[Federal Register Volume 62, Number 190 (Wednesday, October 1, 1997)]
[Notices]
[Pages 51410-51419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26046]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-570-850]


Notice of Final Determination of Sales at Less Than Fair Value: 
Collated Roofing Nails From the People's Republic of China

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT: Everett Kelly or Brian Smith, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230; telephone: (202) 482-4194 or (202) 482-1766, respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930, as amended 
(``the Act''), by the Uruguay Round Agreements Act (``URAA''). In 
addition, unless otherwise indicated, all citations to the Department 
of Commerce regulations are to the regulations at 19 CFR Part 353 
(April 1997).

Final Determination

    We determine that collated roofing nails (``CR nails'') from the 
People's Republic of China (``PRC'') are being sold in the United 
States at less than fair

[[Page 51411]]

value (``LTFV''), as provided in section 735 of the Act. The estimated 
margins of sales at LTFV are shown in the ``Suspension of Liquidation'' 
section of this notice.

Case History

    Since the preliminary determination (Notice of Preliminary 
Determination of Sales at Less Than Fair Value and Postponement of 
Final Determination: Collated Roofing Nails from the People's Republic 
of China), 62 FR 25899 (May 12, 1997), the following events have 
occurred:
    In May, 1996, we attempted to verify the responses to the 
antidumping questionnaire of respondents Shenzhen Top United Steel Co., 
Ltd. (``Top United''), Suzhou Junhua Metal Products Co., Ltd. 
(``Junhua''), and Qingdao Zongxun Nail Products Co., Ltd. 
(``Zongxun''). On May 12, 1997, respondent Shanghai Minmetals Pu Dong 
Corporation (``Pu Dong'') informed the Department that it could not 
permit verification of its questionnaire response. The Paslode Division 
of Illinois Tool Works Inc. (``Petitioner'') and respondents submitted 
case briefs on July 29, 1997, and rebuttal briefs on August 5, 1997.

Scope of Investigation

    The product covered by this investigation is CR nails made of 
steel, having a length of \13/16\ inch to 1\13/16\ inches (or 20.64 to 
46.04 millimeters), a head diameter of 0.330 inch to 0.415 inch (or 
8.38 to 10.54 millimeters), and a shank diameter of 0.100 inch to 0.125 
inch (or 2.54 to 3.18 millimeters), whether or not galvanized, that are 
collated with two wires.
    CR nails within the scope of this investigation are classifiable 
under the Harmonized Tariff Schedule of the United States (``HTSUS'') 
subheading 7317.00.55.06. Although the HTSUS subheading is provided for 
convenience and customs purposes, our written description of the scope 
of this investigation is dispositive.

Period of Investigation

    The period of this investigation (``POI'') comprises each 
exporter's two most recent fiscal quarters prior to the filing of the 
petition. In this case, the POI is April 1, 1996, through September 30, 
1996.

Nonmarket Economy Country Status

    The Department has treated the PRC as a nonmarket economy country 
(``NME'') in all past antidumping investigations (see, e.g., Final 
Determination of Sales at Less Than Fair Value: Silicon Carbide from 
the People's Republic of China, 59 FR 22585 (May 2, 1994) (``Silicon 
Carbide''). Neither respondents nor petitioner have challenged such 
treatment. Therefore, in accordance with section 771(18)(C) of the Act, 
we will continue to treat the PRC as an NME in this investigation.
    When the Department is investigating imports from an NME, section 
773(c)(1) of the Act directs us to base normal value (``NV'') on the 
NME producers' factors of production, valued, to the extent possible, 
in a comparable market economy that is a significant producer of 
comparable merchandise. The sources of individual factor prices are 
discussed in the NV section of this notice, below.

Separate Rates

    Top United and Zongxun have each requested a separate company-
specific antidumping duty deposit rate.<SUP>1</SUP> With respect to 
Junhua, Pu Dong and Wuxi, please see the ``facts available'' section 
below. Top United is a joint venture between a PRC company ``owned by 
all the people,'' a company in Hong Kong, and a company in the British 
Virgin Islands. Zongxun is a joint venture between a PRC collective-
owned enterprise, and a Taiwan company.
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    \1\ The Department's starting point in NME proceedings is a 
rebuttable presumption that all companies are government controlled 
and therefore subject to a single, countrywide antidumping duty 
deposit rate.
---------------------------------------------------------------------------

    Zongxun's business license notes that this PRC company is a foreign 
trade joint venture which owns the production and export facilities 
used to manufacture and export the subject merchandise it sells to the 
United States.
    In other cases involving the PRC, joint ventures between 
``collective''-owned enterprises and foreign investors have not been 
precluded from consideration of a separate rate (see, e.g., Final 
Antidumping Duty Determination of Sales at Less Than Fair Value: 
Certain Partial-Extension Steel Drawer Slides with Rollers from the 
People's Republic of China, 60 FR 54472 (Oct. 23, 1995) (``Drawer 
Slides''). Furthermore, as stated in Silicon Carbide, ownership of a 
company by all the people does not require the application of a single, 
PRC-wide rate. Therefore, for purposes of our final determination, both 
Top United and Zongxun are eligible for a separate rate.
    To establish whether a firm is sufficiently independent from 
government control to be entitled to a separate rate, the Department 
analyzes each exporting entity under a test arising out of the Final 
Determination of Sales at Less Than Fair Value: Sparklers from the 
People's Republic of China, 56 FR 20588 (May 6, 1991) and amplified in 
Silicon Carbide. Under the separate rates criteria, the Department 
assigns separate rates in NME cases only if respondents can demonstrate 
the absence of both de jure and de facto governmental control over 
export activities.
1. De Jure Control
    The respondents have placed on the record a number of documents to 
demonstrate absence of de jure control, including laws, regulations, 
and provisions enacted by the State Council of the central government 
of the PRC. They have also submitted documents which establish that CR 
nails are not included on the list of products that may be subject to 
central government export constraints. In addition, respondents 
submitted the ``Law of the People's Republic of China on Chinese-
Foreign Contractual Joint Ventures' (April 13, 1988). The articles of 
this law authorize joint venture companies to make their own 
operational and management decisions. Further, Zongxun submitted the 
``Regulations Governing Rural Collective Owned Enterprises of the PRC'' 
(July 1, 1990). The articles of this law authorize collective-owned 
enterprises to make their own operational and management decisions.
    In prior cases, the Department has analyzed the very laws which the 
respondents have submitted in this investigation and found that they 
establish an absence of de jure control. (See Drawer Slides.) We have 
no new information in this proceeding which would cause us to 
reconsider this determination.
    However, as in previous cases, there is some evidence that certain 
enactments of the PRC central government have not been implemented 
uniformly among different sectors and/or jurisdictions in the PRC. 
(See, e.g., Silicon Carbide.) Therefore, the Department has determined 
that an analysis of de facto control is critical in determining whether 
Top United and Zongxun are, in fact, subject to a degree of 
governmental control which would preclude the Department from assigning 
separate rates.
2. De Facto Control
    The Department typically considers four factors in evaluating 
whether each respondent is subject to de facto governmental control of 
its export functions: (1) Whether the export prices are set by, or 
subject to, the approval of a governmental authority; (2) whether the 
respondent has authority to

