Notice of Final Determination of Sales at Less Than Fair Value: Certain Paper Clips From the People's Republic of China

DEPARTMENT OF COMMERCE

[A-570-826]

Notice of Final Determination of Sales at Less Than Fair Value:

Certain Paper Clips From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: October 7, 1994.

FOR FURTHER INFORMATION CONTACT: Dorothy Tomaszewski or Erik Warga,

Office of Antidumping Investigations, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, NW, Washington, DC 20230; telephone:

(202) 482-0631 or (202) 482-0922, respectively.

FINAL DETERMINATION: We determine that certain paper clips (paper

clips) from the People's Republic of China (PRC) are being, or are

likely to be, sold in the United States at less than fair value (LTFV),

as provided in section 735 of the Tariff Act of 1930, as amended (the

Act). The estimated margins are shown in the ``Continuation of

Suspension of Liquidation'' section of this notice.

Case History

Since the preliminary determination on May 11, 1994 (59 FR 25885,

May 18, 1994), the following events have occurred.

On May 24, 1994, the three participating respondent manufacturers

submitted revised information on factors of production. We also issued

an additional supplemental questionnaire to respondents (named below),

to which respondents responded on June 2, 1994.

From June 10 through June 24, 1994, we verified that responses of

the exporters, Shanghai Lansheng Corporation (Lansheng), Zhejiang

Machinery and Equipment Import and Export Corporation (ZMEC), and

Zhejiang Light Industrial Products Import and Export Corporation

(ZLIP); and the manufacturers, Wuyi Cultural and Educational

Commodities General Factory (Wuyi), Shanghai Stationery Pins Factory

Fengbin (Fengbin), and Jiaxing Stationery Pins Factory (Jiaxing).

Petitioners, ACCO International Inc. and Noesting Inc., and respondents

filed case briefs on August 8, 1994, and rebuttal briefs on August 15,

1994. A public hearing was held on August 17, 1994.

Scope of Investigation

The products covered by this investigation are certain paper clips,

wholly of wire of base metal, whether or not galvanized, whether or not

plated with nickel or other base metal (e. g., copper), with a wire

diameter between 0.025 inches and 0.075 inches (0.64 to 1.91

millimeters), regardless of physical configuration, except as

specifically excluded. The products subject to this investigation may

have a rectangular or ring-like shape and include, but are not limited

to, clips commercially referred to as ``No. 1 clips,'' ``No. 3 clips,''

``Jumbo'' or ``Giant'' clips, ``Gem clips,'' ``Frictioned clips,''

``Perfect Gems,'' ``Marcel Gems,'' ``Universal clips,'' ``Nifty

clips,'' ``Peerless clips,'' ``Ring clips,'' and ``Glide-on clips''.

Specifically excluded from the scope of this investigation are

plastic and vinyl covered paper clips, butterfly clips, binder clips,

or other paper fasteners that are not made wholly of wire of base metal

and are covered under a separate subheading of the Harmonized Tariff

Schedule of the United States (HTSUS).

The products subject to this investigation are classifiable under

subheading 8305.90.3010 of the HTSUS. Although the HTSUS subheading is

provided for convenience and customs purposes, our written description

of the scope of this investigation is dispositive.

Period of Investigation

The period of investigation (POI) is May 1, 1993, through October

31, 1993.

Best Information Available

As stated in the preliminary determination, we have based the duty

deposit rate for all exporters other than the three identified above

(the ``all others'' rate) on best information available (BIA). One

exporter, Abel Industries, indicated that it would not participate in

the investigation. Further, given that information has not been

presented to the Department to demonstrate otherwise, Abel and all

other PRC companies not participating in this investigation are not

entitled to separate dumping margins. As such, because Abel decided not

to participate in this investigation, we are basing the ``All Others''

rate, which will also apply to Abel, on BIA. This is similar to our use

of the BIA-based ``All Others'' rate in other recent antidumping duty

investigations. (See, e.g., Final Determination of Sales at Less-Than-

Fair-Value: Silicon Carbide From the People's Republic of China (59 FR

22585, May 2, 1994) (Silicon Carbide)).

In determining what to use as BIA, the Department follows a two-

tiered methodology, whereby the Department normally assigns less

adverse margins to those respondents that cooperated in an

investigation and margins based on more adverse assumptions for those

respondents that did not cooperate in an investigation. As outlined in

the Final Determination of Sales at Less Than Fair Value: Certain Hot-

Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel

Flat Products, and Certain Cut-to-Length Carbon Steel Plate From

Belgium (58 FR 37083, July 9, 1993), when a company refuses to provide

the information requested in the form required, or otherwise

significantly impedes the Department's investigation, it is appropriate

for the Department to assign to that company the higher of (a) the

highest margin alleged in the petition, or (b) the highest calculated

rate of any respondent in the investigation. Here, since at least one

PRC exporter failed to respond to our questionnaire, and because we

presume all exporters to be centrally controlled absent verified

information to the contrary, we are assigning a margin of 126.94

percent (the highest margin in the petition, as recalculated by the

Department for methodological inconsistencies at the time of the

initiation of this case) as BIA to all exporters other than those

responding exporters which have shown their independence from control

in common with one or more other exporters of the subject merchandise.

