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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-843]

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

Bicycles From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: April 30, 1996.

FOR FURTHER INFORMATION CONTACT: Katherine Johnson at (202) 482-4929,

Shawn Thompson at (202) 482-1776, or James Terpstra at (202) 482-3965,

Office of Antidumping Investigations, Import Administration,

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

Street and Constitution Avenue, N.W., Washington, D.C. 20230.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 by the Uruguay

Rounds Agreements Act (URAA).

Final Determination

As explained in the memoranda from the Assistant Secretary for

Import Administration dated November 22, 1995, and January 11, 1996,

the Department of Commerce (the Department) has exercised its

discretion to toll all deadlines for the duration of the partial

shutdowns of the Federal Government from November 15 through November

21, 1995, and December 16, 1995, through January 6, 1996. Thus, the

deadline for the final determination in this investigation has been

extended by 28 days, i.e., one day for each day (or partial day) the

Department was closed. As such, the deadline for this final

determination is no later than April 22, 1996.

We determine that bicycles from the People's Republic of China

(PRC) are being 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 ``Suspension

of Liquidation'' section of this notice.

Case History

Since the preliminary determination on November 1, 1995 (60 FR

56575, November 9, 1995), the following events have occurred:

On November 6, 1995, Bo An Bike Co., Ltd. (hereinafter Bo An),

CATIC Bicycle Co., Ltd. (hereinafter CATIC), Shenzhen China Bicycles

Co. (Holdings) Ltd. (hereinafter CBC), Giant China Co., Ltd.

(hereinafter Giant), Hua Chin Bicycle Co., Ltd. (hereinafter Hua Chin),

Merida Industry (Hong Kong) Co., Ltd./Merida Bicycle Co., Ltd.

(hereinafter Merida), Shenzhen Overlord Bicycle Co., Ltd. (hereinafter

Overlord), and Universal Cycle Corp. (hereinafter Universal) requested

a postponement of the final determination pursuant to 19 CFR 353.20. On

November 9, 1995, Chitech Industries, Ltd. (Hong Kong) (and affiliated

parties Tandem Industries, Ltd. (Hong Kong), Magna Technology Corp.

(Taiwan), Taiwan Tandem Co., Ltd. (Taiwan), and Shun Lu Bicycle Co.

(aka Shunde Tandem Bicycle Parts Company) (hereinafter Chitech) made a

similar request.

On November 9 and 20, 1995, respondents alleged clerical errors in

the preliminary determination. Also, on

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November 20, 1995, petitioners and all respondents, except Chitech,

requested a hearing. On December 4, 1995, the Department amended the

preliminary determination and postponed the final determination. (See,

Amendment to Preliminary Determination of Sales at Less Than Fair Value

and Postponement of Final Determination: Bicycles from the People's

Republic of China, 60 FR 64016 (December 13, 1995)).

In December, January, and February, we verified the respondents'

questionnaire responses. Additional published information (PI) on

surrogate values was submitted by petitioners and respondents on March

6, 1996. Petitioners and respondents submitted case briefs on March 26,

1996, and rebuttal briefs on April 2, 1996. A public hearing was held

on April 3, 1996.

On January 31 and February 5, 1996, Chitech and CBC, respectively,

requested that the Department reconsider its decision not to publish an

amended preliminary determination with respect to these two companies.

On February 9, 1996, these requests were denied.

Finally, the respondents have made numerous submissions requesting

that the Department rescind the investigation (See, Comment 7 in the

General Comments section below).

Scope of Investigation

The product covered by this investigation is bicycles of all types,

whether assembled or unassembled, complete or incomplete, finished or

unfinished, including industrial bicycles, tandems, recumbents, and

folding bicycles. For purposes of this investigation, the following

definitions apply irrespective of any different definition that may be

found in Customs rulings, U.S. Customs law, or the Harmonized Tariff

Schedule of the United States (HTSUS): (1) The term ``unassembled''

means fully or partially unassembled or disassembled; (2) the term

``incomplete'' means lacking one or more parts or components with which

the complete bicycle is intended to be equipped; and (3) the term

``unfinished'' means wholly or partially unpainted or lacking decals or

other essentially aesthetic material. Specifically, this investigation

is intended to cover: (1) Any assembled complete bicycle, whether

finished or unfinished; (2) any unassembled complete bicycle, if

shipped in a single shipment, regardless of how it is packed and

whether it is finished or unfinished; and (3) any incomplete bicycle,

defined for purposes of this investigation as a frame, finished or

unfinished, whether or not assembled together with a fork, and imported

in the same shipment with any two of the following components: (a) The

rear wheel; (b) the front wheel; (c) a rear derailleur; (d) a front

derailleur; (e) any one caliper or cantilever brake; (f) an integrated

brake lever and shifter, or separate brake lever and click stick lever;

(g) crankset; (h) handlebars, with or without a stem; (i) chain; (j)

pedals; and (k) seat (saddle), with or without seat post and seat pin.

The scope of this investigation is not intended to cover bicycle

parts except to the extent that they are attached to or in the same

shipment as an unassembled complete bicycle or an incomplete bicycle,

as defined above.

Complete bicycles are classifiable under subheadings 8712.00.15,

8712.00.25, 8712.00.35, 8712.00.44, and 8712.00.48 of the 1995 HTSUS.

Incomplete bicycles, as defined above, may be classified for tariff

purposes under any of the aforementioned HTSUS subheadings covering

complete bicycles or under HTSUS subheadings 8714.91.20-8714.99.80,

inclusive (covering various bicycle parts). The HTSUS subheadings are

provided for convenience and customs purposes. The written description

of the scope of this investigation is dispositive.

