[Federal Register Volume 62, Number 223 (Wednesday, November 19, 1997)]
[Notices]
[Pages 61794-61801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30397]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-570-822]


Certain Helical Spring Lock Washers From the People's Republic of 
China; Final Results of Antidumping Duty Administrative Review

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

SUMMARY: The Department of Commerce (the Department) published the 
preliminary results of the administrative review of the antidumping 
duty order on certain helical spring lock washers (HSLWs) from the 
People's Republic of China (PRC) in the Federal Register on July 11, 
1997 (62 FR 37192). This review covers sales of this merchandise to the 
United States during the period October 1, 1995 through September 30, 
1996. We gave interested parties an opportunity to comment on our 
preliminary results. Based upon analysis of the comments received, we 
changed the results from those presented in the preliminary results of 
the review.

EFFECTIVE DATE: November 19, 1997.

FOR FURTHER INFORMATION CONTACT: Tamara Underwood or Maureen Flannery, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone: (202) 482-4733.

Background

    The Department published the preliminary results of this review of 
the antidumping duty order on HSLWs from the PRC in the Federal 
Register on July 11, 1997 (62 FR 37192). On August 11, 1997, 
petitioner, Shakeproof Industrial Products Division of Illinois Tool 
Works (SIP), and respondent, Zhejiang Wanxin Group, Co., Ltd. (ZWG), 
submitted comments on the Department's preliminary results. On August 
18, 1997, petitioner and respondent submitted rebuttal comments. The 
Department rejected respondent's August 11, 1997 submission because it 
contained new information. Respondent resubmitted comments on August 
22, 1997. We held a hearing on September 22, 1997. On October 28, 1997, 
the Department placed new information on the record and gave interested 
parties an opportunity to comment pursuant to 19 U.S.C. section 
1677m(g). The respondent submitted comments on October 31, 1997. The 
Department has now completed this review in accordance with section 751 
of the Tariff Act of 1930, as amended (the Act).

Applicable Statute and Regulations

    Unless otherwise stated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Act by the Uruguay Round of 
Agreements Act. In addition, unless otherwise stated, all citations to 
the Department's regulations are references to the regulations as 
codified at 19 CFR Part 353 (1996).

Scope of Review

    The products covered by this review are HSLWs of carbon steel, of 
carbon alloy steel, or of stainless steel, heat-treated or non-heat-
treated, plated or non-plated, with ends that are off-line. HSLWs are 
designed to: (1) function as a spring to compensate for developed 
looseness between the component parts of a fastened assembly; (2) 
distribute the load over the larger area for screws or bolts; and (3) 
provide a hardened bearing surface. The scope does not include internal 
or external tooth washers, nor does it include spring lock washers made 
of other metals, such as copper.

[[Page 61795]]

    HSLWs subject to this review are currently classifiable under 
subheading 7318.21.0030 of the Harmonized Tariff Schedule of the United 
States (HTS). Although the HTS subheading is provided for convenience 
and Customs purposes, the written description of the scope of this 
proceeding is dispositive.
    This review covers one exporter of HSLWs from the PRC, ZWG, and the 
period October 1, 1995 through September 30, 1996.