Separate Rates

The three participating exporters, ZMEC, ZLIP and Lansheng, have

each requested a separate rate. ZMEC and ZLIP are companies owned by

``all the people'' and for five of the six months of the POI, Lansheng

also was owned by ``all the people.'' In the sixth month, Lansheng was

restructured into a share company. To establish whether a firm is

sufficiently independent to be entitled to a separate rate, the

Department employs the criteria developed in the Final Determination of

Sales at Less Than Fair Value: Sparklers from the People's Republic of

China (56 FR 20588, May 6, 1991) (Sparklers) and amplified in Silicon

Carbide. Under this analysis, the Department assigns a separate rate

only when an exporter can demonstrate the absence of both de jure\1\

and de facto\2\ governmental control over export activities.

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\1\Evidence supporting, though not requiring, a finding of de

jure absence of central control includes: (1) An absence of

restrictive stipulations associated with an individual exporter's

business and export licenses; (2) any legislative enactments

decentralizing control of companies; or (3) any other formal

measures by the government decentralizing control of companies.

\2\The factors considered include: (1) whether the export prices

are set by or subject to the approval of a governmental authority;

(2) whether the respondent has authority to negotiate and sign

contracts and other agreements; (3) whether the respondent has

autonomy from the government in making decisions regarding the

selection of management; and (4) whether the respondent retains the

proceeds of its export sales and makes independent decisions

regarding disposition of profits or financing of losses (see Silicon

Carbide).

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De Jure Analysis

The PRC laws placed on the record of this case establish that the

responsibility for managing companies owned by ``all the people'' has

been transferred from the government to the enterprise itself. These

laws include: ``Law of the People's Republic of China on Industrial

Enterprises Owned by the Whole People,'' adopted on April 13, 1988

(1988 Law); ``Regulations for Transformation of Operational Mechanism

of State-Owned Industrial Enterprises,'' approved on August 23, 1992

(1992 Regulations); and the ``Temporary Provisions for Administration

of Export Commodities,'' approved on December 21, 1992 (Export

Provisions). The 198l8 Law states that enterprises have the right to

set their own prices (see Article 26). This principle was restated in

the 1992 Regulations (see Article IX). The Export Provisions list those

products subject to direct government control. Paper clips do not

appear on the Export Provisions list and are not, therefore, subject to

the constraints of these provisions.

Consistent with Silicon Carbide, we determined that the existence

of these laws demonstrates that ZMEC and ZLIP, companies owned by ``all

the people,'' are not subject to de jure control.

Since Lansheng was initially a company owned by ``all the people,''

the laws cited above establish that the government devolved control

over Lansheng by law. The only additional law that may be pertinent to

the de jure analysis of Lansheng as a share company is the Company Law

(effective July 1, 1994). While Lansheng indicated that it was

organized consistent with the Company Law, the law did not enter into

force until nine months after the POI. In any event, this law does not

alter the government's de jure devolution of control that occurred when

the company was owned by ``all the people.'' Therefore, we have

determined that Lansheng is not subject to de jure control.

In light of reports\3\ indicating that laws shifting control

control from the government to the enterprises themselves have not been

implemented uniformly, an analysis of de facto control is critical to

determining whether respondents are, in fact, subject to governmental

control.

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\3\See ``PRC Government Findings on Enterprise Autonomy,'' in

Foreign Broadcast Information Service-China-93-133 (July 14, 1993)

and 1992 Central Intelligence Agency Report to the Joint Economic

Committee, Hearings on Global Economic and Technological Change:

Former Soviet Union and Eastern Europe and China, Pt. 2 (102 Cong.,

2d Sess)

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De Factor Control Analysis

We analyze below the issue of de factor control based on the

criteria set forth in Silicon Carbide.

ZMEC

In the course of verification, we confirmed that ZEMC's export

prices are neither set by, nor subject to approval, by any government

authority. This point was supported by ZMEC's sales documentation and

company correspondence. We also confirmed, based on examination of

documents related to sales negotiations, written agreements and other

correspondence, that ZMEC has the authority to negotiate and sign

contracts and other agreements independent of government authority. We

further found that ZMEC retained proceeds from its export sales and

made independent decisions regarding disposition of profits and

financing of losses. ZMEC's financial and accounting records as well as

joint venture and purchase contracts supported this conclusion.

Finally, we have determined that ZMEC has autonomy from the central

government in making decisions regarding the selection of management.

Although ZMEC's appointment of management is acknowledged by the

Zhejiang Machinery Bureau (ZMB), we have concluded that this does not

constitute control by ZMB. Based on our examination of minutes of

management nomination meetings, appointment announcements and

correspondence between ZMEC and ZMB, verification established that the

ZMB's involvement in ZMEC's management appointment process reflects

nothing more than an administrative formality\4\. Furthermore, based on

examination of correspondence files, we found no evidence of

involvement by Zhejiang Commission of foreign and Economic cooperation

(ZCOFTEC), or any other government authority, in any aspect of ZMEC's

operations. For these reasons, we have determined that ZMEC is not

subject to de facto control by governmental authorities.

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\4\As we confirmed at verification, the ZMB simply maintains

communication with all companies in the machinery industry in the

Zhejiang Province and provides general news, trade and statistical

services for all companies in this industry.

