attribute the subsidy to multinational production.
(8) Attribution of subsidies to plants or factories. The Secretary will not tie or attribute a subsidy on a plant- or factory-specific basis.
(9) General standard for finding tying. A subsidy will normally be determined to be tied to a product or market when the authority providing the subsidy was made aware of, or otherwise had knowledge of, the intended use of the subsidy and acknowledged that intended use of the subsidy prior to, or concurrent with, the bestowal of the subsidy.
(c) Trading companies —(1) In general. Benefits from subsidies provided to a trading company that exports subject merchandise shall be cumulated with benefits from subsidies provided to the firm which is producing subject merchandise that is sold through the trading company, regardless of whether the trading company and the producing firm are affiliated.
(2) The individually examined respondent exports through trading company. To cumulate subsidies when the trading company is not individually examined as a respondent, the Secretary will pro-rate the subsidy rate calculated for the trading company by using the ratio of the producer's total exports of subject merchandise to the United States sold through the trading company divided by producer's total exports of subject merchandise to the United States and add the resultant rate onto the producer's calculated subsidy rate.
(3) The individually examined respondent is a trading company. To cumulate subsidies when the trading company is individually examined as a respondent, the Secretary will pro-rate the subsidy rate calculated for the producer(s) by the ratio of the producer's sales of subject merchandise to the United States purchased or sourced by the trading company to total sales to the United States of subject merchandise from all selected producers sourced by the respondent trading company and add the resultant rates to the trading company's calculated subsidy rate.
(d) Ad valorem subsidy rate in countries with high inflation. For countries experiencing an inflation rate greater than 25 percent per annum during the relevant period, the Secretary will normally adjust the benefit amount (numerator) and the sales data (denominator) to account for the rate of inflation during the relevant period of investigation or review in calculating the ad valorem subsidy rate.
§ 351.526   Subsidy extinguishment from changes in ownership.
(a) In general. The Secretary will normally presume that non-recurring subsidies continue to benefit a recipient in full over an allocation period determined consistent with §§ 351.507(d), 351.508(c)(1), or 351.524, notwithstanding an intervening change in ownership.
(b) Rebutting the presumption of subsidy continuation notwithstanding a change in ownership. (1) An interested party may rebut the presumption in paragraph (a) of this section by demonstrating with sufficient evidence that, during the allocation period, a change in ownership occurred in which the seller sold its ownership of all or substantially all of a company or its assets, retaining no control of the company or its assets, and
(i) In the case of a government-to-private sale, that the sale was an arm's-length transaction for fair market value, or
(ii) In the case of a private-to-private sale, that the sale was an arm's-length transaction, unless a party demonstrates that the sale was not for fair market value.
(2) Arm's-length. In determining whether the evidence presented in paragraph (b)(1) of this section demonstrates that the transaction was conducted at arm's length, the Secretary will be guided by the SAA, which defines an arm's-length transaction as a transaction negotiated between unrelated parties, each acting in its own interest, or between related parties such that the terms of the transaction are those that would exist if the transaction had been negotiated between unrelated parties.
(3) Fair Market Value. (i) In determining whether the evidence presented by parties pursuant to paragraph (b)(1) of this section demonstrates that the transaction was for fair market value, the Secretary will determine whether the seller, including in the case of a privatization through the government in its capacity as seller, acted in a manner consistent with the normal sales practices of private, commercial sellers in that country, taking into account evidence regarding whether the seller failed to maximize its return on what it sold.
(ii) In making the determination under paragraph (b)(3)(i) of this section, the Secretary may consider information regarding comparable benchmark prices as well as information regarding the process through which the sale was made. The following is a non-exhaustive list of specific considerations that the Secretary may find to be relevant in this regard:
(A) Objective analysis. Whether the seller performed or obtained an objective analysis in determining the appropriate sales price and, if so, whether it implemented the recommendations of such objective analysis for maximizing its return on the sale, including in regard to the sales price recommended in the analysis;
(B) Artificial barriers to entry. Whether the seller-imposed restrictions on foreign purchasers or purchasers from other industries, overly burdensome or unreasonable bidder qualification requirements, or any other restrictions that artificially suppressed the demand for, or the purchase price of, the company;
(C) Highest bid. Whether the seller accepted the highest bid, reflecting the full amount that the company or its assets (including the value of any subsidy benefits) were actually worth under the prevailing market conditions and whether the final purchase price was paid through monetary or close equivalent compensation; and
(D) Committed investment. Whether there were price discounts or other inducements in exchange for promises of additional future investment that private, commercial sellers would not normally seek (for example, retaining redundant workers or unwanted capacity) and, if so, whether such committed investment requirements were a barrier to entry or in any way distorted the value that bidders were willing to pay for what was being sold.
(4) Deadline to rebut the presumption under paragraph (b)(1) of this section. The Secretary will normally not consider information submitted by a respondent or government on the record to be sufficient to rebut the presumption of subsidy continuation under paragraph (b)(1) of this section unless that submitted information is timely filed as part of the respondent's or government's initial questionnaire response.