[[Page 51412]]

negotiate and sign contracts, and other agreements; (3) whether the 
respondent has autonomy from the government in making decisions 
regarding the selection of its management; and (4) whether the 
respondent retains the proceeds of its export sales and makes 
independent decisions regarding disposition of profits or financing of 
losses (see, e.g., Silicon Carbide).
    During verification, our examination of correspondence and sales 
documentation revealed no evidence that either Top United's or 
Zongxun's export prices are set, or subject to approval, by any 
governmental authority. That Top United and Zongxun have the authority 
to negotiate and sign contracts and other agreements independent of any 
government authority was evident from our examination of correspondence 
and written agreements and contracts. Finally, we have determined that 
Top United and Zongxun have autonomy from the central government in 
making decisions regarding the appointment of management. We also noted 
that Top United and Zongxun retained proceeds from their export sales 
and made independent decisions regarding disposition of profits and 
financing of losses (based on our examination of financial records and 
purchase invoices).
    Consequently, we determine that these exporters have met the 
criteria for the application of separate rates.

Facts Available

A. Non-Responding Exporters

    Because some companies did not respond to our questionnaire, we are 
applying a single antidumping deposit rate--the PRC-wide rate--to all 
exporters in the PRC (except the two fully participating exporters) 
based on our presumption that the export activities of the companies 
that failed to respond are controlled by the PRC government. See, e.g., 
Notice of Final Determination of Sales at Less Than Fair Value: 
Bicycles from the People's Republic of China 61 FR 19026 (Apr. 30, 
1996) (``Bicycles'').
    This PRC-wide antidumping rate is based on adverse facts available. 
Section 776(a)(2) of the Act provides that ``if an interested party or 
any other person--(A) withholds information that has been requested by 
the administering authority, (B) fails to provide such information by 
the deadlines for the submission of the information or in the form and 
manner requested, subject to subsections (c)(1) and (e) of section 782, 
(C) significantly impedes a proceeding under this title, or (D) 
provides such information but the information cannot be verified as 
provided in section 782(i), the administering authority * * * shall, 
subject to section 782(d), use the facts otherwise available in 
reaching the applicable determination under this title.''
    Section 776(b) of the Act provides that adverse inferences may be 
used against a party that has failed to cooperate by not acting to the 
best of its ability to comply with a request for information. The 
exporters that decided not to respond in any form to the Department's 
questionnaire have failed to act to the best of their ability in this 
investigation. Further, absent a response, we must presume government 
control of these and all other PRC companies for which we cannot make a 
separate rates determination. Thus, the Department has determined that, 
in selecting from among the facts otherwise available, an adverse 
inference is warranted. As adverse facts available, we are assigning 
the higher of the petition margin or the margin calculated for any 
participating respondent in this investigation. Because the margins in 
the petition (as recalculated by the Department at initiation) were 
higher than any of the calculated margins for a respondent, we used the 
highest margin stated in the Notice of Initiation, 118.41%, as total 
adverse facts available for the PRC-wide rate.
    Section 776(c) of the Act provides that where the Department 
selects from among the facts otherwise available and relies on 
``secondary information,'' such as the petition, the Department shall, 
to the extent practicable, corroborate that information from 
independent sources reasonably at the Department's disposal. The 
Statement of Administrative Action accompanying the URAA, H.R. Doc. No. 
316, 103d Cong., 2d Sess. (1994) (hereinafter, the ``SAA''), states 
that ``corroborate'' means to determine that the information used has 
probative value. See SAA at 870.
    In the petition, the petitioner based its allegation of export 
price on price quotations from two manufacturer/exporters of CR nails 
in the PRC. These price quotations were adjusted for movement expenses 
using customs data and IM-145 Import Statistics. See Notice of 
Initiation, 61 FR at 67307-08. As we stated in Final Determination of 
Sales at Less Than Fair Value: Certain Pasta From Turkey, 61 FR 30309 
(June 14, 1996), we consider price quotations as information from 
independent sources. The export price calculations were based upon 
independent sources and Import Statistics, both sources which we 
consider to require no further corroboration by the Department. 
Therefore, we determined at initiation, and continue to find, that the 
calculations set forth in the petition have probative value.
    The petitioner based its allegation of NV on the factors of 
production. See Notice of Initiation, 61 FR at 67308. To calculate the 
factors of production, the petitioner used manufacturing costs based on 
its own production experience, its 1995 audited financial statements, 
and publicly available industry data. Id. The factors of production 
amount for the most significant raw material input (i.e., steel wire) 
in the petition is consistent with the factors of production amount 
reported by the respondents on the record of this investigation. As 
such, we determine that the NV calculations have probative value. (See 
memorandum to the file dated May 5, 1997.)
    Based on our pre-initiation analysis and reexamination of the price 
information supporting the petition, we determine that the highest 
margin stated in the Notice of Initiation is corroborated within the 
meaning of section 776(c) of the Act.

B. Wuxi

    As stated in our preliminary determination, Wuxi failed to file its 
questionnaire responses with the Department in the proper manner and to 
serve its responses on the other interested parties in this 
investigation. The Department afforded Wuxi numerous opportunities to 
remedy these deficiencies. In addition, Wuxi's submissions did not 
provide adequate information for determining that Wuxi is sufficiently 
independent from government control to be entitled to a separate rate. 
As such, we determine that Wuxi is not entitled to a separate rate. We, 
therefore, have included Wuxi in the ``PRC-wide'' rate.

C. Pu Dong

    As noted above, Pu Dong refused verification of its questionnaire 
response. Because of Pu Dong's failure to allow the Department to carry 
out its verification procedures, the Department was unable to verify 
whether Pu Dong is sufficiently independent from government control to 
be entitled to a separate rate. Further, none of the other data in Pu 
Dong's questionnaire response can be used because Pu Dong refused 
verification. We, therefore, have included Pu Dong in the ``PRC-wide'' 
rate. Because we are including Pu Dong in the PRC-wide rate, we will 
not address any of the other issues concerning Pu Dong.