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ZLIP

During verification, our examination of correspondence and sales

documentation revealed no evidence that ZLIP's export prices are set,

or subject to approval, by any governmental authority. That ZLIP has

the authority to negotiate and sign contracts and other agreements

independent of any government authority was evident from our

examination of correspondence and written agreements and contracts. We

also confirmed that ZLIP retained proceeds from its export sales and

made independent decisions regarding disposition of profits and

financing of losses (based on our examination of bank account records,

financial records, and purchase contracts).

Based on our examination of management appointment announcements

and other correspondence, we have determined that ZLIP had autonomy

from the central government in making decisions regarding the selection

of management. According to ZLIP's company charter, both the general

manager and the deputy general manager are appointed by the local

administering authority, the ZCOFTEC. While this may indicate that ZLIP

is subject to the control of ZCOFTEC, there is no evidence that any

other exporter of the subject merchandise, is currently under the

control of ZCOFTEC. Therefore, we have concluded that ZLIP is entitled

to a separate rate.\5\

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\5\All non-responding exporters are presumed to be under the

control of the central government. Moreover, there is no basis on

which to conclude that Abel, the only exporter that has not

participated in this proceeding, in subject to control by ZCOFTEC.

Abel is located in Shenzhen Province, and ZCOFTEC is an agency of

Zhejiang Province. Therefore, there is no basis to conclude that any

non-responding exporter is controlled by ZCOFTEC. ZMEC, also located

within Zhejiang Province, is not subject to such control by ZCOFTEC.

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Lansheng

In conducting a de facto analysis of Lansheng, we have examined the

factors set forth in Silicon Carbide, and whether the change in

corporate structure alters our conclusion regarding those factors.

Lansheng's sales documentation and correspondence supports the

conclusion that no government entity exercises control over Lansheng's

export prices. Additionally, our examination of numerous contracts with

domestic and foreign trading companies demonstrates that Lansheng has

the authority to negotiate and sign contracts and other agreements

without interference from any governmental entity. We confirmed during

verification that this situation did not change after Lansheng became a

share company.

Before Lensheng became a share company, the general manager of its

predecessor company, Shanghai Stationery & Sporting Goods Import and

Export Company (Shanghai Stationery), was elected on February 27, 1993.

The election proceeded in the following manner. First, for every ten

employees, there was one elected representative. Second, the

representatives then elected the general manager. Third, once the

general manager was elected, the company sent a letter, announcing the

election to the Shanghai Commission of Foreign Trade and Economic

Cooperation (Shanghai COFTEC). Shanghai COFTEC then approved the

manager and sent a letter of congratulation to the company. While

Shanghai COFTEC technically had the authority to reject an elected

manager, it reportedly had never done so. After Lansheng became a share

company, the same manager continued to lead the company. At the first

general shareholder's meeting, when Lansheng's Board of Directors was

elected, the shares held by the State Assets Management Bureau (SAMB)

were voted by the general manager of the former company, Shanghai

Stationery. Subsequently, the newly elected Board of Directors

appointed the former general manager as Chairman of the Board for

Lansheng (see the Final Concurrence Memorandum in this proceeding,

which attaches the Department's report of its verification of Lansheng

in the Antidumping Investigation of Certain Cased Pencils from the

PRC). There is no evidence that any government entity participated in

the election of the Board of Directors or the decision to retain

current management.

We also found that Lansheng retained proceeds from export sales and

made independent decisions regarding the disposition of profits and

financing of losses both before and after becoming a share company.

This point was supported through examination of Lansheng's bank account

records and bank loan applications. (See Lansheng's verification

report.)

As indicated above, Lansheng's change to a share company did not

have any effect on the actual day-to-day operations. The record shows

that, following its conversion to a share company, 25.1 percent of

Lansheng's shares were sold publicly, with the proceeds returning to

the company as new capital investment. The remaining 74.9 percent of

the shares represents the value of the assets in the original company,

Shanghai Stationery (which was owned by ``all the people''). Evidence

on the record indicates that these remaining shares are held in trust

by the SAMB, just as its assets were held in trust when Lansheng was

owned by ``all the people.'' The company's management, which has

remained the same throughout its transition to a share company, votes

these shares at the general shareholders' meetings of Lansheng. This

evidence supports the conclusion that, under the new corporate

structure, the government has not exerted control over Lansheng through

the exercise of shareholder rights or otherwise; operational control

remains in the hands of company management.

Conclusion

In the case of ZMEC and Lansheng, the record demonstrates an

absence of de jure and de facto government control. With respect to

ZLIP, we have determined that ZLIP is not controlled by the central

government and that, although ZLIP may be controlled by ZCOFTEC,

ZCOFTEC does not control any other PRC exporter of paper clips.

Accordingly, we determine that each should receive a separate rate.

Fair Value Comparisons

To determine whether sales by the three responding exporters of

paper clips from the PRC to the United States were made at less-than-

fair-value prices, we compared the United States price (USP) to the

foreign market value (FMV), as specified in the ``United States Price''

and ``Foreign Market Value'' sections of this notice.

United States Price

USP and ZMEC, ZLIP and Lansheng was calculated on the same basis as

in the preliminary determination. The following adjustments were made

to the reported U.S. sales of these exporters pursuant to our findings

at verification (see Calculation Memorandum, on file in room B-099 of

the Main Commerce Department Building, for details on these

adjustments):

* We adjusted foreign inland freight for ZMEC based on verified

distances between factory and port of exportation.