Analysis of Comments Received

    Comment 1: Use of Import Prices to Value Steel Inputs.
    Petitioner, SIP, asserts that the Department should limit the use 
of imported steel prices to valuing the imported steel actually used. 
Petitioner argues that, in accordance with section 1677b(c)(1) of the 
Act, the Department must determine normal value (NV) ``on the basis of 
the value of the factors of production utilized in producing the 
merchandise.'' Petitioner contends that, although the Department used 
non-surrogate, market-economy actual prices in Final Determination of 
Sales at Less Than Fair Value: Oscillating Fans and Ceiling Fans from 
the People's Republic of China (56 FR 55271, October 25, 1991)(Fans), 
and affirmed in Lasko Metal Products v. United States, 43 F .3d 1442 
(Fed. Cir. 1994)(Lasko), the Department only applied these values to 
the actual imports. Petitioner states that the Department relied on 
surrogate values to value all non-imported inputs. Petitioner claims 
that the use of import prices to cover non-imported factor inputs is an 
arbitrary extension of the Department's authority.
    Petitioner contends that the import quantities of steel are not the 
same as the domestically-sourced quantities of steel and that the 
Department should value these quantities as two separate factors of 
production. Petitioner states that the Act defines ``factors of 
production'' to include the ``quantities of raw materials employed.'' 
Petitioner contends that, although the Act and Lasko affirm that the 
Department can consider non-surrogate, market-economy actual prices to 
be the best information and use those prices, neither the Act nor Lasko 
provides justification for the Department's use of values for one 
factor as the value for another factor, even if both factors are steel.
    Petitioner asserts that accuracy is not enhanced by using import 
prices for valuing all steel inputs. Petitioner states that the goal of 
the Act is to approximate the costs where non-market economy (NME) 
costs do not reflect market-determined prices. Petitioner claims that 
the Department cannot use import prices to accurately and fairly 
reflect the value of the domestically-sourced steel. Petitioner takes 
issue with the proposed antidumping duty regulations on this point 
(Antidumping Duties; Countervailing Duties; Notice of Proposed 
Rulemaking (61 FR 7309, 7345, February 27, 1996)), and contends that it 
is not enough to provide that the market-economy price may be 
disregarded ``where the amount purchased from a market economy supplier 
is insignificant.'' Petitioner suggests that it should be the other way 
around: at most, only if the amount purchased within the NME is 
insignificant, should the Department use the non-surrogate, market-
economy actual price to value all steel. Petitioner cites the 
Department's practice of valuing inputs based on the weighted average 
of prices paid in constructed value (CV) market economy cases. 
Petitioner cites Notice of Final Determination of Sales at Less Than 
Fair Value: Collated Roofing Nails from Korea (62 FR 25895, 25897, May 
12, 1997) as an example of this practice.
    Petitioner also asserts that, if the Department values all steel at 
the import price, it can drastically distort the NME producer's costs 
when, for example, the NME producer uses imported steel to fulfill half 
of its steel requirements and domestic steel to fulfill the remainder 
of its steel requirements. Petitioner adds that the major defect in the 
Department's approach is that it fails to recognize that an NME 
producer will import factors at prices which are less than the prices 
it would otherwise pay for the input. Petitioner concludes that the 
Department's methodology does not promote either accuracy or fairness.
    Respondent asserts that the Department correctly used the imported 
steel price to value all of its steel inputs in the preliminary results 
and should continue to do so in the final results. Respondent states 
that the imported steel meets all criteria established by the 
Department for using market-economy prices and that the Department is 
obliged to use the price paid for that input to value all of the 
respondent's consumption of that input. Respondent argues that the 
Department's methodology in the preliminary results is fully supported 
by the Department's prior practice, the proposed and final regulations, 
the court decisions, and the statute. Respondent maintains that the 
Department's established practice of valuing all of the production 
input using the NME producer's actual import prices for that input is 
legitimate and does enhance accuracy, as affirmed in Lasko: ``Where we 
can determine that an NME producer's input prices are market 
determined, accuracy, fairness, and predictability are enhanced by 
using those prices. Therefore, using surrogate values when market-based 
values are available would, in fact be contrary to the intent of the 
law.'' 43 F.3d 1442, 1446 (Fed. Cir. 1994). Respondent maintains that 
the decision in Lasko confirms that surrogate values are merely the 
best approximation of what the NME producer might pay if the NME 
producer were operating in a market economy. Respondent also adds that 
the court stated in Lasko that the Department's practice is a 
``legitimate policy choice . . . in interpreting and applying the 
statute.'' 43 F.3d at 1446. Respondent claims that Lasko upheld the 
Department's market-economy input methodology as consistent with the 
statute. Respondent also cites the Department's position in the Notice 
of Final Determination of Sales at Less Than Fair Value: Melamine 
Institutional Dinnerware Products from the People's Republic of China 
(62 FR 1798, 1710, January 13, 1997)(Melamine), which states that ``the 
market economy price is the most appropriate basis for determining the 
value of the [input] purchased from the PRC suppliers.'' Respondent 
concludes that when the NME producer actually purchases a market-
economy input and pays in market economy currency, there is no need to 
use the best approximation.
    Respondent asserts that the CV calculation methodology referenced 
by petitioner is irrelevant to NME cases. Respondent states that, 
pursuant to 19 U.S.C. Sec. 1677b(a)(2), CV applies to market-economy 
cases and not to NME cases. Respondent claims that, pursuant to 19 
U.S.C. Sec. 1677b(c), the Department is required to use a selected 
import price or a surrogate price to value an NME producer's production 
costs. Respondent asserts that petitioner's argument that the 
Department's practice distorts the NME producer's costs ignores 
commercial reality and is contrary to the court rulings and the basic 
principles underlying NME cases. Respondent argues that, contrary to 
petitioner's argument, NME producers will purchase domestic materials 
when the domestic price is less than the import price. Respondent 
claims that in Sigma Corp. v. United States, 117 F.3d 1401 (Fed. Cir. 
1997) (Sigma), the court suggested that the Department may not assume 
that the NME producers purchase domestic materials at a higher 
delivered price than that for imported materials.

[[Page 61796]]