[[Page 51413]]

D. Junhua

    We find that Junhua did not provide a complete reporting of all of 
its ``affiliated parties,'' as requested in the antidumping 
questionnaire (see Questionnaire, p. A-4). Specifically, the existence 
of several PRC subsidiaries of Junhua's Hong Kong parent only came to 
light at verification. The Department was not able to evaluate the 
extent of government control with respect to Junhua's affiliates, nor 
could the Department confirm that these affiliates were not involved in 
the production or sale of subject merchandise. Section 776(b) provides 
that adverse inferences may be used against a party that has failed to 
cooperate by not acting to the best of its ability to comply with 
requests for information. See also SAA at 870. Junhua's failure to 
provide complete and accurate information in a timely manner 
demonstrates that Junhua has failed to cooperate to the best of its 
ability in this investigation. Thus, the Department has determined 
that, in selecting among the facts otherwise available for Junhua, an 
adverse inference is warranted. As adverse facts available, we 
determine that Junhua is not entitled to a separate rate, and will be 
subject to the PRC-wide rate. Because we are including Junhua in the 
PRC-wide rate, we will not address any of the other issues concerning 
Junhua.

Fair Value Comparisons

    To determine whether sales of the subject merchandise by Top United 
and Zongxun to the United States were made at less than fair value, we 
compared the export price (``EP'') or constructed export price 
(``CEP'') to the NV, as described in the ``Export Price and Constructed 
Export Price'' and ``Normal Value'' sections of this notice, below. In 
accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI-
wide weighted-average EPs or CEPs to weighted-average NVs.

Export Price/Constructed Export Price

Top United

    We used CEP in accordance with section 772(b) of the Act, because 
the sales to unaffiliated purchasers were made after importation. We 
calculated CEP based on the same methodology used in the preliminary 
determination, with the following exceptions: we corrected Top United's 
response in light of errors discovered during preparations for 
verification with respect to gross unit prices, payment dates, 
discounts, and movement expenses; we adjusted Top United's handling and 
brokerage charges, which were based on pre-POI data, to reflect POI 
levels; we adjusted the margin calculations, where necessary, to 
reflect weighted-average prices for U.S. sales of identical 
merchandise.

Zongxun

    We used EP in accordance with section 772(a) of the Act, because 
the subject merchandise was sold to unaffiliated customers before 
importation and because CEP methodology was not indicated by the facts 
of record. We calculated EP based on the same methodology used in the 
preliminary determination, with the following exception: we adjusted 
Zongxun's handling and brokerage charges, which were based on pre-POI 
data, to reflect POI levels.

Normal Value

A. Surrogate Country

    Section 773(c)(4) of the Act requires the Department to value an 
NME producer's factors of production, to the extent possible, in one or 
more market economy countries that: (1) Are at a level of economic 
development comparable to that of the NME, and (2) are significant 
producers of comparable merchandise. The Department has determined that 
India, Pakistan, Sri Lanka, Egypt, and Indonesia are countries 
comparable to the PRC in terms of overall economic development (see 
Memorandum dated March 24, 1997). According to the available 
information on the record, we have determined that Indonesia is a 
significant producer of merchandise that is comparable to CR nails. 
Accordingly, we have calculated NV using Indonesia import prices--
except, as noted below, in the ``Factors of Production'' section of 
this notice, in certain instances where an input was sourced from a 
market economy--for the PRC producer's factors of production. We have 
obtained and relied upon publicly available information (``PAI'') 
wherever possible.

B. Factors of Production

    In accordance with section 773(c) of the Act, we calculated NV 
based on factors of production reported by the companies in the PRC 
which produced CR nails for the exporters which sold CR nails to the 
United States during the POI. As in the preliminary determination, we 
calculated NV based on factors of production reported by the 
respondents.
    To calculate NV, the verified per-unit factor quantities were first 
multiplied by Indonesia values; the resulting products were then 
summed. We then added amounts for overhead, general expenses (including 
interest) (``SG&A''), profit, and packing expenses incident to placing 
the merchandise in condition packed and ready for shipment to the 
United States.
Top United
    We calculated NV based on the same methodology used in the 
preliminary determination, with the following exceptions: we corrected 
Top United's response in light of errors discovered during preparations 
for verification with respect to unreported raw materials, 
transportation distances, and certain incorrectly reported raw material 
amounts; we also corrected for errors discovered by the Department 
during verification with respect to the reported values of sodium 
hydrosulfate, diesel fuel, and labor allocation; we subtracted the 
value of Top United's steel scrap from the calculated NVs for Top 
United's sales of CR nails; for transportation distances used for the 
calculation of freight expenses on raw materials, we added to CIF 
surrogate values from Indonesia a surrogate freight cost using the 
shorter of the reported distances from either the closest PRC port to 
the factory, or from the domestic supplier to the factory; and we used 
more contemporaneous data for the Indonesia surrogate values for 
welding wire and rubber bands.
Zongxun
    We calculated NV based on the same methodology used in the 
preliminary determination, with the following exceptions: we corrected 
Zongxun's response in light of errors discovered during preparations 
for verification with respect to the values for steel scrap and 
cardboard carton; we subtracted the value of Zongxun's steel scrap from 
the calculated NVs for Zongxun's sales of CR nails; for transportation 
distances used for the calculation of freight expenses on raw 
materials, we added to CIF surrogate values from Indonesia a surrogate 
freight cost using the shorter of the reported distances from either 
the closest PRC port to the factory, or from the domestic supplier to 
the factory; and we used more contemporaneous data for the Indonesia 
surrogate values for welding wire and rubber bands.

Critical Circumstances

    The petition contained a timely allegation that there is a 
reasonable basis to believe or suspect that critical circumstances 
exist with respect to imports of subject merchandise. Section 733(e)(1) 
of the Act provides that the Department will determine that there is a 
reasonable basis to believe or suspect that critical circumstances 
exist if: (A)(i)

[[Page 51414]]