* Minor adjustments were also made to ZMEC's reported ocean freight

and marine insurance charges.

* We adjusted ZLIP's and ZMEC's respective USP for unreported bank

transactions fees based on findings at verification.

* In the case of ZMEC, three unreported sales were discovered at

verification which were verified and included in the final

determination. Commission fees related to these unreported sales were

verified and also included in the final determination.

* Several CIF sales reported by ZMEC were clarified and verified as

C&F sales and considered as such for the final determination.

* The reported quantity for one of Lansheng's transactions was

adjusted.

Foreign Market Value

We calculated FMV based on factors of production cited in the

preliminary determination, making adjustments based on verification

findings (see Calculation Memorandum). To calculate FMV, the verified

factor amounts were multiplied by the appropriate surrogate values for

the different inputs. We have used the same surrogate values used in

the preliminary determination with the exception of nickel and sodium

hydroxide. Instead of using the value for non-alloy nickel bar, we used

for this final determination the value for unwrought nickel, which was

found to be the form of nickel used for plating purposes. We also used

a surrogate value for sodium hydroxide in liquid (rather than solid

flake) form based on verification findings. We correctly valued two

other proprietary factors whose names had been incorrectly reported.

Based on verification, we adjusted certain factors' values to

reflect the actual purity used in the production of subject

merchandise.

We have adjusted the surrogate inland freight charge for

transporting factor inputs from supplier to factory to reflect the

surrogate value for the actual quantity being transported. We

recalculated inland freight distances between factory and input

supplier based on verified distances for Jiaxing and Fengbin.

For Wuyi and Jiaxing, we used verified packing factor amounts to

calculate packing cost for the final calculations.

In the case of Fengbin, three additional proprietary factors of

production were identified after the preliminary determination. These

factors were verified and considered for the final determination. In

addition, factors of production, labor and energy used in

electroplating subject merchandise were adjusted to reflect allocation

based on actual electroplating process time.

In the case of Jiaxing, verification findings made it possible to

calculate type-specific FMVs for No. 1 and Giant paper clips for the

final determination. Reported direct labor was adjusted based on

verification findings.

In the case of Wuyi, total reported clip production was found to be

overstated at verification and adjustments to factors of production

were made accordingly. For certain factors, adjustments were made to

reflect actual amounts consumed during the POI instead of simple

averages. Adjustments were also made to material, labor and electricity

factors used in electroplating subject merchandise, to reflect actual

quantities consumed for paper clip plating during the POI. We also made

a downward adjustment to reported electricity usage in the clip

production process based on verification findings.

Surrogate Country

Section 773(c)(4) of the Act requires the Department to value the

factors of production, to the extent possible, in one or more market

economy countries that are (1) at a level of economic development

comparable to that of the non-market economy country, and (2)

significant producers of comparable merchandise. The Department has

determined that India and Pakistan are the countries most comparable to

the PRC in terms of overall economic development. (See memorandum from

the Office of Policy to the file, dated November 29, 1993.) Although

India is the preferred surrogate country for purposes of calculating

the factors of production, we have resorted to Pakistan for certain

surrogate values where Indian values were either unavailable or

significantly outdated. We have obtained and relied upon published,

publicly available information, wherever possible.

Verification

As provided in section 776(b) of the Act, we verified the

information submitted by respondents for use in our final

determination. We used standard verification procedures, including

examination of relevant accounting and production records and original

source documents provided by respondents.

Interested Party Comments

Comment 1: PRC Exporters and Separate Rates

ZMEC and ZLIP

Petitioners argue that ZLIP and ZMEC are both subject to control by

one or more government agencies in the Zhejiang Province. Since the

ZCOFTEC has the authority under the company charter to appoint ZLIP's

general manager and deputy general manager, petitioners contend that

ZLIP's operations are overseen by ZCOFTEC. Petitioners argue that ZMEC

also is under the supervision of the ZCOFTEC since ZCOFTEC communicates

with ZMEC, an export trading company located in the Zhejiang province.

Petitioners also note that ZMEC's appointment of its general manager is

subject to approval by another Zhejiang province government agency, the

ZMB.

Respondents counter that little evidence is provided to support

Petitioners' claim that ZMEC and ZLIP are both subject to the control

of the ZCOFTEC and the ZMB. The fact that the ZCOFTEC communicates to

all export trading companies in the Zhejiang province does not evince

governmental control over the companies' operations. with respect to

ZMB, respondents argue that the ZMB's role is also limited to the

communication of market information, and statistical services to

companies in the machinery industry. Even though the ZMB has the right

under law to object to any general manager nomination, respondents

state that this responsibility does not allow the ZMB total control

over ZMEC's operations. In fact, no evidence was found to indicate that

the ZMB has ever actually exercised that right in the case of ZMEC.

Furthermore, respondents note that evidence on the record regarding

other aspects of de facto control demonstrates that both ZLIP and ZMEC

clearly are independent from central or provincial government control.

Both companies act independently without governmental interference in

setting their own export prices, negotiating contracts and agreements,

and disposing of profits and financing of losses. Respondents argue

that the ``totality of information'' contradicts petitioners'

assertions that ZLIP and ZMEC are controlled by the governmental body

and therefore, should not be assigned company-specific, separate rates.

