[Federal Register Volume 62, Number 49 (Thursday, March 13, 1997)]
[Notices]
[Pages 11813-11820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6378]


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DEPARTMENT OF COMMERCE
[A-570-803]


Heavy Forged Hand Tools From the People's Republic of China; 
Final Results of Antidumping Duty Administrative Reviews

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

ACTION: Notice of final results of antidumping duty administrative 
reviews.

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SUMMARY: On November 6, 1996, the Department of Commerce (the 
Department) published the preliminary

[[Page 11814]]

results of its administrative reviews of the antidumping duty orders on 
heavy forged hand tools (HFHTs) from the People's Republic of China 
(PRC). The period of review is February 1, 1995 through January 31, 
1996.
    We gave interested parties an opportunity to comment on our 
preliminary results. Based upon our analysis of the comments received, 
we have changed the results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: March 13, 1997.

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

Supplementary Information:

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 Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
current regulations, as amended by the interim regulations published in 
the Federal Register on May 11, 1995 (60 FR 25130).

Background

    On November 6, 1996, the Department published in the Federal 
Register the preliminary results of the administrative reviews of the 
antidumping duty orders on HFHTs from the PRC (61 FR 57384). We 
received case briefs from petitioner, respondents, and an importer. We 
received rebuttal briefs from petitioner and respondents. We held a 
hearing on December 20, 1996. The Department has now completed these 
administrative reviews in accordance with section 751 of the Act.

Scope of Review

    Imports covered by these reviews are shipments of HFHTs from the 
PRC comprising the following classes or kinds of merchandise: (1) 
Hammers and sledges with heads over 1.5 kg (3.33 pounds) (hammers/
sledges); (2) bars over 18 inches in length, track tools, and wedges 
(bars/wedges); (3) picks/mattocks; and (4) axes/adzes.
    HFHTs include heads for drilling hammers, sledges, axes, mauls, 
picks, and mattocks, which may or may not be painted, which may or may 
not be finished, or which may or may not be imported with handles; 
assorted bar products and track tools including wrecking bars, digging 
bars and tampers; and steel wool splitting wedges. HFHTs are 
manufactured through a hot forge operation in which steel is sheared to 
required length, heated to forging temperature, and formed to final 
shape on forging equipment using dies specific to the desired product 
shape and size. Depending on the product, finishing operations may 
include shot-blasting, grinding, polishing, and painting, and the 
insertion of handles for handled products. HFHTs are currently provided 
for under the following Harmonized Tariff System (HTS) subheadings: 
8205.20.60, 8205.59.30, 8201.30.00, and 8201.40.60. Specifically 
excluded are hammers and sledges with heads 1.5 kg (3.33 pounds) in 
weight and under, hoes and rakes, and bars 18 inches in length and 
under. Although the HTS subheadings are provided for convenience and 
customs purposes, our written description of the scope of these orders 
is dispositive. These reviews cover three exporters of HFHTs from the 
PRC, Fujian Machinery Import & Export Corporation (FMEC), Shandong 
Machinery & Equipment Import & Export Corporation (SMC), and Tianjin 
Machinery & Equipment Import & Export Corporation (TMC). The review 
period is February 1, 1995 through January 31, 1996.

Analysis of the Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We received case briefs and rebuttal briefs from 
petitioner and FMEC, SMC, and TMC, and a case brief from Olympia 
Industrial, Inc. (Olympia), an interested party.

Comment 1

    Petitioner argues that, when valuing the steel input as a factor of 
production in the manufacture of HFHTs, the Department should use 
Indian steel prices quoted by a consultant familiar with the Indian 
steel industry and submitted for the record by petitioner, rather than 
1992 data from the Monthly Statistics of the Foreign Trade of India 
(Indian Import Statistics), adjusted for inflation. (Petitioner points 
out that the Department determined that 1993-1995 data from the Indian 
Import Statistics was aberrational or unreliable.) Petitioner argues 
that the production of HFHTs requires special, high quality grades of 
steel with exacting characteristics in areas such as surface quality, 
grain structure, and internal strength. If these requirements are not 
met, petitioner claims, the use of lower grade qualities of steel can 
result in cracking during the production or use of the HFHT. Petitioner 
argues that the Indian Import Statistics data for the HTS subheading 
7214.50, ``Forged Bars and Rods Containing 0.25% or Greater But Less 
Than 0.6% of Carbon,'' which the Department used to value steel for the 
preliminary results, is inadequate because this subheading is too broad 
and encompasses both merchant quality and special bar quality (SBQ) 
steel products. As a result, petitioner claims, the average import 
values are too low and do not accurately reflect the value of the steel 
used in making HFHTs. Petitioner maintains that the specific price 
quotations for the grades of steel used in the production of HFHTs 
provided by a consultant familiar with the Indian steel industry are 
superior to the Indian Import Statistics or data published by the Steel 
Authority of India Limited (SAIL), the latter of which was suggested by 
respondents. Furthermore, petitioner argues that, in situations where 
import statistics were found to be distortive or aberrational, the 
Department has used alternatives, such as specific price quotations, 
citing Furfuryl Alcohol from the PRC; Final Results of Administrative 
Review, 60 FR 22544, 22548 (May 8, 1995) (Furfuryl Alcohol), and 
Coumarin from the PRC; Final Results of Antidumping Duty Administrative 
Review, 59 FR 66895, 66900 (December 28, 1994) (Coumarin).
    Respondents argue that the steel price quotes are for a different 
quality of steel than the steel used in the PRC to produce the subject 
merchandise.