Department's Position

    We disagree with petitioner. In general, the purpose of the 
antidumping statute is to ``determine margins as accurately as 
possible.'' Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1190 
(Fed. Cir. 1991). Section 773 (c)(4) of the Act, the provision for 
factors of production methodology, was intended to be used when NME 
prices and costs are unreliable, i.e., not market-based. See, e.g., S. 
Rep. No. 93-1298, 93d Cong., 2d Sess. 174 (1974). The purpose of 
section 773(c) is to determine what the firm's prices or costs would be 
if such prices or costs were determined by market forces.
    Because the statute does not explicitly address the situation in 
which an NME producer imports some inputs from market economies, cf. 19 
U.S.C. Sec. 1677b(c), the Department has determined that if an NME 
producer reports prices that are based on inputs from market-economy 
suppliers, it is appropriate to use those prices instead of a surrogate 
value, if the amounts purchased are meaningful, i.e., they are not 
insignificant. The Department has applied this practice consistently in 
recent years, See Melamine, 62 FR at 1710, and has received affirmation 
of this practice in court decisions. See, e.g., Lasko, 43 F.3d at 1446, 
as cited by respondents. The Department subsequently codified this 
practice in Section 351.408(c)(1) of the Antidumping Duties; 
Countervailing Duties; Final Rule, published in the Federal Register on 
May 19, 1997 (62 FR 27296, 27413) (Final Rule). As explained in the 
background section of the those regulations, the only situation in 
which we would not rely on the price paid by an NME producer to a 
market economy supplier is where the quantity of the input purchased 
was insignificant. See Final Rule, 62 FR at 27366.
    In factor valuation, the Department has developed practices which 
emphasize accuracy, fairness, and predictability. The Department stated 
that ``the simplest example of a value based on market principles in a 
proceeding involving an NME is a price paid in convertible or market 
economy currency for an input sourced from a market economy country.'' 
(See Fans, Comment 1.) In this instant case, the amount of steel 
imported is approximately equal to one-third of the amount used to 
produce the subject merchandise during the period of review. We 
consider this to be a meaningful amount, i.e., it is not insignificant, 
for purposes of using the market-economy input price to value all of 
the steel used to produce the subject merchandise. In this respect, the 
Department's determination to value all steel inputs using the market-
economy input prices respondent actually paid is consistent with these 
goals and practices.
    Petitioner's contention that imported steel and domestically-
produced steel constitute separate factors of production is, in effect, 
just another way of arguing that we should value them separately. There 
is no evidence that the imported steel is physically different from the 
domestically-sourced steel, such that the imported steel should be 
considered a different factor of production from the domestically-
sourced steel.
    Therefore, in accordance with the Department's established 
practice, we continue to use the actual imported steel prices to value 
steel inputs because these prices represent the actual market-based 
prices incurred by the respondent in producing the subject merchandise 
and, as such, are the most accurate and appropriate values for this 
particular factor for the purpose of calculating NV.
    Comment 2: Adjusting Imported Steel Prices for Inflation.
    Petitioner asserts that if the Department uses import prices for 
the final results, the Department should adjust the import prices to 
reflect the period of review (POR) where those import prices are used 
to value non-imported steel used to produce HSLWs. Petitioner 
recognizes that the Department has not made adjustments in the past to 
values based on market-economy prices, but argues that the Department's 
approach does not apply to the facts of this case.
    Respondent asserts that the prices for imported steel already 
reflect the POR price levels because ZWG imported the steel during the 
POR and, therefore, the prices do not need adjustment.
    Department's Position: We agree with respondent. Because the prices 
for the steel imports used to value the steel factor are POR prices, 
there is no need for any further adjustment to account for inflation.
    Comment 3: Movement Expenses for Imported Steel.
    Petitioner asserts that the Department should value imported steel 
by including all costs, such as brokerage and handling fees and 
transportation from the port to the factory, and adjust these costs for 
inflation. Petitioner cites Sebacic Acid from the People's Republic of 
China; Final Results of Antidumping Duty Administrative Review (62 FR 
10530, March 7, 1997) (Sebacic Acid), where the Department added PRC 
brokerage and freight from the port to the factory for market-economy 
inputs. Petitioner states that, although the preliminary results 
mention that the Department ``made further adjustments to account for 
the freight costs incurred between the port and ZWG,'' a review of the 
calculations reveals that this adjustment may have not be included.
    Department's Position: We agree with petitioner in part. While we 
agree that the Department should value the non-surrogate, market-
economy actual prices by including all expenses such as brokerage and 
handling and transportation from the port to the factory, the facts of 
this case make changes to the preliminary results unnecessary. See the 
proprietary version of ``Memo to the File: Analysis for the Final 
Results of the Third Administrative Review of Certain Helical Spring 
Lock Washers from the People's Republic of China,'' dated November 10, 
1997 (Final Analysis Memo), for a discussion on movement adjustments.
    Comment 4: Steel Scrap.
    Petitioner asserts that the Department grossly distorted the net 
cost of the steel input to the Chinese producer by using a non-
surrogate import price for steel and a surrogate value for steel scrap. 
Petitioner claims that scrap value is based on a relationship between 
steel (from which the scrap steel generated) and scrap which can be 
recycled. Petitioner maintains that the steel scrap value in India (the 
surrogate country) is different from the scrap value in the United 
Kingdom (the non-surrogate country from which ZWG purchased the steel).
    Petitioner suggests that the Department correct this distortion by 
using the scrap value in the United Kingdom or applying the ratio of 
scrap value-to-steel value in India to the imported (U.K.) steel value 
in order to value the Chinese producer's scrap.
    Respondent states that the Department correctly valued steel scrap 
in the preliminary results. Respondent argues that petitioner failed to 
provide any supporting evidence for its arguments. Respondent maintains 
that petitioner failed to provide any factual evidence showing that 
Indian import prices of steel scrap are not appropriate to value the 
steel scrap generated by ZWG from the consumption of steel wire rod 
from the United Kingdom. Respondent contends that petitioner further 
failed to provide any links between steel wire rod prices and steel 
scrap prices.
    Respondent also asserts that the Department must use a surrogate 
value for steel scrap because respondent sold the steel scrap in the 
PRC in PRC currency. Respondent adds that

[[Page 61797]]