Lansheng

Petitioners contend that the record in this investigation reflects

no de facto evidence of Lansheng's independence from government

control. The fact that the SAMB holds 74.5 percent of the shares in

Lansheng allows the SAMB to have absolute control over the selection of

the company board of directors and the appointment of the company's

general managers and chairman of the board. Because the SAMB, a

governmental agency, has control over the company's operations,

petitioners argue, Lansheng should not be considered for a separate

rate.

Respondents argue that the record shows the role of the SAMB in the

operation of Lansheng to be extremely limited. The shares held by the

SAMB are ``entrusted'' to the management of the company and, therefore,

the SAMB's role is similar to that of an ``inactive investor'', or

title holder. Respondents point to the fact that Lansheng will be free

to sell all of its shares to the public within three years as an

indication of the limited role of the SAMB during Lansheng's transition

from a state-owned company to a share company. Respondents state that

the functions of the board of directors and general manager are not

governed by the SAMB but are defined in the company's articles of

association. Respondents contend that petitioners fail to recognize

that the Department considers evidence relating to all aspects of de

facto control and does not necessarily preclude a respondent from a

separate rate based on information dealing with one aspect of

governmental control. According to respondents, evidence regarding

other factors of de facto control further demonstrates that Lansheng's

operations are not subject to governmental control by the SAMB or any

other governmental entity. Therefore, respondents argue, Lansheng

should be given a separate rate.

DOC Position

We agree with respondents, as explained above in the ``Separate

Rates'' section, that each exporter should receive a separate rate.

Comment 2: Universe of Manufacturers/Sellers

Petitioners argue that only a fraction of the manufacturers and

sellers of paper clips in the PRC during the POI participated in the

investigation, and cite several firms which were listed in the petition

and submissions by respondents that did not respond to the

questionnaire. Two of these firms are reported as being located in

Zhejiang Province, where ZLIP and ZMEC are located. Petitioners cite

several cases stating that all PRC firms owned by the same governmental

authority, and which produced or sold the subject merchandise during

the POI, must cooperate in the investigation in order for respondent

firms to receive a separate rate from the Department (see, e.g., Final

Determination of Sales at Less Than Fair Value: Helical Spring Lock

Washers from the People's Republic of China (HSLW) (58 FR 48833,

September 20, 1993)). Because certain firms mentioned in previous

submissions did not participate in the investigation, petitioners

assert that it is impossible for the Department to determine that the

respondent firms seeking a separate rate are actually independent and

not related to any other, unidentified or non-participating PRC company

involved in the production and sale of the subject merchandise to the

United States.

ZMEC, ZLIP and Lansheng argue that the Department should not

preclude them from receiving their own company-specific separate rate

simply because other potentially state-owned paper clip manufactures

and exporters did not respond to the Department's questionnaire.

Respondents cite Silicon Carbide, wherein ``state-ownership'' is not

considered to be indicative of common control by a single entity.

Respondents assert that any state-owned company is entitled to a

separate rate if it can prove absence of de facto and de jure control

by a government entity. Firms which refuse to participate or which do

not satisfy the above-mentioned separate rates test are assumed to be

under central government control and are assigned a country-wide ``all-

others'' rate. Respondents assert that AMEC, ALIP and Lansheng have

established that there is an absence of de facto and de jure control by

the central government and, therefore, that they qualify for company-

specific separate rates, even though other state-owned firms in the PRC

did not participate in the investigation.

DOC Position

We agree with respondents that each participating exporter in this

investigation (i.e., ZMEC, ZLIP and Lansheng) is entitled to its

company-specific separate rate regardless of whether other potential

PRC exporters and sellers of subject merchandise participated in this

investigation. Petitioners' concern that all firms that produced paper

clips during the POI did not participate in the investigation is

misplaced. Each of the three exporters investigated established that

they were independent of any central government control and, therefore,

received a company-specific separate rate. The ``all other'' exporters

are presumed to be under central government control and, therefore,

received a single rate, which, in this case, was based on BIA due to

Abel's failure to respond to the questionnaire (see ``Best Information

Available'' section of this notice, above). Because the ``all other''

exporters are presumed to be under central government control and the

three responding companies have established that they are not under

central government control, the responding firms and the ``all other''

exporters are not within a common sphere of control.

Comment 3: Choice of ``All-Others'' Rate

Petitioners assert that the Department incorrectly calculated the

margin to be used as the ``all-others'' rate in the preliminary

determination by using the information set forth in the October 13,

1993, petition. Petitioners assert that the Department should have

chosen the highest margin (150.00 percent) set forth in the petition,

as amended on January 26, 1994. According to petitioners, the margin

resulting from the amended petition is based on Petitioners' updated

values for certain chemicals used to plate paper clips. Petitioners

claim that the January 26, 1994, submission clarified that the values

which the Department had disregarded in adjusting the petition for

initiation purposes were not being used as ``surrogate values'' in the

manner in which the Department might apply Indian and Pakistani values.

Petitioners state that the values set forth in the amended petition's

exhibits reflect the actual experience of an affiliate of one of the

petitioners in producing wire paper clips in Mexico. Those values were

provided because, given the specialized nature of the particular

inputs, petitioners were unable to obtain publicly available published

information from an appropriate surrogate country. By basing these

values on the actual experience of petitioners' affiliate, petitioners

claim to have followed the established practice of the Department to

permit a petitioner in an antidumping case to base certain values and

costs on petitioners' own experience. Petitioners cited to several past

cases to support this argument (e.g., Final Determination of Sales at

Less Than Fair Value: Sebacic Acid from the People's Republic of China

(Sebacic Acid) (58 FR 37908, May 31, 1994)).