(5) Market distortion. Information presented under paragraphs (b)(2) and (3) of this section notwithstanding, the Secretary will not find the presumption in paragraph (a) of this section to be rebutted if an interested party has demonstrated that, at the time of the change in ownership, the broader market conditions necessary for the transaction price to accurately reflect the subsidy benefit were not present or were severely distorted by government action or inaction such that the transaction price was meaningfully different from what it would otherwise have been absent the distortive government action or inaction. In assessing such claims, the Secretary may consider, among other things, the following factors:
(i) Fundamental conditions. Whether the fundamental requirements for a properly functioning market are sufficiently present in the economy in general as well as in the particular industry or sector, including, for example, free interplay of supply and demand, broad-based and equal access to information, sufficient safeguards against collusive behavior, and effective operation of the rule of law; and
(ii) Legal and fiscal incentives. Whether the government has used the prerogatives of government in a special or targeted way that makes possible or otherwise significantly distorts the terms of a change in ownership in a way that a private seller could not. Examples of such incentives include, but are not limited to, the following:
(A) Special tax or duty rates that make the sale more attractive to potential purchasers;
(B) Regulatory exemptions particular to the privatization (or to privatizations generally) affecting worker retention or environmental remediation; or
(C) Subsidization or support of other companies to an extent that severely distorts the normal market signals regarding company and asset values in the industry in question.
(c) Subsidy benefit extinguishment —(1) In general. If the Secretary determines that any evidence presented by interested parties under paragraph (b) of this section rebuts the presumption under paragraph (a) of this section, the full amount of pre-transaction subsidy benefits, including the benefit of any concurrent subsidy meeting the criteria in paragraph (c)(2) of this section, will be found to be extinguished and therefore not countervailable. Absent such a finding, the Secretary will not find that a change in ownership extinguishes subsidy benefits.
(2) Concurrent subsidies. For purposes of paragraph (c)(1) of this section, concurrent subsidies are those subsidies given to facilitate or encourage or that are otherwise bestowed concurrent with a change in ownership. The Secretary will normally consider the value of a concurrent subsidy to be fully reflected in the fair market value price of an arm's-length change in ownership and, therefore, to be fully extinguished in such a transaction under paragraph (c)(1) of this section, if the following criteria are met:
(i) The nature and value of the concurrent subsidies are fully transparent to all potential bidders and, therefore, reflected in the final bid values of the potential bidders,
(ii) The concurrent subsidies are bestowed prior to the sale, and
(iii) There is no evidence otherwise on the record demonstrating that the concurrent subsidies are not fully reflected in the transaction price.
§ 351.527   [Reserved]
§ 351.528   Exchanges of undervalued currencies.
(a) Currency undervaluation —(1) In general. The Secretary normally will consider whether a benefit is conferred from the exchange of United States dollars for the currency of a country under review or investigation under a unified exchange rate system only if that country's currency is undervalued during the relevant period. In determining whether a country's currency is undervalued, the Secretary normally will take into account the gap between the country's real effective exchange rate (REER) and the real effective exchange rate that achieves an external balance over the medium term that reflects appropriate policies (equilibrium REER).
(2) Government action. The Secretary normally will make an affirmative finding under paragraph (a)(1) of this section only if there has been government action on the exchange rate that contributes to an undervaluation of the currency. In assessing whether there has been such government action, the Secretary will not normally include monetary and related credit policy of an independent central bank or monetary authority. The Secretary may also consider the government's degree of transparency regarding actions that could alter the exchange rate.
(b) Benefit —(1) In general. Where the Secretary has made an affirmative finding under paragraph (a)(1) of this section, the Secretary normally will determine the existence of a benefit after examining the difference between:
(i) The nominal, bilateral United States dollar rate consistent with the equilibrium REER; and
(ii) The actual nominal, bilateral United States dollar rate during the relevant time period, taking into account any information regarding the impact of government action on the exchange rate.
(2) Amount of benefit. Where there is a difference under paragraph (b)(1) of this section, the amount of the benefit from a currency exchange normally will be based on the difference between the amount of currency the firm received in exchange for United States dollars and the amount of currency that firm would have received absent the difference referred to in paragraph (b)(1) of this section.
(c) Information sources. In applying this section, the Secretary will request that the Secretary of the Treasury provide its evaluation and conclusion as to the determinations under paragraphs (a) and (b)(1) of this section.
§ 351.529   Certain fees, fines, and penalties.
(a) Financial contribution. When determining if a fee, fine, or penalty that is otherwise due, has been forgone or not collected, within the meaning of section 771(5)(D)(ii) of the Act, the Secretary may conclude that a financial contribution exists if information on the record demonstrates that payment was otherwise required and was not made, in full or in part. In making such a determination, the Secretary will not be required to consider whether the government took efforts to seek payment or grant deferral, or otherwise acknowledged nonpayment, of the fee, fine, or penalty.
(b) Benefit. If the Secretary determines that the government has exempted or remitted in part or in full, a fee, fine, or penalty under paragraph (a) of this section, a benefit exists to the extent that the fee, fine, or penalty paid by a party is less than if the government had not exempted or remitted that fee, fine, or penalty. Further, if the government is determined to have deferred the payment of the fee, fine, or penalty, in part or in full, a benefit exists to the extent that appropriate interest charges are not collected. Normally, a deferral of payment of fees, fines, or penalties will be treated as a government provided loan in the amount of the payments deferred, according to the methodology described in § 351.505.
§ 351.601   Annual list and quarterly update of subsidies.
The Secretary will make the determinations called for by section 702(a) of the Trade Agreements Act of 1979, as amended (19 U.S.C. 1202 note) based on the available information, and will publish the annual list and quarterly updates described in such section in the Federal Register.