petitioner failed to provide any surrogate information on the value of 
steel scrap.
    Department's Position: We disagree with petitioner's assertions 
that we distorted the cost of the steel input by valuing steel using 
actual prices respondent paid for U.K. steel and valuing scrap using 
surrogate prices from India. Petitioner did not provide any evidence to 
support its claim of a clear relationship between the prices of steel 
and scrap. Even if petitioner had established that such a relationship 
exists, there are no data on the price of scrap imported from the 
United Kingdom into the PRC.
    Moreover, we compared the prices of steel scrap imported into 
India, Indonesia, Canada, the European Community, the United Kingdom, 
and the United States during a period contemporaneous with the POR. We 
were unable to obtain statistics on prices of steel scrap imported into 
Pakistan, Sri Lanka, and Egypt, which were potential surrogate 
countries. Our analysis of the Indian imports of steel scrap from the 
Monthly Statistics of the Foreign Trade of India (MFTI) show that the 
price of steel scrap imports into India are not aberrational. (See 
``Memo to the File: Comparison of Steel Scrap Values for the Final 
Results of the Third Administrative Review of Certain Helical Spring 
Lock Washers from the People's Republic of China'' (Steel Scrap Price 
Comparison Memo), November 7, 1997.) Therefore, in accordance with our 
established practice of valuing factors of production using surrogate 
values that are demonstrated to be a reliable reflection of prices 
during the POR, we are continuing to use Indian import price from MFTI 
to value steel scrap for the final results.
    Comment 5: Hydrochloric Acid.
    Petitioner argues that the Department included three aberrational 
values for determining the average hydrochloric acid (HCL) value. 
Petitioner claims that, because the Department has consistently avoided 
using aberrational values, these aberrational values should be omitted 
in the final results.
    Respondent asserts that the Department correctly valued HCL using 
Chemical Weekly's FOB prices, except for freight costs associated with 
the HCL. Respondent argues that because petitioner failed to identify 
any specific data as aberrational and failed to provide any supporting 
evidence for its argument, the Department should reject petitioner's 
argument.
    Department's Position: We agree with petitioner. We analyzed the 
HCL values published in each of the Chemical Weekly issues used for 
this review and found that two issues, February 14-20, 1996, and April 
15-20, 1996, contained values at least 12 times the average value. The 
values of these two issues seem to be related to exceptionally low 
quantities of HCL exports. We excluded these values from the final 
calculations. We found a clerical error in the transcription of one HCL 
price from the July 27-31, 1996, issue, used to calculate a surrogate 
value in the preliminary results. Therefore, in the final calculations, 
we have corrected this price. (See Final Analysis Memo.)
    Comment 6: Adjustments for Chemical Purity.
    Respondent asserts that the Department should calculate the ratio 
of the purity of chemical inputs consumed to the purity of the 
chemicals as sold commercially and apply this ratio to the Indian 
import data. Respondent argues that the Department adopted this 
methodology in past NME cases and refers to the calculation memoranda 
for several proceedings, including Notice of Final Determination of 
Sales at Less Than Fair Value: Collated Roofing Nails from the People's 
Republic of China (62 FR 25899, May 12, 1997) and Notice of Final 
Determination of Sales at Less Than Fair Value: Beryllium and High 
Beryllium Alloys from the Republic of Kazakstan (62 FR 44293, January 
17, 1997).
    Petitioner asserts that there is insufficient information on the 
record for the Department to adjust values for chemical concentration. 
Petitioner argues that to adjust chemical concentrations, the 
Department must ascertain the actual chemical concentration from which 
the value was derived and must determine which additional chemicals 
were used to dilute or alter the concentration of the chemical. 
Petitioner argues that the Department must value the additional 
chemicals. Petitioner adds that even this suggested methodology may 
result in underreporting the value of the diluted chemical because of 
the additional costs of performing the dilution, such as labor, 
equipment, and energy.
    Department's Position: We agree, in part, with respondent's 
assertions that we should make adjustments for chemical purity, as we 
have done in previous cases. For inputs where the chemical 
concentration levels of the HTS categories are defined in the Indian 
import statistics, and where respondent reported chemical concentration 
levels used, we have made adjustments accordingly.
    However, there is no evidence on the record with regard to the 
chemical concentration levels associated with all chemical inputs in 
the MFTI. Absent any evidence that they do not reflect standard 
concentrations commonly sold, an adjustment is unwarranted. Where the 
information regarding the level of chemical concentration is 
insufficient, we have not made any adjustment. (See Final Analysis 
Memo.)
    Comment 7: HCL Concentration.
    Petitioner asserts that the Department erred in adjusting HCL 
concentration. Petitioner argues that the Department purportedly 
adjusted HCL surrogate values to match the reported concentration 
although the surrogate data did not indicate concentration level.
    Petitioner also asserts that, because the HCL used to make HSLWs is 
already diluted, the Department must, in calculating the value of the 
diluted HCL, include the value of the diluting water or chemical.
    Respondent contends that the Department will double-count water if 
it values the water for diluting HCL separately from factory overhead 
and electricity values, as suggested by petitioner. Respondent claims 
that the water inputs were included in factory overhead for the 
production factory and were included and valued in electricity inputs 
for the plating factory in the preliminary calculations.

Department's Position

    We agree, in part, with petitioner regarding an adjustment to the 
value of HCL based on concentration level. As we mentioned in Comment 
6, for inputs where the chemical concentration levels are defined in 
the surrogate value source, and where respondent reported chemical 
concentration levels used, we have made adjustments. However, there is 
no evidence on the record with regard to the HCL concentration level 
associated with the HCL prices in Chemical Weekly. Absent any evidence 
that they do not reflect standard concentrations commonly sold, an 
adjustment is unwarranted. Therefore, we have not adjusted the 
surrogate value for HCL for concentration level in the final results. 
(See Notice of Final Determination of Sales at Less Than Fair Value: 
Saccharin from the People's Republic of China, 59 FR 58818, Comment 4, 
November 15, 1994 (Saccharin).)
    We disagree with petitioner's assertions that the diluting agent, 
water or another chemical, should be included in calculating the value 
of the HCL. We have no basis to conclude that respondent did not report 
all input amounts required to produce HSLWs, regardless of the manner 
in which the input enters the production process.