Period of Investigation

The period of investigation is April 1, 1994, through March 31,

1995.

Separate Rates

Four of the responding exporters in this investigation are located

outside the PRC. They are Merida, Giant, Hua Chin and Chitech. Further,

there is no PRC ownership of any of these companies. Therefore, we

determine that no separate rates analysis is required for these

exporters because they are beyond the jurisdiction of the PRC

government. (See, e.g., Final Determination of Sales at Less Than Fair

Value: Disposable Pocket Lighters from the People's Republic of China,

60 FR 22359, 22361, (May 5, 1995)).

The remaining five respondents are either joint ventures between

Chinese and foreign companies or are Chinese-owned companies publicly

traded on the Shenzhen stock exchange. They are CATIC, CBC, Overlord,

Universal, and Bo An. For these respondents, a separate rates analysis

is necessary to determine whether the exporters are independent from

government control.

To establish whether a firm is sufficiently independent from

government control to be entitled to a separate rate, the Department

analyzes each exporting entity under a test arising out of the Final

Determination of Sales at Less Than Fair Value: Sparklers from the

People's Republic of China, 56 FR 20588, (May 6, 1991) (Sparklers) and

amplified in the 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). Under the separate rates criteria, the

Department assigns separate rates in non-market-economy cases only if

respondents can demonstrate the absence of both de jure and de facto

governmental control over export activities.

1. Absence of De Jure Control

The respondent have placed on the administrative record a number of

documents to demonstrate absence of de jure control, including laws,

regulations, and provisions enacted by the State Council of the central

government of the PRC. Respondents have also submitted documents which

establish that bicylcles are not included on the list of products that

may be subject to central government export constraints. The Department

has reviewed these and other enactments in prior cases and has

previously determined that these laws indicate that the responsibility

for managing state-owned enterprises has been shifted from the

government to the enterprise itself (See, Silicon Carbide and Final

Determination of Sales at Less Than Fair Value: Furfuryl Alchohol from

the People's Republic of China, 60 FR 22544. (May 8, 1995) (Furfuryl

Alcohol)). In addition, as discussed in the Final Determination of

Sales at Less Than Fair Value: Certain Cased Pencils from the People's

Republic of China, 59 FR 55625, (November 9, 1994) (Pencils), the laws

governing share companies have not altered the devolution of control.

However, as stated in previous cases, there is some evidence that

the PRC central government enactments have not been implemented

uniformly among different sectors and/or jurisdictions in the PRC (See

Silicon Carbide and Furfuryl Alcohol). Therefore, the Department has

determined that an analysis of de facto control is critical in

determining whether respondents are, in fact, subject to a degree of

governmental control which would preclude the Department from assigning

separate rates.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental control of

its export functions: (1) Whether the export prices are set by or

subject to the approval of a governmental authority; (2) whether

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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 and Furfuryl Alcohol).

Each respondent has asserted and we verified the following: (1) it

establishes its own export prices; (2) it negotiates contracts, without

guidance from any governmental entities or organizations; (3) it makes

its own personnel decisions; and (4) it retains the proceeds of its

export sales, uses profits according to its business needs and has the

authority to sell its assets and to obtain loans. In addition,

respondents' questionnaire responses indicate that company-specific

pricing during the POI does not suggest coordination among exporters.

During verification proceedings, Department officials viewed such

evidence as sales documents, company correspondence, and bank

statements. Regarding personnel decisions, we reviewed such evidence as

the discussion of the selection of the board of directors in contracts

between joint venture companies and minutes from the board of director

meetings. This information supports a finding that there is a de facto

absence of governmental control of export functions. Consequently, we

have determined that the above-mentioned respondents have met the

criteria for the application of separate rates.

China-Wide Rate

Six of the mandatory respondents did not respond to the

questionnaire. Hence, we are applying a single antidumping rate to

these exporters as well as all other exporters of PRC-manufactured

bicycles based on our presumption that the export activities of these

respondents who failed to completely respond and to establish that they

meet the criteria for a separate rate are controlled by the PRC

government. (See, Comments 8 and 9 in the General Comments section

below).

Facts Available

Pursuant to sections 776(a) and (b) of the Act, we have based the

China-wide rate on facts available, using adverse inferences, because

the non-responding companies have failed to cooperate to the best of

their ability. Given that this margin involves data contained in the

petition, we are required to corroborate this data, to the extent

practicable, pursuant to section 776(c) of the Act. (See, also,

Statement of Administrative Action (SAA) at 200). We have identified

several major items (i.e., depreciation, interest, and profit, as well

as the factor values for frames, forks, and rims) contained in the

petition which individually comprise a significant portion of the

normal value (NV) calculations. We compared the data in the petition to

secondary data which includes but is not limited to the same type of

data used as the basis for the petition and the audited financial

reports of two of the largest Indian bicycle producers.

As a result of our analysis, we found that, with the exception

noted immediately below, the secondary information for these factor

values are comparable to those provided in the petition. Accordingly,

this petition information has been corroborated.

However, after analyzing the figure contained in the petition for

depreciation, interest and profit, we found, as did both petitioners

and respondents, that this figure does not reflect usual cost and

profit in the Indonesian bicycle industry. Specifically, the 1992

figure of 57.91 percent provided in the petition does not correspond

with the 1993 figure of 22.84 percent and the 1991 figure of 22 percent

provided by respondents on September 19 and 25, 1995. (For further

discussion see Memorandum to Barbara R. Stafford re: Factors Valuation

dated November 1, 1995). Therefore, we find that the 57.91 percent

figure is not corroborated (i.e., has no probative value in determining

depreciation, interest, and profit).