Department's Position

    We disagree with petitioner that we should use its submitted Indian 
price quotations for valuing steel. There is no evidence on the record 
supporting petitioner's contention that respondents use SBQ steel for 
the production of HFHTs. As we explained in the fourth administrative 
review, our objective is to value the surrogate steel at prices which 
most closely reflect the type of steel used by the PRC producers. See 
Heavy Forged Hand Tools, Finished or Unfinished, With or Without 
Handles, From the People's Republic of China; Final Results of 
Antidumping Administrative Review, 61 FR 51272 (October 1, 1996). We 
verified that the respondents use 1045 carbon steel, which is 
classified under HTS subheading 7214.50. See Memorandum to the file 
from Daniel Singer, regarding the verification of Tianjin Machinery 
Import & Export Corporation (December 19, 1996). The price quotation 
submitted by petitioner is for an alloy steel with a higher carbon 
content than

[[Page 11815]]

1045 carbon steel. Furthermore, HTS subheading 7214.50 would include 
both merchant quality and SBQ steel. Unlike in Furfuryl Alcohol and 
Coumarin, we have not found the Indian Import Statistics to be 
distortive or aberrational. (See Comment 2.) Therefore, we have 
continued to value steel using HTS subheading 7214.50 of the Indian 
Import Statistics.

Comment 2

    Respondents argue that the steel value the Department used in the 
preliminary results, 1992 data from the Indian Import Statistics 
inflated by the wholesale price index (WPI), is not supported by 
evidence on the record and does not reflect ``the best available 
evidence'' of the factor values. Respondents maintain that the 
Department's steel valuation was unreasonable since the value is 
inconsistent with secondary evidence.
    Respondents argue that the steel value used by the Department is 
higher than the value of steel imported into the United States and into 
Indonesia under HTS category 7214.50, and European steel wire rod 
export prices for a similar HTS category. Respondents maintain that 
changes in the WPI reflect exchange rate changes rather than changes in 
the value of steel. Respondents argue that, because the value of the 
Indian rupee decreased since 1992, domestic Indian steel prices should 
have fallen relative to world steel prices. Respondents assert that the 
SAIL data on the record of these reviews supports this argument. 
Respondents argue that the 1992 Indian import value for steel used by 
the Department in the preliminary results, adjusted for inflation by 
the WPI, does not accurately reflect this decrease in Indian domestic 
steel prices.
    Respondents also note that the surrogate value of steel scrap used 
by the Department in these reviews is lower, not higher, than the 1992 
value of steel scrap. Respondents argue that the value for steel scrap 
should be positively correlated to the value for steel, and conclude 
that this is evidence that the value of Indian steel decreased.
    Respondents argue that, in light of the above, the Department 
should use the price of HTS category 7214.50 steel from the Indian 
Import Statistics for the current period of review (POR), after 
excluding aberrational values. Respondents argue that the fact that 
import quantities were small does not, ipso facto, render the prices 
aberrational or invalid. Respondents argue that prices of 1995 imports 
into India from Saudi Arabia are not aberrational in comparison with 
1992 Indian imports, 1995 Indonesian and U.S. import prices, and 
European steel wire rod export prices. If the Department determines not 
to use the price of Indian imports from Saudi Arabia, respondents 
argue, the Department should consider other surrogate countries, such 
as Indonesia, or U.S. steel import prices.
    Petitioner argues that the alternative factor value sources cited 
by respondents, including the Indonesian Import Statistics, U.S. import 
prices, and European wire rod export prices, are largely irrelevant to 
the price of carbon steel bar in India. In addition, petitioner objects 
to the use of wire rod export prices for comparison purposes because 
wire rod is an entirely different product than bar and requires 
different production methods. Petitioner also questions the 
respondents' recommendation of steel wire rod prices when they had 
objected to use of those prices in prior administrative reviews of 
these orders. Petitioner maintains that, since India and China are 
highly protected markets, there is no reason to believe that steel 
prices in either country track such prices in other countries with more 
open trade policies or a world market price. Petitioner also argues 
that there is no evidence on the record demonstrating a positive 
correlation between steel scrap and steel prices, and that evidence 
would actually reveal otherwise.
    Petitioner argues that it is reasonable to inflate the steel value 
through the use of the WPI because China and India have significant 
inflationary economies, citing International Financial Statistics, 
published by the International Monetary Fund, November 1996. Petitioner 
also states that the use of the WPI is appropriate because it reflects 
prices paid for inputs at the wholesale level, as well as overall 
economic activity. Petitioner maintains that, because it is widely 
recognized that steel prices move with overall economic activity and 
because the Department has used the WPI as an inflator in the original 
investigations, in subsequent reviews of these dumping orders, and in 
other non-market economy (NME) cases, the Department should therefore 
continue to use the WPI.
    Petitioner asserts that the record demonstrates that the Indian 
Import Statistics, adjusted for inflation and used in the preliminary 
results of these reviews, are reasonable. The petitioner argues that, 
since the inflated Indian Import Statistics correspond closely to data 
submitted by the petitioner on actual steel prices during the POR for 
the specific type and grade of steel used in manufacturing HFHTs, the 
inflated import values used in the preliminary results are 
representative of the actual prices charged in the surrogate country. 
Therefore, the petitioner requests that, for the final results, the 
Department use either the Indian steel price quotations it submitted, 
or the 1992 Indian Import Statistics, adjusted for inflation.