[[Page 61798]]

Therefore, the value of the diluting agent is accounted for in the 
values for water and other chemical inputs.
    Comment 8: Freight Costs.
    Respondent disputes the Department's addition of freight costs to 
the imported steel prices and to the input prices obtained from MFTI 
because these prices include foreign inland freight and ocean freight 
costs. Respondent asserts that, by adding the freight costs to these 
prices, the Department double-counted the freight costs. Respondent 
argues that, in Sigma, the court prohibited the Department from such 
double-counting. Respondent suggests that the Department value the 
freight cost of PRC-sourced material based on the reported distance and 
method of transportation from the importing seaport to the factory, 
where that cost is lower than the calculated freight costs based on 
actual distance and method of transportation from the domestic 
supplier. Respondent contends that these adjustments are in accordance 
with the Sigma ruling.
    Petitioner asserts that a change to the Department's adjustment to 
material inputs for domestic freight costs is not warranted. Petitioner 
argues that respondent has not indicated why or to what extent any 
inland freight expense should be adjusted to accord with Sigma.
    Department's Position: We agree with respondent that the Department 
should adjust freight costs of the inputs in accordance with Sigma. In 
Sigma, the court ruled that the Department overvalued freight when it 
added to the surrogate value for a material input, which was obtained 
from the import statistics of the surrogate country, an amount for 
freight from the NME supplier factory to the NME factory. The court 
reasoned that a manufacturer would minimize its material and freight 
costs by purchasing imported material if the cost of transportation 
from the port to the factory were less than the cost of transportation 
from the domestic supplier to the factory. For the final results, we 
adjusted the CIF surrogate values by revaluing freight expenses based 
on the shorter of two distances: the distance from the port of import 
to the factory or the distance from the actual supplier to the factory. 
(See Notice of Final Determination of Sales at Less Than Fair Value: 
Collated Roofing Nails from the People's Republic of China (62 FR 
51410, 51414, October 1, 1997) (Roofing Nails).) In situations where an 
input is purchased from several suppliers, we adjusted the value for 
inland freight by comparing the distance from the port of import to the 
factory to the distance from each supplier to the factory. We then 
multiplied the shorter of the distances for each supplier by the 
proportion of the input purchased from each supplier to calculate the 
weighted average inland freight expense for each input.
    Comment 9: HCL Freight Expense.
    Respondent asserts that the Department should not add freight costs 
for transporting HCl from PRC suppliers to respondent's factories to 
the Chemical Weekly price because the Chemical Weekly price is an FOB 
Indian export price. Respondent argues that because the price is an FOB 
Indian seaport price, it includes both the ex-factory price of HCl and 
the transportation costs thereof from an Indian factory to an Indian 
seaport. Respondent maintains that the Department double-counted 
freight costs for HCl by adding PRC domestic freight costs to the 
domestic transportation costs included in the surrogate value.
    Respondent adds that the Department did not include the domestic 
freight costs in the respondent's country when the Department used 
Chemical Weekly's FOB Indian seaport price in past NME cases. 
Respondent cites the April 22, 1996 Factors Valuation Memorandum for 
the Notice of Final Determination of Sales at Less Than Fair Value: 
Bicycles from the People's Republic of China (61 FR 19026, April 30, 
1996) (Bicycles) and the October 22, 1995 Valuation Memorandum for the 
Notice of Final Determination of Sales at Less Than Fair Value: 
Polyvinyl Alcohol from the People's Republic of China (61 FR 14057, 
March 29, 1996) (Polyvinyl Alcohol), in which the Department did not 
add freight to the surrogate value.
    Petitioner asserts that the Department should continue to add 
domestic PRC freight costs to the value for HCL because specific 
distance and transportation modes for moving the HCL from the supplier 
to respondent's factory, and for moving the HCL in the surrogate 
country from supplier to port of export, are not identified on the 
record. Petitioner argues that respondent reported the HCL 
transportation distance as short and the mode as truck, while 
transportation distance and mode are unknown for the Indian HCL 
surrogate value.

Department's Position

    We agree with respondent that freight costs for transporting HCL 
from the PRC suppliers to the factory should not be added to the 
surrogate value. When we use, as a surrogate for respondent's materials 
costs, the cost of the material in a surrogate country, this cost 
should include the cost of transporting the merchandise to the consumer 
in the surrogate country. In the preliminary results, we relied on 
Chemical Weekly for a surrogate value for HCL. The HCL prices in 
Chemical Weekly are based upon FOB export prices from the surrogate 
country, India. FOB export prices by definition include the cost of 
transporting the merchandise from the Indian supplier to the Indian 
port. We consider this cost to be equivalent to the cost of 
transporting the merchandise from the Indian supplier to the Indian 
consumer. See the factor valuation memos for Bicycles and Polyvinyl 
Alchohol. Therefore, for these final results we have not added any 
additional freight to the FOB value.
    Petitioner's assertions that the record does not provide specific 
information from which the Department can calculate freight costs is 
moot because there is no need to calculate such costs.
    Comment 10: Wood Pallets.
    Respondent asserts that the Department should value the wood pallet 
input by using HTS 4403.2000, ``sawlogs and veneerlogs in rough w/n 
striped of bark or merely rough down,'' instead of HTS 4415.1000, 
``cases, boxes, crate, drum and similar packings--cable drums of 
wood,'' because respondent produces finished pallets itself. Respondent 
states that because it uses the same wood to produce wood brackets and 
wood pallets, the Department should value wood for pallets using the 
same HTS number it used to value wood brackets, HTS 4403.2000. 
Respondent argues that, during the investigation, the Department 
verified that respondent produces finished pallets. Respondent contends 
that because the Department added the value for finished wood pallets, 
using HTS 4415.1000, and the values for wood, nails, and packing labor 
in the NV calculation, the Department double-counted the costs of wood, 
nails, and packing labor.
    Respondent also asserts that, even if the Department determines not 
to use input values under HTS 4403.2000, the Department should use HTS 
4415.2000 to minimize double-counting. Respondent argues that MFTI 
classifies wood pallets under HTS 4415.2000, which states ``pallet box, 
pallets, and other load boards of wood.'' Respondent maintains that in 
comparison to the MFTI definition of HTS 4415.1000, ``cases, boxes, 
crates, drums, and similar packing cable drums of wood,'' it is clear 
that MFTI includes a wood pallet in HTS 4415.2000.
    Petitioner asserts that the Department correctly valued pallets 
using the surrogate value for the finished pallet. Petitioner states 
that the Department can