We have used the 1991 figure for depreciation, profit, and interest

in recalculating the margins in the petition. We did not use the more

current 1993 figure because the study containing it was issued only in

draft form.

Fair Value Comparisons

To determine whether sales of bicycles from the PRC to the United

States were made at LTFV, we compared Export Price (EP) and/or

Constructed Export Price (CEP) to the NV, as specified in the ``United

States Price'' and ``Normal Value'' sections of this notice.

United States Price

For all responding exporters, with the exception of CATIC, which

had only CEP sales, we based United States Price (USP) on EP in

accordance with section 772(a) of the Act, as the subject merchandise

was sold directly to the first unaffiliated purchaser in the United

States prior to importation and CEP methodology was not otherwise

indicated.

In addition, for Giant, CBC, CATIC, and Chitech, where sales to the

first unaffiliated purchaser took place after importation into the

United States, we based USP on CEP, in accordance with section 772(b)

of the Act.

We corrected respondents' data for errors and omissions found at

verification. See, Concurrence Memorandum and company-specific

calculation memoranda for details. In addition, we made company-

specific adjustments as follows:

1. Bo An

We calculated EP based on packed, FOB Hong Kong port prices to

unaffiliated purchasers in the United States. We made deductions from

the starting price, where appropriate, for foreign inland freight and

brokerage and handling (which includes containerization, documentation

fees, the Hong Kong terminal handling charge and PRC brokerage costs)

and Hong Kong duty. As all foreign inland freight and brokerage and

handling were provided by PRC suppliers, these services were valued in

India.

2. CBC

We calculated EP and CEP based on packed, delivered prices to

unaffiliated customers. Where appropriate, we made deductions from the

starting price for discounts and rebates and credit notes. We also made

deductions, where appropriate, for foreign inland freight, foreign

brokerage and handling, Hong Kong duty, U.S. freight and warehousing

expenses, ocean freight and marine insurance, and U.S. duty and harbor

fees. With the exception of foreign inland freight, movement charges

were provided by market-economy suppliers and paid for in market-

economy currency. Regarding foreign inland freight, this service was

provided by a PRC supplier. Accordingly, we valued this expense in

India.

Further, we made additions to CEP for interest revenue received

from the unaffiliated customers. In accordance with section 772(d)(1)

of the Act, we deducted from CEP the following expenses that related to

economic activity in the United States: commissions, direct selling

expenses, including advertising, warranties, and credit expenses, and

indirect selling expenses, including inventory carrying costs. Finally,

we made an adjustment for CEP profit in accordance with section

772(d)(3) of the Act. (See,

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Comments 1 and 2 in the General Comments section below.)

3. CATIC

We calculated CEP based on packed, FOB U.S. warehouse prices, or

delivered prices, to unaffiliated customers. We made deductions from

the starting price for discounts, where appropriate. We also made

deductions for foreign brokerage and handling, freight expenses, ocean

freight and marine insurance, U.S. brokerage and handling, and U.S.

duty and harbor fees. We deducted from CEP the following expenses that

related to economic activity in the United States: commissions, direct

selling expenses, including advertising, warranty, credit, and

repacking, and indirect selling expenses, including inventory carrying

costs. Finally, we made an adjustment for CEP profit in accordance with

section 772(d)(3) of the Act. (See, Comments 1 and 2 in the General

Comments section below.)

4. Giant

We calculated EP and CEP based on packed, FOB PRC port or CIF U.S.

port or delivered prices to unaffiliated purchasers. We made deductions

from the starting price, where appropriate, for the following: foreign

brokerage and handling, U.S. brokerage, international freight (which

includes U.S. inland freight), U.S. duty, loading and containerization,

and marine insurance (which also includes U.S. inland insurance, harbor

maintenance fees and merchandise processing fees). All of the above

expenses were provided by market-economy carriers and paid for in

market-economy currencies. We also deducted an amount for foreign

inland freight but since this service was provided by a PRC supplier,

we valued this expense in India. We also deducted from the starting

price, where appropriate, discounts and rebates.

In accordance with section 772(d)(1) of the Act, we deducted from

CEP the following expenses that related to economic activity in the

United States: direct selling expenses, including warranties,

advertising, and credit expenses, and indirect selling expenses,

including inventory carrying costs. Finally, we made an adjustment for

CEP profit in accordance with section 772(d)(3) of the Act. (See,

Comments 1 and 2 in the General Comments section below.)

5. Hua Chin

We calculated EP based on packed, FOB Hong Kong port prices to

unaffiliated purchasers in the United States. We made deductions from

the starting price, where appropriate, for foreign inland freight and

Hong Kong terminal handling fees. As all foreign inland freight and

handling fees were provided by PRC suppliers, these services were

valued in India.

6. Merida

We calculated EP based on packed, FOB Hong Kong port prices to

unaffiliated purchasers in the United States. We made deductions from

the starting price, where appropriate, for foreign inland freight and

brokerage and handling (which includes containerization, documentation

fees, the Hong Kong terminal handling charge and PRC brokerage costs)

and Hong Kong duty. As all foreign inland freight and brokerage and

handling were provided by PRC suppliers, these services were valued in

India.

7. Overlord

We calculated EP based on packed. FOB Hong Kong port prices to

unaffiliated purchasers in the United States. We made deductions from

the starting price, where appropriate, for foreign inland freight,

brokerage and handling and Hong Kong duty. As all foreign inland

freight and brokerage and handling were provided by PRC suppliers,

these services were valued in India.