There is a history of dumping and material injury by reason of dumped 
imports in the United States or elsewhere of the subject merchandise, 
or (ii) the person by whom, or for whose account, the merchandise was 
imported knew or should have known that the exporter was selling the 
subject merchandise at less than its fair value and that there was 
likely to be material injury by reason of such sales, and (B) there 
have been massive imports of the subject merchandise over a relatively 
short period.
    To determine that there is a history of dumping of the subject 
merchandise, the Department normally considers evidence of an existing 
antidumping duty order on CR nails in the United States or elsewhere to 
be sufficient. See, e.g., Preliminary Determinations of Critical 
Circumstances: Brake Drums and Rotors from the People's Republic of 
China, 61 FR 55269 (Oct. 25, 1996); Notice of Final Determinations of 
Sales at Less Than Fair Value: Brake Drums and Rotors from the People's 
Republic of China, 62 FR 9160 (Feb. 28, 1997) (``Brake Drums and 
Rotors''). Currently, no countries have outstanding antidumping duty 
orders on CR nails from the PRC. The petitioner alleged a history of 
dumping based upon an antidumping order on steel wire nails from the 
People's Republic of China, the scope of which covered CR nails. See 
Final Results of Changed Circumstances Administrative Review and 
Revocation of Antidumping Duty Order; Certain Steel Wire Nails from the 
People's Republic of China, 52 FR 33463 (Sept. 3, 1987). However, 
because the issue has no effect on our determination of critical 
circumstances, we are not addressing it for this final determination.
    In this investigation, there is no dumping margin for either Top 
United or Zongxun. Therefore, they will be excluded from any 
antidumping duty order, and thus it is unnecessary to determine whether 
critical circumstances exist with respect to these two companies.
    Regarding firms covered by the ``PRC-wide'' rate, we have used the 
``facts available'' as the basis for determining whether critical 
circumstances exist. In determining whether an importer knew or should 
have known that the exporter was selling subject merchandise at less 
than fair value and thereby causing material injury, the Department 
normally considers margins over 25% for EP sales and 15% for CEP sales 
to impute knowledge of dumping and of resultant material injury. Brake 
Drums and Rotors, 62 FR at 9164-65. The ``facts available'' margin for 
these exporters exceeds the threshold for imputing knowledge of dumping 
to the importers of the merchandise. In addition, because we do not 
have verified, company-specific data on shipments of CR nails following 
the filing of the petition, we must adversely assume, as the ``facts 
available,'' a massive increase in imports from these non-responding 
exporters. We, therefore, determine that critical circumstances exist 
for all non-responding exporters.

Verification

    As provided in section 782(i) of the Act, we attempted to verify 
the information submitted by respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records, and original 
source documents provided by respondents.

Interested Party Comments

    Because the Department decided to base its final determination for 
Junhua and Pu Dong entirely on facts available, comments pertaining to 
other issues have not been addressed for Junhua and Pu Dong.

Comment 1: Offset to NV for Steel Scrap By-Product

    Top United and Zongxun assert that the Department should subtract 
the value of their steel scrap from the calculated NV for CR nails. 
They state that during verification, the Department verified that the 
steel scrap was generated during the production of CR nails, and 
further verified the volume of the steel scrap that respondents sold to 
third parties during the period of this investigation. They refer to 
other proceedings involving PRC companies, during one of which the 
Department stated that ``it is Department practice to subtract the 
sales revenue of by-products such as steel scrap from the production 
costs of the subject merchandise.'' Brake Drums and Rotors. They also 
refer to Sebacic Acid From the PRC, 59 FR 28053, 28056 (May 31, 1994), 
in which the Department stated that ``this treatment of by-products is 
consistent with generally accepted accounting principles.''
    Petitioner does not object to an adjustment to NV for steel scrap 
as long as (i) Top United and Zongxun's claims relate to steel scrap 
which is directly tied to the production of the subject merchandise, 
(ii) the scrap is sold directly by the factory, and (iii) the 
Department verified the claim.

DOC Position

    We agree with Top United and Zongxun. We verified that the scrap 
produced during the manufacture of CR nails is sold by the factory. The 
proper adjustment is a reduction in the cost of manufacture, which is 
consistent with the Department's practice in other NME investigations 
(see, e.g., Pure Magnesium and Alloy Magnesium from the Russian 
Federation, 60 FR 16440, March 30, 1995). We have accordingly 
subtracted the value of Top United and Zongxun's steel scrap from the 
calculated NVs for their CR nails, using as surrogate information Biro 
Pusat Statistik's ``Foreign Trade Statistical Bulletin'' to value 
reported steel scrap amounts.

Comment 2: Calculation of Surrogate Freight Costs in Valuing Materials

    Top United and Zongxun claim that the Department double-counted the 
surrogate freight costs for certain PRC-sourced materials in its 
preliminary calculations. They contend that when using CIF prices as 
surrogate values, the Department should presume that the factory would 
purchase specific materials from the closest source--be it the port or 
the domestic supplier's factory--and that the Department should value 
freight accordingly.
    Top United and Zongxun cite Sigma Corp. v. United States, No. 95-
1509, 96-1036, 95-1510, 96-1037, 1997 U.S. App. LEXIS 16506 (Fed. Cir. 
July 7, 1997), in which the United States Court of Appeals for the 
Federal Circuit (``CAFC'') held that the calculated freight costs for 
PRC-made materials may not exceed the calculated freight costs of 
shipping the material from respondents' importing seaports in the PRC 
to their factories. Top United and Zongxun believe that this decision 
clearly prohibits the Department from adding surrogate freight costs 
exceeding the freight costs from the manufacturer's importing seaport 
to its factory.
    Petitioner contends that Top United and Zongxun have not indicated 
why, or to what extent, any inland freight expense should be adjusted 
in line with Sigma. Petitioner indicates that although the principle of 
Sigma is clear, Top United and Zongxun's claim in the instant case is 
not clear. The major factor input is steel, for which the Department 
used market economy prices. Therefore, petitioner believes that the 
Department's calculations do not include any expense for the inland 
freight within the PRC for the imported steel and, thus, do not warrant 
any adjustments.

[[Page 51415]]

DOC Position

    We agree with Top United and Zongxun. The CAFC's decision in Sigma 
requires that we revise our calculation of source-to-factory surrogate 
freight for those material inputs that are based in CIF import values 
in the surrogate country. Accordingly, we have added to CIF surrogate 
values from Indonesia a surrogate freight cost using the shorter of the 
reported distances from either the closest PRC port to the factory, or 
from the domestic supplier to the factory.

Comment 3: Respondents' Corrections Presented at Verification

    Top United and Zongxun contend that the Department's final dumping 
calculation should incorporate corrections of errors discovered in 
their questionnaire responses. They cite the Department's Memoranda on 
Verification Agenda, which state that respondents may submit 
corrections at the start of verification. Top United and Zongxun 
further state that these corrections to their questionnaire responses 
were timely submitted and verified, and that the Department should 
therefore include these corrections in the calculation of respondents' 
dumping margins in the final determination.
    Petitioner contends that the Department should not use Top United 
and Zongxun's corrections, because most of the errors contained in 
their questionnaire responses were not minor. Petitioner argues that 
based on the number of errors reported by Top United and Zongxun at the 
start of verification, the companies did not act to the best of their 
ability in providing accurate information. Petitioner asserts that the 
Department should therefore apply adverse facts available in the areas 
where respondents were not cooperative.