Respondents request that the Department continue to reject

petitioners' unsubstantiated and untimely petition amendments for

purposes of determining the ``all others'' rate. According to

respondents, the amended data submitted by petitioners should not be

accepted by the Department since the data is from a Mexican affiliate

and this does not satisfy the requirement that costs submitted under

the rubric of ``petitioners' data'' be based on U.S. cost. Second,

respondents contend that the amended data should not be considered for

the final determination since petitioners did not demonstrate that

Mexico qualifies as a reasonable surrogate country for the PRC.

Finally, respondents claim that petitioners' amendments to the petition

were filed in an untimely fashion.

DOC Position

We agree with respondents and will continue to use the highest

margin in the petition, as recalculated by the Department in the

initiation notice (126.94 percent). Petitioners failed to provide any

explanation or documentation of their efforts to find surrogate country

value information. Moreover, petitioners' use of Mexican values is

tantamount to selecting Mexico as a surrogate country, regardless of

how petitioners choose to characterize their intentions. Petitioners

never explicitly stated why their use of Mexican values is appropriate

in light of the Department's hierarchy for selecting surrogate country

economies.

Comment 4: Application of BIA/``All Others'' Rate to Respondents Who

Did Not Sell Subject Merchandise to the United States During the POI

Respondents request that the Department not apply the ``all

others'' rate based on BIA to the ten PRC companies that responded to

the Department's November 4, 1993, survey advising that they had not

shipped the subject merchandise to the U.S. during the POI. Because the

``no-shipment'' companies responded to the Department's survey and were

cooperative, respondents argue that the Department should modify the

``all others'' rate with respect to these companies. Respondents note

that the Department did not issue further questionnaires to these

companies or otherwise indicate that these responses were considered to

be incomplete. Moreover, respondents assert that the Department was not

precluded from verifying the statements of the ``no-shipment''

companies. Respondents cite Olympic Adhesive, Inc. v. United States,

where the Court of Appeals Federal Circuit held that ``a `No' answer is

a complete answer.''

Therefore, respondents contend, these ten companies complied with

Department regulations and should not be given the same BIA rate as

respondents which refused to respond to the Department's questionnaires

entirely. Respondents argue that these companies should be considered

cooperative respondents and should not be assigned a margin based on

BIA. Instead, respondents request that these ten companies be given a

margin based on a weighted-average of the other participating

exporters' margins.

Petitioners assert that respondents' request that the Department

modify the ``all others'' rate for the ten ``no-shipment'' companies

should not be granted. First, petitioners state that the Department's

recent determinations involving the PRC assigned companies a rate based

on the highest margin stated in the petition because the companies in

question were unable to show entitlement to a separate rate.

Petitioners contend that claims by these PRC firms that they did not

produce or sell paper clips exported to the U.S. during the POI is not

factual information that can be used by the Department to calculate an

appropriate antidumping margin. Petitioners further argue that any

reference to the use in past cases of a weighted-average of other

respondents' margins are inapposite, because the cited determinations

do no discuss a method for assigning an antidumping duty rate to

companies which did not submit factual information. In addition,

petitioners state the 1991 determinations cited by respondents have

been superseded by more recent decisions by the Department, in which

the highest margin alleged in the petition was selected for firms

deemed ineligible for a separate rate. Petitioners also maintain that

the respondents' assertion that the application of the highest margin

alleged in the petition to the no-shipping firms constitutes punitive

``BIA'' is incorrect. Petitioners counter that the Department

regulations authorize the reliance on factual information submitted in

support of the petition, if the Department does not receive a complete,

accurate, and timely response to its request for factual information.

Given the lack of factual information from the non-shipping firms,

petitioners maintain that the Department properly assigned to those

firms an ``all others'' rate based on factual information from the

petition. Finally, petitioners argue that to give the non-participating

firms a rate based on an average of separate rates assigned to the

respondent exporters would reward companies that remained outside of

the Department's investigation. Such firms, by not participating, would

actually receive a margin that is lower than half of the responding

firms which submitted factual information.

DOC Position

We agree with petitioners. Even though the ten companies reported

that they made no sales of subject merchandise to the U.S. during the

POI, the companies did not take the opportunity to answer the ownership

and government control questions presented in the November 3, 1993,

survey and/or complete the Separate Rates attachment of the

Department's questionnaire, which the Department issued both to PRC

government agencies and directly to all but one\6\ of the ten

companies. The companies did not respond to the Department's requests

for factual information in an accurate and timely fashion. On the

contrary, the companies did not submit any factual information

pertaining to their respective ownership and control status to

demonstrate that they are eligible for a separate rate. Therefore, we

reject respondents' request to modify the ``all others'' rate for the

ten ``no-shipment'' companies.

---------------------------------------------------------------------------

\6\One company was not issued a questionnaire despite being

named in the petition because there was no indication that it had

shipped subject merchandise to the United States during the POI.