Department's Position

    We agree with respondents that the steel surrogate value we used in 
the preliminary results is not the best information by which to value 
the steel factor. It is our objective to value surrogate steel at 
prices which most closely reflect the type of steel used by the PRC 
producer during the POR. As stated in the October 30, 1996 surrogate 
value memorandum for the preliminary results (Surrogate Value 
Memorandum, Preliminary Results), the 1995 Indian Import Statistics 
reflected a small quantity of imports. In the 1994/1995 administrative 
reviews of these orders, we determined that 1994 Indian Import 
Statistics were based on a small quantity of imports and that 1993 
Indian Import Statistics were aberrational when compared to 1992 Indian 
and 1993 U.S. import statistics. Therefore, we used the 1992 Indian 
Import Statistics value, adjusted for inflation, in the preliminary 
results.
    For these final results, we reevaluated the 1995 Indian import 
data. We determined that the price of 1995 Indian imports from Saudi 
Arabia was reliable because it is comparable to 1995 U.S. import data, 
1995 Indonesian import data, and the inflated 1992 Indian import data 
we used for the preliminary results. See the Analysis Memorandum for 
the final results of these reviews, (Analysis Memorandum, Final 
Results, March 6, 1997). We used the 1995 Indian steel value from Saudi 
Arabia for HTS category 7214.50 because it is contemporaneous with the 
POR, and is specific to the grade and chemical composition of the type 
of steel used by respondents. Because we have changed our source for 
steel valuation to a source contemporaneous with the POR, the issue of 
how best to inflate earlier data is moot.

Comment 3

    Respondents argue that the Department failed to use the most 
contemporaneous labor rate data. Respondents note that the Department 
determined a POR labor rate based on 1990 data from the International 
Labor Organization's Yearbook of Labor Statistics (YLS) and adjusted 
for inflation using the consumer price index (CPI) reported in 
International Monetary Fund's International Financial Statistics. 
Respondents contend that the Department has not shown that indexed

[[Page 11816]]

1990 data is the best data available or that the labor rate in India 
during the POR corresponds to the 1990 rate inflated by the CPI.
    Respondents argue that the Department failed to determine whether 
the daily wage rate for 1990 in the YLS was for 5 or 6 days a week. It 
is equally possible, even probable, respondents maintain, that the work 
week includes 5 and one-half days, with the rate being for the full day 
(or even a work week of five days with more than 8 hours per day). 
Respondents further state that the Department assumed that an Indian 
employee works 6 days a week, 52 weeks a year. Respondents maintain 
that instead of working 4.333 weeks a month (6 days a week every week 
of the year), it is more accurate to assume a 50 work-week year.
    Furthermore, respondents assert that the Department erred in 
calculating the hourly labor rate. Respondents point out that the 
Department used data for labor hours worked per week from the IL&T and 
argue that the IL&T does not explain how the daily wage rate was 
determined for the YLS. Respondents contend that the IL&T data does not 
correspond to the POR nor does it correspond to the rates in the YLS. 
Respondents cite chapter 12 of the YLS as specifically including the 
number of hours worked per week in manufacturing.
    Respondents also assert that the Department failed to adjust labor 
rates to reflect different levels of labor skills. Respondents state 
that the workers in the factories have different skill levels and that, 
to the extent possible, the Department should determine different labor 
rates to correspond with the different skill levels. Respondents argue 
that the Department used data for hours worked from Investing, 
Licensing, and Trading Conditions Abroad (IL&T), published by the 
Economist Intelligence Unit in November 1994, and could have used the 
same source to reflect estimates of the rate differentials. Respondents 
suggest that, absent more contemporaneous data, the Department should 
use the information contained in Foreign Labor Trends--India (FLTI), 
published by the American Embassy in New Delhi. The FLTI provides 1992 
Indian wage rates for three skill categories: skilled, semi-skilled, 
and unskilled. If the Department chooses to use the YLS, respondents 
contend, the Department should determine different skill level wage 
rates, considering the single YLS rate as the semi-skilled worker rate. 
Respondents assert that, since the Department has preliminarily 
determined to use IL&T for hours worked, the IL&T can be used as the 
``best evidence available'' of the wage differentials.