DOC Position

    We agree with Top United and Zongxun and have accepted the 
corrections for computing the final margin calculations of the 
companies. The revisions corrected data already on the record and did 
not introduce new information not previously reported. Accordingly, we 
determine that resorting to facts available is unwarranted in this 
particular case. The Department's use of facts available is subject to 
section 782(d) of the Act. Under section 782(d), the Department may 
disregard all or part of a respondent's questionnaire response when the 
response is not satisfactory or it is not submitted in a timely manner. 
The Department has determined that neither of these conditions apply. 
The Department was able to verify the responses, thus rendering them 
satisfactory, and the types of revisions submitted by respondents met 
the deadline for such changes. Under section 782(e), the Department 
shall not decline to consider information that is (1) timely, (2) 
verifiable, (3) sufficiently complete that it serves as a reliable 
basis for a determination, (4) demonstrated to be provided based on the 
best of the respondent's ability, and (5) can be used without undue 
difficulties. In general, Top United and Zongxun have met these 
conditions.
    Accordingly, we find no basis to reject Top United's and Zongxun's 
responses, and thus, no basis to rely on the facts otherwise available 
for our final determination.

Comment 4: Averaging U.S. Sales of Identical Merchandise in Calculating 
Dumping Margins

    Top United and Zongxun request that the Department ensure that U.S. 
sales of identical merchandise, i.e., sales having the same Matching 
Control Number, are averaged in calculating respondents' dumping 
margins in the final determination. They assert that the average-to-
average comparison is the Department's established practice in 
calculating dumping margins in investigations, citing section 
777A(d)(1)(A)(i) of the Act.
    Petitioner opposes this request, stating that Top United and 
Zongxun do not cite any example where they disagree with the 
Department's preliminary calculations. Petitioner believes that the 
Department should have the flexibility to use a different comparison 
basis, to the extent that the facts indicate a different method of 
comparison.

DOC Position

    We agree with Top United and Zongxun. The margin calculations have 
been adjusted, where necessary, to reflect weighted-average prices for 
U.S. sales of identical merchandise.

Comment 5: The Use of India, Not Indonesia, as the Surrogate Country

    Petitioner asserts that the Department should use India as the 
surrogate country for the final determination. Petitioner cites to 
section 773(c)(4) of the Act, which requires the surrogate country to 
be a market economy country that (1) is at a level of economic 
development comparable to that of the NME, and (2) is a significant 
producer of comparable merchandise. While petitioner agrees that both 
India and Indonesia are economically comparable to the PRC, petitioner 
argues that the combined production of the Indian producers, as 
established by an affidavit in the petition, exceeds the amount of U.S. 
imports from Indonesia. Petitioner argues that although the Department 
selected Indonesia because the U.S. import statistics reflect minimal 
imports of ``collated nails'' from Indonesia, but none from India, the 
statute and regulations do not support giving greater weight to import 
statistics over a petitioner's information. Petitioner claims that 
since there is no information on the record that either country 
manufactures CR nails, the Department should ``* * * give Petitioner's 
information preferred weight, since it is the foundation upon which the 
petition is based, and was used by the Department as adverse facts 
available for non-cooperating parties.''
    Top United and Zongxun argue that the Department correctly used the 
Indonesia data to value their material inputs, factory overhead, SG&A, 
and profit, in accordance with evidence presented before the 
Department. They contend the petition does not include any supporting 
data, such as production or sales data, with respect to the India nail 
industry which shows that India is a significant producer of CR nails. 
They refer to the comments on the surrogate values, dated April 9, 
1997, which include the U.S. import statistics for 1996, and 
demonstrate a substantial volume of collated nails exported from 
Indonesia, whereas India exported no collated nails to the United 
States during the same period. They assert that an absence of exports 
to the United States raises a question as to whether India ever 
produced CR nails, based on the fact the United States is the largest 
consumer of collated nails in the world. Moreover, Top United and 
Zongxun cite to an affidavit provided in their April 7, 1997, 
submission from Tachikawa & Co., stating that P.T. Intan Swarkartiaka, 
an Indonesian producer, produces CR nails and exports them to the 
United States. Finally, they argue that the Indonesia data, which are 
concurrent with the POI, are more contemporaneous than the India data, 
which do not cover the POI; and that the Indonesia data are nail 
industry specific, while India data are on a metal-industry-wide basis.

DOC Position

    We agree with Top United and Zongxun. The PAI showed that Indonesia 
produced collated nails during the POI, whereas there is no PAI showing 
that India produced any collated nails. The Indonesia data are

[[Page 51416]]

more contemporaneous and specific to CR nails than the India data, 
which are on a metal-industry-wide basis (see Memorandum to the File, 
dated September 24, 1997).

Comment 6: SG&A, Factory Overhead, and Profit Used in Calculating 
Plating Costs

    Petitioner asserts that in calculating NV for Zongxun, the 
Department improperly used only factor inputs for plating, and did not 
include any amount for SG&A, factory overhead, or profit for the 
subcontractor. Petitioner argues that any subcontractor would include 
those three items in its price. Petitioner cites Certain Helical Spring 
Lock Washers From China, 58 FR 48833 (September 20, 1993), in which the 
Department verified and used the subcontractor's factors of production 
in calculating NV, which included materials costs, plus total direct 
labor, overhead expenses, general expenses, and profit. Petitioner 
contends that the Department should add those three elements for 
plating in the final determination, based on either plating expenses 
from other investigations, or data for the Indonesia nail industry.

DOC Position

    We disagree with petitioner. In our preliminary determination, the 
overhead, SG&A, and profit rates were applied to the aggregate of the 
plating and nail factors of production. The amounts for SG&A, factory 
overhead, and profit for plating are therefore already included in the 
calculations. Thus, no recalculations for plating costs are necessary.

Comment 7: Import Prices Used to Calculate Steel Values

    Petitioner alleges that the Department's calculation of steel input 
values based on prices from market economy countries artificially 
lowers the factory's costs because it utilizes the lower price for the 
input. Petitioner argues that the Department's ``* *  * established 
policy of evaluating inputs in NME cases based on market prices paid by 
the manufacturer for inputs purchased from a market-economy source * * 
*'', as stated in Tapered Roller Bearings and Parts thereof, Finished 
and Unfinished, From China, 62 FR 6189 (February 11, 1997), questions 
commercial reality. Petitioner asserts that the Department should not 
use one import price to value 100% of the steel inputs where a factory 
in the PRC imports less than 100% of its production requirement for the 
POI. Instead, the Department should adopt a standard which involves 
assigning a value to the input actually used. Petitioner challenges the 
Department's rationale in the use of market price inputs, and argues 
that the Department's policy is wrong as a matter of law.
    Top United and Zongxun refute petitioner's claim, stating that 
petitioner's arguments are contrary to the Department's established 
practice, court decisions, the proposed and final regulations, and the 
Act. They cite Lasko Metal Products v. United States, 43 F. 3d 1442, 
1443 (Fed. Cir. 1994), stating that the CAFC upheld the Department's 
established practice of using actual imported prices to value material 
inputs in NME cases. They cite section 351.408(c)(1) from the 
Department's regulations which states that ``where a portion of the 
factor is purchased from a market economy source * * * the Secretary 
normally will value the factor using the price paid to the market 
economy supplier.'' They also cite to 19 U.S.C. 1677b(c)(1), asserting 
that the import price is the best available information in a market 
economy to value the NME producer's factors of production. They also 
cite to Chrome Plated Lug Nuts from the PRC, 56 FR 46153 (September 10, 
1991), in which the Department stated that import prices are superior 
to the surrogate country's price because ``accuracy, fairness, and 
predictability are enhanced.'' They believe that the Department 
legitimately valued their entire wire rod input using imported prices, 
and should continue to do so in the final determination without 
adjusting the reported import prices.