---------------------------------------------------------------------------

Comment 5: Double-Counting of Indirect Expenses in Manufacturers' FMV

Calculations

Respondents claim that the Department's preliminary calculation

includes the cost of chemical factor inputs used in the electroplating

stage of paper clip production both in the cost of manufacture (i.e.,

raw material valuation) and in factory overhead (which was based on an

industry-specific income statement in the Reserve Bank of India

Bulletin). Respondents believe that all materials, other than steel,

nickel and nickel sulfate, should be treated by the Department in its

final determination as indirect, not direct materials, According to

respondents, these remaining chemicals are used to bathe the unfinished

products during the electroplating stage and are not actually

incorporated into the finished product and, therefore, are properly

included in factory overhead. In support of this, respondents cite the

Final Determination of Extruded Rubber Thread from Malaysia (57 FR

38465, August 25, 1992) which stated that a particular input ``is

properly treated as variable overhead rather than a direct cost because

if is not part of the finished good.'' Specifically, respondents claim

that the factory overhead components of the income statement included

the item ``other manufacturing expenses.'' Respondents maintain that

although the income statement includes a separate line for ``raw

materials, components, etc. consumed'', it does not contain any similar

category for indirect materials. Respondents cite additional cases to

note the treatment of indirect materials in past NME cases and request

the Department to correct its calculation of cost of manufacture by

including only direct materials in the final determination.

Petitioners contend that the chemical materials used in the

electroplating process should be treated as direct materials in the

final determination because respondents have failed to provide any

evidence that double-counting actually did occur. Furthermore,

petitioners assert that respondents' argument that plating chemicals

are indirect materials is based on a faulty premise that the chemicals

are not physically incorporated into the finished product. According to

petitioners, the chemicals which form the bath used to plate the clips

are actually incorporated into the clips by ensuring the nickel remains

attached to the wire. Without these chemicals, the nickel would not

stay on the wire. Petitioners further cite several cases involving the

PRC where chemicals used in plating were valued as direct materials.

Petitioners request that the Department follow prior determinations and

treat plating chemicals as direct materials.

DOC Position

We agree with petitioners that the chemical inputs in the plating

process are direct materials because the chemicals are physically

incorporated into, and become part of, the finished product during the

plating process (see HSLW; Final Determination of Sales at Less than

fair Value: Chrome-Plated Lug Nuts from the People's Republic of China

(56 FR 46153, 10 September 1991) and Sparkers). There is no evidence on

the record to prove that the chemical inputs used in the plating

process are actually included in the factory overhead category of

``other manufacturing expenses.'' Therefore, we have treated the

chemical inputs as direct materials for the calculations in the final

determination.

Comment 6: Treatment of Chemical Inputs Having Lower Concentration

Levels

If the Department decides to value plating chemicals as direct

materials, respondents request the Department to adjust the surrogate

values of those chemicals (which respondents contend represent values

for undiluted products) to reflect verified actual concentration levels

of chemicals used by the manufacturers.

Petitioner argue that no authority exists for the Department to

adjust its surrogate value calculations to reflect the concentration

levels of chemical inputs used by the manufacturers because the

Department would have to make an assumption regarding the purity level

of the surrogate value selected. In this case, petitioners contend that

there is no information on the record to base the percentage of purity

of each of the published values.

DOC Position

The Department is faced with three options in determining the

appropriate purity concentration of the chemical factors in the Indian

Import Statistics: assume the value is based on 100 percent purity for

all factors; assume it is based on normal commercial strengths for

chemical factors, as stipulated in the Condensed Chemical Dictionary;

or assume the value is based on verified chemical strengths used by the

manufacturers in the plating process. Unlike in Sebacic Acid (which

petitioners cite for the prospect that the Department should not make

unsubstantiated assumptions about the purity of the Indian import

statistics for chemicals, information on the record in this

investigation provides us with the basis upon which to infer purity

percentages of Indian imports. Therefore, we have applied commercial

strengths based on the Condensed Chemical Dictionary as the most

reasonable method for valuing purity concentration of these chemical

factors for commercial use.

Comment 7: Surrogate Country Value for Nickel and Nickel Sulfate

Respondents contend that the surrogate values for nickel and nickel

sulfate used in the preliminary determination are unreasonable because

they represent a price which is approximately four times the

international market price of those inputs. Therefore, respondents

request the Department to revise its calculations for the final

determination to adjust the surrogate values for nickel and nickel

sulfate.

Petitioners assert that respondents have not standing to criticize

the use of the surrogate values since respondents failed to submit any

information on publicly available published information in a timely

manner, as requested by the Department. Moreover, petitioners contend

that in past cases involving the PRC, the Department has maintained

that to reject Indian surrogate values simply because respondents

allege that those values did not reflect world market prices would be

overly subjective on the part of the Department (HSLW, Final

Determination of Sales at Less Than Fair Value: Sulfanilic Acid from

the People's Republic of China (57 FR 29705, July 6, 1992)).

DOC Position

We used a value for non-alloy nickel bar in the preliminary

determination based on Indian Import Statistics. After consulting with

nickel specialists and conducting independent research, it was

discovered that unwrought nickel is the usual input for nickel plating.

Accordingly, we have thus use this value for nickel for our final

determination. In order not to overstate the value of nickel used in

the plating process of paper clips, we have used the basket category

for unwrought nickel in the Indian Import Statistics, to calculate the

surrogate value of nickel used in the plating process for the final

determination. Because we have learned nothing to call into question

the surrogate value used for nickel sulfate, the value used for that

factor remains unchanged.