Department's Position

    We disagree with respondents. When labor data contemporaneous with 
the POR is unavailable, and an inflation index specific to labor is 
also unavailable, the Department's practice in NME cases is to adjust 
labor values prior to the period of review using the CPI. See, e.g., 
Chrome-Plated Lugnuts from the PRC; Final Results of Administrative 
Review, 61 FR 58518, 58518 (November 15, 1996) (Lug Nuts).
    As respondents noted, chapter 12 of the YLS contains the hours 
worked per week specific to SIC code 381, the category that includes 
the HFHT industry, and from which we used the daily wage rate. See 
Analysis Memorandum, Final Results, page 3. For these final results, we 
have used the hours worked per week in chapter 12 of the YLS rather 
than in the IL&T because it is more specific to the HFHT industry.
    We disagree with the respondents' comments on the days worked per 
week and the weeks worked per year. The IL&T specifies that factory 
workers work a six-day week. The YLS specifies the daily wage rate 
earned and the hours worked per week. Since the number of days worked 
per week was not specified in the YLS, we have continued to use the 
six-day work week indicated in the IL&T, along with the daily wage rate 
and hours worked per week as shown in the YLS, in our calculations of 
the hourly wage rate. (See Analysis Memorandum, Final Results.) Because 
we are using the hours worked per week from the YLS, respondents' claim 
regarding the number of weeks worked per year is moot.
    With respect to valuing labor by skill level, although the YLS data 
is less contemporaneous than the FLTI data submitted by respondents and 
does not specify labor rates covering different skill levels, the YLS 
provides labor rates on an industry-specific basis. As in Lug Nuts and 
Notice of Final Results of Antidumping Duty Administrative Review; 
Helical Spring Lock Washers from the PRC, 66260 (December 17, 1996), we 
used SIC code 381 because this category covers the HFHT industry. 
Because the YLS data does not break out labor rates among skill levels, 
we applied the same wage rate to each skill level reported by 
respondents. See page 7 of Surrogate Values Memorandum, Preliminary 
Results.

Comment 4

    Respondents argue that the data used by the Department to determine 
selling, general, and administrative expenses (SG&A), factory overhead, 
and profit do not comport with the legislative history to Section 
773(c) (the NME provision). Respondents cite the Conference Report, 
Omnibus Trade and Competitiveness Act of 1988, at 591, which states 
that ``Commerce should seek to use, if possible, data based on 
production of the same general class or kind of merchandise using 
similar levels of technology and at similar levels of volume * * *'' as 
in the NME. Respondents assert that the April 1995 Reserve Bank of 
India Bulletin (RBI) data for ``Processing and Manufacture: Metals, 
Chemicals and Products Thereof,'' used by the Department in the 
preliminary results, encompasses a broader industry spectrum than the 
same general class or kind of merchandise in these reviews. Respondents 
argue that the Department has failed to provide a rationale for why the 
SG&A expenses incurred in the chemical industry in India are similar to 
SG&A expenses incurred in the Chinese HFHT industry. Respondents 
suggest that the Department revise its methodology in calculating SG&A, 
factory overhead, and profit, and use the same basic methodology it 
used in Helical Spring Lock Washers from the PRC; Notice of Preliminary 
Results of Antidumping Administrative Review, 61 FR 42000 (August 13, 
1996) (Lock Washers 1994/1995), noting that, in Lock Washers 1994/1995, 
the Department prorated certain expenses. Respondents suggest the 
elimination of royalty, research and development, and insurance 
expenses, which they claim the Chinese companies do not incur. 
Respondents maintain that these changes would change the SG&A, 
overhead, and profit percentages significantly.
    The petitioner argues that the Department should reject the 
respondents' proposal to eliminate costs such as research and 
development, royalty, and insurance expenses. The petitioner points to 
the subjective process of naming account categories in financial 
statements. Petitioner contends the fact that a particular account on 
the Indian statements does not exist on the Chinese statements does not 
necessarily imply that the Chinese companies do not incur these costs. 
Petitioner asserts that it would be inappropriate to pick and choose 
among the Indian account titles based simply on what the Chinese 
companies have chosen to name their accounts. Moreover, petitioner 
maintains, the removal of these costs from the SG&A calculation will 
only serve to increase