DOC Position

    We agree with Top United and Zongxun. When steel was purchased from 
a market economy, we used the prices paid to market economy suppliers 
to value this input, even though the producer did not purchase 100 
percent of the steel from a market economy. We believe that it is 
normally appropriate to use those prices in lieu of values of a 
surrogate, market-economy producer, because the actual prices are 
market-driven and reflect the producer's actual experience. In most 
cases, there is nothing to be gained in terms of accuracy, fairness, or 
predictability in using surrogate values when market-determined values 
exist for the input used. Indeed, where we determine that a NME 
producer's input prices are market determined, accuracy, fairness, and 
predictability are enhanced by using those prices (see Chrome Plated 
Lug Nuts from the PRC, 56 FR 46153 (September 10, 1991)).

Comment 8: Values for Other Factor Inputs

Labor
    Petitioner asserts that the Department's one figure to value both 
skilled and unskilled labor is unreasonably low, in comparison with the 
labor rates in India and those actually paid in the PRC. Petitioner 
also claims that this value lacks adjustments for benefits such as 
medical care and housing, which are generally provided in the PRC at no 
cost. Petitioner proposes that the Department find separate values for 
skilled and unskilled workers for its final determination.
    Top United and Zongxun reject petitioner's argument, stating that 
the Indonesia labor rates that the Department used in the preliminary 
determination are comparable with the India labor rates available to 
the Department. They assert that petitioner did not provide any 
information showing separate values for skilled and unskilled labor, 
and that such data is not available to the Department. Finally, they 
argue that PRC labor rates are not usable in any respect because they 
are NME values, which are ``not accurate, reliable measures'' of normal 
value. See Oscillating Fans and Ceiling Fans From PRC, 56 FR 25664, 
25667 (June 5, 1991).

DOC Position

    We agree with Top United and Zongxun. As in several previous PRC 
investigations, e.g. Polyvinyl Alcohol from the PRC, 60 FR 52647 
(October 10, 1995), we used data from the Yearbook of Labor Statistics 
to value labor. This source did not identify the skill level of this 
labor rate. As determined in other cases, such as Honey from the PRC 
(preliminary determination), 60 FR 14725, 14729 (March 20, 1995) and 
Manganese Sulfate from the PRC (final determination), 60 FR 52155, 
52159 (October 5, 1995), there is no basis to assume the skill level of 
this particular surrogate labor value. Thus, for purposes of the final 
determination, we applied a single labor value to all reported labor 
factors.
Water
    Petitioner suggests that the Department treat water as a factor 
input, not as overhead. Petitioner states that water is used in the 
plating process as a factor input since it is used in the chemical 
baths, and thus becomes part of the plating materials.
    Top United and Zongxun argue that the Department will double-count 
water if it values the water separately because the costs for water 
were included in overhead for Zongxun and as diesel oil

[[Page 51417]]

for Top United, which maintains its own wells. They believe that this 
double-counting was correctly avoided by assuming water to be included 
in the surrogate value factory overhead. Based on how the water was 
used in the production process, respondents assert that the water is 
not incorporated into the finished product, and that the Department 
should accordingly follow its preliminary determination and not value 
water consumed by respondents as a separate factor in the final 
determination.

DOC Position

    We agree with Top United and Zongxun that water should be 
considered to be included in factory overhead. Because it is a normal 
practice to assume that water is included in factory overhead, we find 
it reasonable to presume that water is included in the Indonesia 
overhead value we used. Therefore, if we were to assign a separate 
value to water, we would be double-counting the cost (see Saccharin 
From the People's Republic of China, 59 FR 58818 (November 15, 1994).
Brokerage and Handling
    Petitioner claims that there is no indication in the record that 
the Department inflated the handling and brokerage charges to reflect 
POI pricing levels. Petitioner notes that the Department has made such 
an adjustment in the past and should make this adjustment in the final 
determination.
    Top United and Zongxun assert that the Department did inflate the 
brokerage and handling charges to reflect POI pricing levels, and that 
petitioner disregarded the Department's efforts to accurately calculate 
the surrogate value.

DOC Position

    We agree with petitioner, and have adjusted handling and brokerage 
charges to reflect the POI pricing levels.
Inland Transportation for Imported Steel
    Petitioner claims that the record does not indicate that the 
Department included the cost of transporting the imported steel wire 
rod to the factory. Petitioner suggests that the Department include 
these costs in its final determination.
    Top United and Zongxun counter that the Department did add the 
entire freight costs for transporting imported wire rod from their 
importing seaports to their production sites.

DOC Position

    We agree with Top United and Zongxun. As stated in the Calculation 
Memorandum (May 5, 1997, p. 1), we ``* * * adjusted the reported unit 
values based on the purchased price to reflect the terms of sale for 
the purchase of the material input (e.g., CIF, FOB) from a market-
economy supplier.'' Therefore, the imported steel prices have already 
been adjusted to reflect inland transportation costs, and require no 
further calculations.
Transportation Expenses Between Factory and Plating Company
    Petitioner alleges that the cost of transportation between the 
plating company and the factory is not indicated in the record. 
Petitioner states that in previous cases, the Department has looked to 
whether the factory or the plating company used their own trucks or an 
independent hauler.
    Top United and Zongxun argue that the Department correctly 
determined not to value transportation costs between their nail 
production sites and their plating subcontractors in the preliminary 
determination. They claim that doing so would double-count the 
transportation costs, as these costs are included in surrogate value 
factory overhead. They refer to the surrogate value for factory 
overhead, which includes expenses such as fuel, electricity, gas 
machinery and equipment, and other industrial services, all of which 
are associated with the operation of trucks. Since Zongxun demonstrated 
that they transported roofing nails to and from their plating factories 
using their own trucks, the Department properly determined that these 
truck expenses are included in the surrogate factory overhead value. 
Citing Helical Spring Lock Washers from the PRC, they refer to the 
Department's determination to include the costs for trucking in the 
surrogate value for factory overhead. Finally, they note that this 
issue does not apply to Top United, as Top United plated its CR nails 
in its own factory.