8. Chitech

We calculated EP based on packed. FOB Hong Kong prices and CEP

based on packed, duty-paid, FOB U.S. warehouse prices to unaffiliated

customers. Were appropriate, we made deductions from the starting price

for various discounts. We also made deductions for foreign brokerage

and handling, freight, Hong Kong import and export fees, terminal

handling fees, ocean freight and marine insurance, U.S. brokerage and

handling, and U.S. duty and harbor fees.

In accordance with section 772(d)(1) of the Act, we deducted from

CEP the following expenses that related to economic activity in the

United States: commissions, direct selling expenses, including

advertising, warranties, and credit expenses, and indirect selling

expenses, including inventory carrying costs. Finally, we made an

adjustment for CEP profit in accordance with section 772(d)(3) of the

Act. (See, Comments 1 and 2 in the General Comments section below.)

9. Universal

We calculated EP based on packed, FOB Hong Kong or FOB Huangpu port

prices to unaffiliated purchasers in the United States. We made

deductions from the starting prices for foreign inland freight, which

was provided by a PRC supplier and therefore was valued using Indian

surrogate values. In addition, we deducted from the FOB Hong Kong

prices terminal handling charges, document fees, import/export

declaration fees, handling fees and courier fees.

Normal Value

In accordance with section 773(c) of the Act, we calculated NV

based on factors of production reported by the responding exporters.

Where an input was sourced from a market economy and paid for in

market-economy currency, we have used the actual price paid for the

input to calculate NV, when possible, in accordance with Department

practice. See, Lasko Metal Products v. United States, 437.3d 1442, 1443

(Fed. Cir. 1994) (Lasko).

In instances where inputs were sourced domestically, we valued the

factors using PI from India where possible. Where appropriate Indian

values were not available, we used PI from Indonesia.

Valuation of Bicycle Parts and Components

As in our preliminary determination, we valued certain parts and

components purchased by some respondents in the PRC, using the average

market-economy prices reported by other respondents for the same part

or component, as discussed below. However, unlike in our preliminary

determination, we used the average actual market-economy price reported

by the other respondents rather than the ranged public version of those

prices. We did this because we determined that the manner in which the

actual prices were ranged, i.e., either higher or lower, could

potentially introduce distortion into the calculation. (See, Comment 3

in the General Comments section below).

The nine responding exporters reported that they purchased a large

number of different components (e.g., brake sets) and sub-components

(e.g. brake arms) for use in assembling finished bicycles. The vast

majority of these purchased inputs are sub-components. These inputs,

both components and sub-components, vary in terms of material

composition (e.g., carbon steel versus aluminum), size, design (e.g.,

cantilever versus side-pull brakes), and other relevant physical

characteristics.

Some inputs were purchased from market-economy suppliers and paid

for in convertible currency. Following our normal practice, we used the

actual price paid for these inputs, where

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possible. However, where the input was not purchased from a market-

economy supplier and paid for in a market-economy currency, it was

necessary to develop a surrogate value.

For certain components and sub-components, differences in material

content and design result in large price differentials. For example,

there is a substantial difference in the price of a frame tube made

from high-tensile steel versus one made with chrome-molybdenum;

therefore, using a surrogate value for a frame tube of high-tensile

steel would unreasonably distort the calculation of NV for a bicycle

with a chrome-molybdenum frame. In reality, for certain components, a

specific design or material composition can result in a distinctly

different input.

With respect to the factors of production methodology, the Court of

Appeals has noted that ``there is much in the statute that supports the

notion that it is Commerce's duty to calculate margins as accurately as

possible and to use the best information in doing so.'' See, Lasko.

Therefore, to minimize distortions and ensure the most accurate margin

calculation possible, we developed a hierarchy for selection of

surrogate values for parts and components based on the need for

specificity with respect to design or material composition or both. Our

first choice under that hierarchy is to use data from India (e.g., the

component prices from the Delhi Market Report) or Indonesia (e.g., the

average unit values from the Indonesian study) if it is specific with

respect to design and material composition or if we could not

determine, based on the evidence, whether significant variations in the

price data stemmed from design or material composition. Where design or

material composition appeared to have a significant impact on price but

design or material-specific data was not available in a surrogate

country, we used the average actual market-economy prices from market-

economy suppliers to the PRC. However, we used this data strictly as a

second alternative to design- or material-specific data from India or

Indonesia, where available.

In one instance, a respondent reported factors of production for a

number of piece-parts produced by its affiliated supplier, e.g., fork

arms. We did not value those subcomponents because we had no factor

values for fork arms. Instead, we valued the smallest component that

incorporated these sub-components, e.g., completed fork set.

Other Factor Valuations

Where possible, we used public information for the surrogate

values. The selection of the surrogate values was based on the quality

and contemporaneity of the data. Where possible, we attempted to value

material inputs on the basis of tax-exclusive domestic prices. As

appropriate, we adjusted input prices to make them delivered prices.

For those values not contemporaneous with the POI, we adjusted for

inflation using wholesale price indices or, in the case of labor rates,

consumer price indices, published in the International Monetary Fund's

International Financial Statistics. For a complete analysis of

surrogate values, see the Factors Calculation Memorandum to Barbara R.

Stafford from the team, dated April 22, 1996.

To value caustic soda, methylene dichloride, zinc hydroxide, oxalic

acid, sulfuric acid, nitric acid, chromic nitric acid, tartaric acid,

and sodium carbonate we used public information from POI issues of the

Indian publication Chemical Weekly. For chromic anhydride, various

phosphates, various chromates, sodium bichromate, dimethyl benzene, and

acetylene and carbon dioxide, we relied on POI import prices contained

in Monthly Statistics.

Regarding sodium bichromate, sodium chromate, and potassium

chromate, we could not find POI prices for these exact inputs.