[[Page 61799]]

choose to value the finished pallets or construct the value of the 
pallet from labor, material (including scrap), tools, energy, 
transportation, and overhead. Petitioner argues that, if all the inputs 
are not available, the Department must use surrogate values. Petitioner 
adds that the Department should include the cost of brackets and labor, 
etc., to account for additional packing expense in addition to using 
surrogate values for pallets.
    Department's Position: We agree with respondent that we should 
value pallets using HTS 4403.2000, a surrogate value for the wood used 
to construct the wood pallets, because respondent constructs the 
pallets, instead of HTS 4415.100, a surrogate value for the finished 
pallet, as used in the preliminary results. In the preliminary results, 
because we valued finished pallets, as well as materials used to 
construct the pallets, such as nails and wood brackets, we overstated 
the value of pallets. This change in methodology is in accordance with 
the Department's determination in the Final Results of Antidumping 
Administrative Review of Heavy Forged Hand Tools, Finished or 
Unfinished, With or Without Handles, from the People's Republic of 
China (61 FR 15028, Comment 3, April 4, 1996) (Hand Tools). In Hand 
Tools, the Department determined that ``we should value the pallets 
using the factor and surrogate values for wood, nails, and packing 
labor, separately, rather than for the complete pallet. The information 
on the record at the time of the preliminary results indicates that the 
factories make the pallets from wood and nails rather than purchase the 
completed pallet.''
    We agree with petitioner's assertions that the Department should 
include the cost of labor, material, tools, energy, transportation, and 
overhead in constructing the value for the pallet. Respondent 
separately reported consumption amounts for wood, depending upon its 
application, and for nails; thus, respondent reported materials used to 
construct the finished pallet. (See Respondent's January 21, 1997 and 
February 21, 1997 submissions.) We have no basis in the record to 
conclude that the packing labor amounts required to construct the 
pallets is not included in the reported input amounts for packing 
labor, or that the energy amounts required to construct the pallets are 
not included in the reported amounts for energy. We also consider, in 
this instant case, that expenses for tools and transportation of pallet 
materials are included in overhead. Therefore, because the expenses for 
labor, tools, energy, transportation, and overhead incurred in the 
construction of wood pallets have been valued as mentioned above, we 
find that further adjustments are not warranted.
    Comment 11: Error in Valuing Wood Pallets and Coal.
    In the preliminary results, the Department used data from the 
February 1995 (April 1994 to February 1995) and August 1996 (April 1995 
to August 1996) issues of MFTI to value wood pallets and coal inputs. 
Respondent asserts that the Department should value inputs using data 
most contemporaneous with the POR when determining the final results. 
Specifically, respondent requests that the Department use data from the 
March 1996 (April 1995 to March 1996) issue of MFTI, rather than the 
April 1994 to February 1995 data, to value wood pallets. Respondent 
argues that the April 1995 to March 1996 data are most contemporaneous 
with the POR.
    Petitioner asserts that the Department should use only the April 
1995 to August 1995 data from MFTI to value coal and wood pallets. 
Petitioner argues that these values for a five-month period most 
closely reflect the values for the POR.
    Petitioner also asserts that the Department included the wholesale 
price index (WPI) for March 1995 when inflating the value, although 
March 1995 was not included in either data source used in the 
preliminary results. Petitioner argues that if the Department uses both 
data sources, the Department should not include the WPI for March 1995 
in the inflator calculation.
    Department's Position: We agree with both respondent's and 
petitioner's premise that the Department should use data most 
contemporaneous with the POR to value inputs for the final results. For 
the final results, we obtained and used Indian import statistics from 
MFTI for the period September 1995 through June 1996 to value wood for 
pallets and coal for the final results. Therefore, we have used values 
for a ten-month period that most closely reflects the POR.
    We agree with petitioner's assertion that the Department should not 
have included the WPI for March 1995 in the calculation of the inflator 
for coal and wood. However, because we have not used the March 1995 
data in the final results, we have not included the March 1995 WPI in 
the calculation of the inflator.
    Comment 12: Labor.
    Petitioner asserts that the Department should use a different 
category for valuing plating labor if the Department bases labor values 
from the 1995 Yearbook of Labour Statistics (YLS). Petitioner argues 
that the plating labor should be valued using categories 351, 
``manufacture of industrial chemicals,'' and 352, ``manufacture of 
other chemical products,'' instead of using category 381, ``manufacture 
of fabricated metal products.''
    Petitioner also asserts that the Department should use different 
values for skilled and unskilled labor. Petitioner argues that the use 
of one average labor value does not accurately reflect the cost of 
labor mix used to produce HSLWs. Petitioner references Sulfanilic Acid 
from China; Preliminary Results of Antidumping Duty Administrative 
Review (62 FR 25917, May 12, 1997) (Sulfanilic Acid), where the 
Department selected surrogate values broken out into skilled labor and 
unskilled labor from the Economist Intelligence Unit's Investing, 
Licensing and Trading Conditions Abroad (ILT).
    Petitioner further asserts that the Department should reject labor 
values used in the preliminary results because these values do not 
include fringe benefits and bonuses. Petitioner suggests that the 
Department use ILT because it was used in other cases covering the same 
POR and does include those benefits.
    Respondent states that the Department correctly selected category 
381 in the YLS as the labor category equivalent to ZWG's plating labor. 
Respondent argues that categories 351 and 352, suggested by petitioner, 
only include labor information related to the manufacture of industrial 
chemicals and other chemical products. Respondent states that its 
plating factory did not manufacture any chemicals or chemical products. 
Rather, respondent argues, the plating factory consumes chemicals and 
chemical products in plating HSLWs, which are metal products. 
Respondent contends that the plating factory is engaged in the 
manufacture of metal products, which is classified as category 381 in 
YLS.
    Respondent agrees with the Department's use of one labor value. 
Respondent asserts that petitioner did not provide any information 
showing separate values for skilled and unskilled labor and that no 
such data are available to the Department.
    Respondent agrees with the Department's use of YLS to value labor 
inputs. Respondent argues that the Department should not use ILT 
because the Department has consistently rejected it as a source for 
surrogate labor values because the data are not based on actual data.
    Finally, respondent requests that the Department value labor for 
the final results using updated labor rates.