DOC Position

    We agree with Top United and Zongxun. As in the preliminary 
determination, we determined that the costs associated with this type 
of transportation are included in the surrogate value for factory 
overhead. This is similar to the Department's determination in Helical 
Spring Lock Washers. Therefore, we did not calculate a separate 
transportation cost for trucking the CR nails to and from the plating 
subcontractor.
Imports From NME Countries in Indonesia Import Data
    Petitioner contends that the Department should exclude data from 
NME countries in the Indonesia import data for welding wire. Citing 
Helical Spring Lock Washers, petitioner states that the Department has 
consistently excluded such data from surrogate values and should 
correct this aspect of the preliminary determination.
    Top United and Zongxun reject this request, claiming that 
petitioner failed to provide information that would enable the 
Department to exclude imports from NME countries from the Indonesia 
import data. They assert that the Department should continue to use the 
same Indonesia surrogate value data in the final determination, as this 
data constitutes ``the best available information'' (19 U.S.C. 
1677b(c)(1)) to value a NME producer's material inputs.

DOC Position

    We agree with petitioner that it is the Department's normal 
methodology to disregard data from NME countries in calculating 
surrogate factor values. In this case, we have removed the total 
quantity and value from NME countries from the import data (see 
Calculation Memorandum, dated September 23, 1997).

Comment 9: Treatment of Below-Specification Products

    Petitioner asserts that the Department should adjust NV for plating 
thickness. Petitioner claims that Top United and Zongxun's reported 
plating thicknesses do not meet U.S. federal or regional, building code 
standards. Petitioner states that since the plating thickness was not 
verified, the Department should assume that Top United and Zongxun were 
aware of these codes and would produce merchandise that complied with 
the codes. Petitioner alleges that there is a significant cost 
differential between the plating thicknesses reported by Top United and 
Zongxun and those required by U.S. codes, and suggests that the 
Department use the information in the petition as the best available 
information with which to recalculate NV.
    Top United and Zongxun argue that the Department correctly valued 
all plating chemicals that they used in production of CR nails during 
the POI. They claim that the Department verified that respondents 
correctly reported the total consumption of plating chemicals, as well 
as the plating thickness of their CR nails, which contradicts 
petitioner's allegation. They further contend that it is irrelevant to 
this investigation

[[Page 51418]]

whether or not their CR nails satisfy the building code requirements 
alleged by petitioner, as the purpose of this investigation is to 
accurately value their production costs of CR nails, not to examine the 
quality of their CR nails. They assert that the Department should 
ignore the petitioner's allegation.

DOC Position

    We agree with Top United and Zongxun. At each verification, we 
examined whether quantities and types of materials associated with the 
subject merchandise were reported accurately and completely. We noted 
no discrepancies regarding the material quantities, with the exception 
of minor errors which have now been corrected (see verification reports 
for Zongxun and Top United dated June 26, 1997, and July 23, 1997, 
respectively). Petitioner's claim that Top United and Zongxun were 
aware of U.S. building codes and would produce merchandise that 
complied with the codes is not germaine to this issue as there is no 
question of inaccurate product comparisons and we have verified that 
all material quantities were included in the response.

Comment 10: Steel Prices

    Petitioner asserts that the Department should value Top United's 
steel using a surrogate value, because the Department has not confirmed 
that the imported steel is actually used to produce the subject 
merchandise. Petitioner claims that at verification Top United's own 
officials admitted that steel other than imported steel may have been 
used to produce subject merchandise. Petitioner also states that the 
record shows that the PRC producer may not have paid for the steel 
inputs.
    Top United refutes petitioner's claim, stating that it indeed used 
imported wire rods to produce CR nails, and that the imported wire rod 
price was actually paid, both of which were verified by the Department. 
Top United declares that its officials never indicated that the company 
did not use imported wire rod, and that petitioner misconstrued the 
statement in the verification report.

DOC Position

    We agree with Top United. Verification supported Top United's claim 
that it used imported steel wire rod in the production of CR nails. 
Accordingly, we have continued to base the value of wire rod on average 
costs for the imported grade of wire rod used.

Comment 11: The MNC Rule

    Petitioner alleges that all the conditions for application of the 
MNC provision are satisfied by Top United. Petitioner refers to section 
773(d) of the Act, which contains the MNC provision, and cites Melamine 
Institutional Dinnerware Products from the People's Republic of China, 
61 FR 43337, 43340 (August 22, 1996), in which the Department stated 
that this provision applies to cases in which the statutory criteria 
are met, regardless of whether it involves a market or non-market 
economy.
    Top United contends that the Department should reject this claim 
because there is no information on the record indicating that Top 
United's NV is lower than the Taiwan prices or constructed value of its 
Taiwan affiliate, Unicatch. Top United further argues that petitioner 
is barred from introducing new information into this investigation in 
its case brief, citing Sec. 351.301(b)(1) (62 FR 27405), which states 
that a submission of factual information is due no later than ``* * * 
seven days before the date on which the verification of any person is 
scheduled to commence * * *'' Finally, Top United argues that 
petitioner offered no recommendation on how to apply the MNC provision 
to this investigation, and without any factual evidence on the record, 
the Department should reject the allegation.

DOC Position

    We agree with Top United. On May 19, 1997, the Department published 
new regulations (62 FR 27296, May 19, 1997). Although this proceeding 
is not governed by those regulations, they are instructive where they 
describe current Department practice and policy. Section 351.404 of the 
new regulations, 62 FR at 27412, describes the Department's current 
policy regarding the selection of the market to be used as the basis 
for NV for purposes of calculating a dumping margin. As stated in the 
preamble to the Final Regulations 62 FR 27357 (May 19, 1997):

    There are a variety of analyses called for by section 773 that 
the Department typically does not engage in unless it receives a 
timely and adequately substantiated allegation from a party * * * 
the Department does not automatically request information relevant 
to a multinational corporation analysis under section 773(d) of the 
Act in the absence of an adequate allegation.