Comment 8: Response Errors of ZMEC and ZLIP

Petitioners note the failure by ZMEC to report relevant sales

during the POI and to account for downward adjustments, such as related

bank charges and commission fees, to U.S. price. Specifically,

petitioner cite unreported bank transaction charges and three

unreported sales and their accompanying commission fees discovered

during ZMEC's verification. Petitioners request that the Department

account for these omissions and draw, when appropriate, adverse

inferences from respondents' failure to submit the aforementioned

information prior to verification.

Petitioners also suggest that bank transaction charges discovered

during ZLIP's verification require the Department to draw adverse

inferences.

Respondents contend that the omissions are minor and insignificant,

and are consistent in nature with minor errors found in virtually every

verification conducted by the Department. Therefore, respondents

conclude that there is no reasonable basis to warrant the use of

``adverse inferences'' in the final determination.

DOC Position

Petitioners are correct that unreported information discovered at

verification must be evaluated in terms of the relative seriousness of

the omission itself and to what extent its discovery calls into

question the integrity of the entire response. However, we agree with

respondents. The omissions are minor and do not significantly erode our

confidence in the integrity of ZLIP's or ZMEC's response. Accordingly,

the verified information related to these omissions has been used for

the final determination.

Comment 9: Use of Semi-Skilled Labor Rates for PRC Production of

Subject Merchandise

Petitioners assert that the Department should use the Indian value

for semi-skilled labor, rather than that of unskilled labor, in

determining the value of labor used to produce paper clips in the PRC.

Furthermore, according to petitioners, respondents have failed to

support their claim that all labor used in the process was unskilled is

not supported by any evidence on the record.

Respondents counter that verification of all three respondent

manufacturers revealed no discrepancies regarding labor in the forming

or electroplating workshops. Therefore, respondents conclude that the

record does not support petitioners' assertion that the Department

should use semi-skilled labor rates in the final determination.

DOC Position

We agree with respondents. Verification revealed no reason to infer

that respondents' used semi-skilled labor in the production of paper

clips. Further, even if we were to determine the use of semi-skilled

labor rates to be appropriate, petitioners provided no basis for

calculating a value for semi-skilled labor in the petition.

Comment 10: Use of Verified Packing Data

Respondents request that the Department use the packing amounts

verified at the manufacturers when calculating the manufacturers'

packing material expenses in the final determination. While packing

material and packing labor were verified at Jiaxing and Wuyi, only

packing labor was verified at Fengbin. Respondents request that the

Department use an average of packing materials data (from the other two

manufacturers), rather than punitive data, for the final determination

with respect to Fengbin's packing materials. Respondents assert that

the Department should grant this request since Fengbin provided

complete responses to the Department's questionnaires which were

substantially verified. Furthermore, according to respondents, the use

of an average of the verified packing material amounts would more

accurately reflect the experiences of the PRC manufacturers.

Petitioners request that the Department base its calculation of

packing expenses on surrogate value information or on information set

forth in the petition. In addition, since Fengbin failed to provide

verified packing material data during this investigation, petitioners

request that the Department use as BIA the information contained in the

petition for Fengbin's packing materials.

DOC Position

For Jiaxing and Wuyi, we have used the verified packing material

data. It is the Department's practice to use partial BIA to correct

minor data deficiencies. Fengbin's omission from its response of

packing material data constitutes such a deficiency. Therefore, we

continue to use the petition's packing material value as BIA for

Fengbin's packing expenses in the final margin calculations.

Continuation of Suspension of Liquidation

In accordance with section 733(d)(1) and 735(c)(4)(B) of the Act,

we are directing the Customs Service to continue to suspend liquidation

of all entries of paper clips from the PRC that are entered, or

withdrawn from warehouse, for consumption on or after May 18, 1994,

which is the date of publication of our notice of preliminary

determination in the Federal Register. The Customs Service shall

require a cash deposit or posting of a bond equal to the estimated

amount by which the FMV exceeds the USP as shown below. These

suspension of liquidation instructions will remain in effect until

further notice.

The weighted-average dumping margins are as follows:

------------------------------------------------------------------------

Margin

Manufacturer/Producer/Exporter percentage

------------------------------------------------------------------------

Lansheng.................................................. 57.64

ZLIP...................................................... 46.01

ZMEC...................................................... 60.70

All Others (including Abel)............................... 126.94

------------------------------------------------------------------------

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

International Trade Commission (ITC) of our determination. As our final

determination is affirmative, the ITC will determine whether these

imports are materially injuring, or threaten material injury to, the

U.S. industry within 45 days. If the ITC determines that material

injury, or threat of material injury does not exist, the proceeding

will be terminated and all securities posted will be refunded or

cancelled. If the ITC determines that such injury does exist, the

Department will issue an antidumping duty order directing Customs

officials to assess antidumping duties on all imports of the subject

merchandise entered, or withdrawn from warehouse, for consumption on or

after the effective date of the suspension of liquidation.

This determination is published pursuant to section 735(d) of the

Act of 19 CFR 353.20(a)(4).

Dated: September 30, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration

[FR Doc. 94-24935 Filed 10-6-94; 8:45 am]

BILLING CODE 3510-DS-M