[[Page 61800]]

    Department's Position: We disagree with petitioner's suggestion 
that the Department should use categories 351 and 352 for valuing 
plating labor. The labor used in plating HSLWs represents labor used in 
the manufacture of fabricated metal products. Though the labor used in 
plating utilizes chemicals, it is not used to manufacture chemicals. We 
have continued to value all labor using category 381.
    We disagree with petitioner's assertion that the Department should 
use ILT to value labor because it provides different values for skilled 
and unskilled labor and includes fringe benefits and bonuses. The 
Department has routinely used YLS to value labor because the ILT 
reports labor rate estimates based on rates stipulated in various 
Indian laws and not based upon actual wage rates.
    Additionally, we disagree with petitioner's assertion that the YLS 
data used in the preliminary results does not include fringe benefits 
and bonuses. The Department considers the ILO statistics, such as the 
YLS data, to be fully loaded with respect to all labor expenses. (See 
Polyvinyl Alcohol, 61 FR at 14061.) Accordingly, because the use of YLS 
is consistent with the Department's established practice, the YLS has 
been determined to include all expenses associated with labor, and the 
ILT data have been determined to be an inappropriate source for wage 
rates, we have continued to use YLS for the final results. (See Certain 
Helical Spring Lock Washers From the People's Republic of China; Final 
Results of Antidumping Administrative Review, 61 FR 66255, 66259, 
December 17, 1996, Chrome-Plated Lug Nuts from the People's Republic of 
China; Final Results of Antidumping Duty Administrative Review, 61 FR 
58519, 58522, November 15, 1996.)
    Comment 13: Water.
    Respondent requested that the Department calculate ZWG's production 
cost without valuing water. Respondent asserts that the Department 
double-counted the water input by valuing water in addition to valuing 
factory overhead for ZWG. Respondent contends that the reported water 
input for ZWG represents water used at the HSLW production factory, not 
at the plating factory. Respondent claims that because the HSLW 
factory's water was supplied by a public utility during the POR, was 
not physically incorporated into the HSLWs, and was not a major 
indirect material input which could be separately valued, ZWG's water 
consumption meets the criteria established in Saccharin for inclusion 
in factory overhead. Respondent argues that the Department has 
established the practice of including the value of water inputs in the 
value of factory overhead where water is supplied by a public utility 
or by a nearby body of water and refers to Saccharin, Sebacic Acid, 
Sulfanilic Acid from the People's Republic of China (61 FR 53711, 
October 15, 1996), Polyvinyl Alcohol, Disposable Lighters from the 
People's Republic of China (60 FR 22359, May 5, 1995), Silicon Carbide 
from the PRC ( 59 FR 22585, May 2, 1994), and Coumarin. Respondent adds 
that in Sebacic Acid, the Department stated that it presumes factory 
overhead values obtained from the Reserve Bank of India Bulletin, the 
factory overhead source used in the instant review, to include values 
for water.
    Petitioner asserts that the Department correctly valued water in 
the preliminary determination. Petitioner states that respondent 
correctly cited Saccharin where the Department considered water an 
overhead item. Petitioner argues that respondent failed to mention that 
the Department also stated in Saccharin that water required for a 
particular segment of the production process may ``be more typical of 
items that are accounted for as direct material inputs, rather than as 
overhead item, and as such, valued separately.'' Petitioner asserts 
that the Department should value water as a separate input factor in 
plating because water is directly incorporated into the final product.
    Department's Position: We disagree with respondent and have 
continued to include the water inputs as material inputs in the 
calculations of production cost of ZWG's factory. Following the 
Department's criteria in Saccharin, we value water if it is required 
for a particular segment of the production process. (See Saccharin, 59 
FR 58818, Comment 7, November 15, 1994.) Based upon respondent's 
description of the production process, we consider respondent's use of 
water in the acid treatment as required for that particular segment, 
because the steel wire rod must be rinsed with water after an acid 
bath. (See Exhibit 5 of respondent's January 21, 1997 submission.) 
Because the water for ZWG's HSLW production factory is a required input 
for a particular segment of the HSLW production process, the 
Department's practice is to value it separately like other direct 
material inputs required in the production process. Moreover, in 
determining whether an input should be valued separately or considered 
valued in overhead, the Department stated in Bicycles that, the input 
in question should be valued separately if it is ``* * * essential for 
producing the finished product * * *.'' and if this input appears ``* * 
* to be [a] significant input[s] into the manufacturing process rather 
than miscellaneous or occasionally used materials, i.e., cleaning 
supplies which might normally be included in consumables.'' Based upon 
respondent's submission, water is a significant input into the 
manufacturing process. (See Exhibit 9 of the proprietary versions of 
respondent's January 21, 1997 submission and Final Analysis Memo.)
    Unlike the instant case, in Sulfanilic Acid, the Department 
included the water value in the factory overhead value because 
respondents pumped water from their own wells for use in the production 
process and recirculated the water. (See Sulfanilic Acid, 61 FR at 
53716.) However, in Saccharin, the Department valued water purchased by 
respondent separately, because it was considered to be a direct input 
in the production of the finished product. (See Saccharin, Comment 7.) 
Also, in Porcelain-on-Steel Cooking Ware From the People's Republic of 
China; Final Results of Antidumping Duty Administrative Review, 62 FR 
32757, 32759, 32762, June 17, 1997, the Department considered water 
consumed in the production process as a direct material input and 
valued it as such. Although respondent's HSLW factory purchased water 
from a public utility, that alone is not dispositive as to how it 
should be valued. Here, as in Saccharin and Porcelain-on-Steel, the 
water was also a required input in a particular segment of the 
production process. Therefore, we have valued it as a separate input.
    Disposable Pocket Lighters and the other cases on which respondent 
relies, do not indicate whether respondent purchased the water, 
consumed the water as a direct input, or required the water for 
producing the finished product. Moreover, with regard to considering 
the Reserve Bank of India Bulletin (RBIB) factory overhead values as 
inclusive of water values, the Department stated in Disposable Pocket 
Lighters that, ``the RBIB data did not indicate to the contrary.'' (See 
Disposable Pocket Lighters, 60 FR at 22367.)
    In the instant case, as we have explained, water purchased from the 
public utility is not an incidental input into the production process. 
Rather, it is a direct input required for a particular segment of the 
production process. Additionally, there is no basis for