    In this case, petitioner alleged for the first time in its case 
brief that the Department should apply the MNC rule to Top United. Most 
significantly, the record of this investigation does not contain 
information regarding the third condition of determining a company to 
be part of a multinational corporation, i.e., the normal value of the 
foreign like product produced in one or more facilities outside the 
exporting country is higher than the normal value of the foreign like 
product produced in the facilities located in the exporting country. 
Presenting the allegation at this point in the investigation did not 
allow the Department sufficient time to collect and analyze the 
information necessary to make a determination regarding the 
applicability of the MNC rule. Therefore, we reject petitioner's MNC 
rule allegation as untimely and unsupported by the record evidence.
Zongxun

Comment 12: Adverse Facts Available for Unreported Sales

    Petitioner contends that the Department should use adverse facts 
available in determining the dumping margin for Zongxun due to possible 
unreported sales discovered during verification. Specifically, 
petitioner contends that the presence in Zongxun's records of certain 
foreign currency receipts and of CR nail sales to other PRC companies 
may be evidence of unreported sales. Petitioner claims that when sales 
cannot be accounted for, particularly where a foreign currency receipt 
is involved, the Department should presume the sale was an unreported 
sale for exportation to the United States, and the Department should 
use adverse facts available and use the highest margin possible. Citing 
19 CFR Sec. 351.308(a), petitioner emphasizes that the Department may 
make a determination on the basis of the facts available when 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 * * *'' Petitioner asserts that 
Zongxun's refusal to cooperate with verifiers to clarify the foreign 
currency receipts and associated transactions warrants the use of facts 
available in determining the appropriate margins.
    Zongxun refutes petitioner's allegation. Zongxun cites the 
Department's verification report, which found ``no indication of export 
sales of subject merchandise having been improperly included in, or 
excluded from, Zongxun's listing of POI sales.'' With respect to its 
sales to PRC companies, Zongxun asserts that, even in the event that 
the Department determined these transactions were export sales, they 
could not be

[[Page 51419]]

considered in this investigation because they were paid in Renminbi, a 
NME currency. Zongxun argues that the verification report never stated 
that any of its domestic sales were paid in a foreign currency. Zongxun 
claims that the foreign currency noted in the verification report 
refers to a loan that is properly recorded as ``payable'' in its 
accounting records. Zongxun argues that a sale would be recorded as a 
``receivable.'' Zongxun attests to their full cooperation during 
verification, and advises the Department to reject petitioner's 
allegation.

DOC Position

    We agree with Zongxun. As stated in the verification report, 
nothing that we examined suggested that the foreign currency receipts 
were unreported sales. Therefore, we determine that these receipts do 
not warrant any adverse inferences for the final determination and the 
verified information has been used for the final determination.

Comment 13: Affiliation of Zongxun and its PRC Parent

    Petitioner contends that Zongxun and its PRC parent are 
sufficiently related so that the Department should collapse them and 
treat them as a single entity for purposes of assigning a dumping 
margin in this investigation. Petitioner cites 19 CFR 351.401(f), and 
then refers to certain factors that the Department may consider when 
identifying the potential for manipulation of price or production, 
including: level of common ownership; whether managerial employees or 
board members of one of the affiliated producers sit on the board of 
directors of the other affiliated producer; and whether operations are 
intertwined, such as through the sharing of facilities or employees, or 
significant transactions between the affiliated parties. Petitioner 
also cites to the Preliminary Determination of Sulfanilic Acid from the 
PRC 62 FR 25917 (May 12, 1997) in which the Department found that two 
companies were ``affiliated'' parties, where substantial retooling 
would not be necessary to restructure manufacturing priorities and 
potential price and production manipulations between the two producers. 
Petitioner alleges that the verification report shows a commonality of 
interests and ownership, and that the failure of Zongxun and its parent 
to submit a consolidated response mandates the Department's use of 
facts available.
    Zongxun rebuts this allegation, insisting that no conditions were 
met to collapse it and its parent, because it has been verified that 
its parent did not produce or export CR nails during the POI and thus 
is not a producer and cannot be collapsed with Zongxun. Zongxun states 
that the Department may collapse affiliated producers, but that 
petitioner's allegation is not supported by the record, and should 
therefore be rejected.

DOC Position

    We agree with Zongxun, in part. During verification, the Department 
reviewed Zongxun's parent's 1996 financial statements. These financial 
statements did not indicate that any income had been derived from 
export sales of CR nails. If Zongxun's parent were to sell the subject 
merchandise under its own name, it would be subject to the PRC-wide 
rate.

Comment 14: Critical Circumstances

    Petitioner alleges that the petition provided a reasonable basis to 
suspect that critical circumstances exist with respect to imports of 
subject merchandise. Petitioner cites section 733(e)(1)(A)(i) of the 
Act, which refers to a ``* * * history of dumping * * *'' In 
particular, petitioner maintains that the revoked antidumping order on 
steel wire nails from China, Certain Steel Wire Nails From China, 52 FR 
33463 (September 3, 1987), provides a sufficient basis to find a 
history of dumping.

DOC Position

    As noted above (see ``Critical Circumstances'' section of this 
notice), it is not necessary to reach a conclusion regarding a history 
of dumping in this case. Insofar as Top United and Zongxun do not have 
margins, critical circumstances do not exist with respect to these 
exporters. Critical circumstances do exist with respect to all other 
exporters based on other factors.

Continuation of Suspension of Liquidation

    For Top United and Zongxun, we calculated a zero margin. Consistent 
with Bicycles, merchandise that is sold by these producers but 
manufactured by other producers will be subject to the order, if 
issued. Entries of such merchandise will be subject to the ``PRC-wide'' 
margin.
    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to continue to suspend liquidation of all imports of 
subject merchandise--except those exported and manufactured by Top 
United or Zongxun--that are entered, or withdrawn from warehouse, for 
consumption on or after February 12, 1997, which is the date three 
months prior to the date of publication of our preliminary 
determination in the Federal Register. We will instruct the Customs 
Service to require a cash deposit or the posting of a bond equal to the 
weighted-average amount by which the NV exceeds the EP or CEP, as 
indicated in the chart below. These suspension of liquidation 
instructions will remain in effect until further notice.

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
                   Exporter/manufacturer                       margin   
                                                             percentage 
------------------------------------------------------------------------
Top United/Top United.....................................          0   
Qingdao Zongxun/Qingdao Zongxun...........................          0   
PRC-wide Rate.............................................        118.41
------------------------------------------------------------------------

The PRC-wide rate applies to all entries of subject merchandise except 
for entries from exporters/factories that are identified individually 
above.

ITC Notification

    In accordance with section 735(f) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will, within 45 days, determine whether these imports are 
materially injuring, or threaten material injury to, the U.S. industry. 
If the ITC determines that material injury, or threat of material 
injury, does not exist, the proceeding will be terminated and all 
securities posted will be refunded or canceled. If the ITC determines 
that such injury does exist, the Department will issue an antidumping 
duty order directing Customs officials to assess antidumping duties on 
all imports of the subject merchandise entered for consumption on or 
after the effective date of the suspension of liquidation. This 
determination is published pursuant to section 735(d) of the Act.

    Dated: September 24, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-26046 Filed 9-30-97; 8:45 am]
BILLING CODE 3510-DS-P