[[Page 11817]]

the profit rate and not alter the end result.
    Petitioner argues that the Department should follow Lock Washers 
1994/1995 by adding fifty percent of employment cost to the SG&A 
calculation. Petitioner claims that this was done in prior reviews of 
HFHTs. However, petitioner contends, the Department should not follow 
Lock Washers 1994/1995 in its omission of the amount listed as ``other 
expenses'' in the RBI Bulletin.

Department's Position

    We disagree with respondents. We note that the RBI data covers both 
the Indian chemical and metal industries, not solely the chemical 
industry. Because similar SG&A data specific to the Indian HFHT 
industry, or the Indian metals industry exclusively, is absent from the 
record of these reviews, we continue to rely on the RBI data used in 
the preliminary results.
    We also disagree with respondents that we should prorate or 
eliminate certain expenses from the SG&A calculation. The Department's 
practice is to use the overall surrogate SG&A expenses to value the 
SG&A expenses of the NME respondents. Because we do not have detailed 
knowledge of how and where SG&A expenses are classified by the NME 
respondents, it would be inappropriate to make item-by-item adjustments 
to the surrogate SG&A. While the respondents may not incur insurance, 
research and development, and royalties, there may be other expenses 
incurred that are not included in the surrogate SG&A calculation. In 
Lug Nuts, the respondent made a similar argument to eliminate research 
and development from the surrogate factory overhead calculation, 
arguing that as a mature industry, it does not incur any research and 
development expense. We rejected the respondent's argument in that 
case, stating that while the respondent may not incur research and 
development expenses, there may be other factory overhead expenses 
incurred that are not included in the surrogate factory overhead. We 
have similarly addressed this issue in Lug Nuts and Notice of Final 
Determination of Sales at Less Than Fair Value; Pure Magnesium and 
Alloy Magnesium from the Russian Federation, 60 FR 16440 (March 30, 
1995). Based on the foregoing, we have not adjusted the surrogate SG&A 
expenses for claimed differences between respondents and the India 
surrogate.
    We disagree with the petitioner that we should prorate employment 
costs and add fifty percent of employment costs to the SG&A 
calculation, as in Lock Washers 1994/1995. As stated in Sulfanilic Acid 
from the People's Republic of China; Final Results and Partial 
Rescission of Antidumping Duty Administrative Review, 61 FR 53711 
(October 15, 1996), in the absence of any information to the contrary, 
it is reasonable to assume that the factories involved in these reviews 
would employ a majority of their workers in production operations, and 
therefore that most of the employment costs would be applicable to the 
cost of manufacturing rather than to SG&A expenses. We have continued 
to include all of the employment costs in the cost of manufacturing. 
Also, we agree with petitioner that the amount listed as ``other 
expenses'' should not be omitted. Absent evidence to the contrary, it 
is reasonable to treat ``other expenses'' as miscellaneous items 
appropriately included in SG&A. Therefore, we have not adjusted the 
SG&A expenses used in the preliminary results.

Comment 5

    The respondents object to the Department's methodology for valuing 
inland freight, which used the price of inland rail freight as reported 
in a 1989 cable from the U.S. embassy in India, inflated by the average 
WPI for the review period. Respondents contend that because this value 
is dated, is unsupported by secondary data, and is less contemporaneous 
than other rail freight data on the record, it does not represent the 
best available information.
    As an alternative source for inland rail freight data, respondents 
argue that the Department should use information contained in Doing 
Business in India: An Economic Profile, prepared by the Director, 
Economic Coordination Unit, Ministry of External Affairs of the 
Government of India. Respondents argue that this data provides a better 
source for rail freight prices because (1) it is official Indian 
government data, (2) it is more current than the data used by the 
Department for the preliminary results, and (3) it provides specific 
rates on a per-kilometer basis, thus eliminating the need to separately 
compute rates for distances over 1,000 kilometers.

Department's Position

    We disagree with respondents. The data in the 1989 Embassy cable, 
though less contemporaneous than data provided by respondents by one 
year, provides relative freight rates for various distances. Thus, it 
more precisely reflects freight charges than the average rate provided 
by respondents. We therefore have continued to use this data for these 
final results.