[[Page 61801]]

determining whether water is included in the factory overhead value in 
the RBIB, and thus no basis for an adjustment. Therefore, in the final 
results, we are continuing to value water for ZWG's factory in 
accordance with the Department's practice in the previous segments of 
this case, as well as its position in previous cases.
    Comment 14: Aberrational Factor Values.
    Respondent asserts that the Department should not use data from the 
June 1996 MFTI to value trisodium phosphate (HTS 2835.23.00), cases, 
boxes, crates, and drums (HTS 4415.10.00), and pallets and load boards 
(HTS 4415.20.00), because respondent claims that the data are 
aberrational.
    Department's Position: We agree with respondent's assertion that 
the value in the June 1996 MFTI for trisodium phosphate, HTS 
2835.23.00, is aberrational, apparently due to the extraordinarily low 
quantity reported. Because we could not obtain more contemporaneous 
data to value trisodium phosphate, we have continued to use the March 
1996 issue of MFTI, covering the period April 1995 through March 1996.
    Respondent's comments regarding the issue of the valuation of 
pallets using data in the June 1996 MFTI for cases, boxes, crates, and 
drums (HTS 4415.10.00), and pallets and load boards (HTS 4415.20.00), 
are moot because we did not value pallets using HTS 4415.10.00 or HTS 
4415.20.00 in the final results. (See Comment 10.)

Additional Changes for the Final Results

    For the final results of this review, we have updated most 
surrogate values based on MFTI. Additionally, we have updated the labor 
surrogate value using the 1996 YLS. (See Final Analysis Memo.)

Final Results of the Review

    As a result of the comments received, we have changed the results 
from those presented in the preliminary results of the review:

------------------------------------------------------------------------
                                                                Margin  
         Manufacturer/exporter              Time  period       (percent)
------------------------------------------------------------------------
Zhejiang Wanxin Group Co., Ltd........     10/01/95-09/30/96       14.15
------------------------------------------------------------------------

    The Department shall determine, and the Customs service shall 
assess, antidumping duties on all appropriate entries.
    Individual differences between Untied States price and normal value 
may vary from the percentages stated above. The Department will issue 
appraisement instructions directly to the Customs service.
    Furthermore, the following deposit rates will be effective upon 
publication of these final results for all shipments of HSLWs from the 
PRC entered, or withdrawn from warehouse, for consumption on or after 
the publication date, as provided for by section 751(a)(1) of the Act: 
(1) for ZWG, which has a separate rate, and all ZWG exports through 
market-economy trading companies, the cash deposit rate will be the 
company-specific rate established in these final results of review; (2) 
for all other PRC exporters, the cash deposit rate will be 128.63 
percent, the PRC rate established in the less-than-fair-value 
investigation of this case; and (3) for non-PRC exporters of subject 
merchandise from the PRC, the cash deposit rate will be the rate 
applicable to the PRC supplier of that exporter.
    These deposit rates shall remain in effect until publication of the 
final results of the next administrative review.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34.(d)(1). Timely written 
notification of the return/destruction of APO materials or conversion 
to judicial protective order is hereby requested. Failure to comply 
with the regulations and the terms of an APO is a sanctionable 
violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: November 10, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30397 Filed 11-18-97; 8:45 am]
BILLING CODE 3510-DS-P