Therefore, we used a POI import price based on a basket category

containing chromates and dichromates in Monthly Statistics to value

these inputs. For dimethyl benzene, we obtained a price for a similar

chemical from Monthly Statistics.

To value argon gas and oxygen, we relied on 1994 Indonesian price

data in the Statistical Bulletin because we could not locate a price

from Indian publications.

With regard to hydrochloric acid, we relied on a 1993 Indian export

price quote from Chemical Weekly because the prices for this input in

other known Indian publications are based on an Indian import category

that is not exclusive to hydrochloric acid (See, Final Determination of

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

China, 59 FR 66895 (December 28, 1995.))

We valued degreaser using information from the only known Indian

publication which contained such a price, The Analyst's Import

Reference 1993, Chemical & Pharmaceutical Products (The Analyst).

We valued paint using Indian price data from Monthly Statistics. We

could not find a material price for solvent (thinner) from publicly

available information. Therefore, we used Indian price data from

Monthly Statistics for a similar chemical, which also dilutes paint.

To value diesel fuel, we used a POI Indian price from the

publication AP Worldstream. To value liquefied petroleum gas, we used a

POI price from the periodical Financial Times of India.

For the valuation of electricity, we used an average 1992

industrial rate from the publication Current Energy Scene in India

because this publication contained data more contemporaneous to the POI

than other known publications.

With regard to labor, we used data from the United Nations'

publication Yearbook of Labor Statistics. Following the method

established in the Final Determination of Sales at Less Than Fair

Value: Polyvinyl Alcohol from the PRC, 61 FR 14062 (March 29, 1996)

(PVA), we find no basis to assume the skill level of the surrogate

value, nor do we have agreement among parties regarding use of this

labor rate for skilled and unskilled labor rate assumptions. Thus, we

applied a single labor value to all reported labor factors, including

indirect labor (See Comment 18 below for further discussion).

To value scrap metal, we relied on Indian data from Monthly

Statistics. We treated the scrap metal as a by-product and deducted its

value from the cost of manufacture (COM) for CBC, Chitech, Giant,

Merida, and Overlord. This adjustment was not appropriate for the

remaining respondents.

For nuts and bolts and screws, we used product-specific published

prices contained from the Indonesian publication Indonesian Foreign

Trade Statistics for Imports (See Comment 17 below for further

discussion).

For certain subcomponents we had no published prices or publicly

ranged market prices from which to choose. Therefore, we valued these

specific components based on the content of material (e.g., steel ,

plastic or rubber). To value components made of steel, we used an

average tax-exclusive 1994 domestic steel price from the Indian

publication Statistics for Iron and Steel. For components made of

plastic and/or rubber, we used Indian price data from Monthly

Statistics.

To value factory overhead, SG&A, and profit, we calculated simple

average percentages based on the data from the four financial

statements of Indian surrogate producers which are contemporaneous with

the POI, i.e., Atlas, Hero, Gujurat and TI. We made certain adjustments

to the percentages calculated as a result of reclassifying

[[Page 19031]]

expenses contained in the financial reports. We calculated a simple

average of the profit ratios for the three Indian surrogate producers

which were profitable during the POI. We also included the profit ratio

of a fourth company; however, we set this additional profit ratio to

zero because this company was not profitable during the POI (See

Comment 15 below for further discussion).

Finally, to value the packing materials, corrugated cartons,

uncorrugated cartons, bubble wrap/foam paper, staples, adhesive tape,

rope, packing paper, polypropylene, polyethylene, recycled plastic

cups, inner recycled paper boxes, and plastic bags, we relied on Indian

data from Monthly Statistics. To value glue, we used an average price

based on Indian price data for two types of glue products from the

publication Chemical Weekly.

Critical Circumstances

For purposes of the preliminary determination, we determined that

critical circumstances existed only with respect to Hua Chin. However,

the margin for Hua Chin in the amended preliminary determination was de

minimis; in effect, making this issue moot for Hua Chin. Since this

amended determination we have not received any information which would

cause us to reconsider our analysis. Because Hua Chin's final margin is

also de minimis, this issue continues to be moot.

Verification

As provided in section 782(i) 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

General Comments

Comment 1: CEP Deductions and COS Adjustments

According to petitioners, the plain language of Section 772(d) of

the Act requires the deduction of all selling expenses from CEP in the

calculation of USP. Petitioners assert that the CEP deduction is not

contingent upon whether circumstance of sale (COS) adjustments or an

offset to NV can be made. Moreover, petitioners note that CEP offsets

are no longer automatic under the new law. In line with this argument,

petitioners claim that no level of trade (LOT) adjustment or CEP offset

is warranted in the instant investigation because the record does not

demonstrate that NV is at a more advanced LOT than CEP. However, should

the Department decide to make an adjustment, petitioners provide their

own calculation showing that this should equal 0.096 percent of COM.

Furthermore, petitioners contend that the Department should make

COS adjustments for EP sales, and assert that the Department can

differentiate between direct and indirect selling expenses in both the

United States and surrogate data if certain assumptions are made.

However, petitioners maintain that, if the Department believes that it

is difficult to segregate all direct from indirect expenses for EP

sales, at a minimum the Department should adjust for U.S. commissions.

Respondents argue that no deduction for CEP selling expenses should

be made. Respondents state that such a deduction would blatantly

disregard the Department's stated policy concerning selling expenses in

non-market-economy (NME) cases. Specifically, respondents contend that,

as in past cases, the financial statements used to determine surrogate

SG&A do not distinguish between direct and indirect selling expenses.