Comment 6

    Respondents argue that, in calculating weighted-average factor 
values from the Indian import data, the Department should not disregard 
prices paid for imports from NME countries. Respondents contend that 
the practice of excluding such prices is not supported by the Act or 
the Department's regulations, and distorts the surrogate value. 
Respondents point out that, in deriving factor values from surrogate 
country import data, the Department usually rejects three categories of 
prices: (1) Prices which are aberrational; (2) prices from NME 
countries; and (3) prices which represent dumped or subsidized prices. 
In rejecting aberrational prices, respondents maintain that the 
Department is utilizing its authority to use the ``best available 
information.'' In rejecting dumped or subsidized prices, respondents 
state, the Department is relying on the legislative history of the Act, 
and the fact that dumped prices do not reflect an appropriate value. In 
the case of NME prices, however, respondents argue that there is no 
presumption that they are either dumped or subsidized. Thus, 
respondents argue, the prices of imports from an NME country cannot be 
excluded automatically.
    Petitioner argues that the Department is correct in disregarding 
prices for imports from NME countries. Petitioner asserts that this is 
a reasonable methodology, and that the Department should continue to 
reject import data from NME countries in calculating factor values.

Department's Position

    We disagree with respondents. To include import data from NME 
countries in the weighted-average factor values would be contrary to 
the Department's established policy. Section 771(18) of the Act defines 
an NME country as ``* * * any foreign country that the [Department] 
determines does not operate on market principles of cost or pricing 
structures, so that sales of merchandise in such country do not reflect 
the fair value of the merchandise.'' Section 773 (c)(1)(B) states ``* * 
* the valuation of the factors of production shall be based on the best 
available information regarding the values of such factors in a market 
economy country or countries considered to be appropriate * * *.'' 
Because the purpose of section 773(c) is to find market values, our 
established policy is to value factor inputs based on prices paid by 
the manufacturer for inputs purchased from a market

[[Page 11818]]

economy source, because those prices reflect commercial reality, while 
prices paid for inputs from NME manufacturers may not. See Tapered 
Roller Bearings, and Parts Thereof, Finished and Unfinished from the 
People's Republic of China; Final Results of Antidumping Duty 
Administrative Review, 61 FR 65533 (December 13, 1996).