Consequently, respondents assert that any adjustment made for purposes

of calculating an offset would require an arbitrary division of these

expenses among direct and indirect selling, G&A, and manufacturing

expenses. As precedent on this issue, respondents cite Final

Determination of Sales at Less Than Fair Value: Oscillating Fans and

Ceiling Fans from the People's Republic of China, 56 FR 55271, (October

25, 1991); Final Determination of Sales at Less Than Fair Value:

Refined Antimony Trioxide From the People's Republic of China, 57 FR

6801 (Feb. 28, 1992); and Final Determination of Sales at Less Than

Fair Value: Certain Helical Spring Lock Washers From the People's

Republic of China, 58 FR 48833 (Sept. 20, 1993).

However, respondents state that, if a CEP deduction is made, the

Department should not add selling expenses to NV. Respondents maintain

that the Department has the authority to disregard selling expenses

because the language of the NME provision of the statute only requires

an addition for general expenses. Nonetheless, respondents maintain

that, if selling expenses are added to NV, the Department should make a

corresponding offset, capped by the amount of the CEP deductions.

Finally, for the same reasons that the data on the record of this

case is not suitable for calculating adjustments to NV, respondents

contend that this data is likewise unusable for purposes of making COS

adjustments.

DOC Position: Regarding the necessity of making CEP deductions, we

have reevaluated our practice in this area and have concluded that CEP

deductions are required by the plain language of the statute, which

states in section 772(c)(2)(d) that CEP ``shall be reduced'' by the

selling expenses associated with economic activity in the United

States. The statute provides no exception for cases involving non-

market-economy countries. Consequently, we have made deductions to CEP

for all selling expenses associated with economic activity in the

United States, in accordance with our practice. (See, e.g., Preliminary

Determination of Sales at Less Than Fair Value and Postponement of

Final Determination: Certain Pasta from Italy, 61 FR 1344, (January 19,

1996)) (Pasta). However, we disagree with petitioners that we should

deduct those U.S. selling expenses incurred in third country markets

which are not associated with selling activity occurring in the United

States. The SAA makes it clear that we only adjust for selling expenses

associated with economic activity in the United States. SAA at 153.

Regarding making an offset to NV, we disagree with respondents that

an offset to NV is required in this case. While the statute requires

certain adjustments to USP, corresponding adjustments to NV are only

required upon a sufficient showing that differences exist justifying

the adjustment. See section 773(a)(7). In this case, the only

information we have about selling expenses is the financial statements

of the Indian producers. These do not specify whether Indian home

market sales are at any particular LOT or include any particular

selling expenses. Therefore, we do not have any basis upon which to

determine whether any adjustment to the surrogate expenses is

appropriate.

We disagree with petitioners' argument that COS adjustments are

required by the statute. Rather, section 773(a)(6)(C) allows NV to be

increased or decreased for differences in circumstances of sale as long

as ``it has been established to the satisfaction of the administering

authority'' that such adjustments are warranted. Given the imprecise

nature of the information about selling expenses in the record in this

case, we have no basis to conclude that such adjustments are warranted

in this case.

Finally, regarding respondents' argument that we should not add

selling expenses to NV because the statute only references general

expenses, we disagree. We have always interpreted

[[Page 19032]]

the term general expenses to refer to selling, general, and

administrative expenses. Accordingly, we included selling expenses in

NV, as is our normal practice.

Comment 2: Profit Deduction from CEP Sales

In addition to deducting selling expenses from CEP, petitioners

contend that the plain language in section 772(d) of the Act also

requires that profit be deducted from CEP. Petitioners suggest that

this deduction be based on the profit of the surrogate producers and

the ratio of CEP deductions to total U.S. expenses.

The record of this investigation does not contain sufficient

information to calculate actual total profit because, according to

respondents, there is no information on actual manufacturing costs and

overhead. Accordingly, respondents argue that no deduction for profit

should be made.

DOC Position: We agree with petitioners. Section 772(d) of the Act

requires the Department to make a deduction for profit associated with

CEP selling expenses. Section 772(f) of the Act specifies that, in

general, this calculation involves both U.S. and home market total

sales, costs, and expenses. In making this calculation in market-

economy cases, we have included respondent's home market sales, cost,

and expense data in this calculation, See, e.g., Pasta. However, in

this case we have no home market sales upon which to base this

calculation. Instead, we only have usable financial statements of four

Indian surrogate producers. In attempting to perform this calculation,

we found that there were numerous difficulties in accurately combining

the total sales, total cost, and total expense data from these

financial statements. This is because these data are expressed in

different ways on each financial statement, making any attempt to

combine them problematic. Given these difficulties, we determined that

petitioners' approach is the most reliable and consistent with the

manner in which this calculation is performed in market-economy cases.

This approach avoids the difficulties in combining data from the

financial statements because the variables are consistently and readily

identifiable across the four financial statements. See also

``Concurrence Memo'' for a complete discussion of this issue.

Comment 3: Publicly Ranged Market-Economy Prices

Petitioners agree with the basic methodology used by the Department

in the preliminary determination for valuing bicycle components.

However, petitioners maintain that the Department's use of average

publicly-ranged market-economy prices had the effect of allowing

respondents to introduce ``distortions'' into the factor values in the

manner in which the prices were ranged. Petitioners argue that the

Department should use prices for valuing bicycle components that allow

the most accurate margin calculation possible. Petitioners maintain

that no proprietary information will be disclosed as long as the

Department releases margin calculations under administrative protective

order (APO), as was done for the preliminary determination.