Comment 7

    Olympia, a U.S. importer of the subject merchandise, requests that 
the Department assign to it the same antidumping cash deposit rate as 
the Department assigns to FMEC. Olympia notes that, in previous reviews 
of these orders, the Department assigned dumping margins based on the 
exporter, rather than the producer. Furthermore, in the 1994/1995 
administrative reviews, the Department assigned separate rates to FMEC 
and SMC, while all other exporters were assigned the single PRC-wide 
rate.
    Olympia argues that the statute and regulations afford the 
Department flexibility with respect to the assignment of rates in NME 
cases, and that the statute does not specify an NME standard for 
deposit rates. Citing to Section 751(a)(2)(A) of the Act, Olympia 
argues that the statute merely stipulates that the Department will 
determine the normal value and export price (or constructed export 
price) of each entry of the subject merchandise and the dumping margins 
for each entry. Furthermore, Section 751(a)(2)(C) of the Act provides 
that the determination of the dumping margins ``shall be the basis for 
the assessment of countervailing or antidumping duties or entries 
covered by the determination and for deposits of estimated duties.'' 
Olympia asserts that the Department's regulations are consistent with 
the statute by simply providing that the Department will publish the 
final results of an administrative review, including ``the weighted-
average dumping margins, if any * * *,'' citing section 353.22(c)(8) of 
the Department's Regulations.
    Olympia further contends that the Department's proposed regulations 
clearly indicate the possible application of ``producer-assigned'' 
rates in NME cases. Olympia cites to the explanatory notes to the 
Department's proposed regulations (61 FR 7316, February 27, 1996), in 
which it says, the Department stated it was considering the possible 
use of separate exporter/producer rates. Olympia further noted that 
these explanatory notes stated that assessment rates should ``be 
specific to each importer, because the amount of duties assessed should 
correspond to the degree of dumping reflected in the price paid by each 
importer.'' (61 FR 7613.) Olympia acknowledged that the Department did 
not take a position with respect to producer/importer rates.
    Olympia asserts that, even though the Department has followed an 
exporter-assigned rates methodology, it has recognized the significance 
of producers in assigning NME rates. Olympia cites to several cases to 
support this point. The first case is the Final Determination of Sales 
at Less Than Fair Value; Chrome Plated Lug Nuts from the PRC, 56 FR 
46153 (September 10, 1991) (Lug Nuts 1990). Olympia states that there 
was only one producer and one exporter of lug nuts in the PRC, and the 
Department assigned the same rate to the exporter as to ``all other 
manufacturers, producers, and exporters.'' Furthermore, Olympia 
asserts, the Department recognized that the prices it used were from 
the PRC exporter to the unrelated U.S. importer, and not between the 
exporter and producer, and the Department ignored any selling expenses 
incurred by the exporter. The PRC exporter, Olympia maintains, thus 
became a non-entity. Olympia claims that the Department has a practice 
of disregarding the exporter, except with respect to the pricing.
    Olympia claims that in Final Determination of Sales at Less Than 
Fair Value; Helical Spring Lock Washers from the PRC, 58 FR 48833, 
48849 (September 20, 1993) (Lock Washers 1992), the Department adopted 
a de facto producer rate. In that case, Olympia states, the respondent, 
the Hangzhou Spring Washer Plant (HSWP), was both producer and 
exporter. HSWP also sold lock washers to trading companies for export 
to the United States. Olympia asserts that the Department assigned the 
HSWP rate to those trading companies instead of assigning them rates 
based on the trading company's export prices.
    Olympia cites the Notice of Preliminary Determinations of Sales at 
Less Than Fair Value and Postponement of Final Determinations: Brake 
Drums and Brake Rotors from the PRC, 61 FR 53190 (October 10, 1996) 
(Brake Drums), and Notice of Final Determination of Sales at Less Than 
Fair Value; Certain Cased Pencils from the PRC, 59 FR 55625 (November 
8, 1994) (Pencils), where the Department excluded from the antidumping 
order exports of the subject merchandise sold by specific exporters and 
manufactured by the producers whose factors of production formed the 
basis for the de minimis and zero margins found in those cases.
    Olympia argues that, by assigning FMEC's cash deposit rates to both 
the producer and the importer of the subject merchandise, the 
Department will avoid effectively tying the NME producer and U.S. 
importer to selected exporters because of the rates assigned. Olympia 
suggests that the Department adopt a parallel producer/importer rate in 
situations where (1) an importer specifically requests such a rate; (2) 
the transaction between the producer and importer have been subject to 
at least one previous review; (3) the producer is not state-controlled; 
and (4) the producer is not related to the exporter. Olympia maintains 
that its situation satisfies all these requirements. Furthermore, 
Olympia argues that employing a specific producer/importer rate (1) 
promotes accuracy and fairness since the rates are specific to, and 
reflect actual prices paid by, a particular importer; and (2) avoids 
unnecessary trade restrictions by allowing an importer the freedom to 
import directly from the producer.
    Petitioner argues that the Department should deny Olympia's request 
for an exemption from standard antidumping duty deposit rules. 
Petitioner adds that such exemptions are made only under the most 
limited circumstances for PRC exporters.
    Petitioner states that PRC producers typically export through 
unrelated trading companies, and, in most cases, the Department 
establishes a deposit rate for future importation for each trading 
company. Petitioner claims that the Department has deviated from this 
principle only in a few unusual cases, such as those cited by Olympia, 
by applying the dumping margin for a certain producer to imported goods 
made by that producer. Petitioner argues that the rationale for 
deviating from the Department's normal practice presented in those 
cases does not apply to these reviews of HFHTs. Petitioner asserts that 
the majority of cases cited by Olympia involve PRC producers whose 
products were assigned a zero dumping margin. Thus, the Department had 
to assign a specific rate to zero-margin producers to avoid imposing 
duty deposits on products that had been found not to be dumped. 
Petitioner asserts that the record in these reviews indicates that all 
of the HFHT producers have dumping margins, so no such concern applies.
    Petitioner points out that in Lug Nuts 1990, since only one factory 
in the PRC manufactured the subject merchandise, the Department knew 
that any lug nut exporter would eventually be assigned the margin for 
the sole producer. Therefore, petitioner argues, it made sense for the 
Department to apply the producer's dumping margin as the duty deposit 
rate for all producers in that

[[Page 11819]]

case. Petitioner asserts that this rationale does not apply to HFHTs, 
which are produced by numerous factories in the PRC.
    Petitioner asserts that Olympia's request to apply FMEC's dumping 
margin to all of Olympia's purchases direct from PRC producers is an 
entirely different situation. Petitioner states that FMEC is a trading 
company, not a producer, whose dumping margin is based on the producers 
whose products it bought during the POR. Petitioner maintains that 
granting Olympia's request would require applying the FMEC dumping 
margin even to HFHTs made by producers that were not included in the 
FMEC dumping calculation. Petitioner states that Department practice 
does not support the application of one producer's dumping margins to 
the products of another.
    Petitioner objects to Olympia's designation of its name as 
proprietary information. Petitioner states that it is not aware of any 
Department practice that allows the name of an interested party to be 
granted proprietary treatment.