Chitech argues that an adjustment to the publicly ranged market-

economy prices would violate confidentiality. The other respondents

argue that petitioners' suggestion would violate 19 CFR 353.32(f)

because it would result in the unauthorized release of data to

companies that did not submit that information. Respondents further

argue that parties would be denied their right to disclosure because

the Department could not disclose such information to them.

Moreover, respondents contend that the current publicly-ranged

market-economy prices used by the Department already penalizes

companies. Respondents assert that some companies would purchase a

component from a domestic source, rather than a market-economy source,

if the domestic source offered the identical component at a lower

price. However, for these domestic purchases, the Department, by

assigning such prices, i.e., the public versions of presumably higher

market-economy prices, as used in the preliminary determination,

ascribes to that component a higher price than the companies may

actually incur. Respondents maintain that using petitioners suggestion

to value Chinese-sourced components would only increase this penalty.

In addition, respondents state that the Department has developed a

preference for using PI to derive factor prices. Respondents maintain

that they have submitted publicly ranged versions of their proprietary

factors of production databases in accordance with the Department's

instructions and 19 CFR 353.32(b)(1). Finally, respondents argue that

neither the Department nor petitioners claimed that the publicly-ranged

prices did not conform to the regulations.

DOC Position: We agree with petitioners that the use of

respondents publicly-ranged prices allows the possibility of

distortions caused by the manner in which respondents ranged these

prices. Respondents were aware of our intention to use the public

versions of these prices in our factor valuations prior to the

preliminary determination. We discussed this issue with them when

explaining the requirements of our additional request for information

related to the special coding instructions for parts and components. We

agree with petitioners that it is appropriate to use actual average

prices for the margin calculations. However, before determining whether

the average of the actual prices could be released publicly, we

analyzed the data sources to satisfy ourselves that no proprietary

information would be released.

For each input price under analysis, we considered the number of

companies reporting a price for that input and whether one or two

companies' relative volume of market-economy purchases were

significant. These factors allowed us to determine to our satisfaction

whether any one company could derive the actual prices reported by

other respondents (i.e., proprietary data). In performing this

analysis, we considered, among other things, the approach to this issue

employed by the International Trade Commission (ITC).\1\ However, we

modified this approach to fit the unique circumstances of this

investigation. We took this approach because there are instances in

which proprietary data would be divulged and it would be too burdensome

to make public versions of all documents which incorporate the

proprietary prices. Accordingly, we classified all the average market-

economy price data as proprietary and will release it to the

appropriate parties under APO.

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

\1\ According to the ITC approach, generally, it would not be

feasible for any one company to determine the actual price as long

as three or more respondents purchase the same component from

market-economy suppliers. However, in situations where one

respondent accounts for 75 percent of the quantity of a given

component, the data is considered proprietary. In addition, in

situations where two respondents account for 90 percent of the

quantity of a given component, that data is considered proprietary.

See, memo from analyst to file regarding this practice dated April

8, 1996.

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

Comment 4: Transfer Prices

At verification we discovered that three respondents, Hua Chin,

Universal and Overlord, had reported the transfer prices of their

affiliates (which included a markup for freight, expenses, and profit)

instead of the price paid to the unrelated supplier. Respondents

contend that because the transfer prices were always higher then the

prices paid to the unrelated supplier, it follows that these prices

must be considered by the

[[Page 19033]]

Department to have been made at arm's length and should not be

adjusted.

Although three respondents reported transfer prices, petitioners

only addressed Overlord. Petitioners argue that the component prices

reported by Overlord do not include those general and administrative

expenses incurred by Overlord Taiwan and NaiYu, its other affiliate, in

purchasing the same components. As such, petitioners maintain that

Overlord understated the actual costs of components from these

suppliers by not accounting for these expenses. Therefore, petitioners

argue that the Department should not adjust these prices downward to

account for the mark-up.

DOC Position: We agree with both petitioners and respondents. Hua

Chin, Universal, and Overlord each reported the price paid to an

affiliate which had purchased certain parts from unaffiliated

suppliers. Regarding Hua Chin, it pays its Taiwan affiliate a service

fee for certain component purchases to cover freight, expenses, and

profit. However, company officials were unable to provide separate

freight invoices showing how much of the service fee was attributable

to freight, other expenses, or profit. Regarding Universal and

Overlord, we found at verification that the prices reported by both

companies were conservative, in that they cover the price from the

unaffiliated supplier plus the affiliated supplier's freight costs and

profit, if applicable. However, we do not know the exact amount of the

price that is applicable to freight costs, expenses, and profit.

Therefore, we made no adjustment to the transfer prices reported by Hua

Chin, Universal, and Overlord, and have used them in our margin

calculations.

Comment 5: Third Country Selling, General, and Administrative Expenses

(SG&A)

Regarding the SG&A expenses incurred by the Hong Kong and Taiwan

affiliates of respondents, petitioners argue that such expenses cannot

be used to build NV because their use would result in an understatement

of these expenses. Petitioners argue that the respondents also incur

significant expenses selling at the factory in the PRC. Because such

expenses are incurred in RMB, they cannot be combined with market-

economy currency expenses incurred by the affiliates. If the Department

used the affiliates' SG&A, it could not also use the PRC-incurred

selling expenses. Therefore, petitioners argue that the Department must

use the SG&A expenses of the Indian surrogate producers. However,

petitioners argue that COS adjustments must be made for particular line

items in affiliates' financial statements, such as commissions, which

they argue should be considered as direct selling expenses.

Chitech argues that the Department cannot lawfully use the SG&A

expenses of the offshore affiliates because these do not fit into the

statutory scheme. Chitech argues that the statute requires the

Department to value SG&A in a surrogate country.