Department's Position

    We disagree with respondents that the same antidumping cash deposit 
rate for FMEC should be applied to Olympia, and note that it would be 
administratively infeasible to apply cash deposit rates on an importer-
specific basis.
    Olympia's reference to the explanatory notes to our proposed 
regulations, with respect to importer-specific assessment rates, is 
misplaced. It has long been the Department's practice to assess duties 
on an importer-specific basis; what Olympia is asking the Department to 
do here is to establish an importer-specific cash deposit rate.
    However, the cases cited by Olympia entail different circumstances 
than those presented in these administrative reviews for HFHTs. In Lock 
Washers 1992, a single company, HSWP, was both producer and exporter. 
We calculated and assigned a single rate based on HSWP's sales to 
unrelated customers in the United States, and to market-economy trading 
companies which were based outside the United States, for sales of lock 
washers exported from the PRC by HSWP and destined for the United 
States. HSWP's sales of lock washers sold to the first unrelated 
customer based in the United States were not assigned a separate cash 
deposit rate. Unlike in Lock Washers 1992, the exporter and producer 
are not the same in these reviews.
    In Lug Nuts 1990, we determined there was one producer and one 
exporter of lug nuts from the PRC to the United States during the 
period. Therefore, the calculated rate was based on the sales from the 
sole exporter and applied to all other producers and exporters who 
began to ship after the publication of the order. In these reviews, 
there is more than one exporter of the subject merchandise. In both 
Brake Drums and Pencils, we found de minimis and zero margins for the 
subject merchandise that was sold by certain exporters and manufactured 
by specific producers. In order to ensure that merchandise that was 
sold by those exporters, but manufactured by other producers, would be 
subject to the antidumping duty order, we applied the exclusion from 
the order only to the producer whose factors formed the basis of the 
zero or de minimis rate analysis. Exclusion from the order is not an 
issue in administrative reviews, therefore, Olympia's references to 
Pencils and Brake Drums do not support its arguments.
    There are no factual circumstances in these reviews similar to 
those in the NME cases cited by Olympia, and we find no reason to 
assign a specific importer-producer rate for Olympia. We note that 
Olympia's lack of a specific importer-producer cash deposit rate does 
not preclude it from purchasing HFHTs directly from the producer, and 
subsequently requesting a review of that producer's exports.

Final Results of Review

    As a result of our review, we have determined that the following 
margins exist:

------------------------------------------------------------------------
           Manufacturer/exporter               Time period      Margin  
------------------------------------------------------------------------
Fujian Machinery Import & Export                                        
 Corporation:                                                           
  Axes/Adzes..............................    2/1/95-1/31/96       18.72
  Bars/Wedges.............................    2/1/95-1/31/96       36.76
  Hammers/Sledges.........................    2/1/95-1/31/96       15.95
  Picks/Mattocks..........................    2/1/95-1/31/96       98.77
Shandong Machinery Import & Export                                      
 Corporation:                                                           
  Bars/Wedges.............................    2/1/95-1/31/96       36.66
  Hammers/Sledges.........................    2/1/95-1/31/96        3.12
  Picks/Mattocks..........................    2/1/95-1/31/96       63.87
Tianjin Machinery Import & Export                                       
 Corporation:                                                           
  Axes/Adzes..............................    2/1/95-1/31/96        2.42
  Hammers/Sledges.........................    2/1/95-1/31/96       15.81
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between United 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 requirements will be effective 
upon publication of this notice of final results of reviews for all 
shipments of HFHTs from the PRC entered, or withdrawn from warehouse, 
for consumption on or after the publication date of these final 
results, as provided for by 751(a)(1) of the Act: (1) The cash deposit 
rates for the reviewed companies named above which have separate rates 
(FMEC, SMC, and TMC) will be the rates for those firms as stated above 
for the classes or kinds of merchandise listed above; (2) for axes/
adzes from SMC, which are not covered by these reviews, the cash 
deposit rate will be the rate established in the most recent review of 
that class or kind of merchandise in which SMC received a separate 
rate--that is, the February 1, 1992 through January 31, 1993 reviews; 
(3) for bars/wedges and picks/mattocks from TMC, which are not covered 
by these reviews, the cash deposit rate will be the rate established in 
the most recent review of those classes or kinds of merchandise, i.e., 
66.32 percent for bars/wedges and 108.20 percent for picks/mattocks; 
and (4) the cash deposit rates for non-PRC exporters of the subject 
merchandise from the PRC will be the rate applicable to the PRC 
supplier of that exporter. The PRC-wide rates are 44.41 percent for 
hammers/sledges, 66.32 percent for bars/wedges, 108.2 percent for 
picks/

[[Page 11820]]

 mattocks and 21.93 percent for axes/adzes.
    This notice serves as a final reminder to importers of their 
responsibility under section 353.26 of the Department's regulations to 
file a certificate regarding 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 the parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with section 353.34(d) of the Department's 
regulations. Timely notification of 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.
    These administrative reviews and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22 
of the Department's regulations.

    Dated: March 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-6378 Filed 3-12-97; 8:45 am]
BILLING CODE 3510-DS-P