DOC Position: We agree that the SG&A expenses of the offshore

affiliates should not be used for calculating NV. In non-market-economy

cases our practice is to value factors of production using the prices

actually paid by a respondent for inputs purchased from a market-

economy producer and paid for in a market-economy currency. This

practice has been used primarily to value material inputs. However, at

the outset of this investigation, we considered using the ``actual''

market-economy expenses of the Hong Kong and Taiwan affiliates to

calculate NV. We also considered using the selling portion of the

affiliates' SG&A to make COS adjustments to NV in both CEP and EP

situations. On September 28, 1995, prior to the preliminary

determination, we issued supplemental SG&A questionnaires to the

respondents and subsequently verified the information contained in the

responses. After analyzing and verifying this SG&A information, we have

identified several problems, discussed below, which cause us to

conclude that use of such data would not enhance the accuracy or

fairness of our calculations.

The first problem involves double counting SG&A. Each of the nine

respondents incur SG&A expenses at their factories in the PRC.

Therefore, in addition to using the affiliates' market-economy SG&A

expenses to construct NV, we would also have to use surrogate data to

value the portion of SG&A incurred in the PRC. To do so, we would have

to determine the appropriate portion of the surrogate SG&A ratio to use

(i.e., that portion concerning the PRC factory incurred selling

expenses) to avoid over-valuing the SG&A element in NV. Although we can

identify both the SG&A ``activities'' performed at the respondents'

factories and the SG&A ``activities'' performed by the respondents'

affiliates, we are not able to use this information to identify the

portion of total surrogate SG&A expenses that should be used to value

SG&A expenses incurred at the factories.

The second problem is in finding the appropriate cost of sales over

which to allocate SG&A. The Department's practice is to express the

SG&A element in NV as a percentage of the cost of sales. In order to

derive this percentage from the affiliates, we used the affiliates'

cost of goods sold. However, we encountered several problems with this

methodology. We were not able to compute an SG&A ratio for one of the

affiliates because it did not report any product costs (cost of sales)

in its financial statement. In addition, the product costs of the other

affiliates include both costs incurred to purchase the product from the

factory in China (costs generally denominated in RMB) and costs

incurred in market economies. Thus, the SG&A ratios derived from the

affiliates are not ratios solely of market-economy expenses and,

therefore, it may not be appropriate to use these ratios.

The Department uses actual market-economy inputs wherever possible

in NME cases because we believe this enhances the accuracy of our

calculations. Given the numerous difficulties described above, we do

not believe the use of these expenses would enhance the accuracy of our

calculations in this case. Therefore, we did not use the affiliates'

SG&A information to construct NV, and instead, used the Indian

producers' surrogate data. In addition, we find that the affiliates'

data is also not usable for making COS adjustments as suggested by

petitioners, for the same reasons discussed above (See, Comment 1

above. See, also, Concurrence Memorandum, dated April 22, 1996, for

further discussion.)

Comment 6: Price Averaging

Respondents state that the Department's preliminary determination

limited averaging to an inappropriately narrow range of products.

Respondents claim that the illustration cited in the SAA regarding

averaging NVs for ``each size of television...'' demonstrates that the

Department's use of control numbers for averaging NV was too narrow of

a basis. The Department should calculate average prices over

``comparable merchandise'' as defined by bicycles of identical type,

wheel size, and number of gear speeds. Respondents claim that these

factors were identified by the ITC as the most important determinants

of price differences among bicycles. Respondents further state that

petitioners used the above factors to segregate different classes of

bicycles for purposes of alleging dumping margins.

Furthermore, respondents argue that control numbers are not an

acceptable method for determining ``comparable merchandise'' for

purposes of averaging

[[Page 19034]]

because of the many working components contained on a bicycle.

Respondents state that using control numbers to define ``comparable

merchandise'' nullifies the intent of the averaging provision because

it limits its application to instances in which prices would not vary

in the first place.

Petitioners contend that the SAA language cited by respondents

actually expresses concern that televisions of different physical

characteristics not be subject to a single average, but rather, be

averaged separately. Petitioners state that the proposed regulations

identify averaging groups as consisting of ``subject merchandise that

is identical or virtually identical in all physical

characteristics....'' Petitioners state that, for the preliminary

determination, the Department followed the approach described by the

proposed regulations, the statute, and the SAA in averaging products by

control numbers.

Further, petitioners suggest that the Department narrow the

averaging categories even further for the final determination.

Petitioners state that the mass merchandisers should be segregated from

the independent bicycle dealers (IBDs) in the averaging groups, based

on the customer codes set forth in the computer program, in order to

ensure that the sales with the same physical characteristics and same

class of customer are averaged together. However, petitioners also

state that, by averaging U.S. prices based on a number of discrete,

physical characteristics, the Department has to a large extent ensured

that it is also comparing bicycles in the same customer class because

bicycles sold to mass merchandisers often will be of lower

specifications than bicycles sold to IBDs.

DOC Position: We agree with petitioners. It has been long-standing

Department practice to average NV using as specific a basis as

available (i.e., control numbers). See, Final Determination of Sales at

Less Than Fair Value: Polyvinyl Alcohol from Taiwan, 61 FR 14065 (March

29, 1996) and Pasta. Respondents' argument is that we should ignore

differences in material composition and/or quality level of components.

Respondents would have us average the prices of a 21-inch bicycle with

a chrome-molybdenum frame with the same size bicycle with a carbon

steel frame. Similarly, respondents would have us average the price of

a bike with an expensive, sophisticated Shimano derailleur with a bike

with an inexpensive derailleur. Clearly, the different costs associated

with frame material composition and componentry are important to

consider in price averaging. Furthermore, we are unable to confirm

petitioners' assertion that there is more than one LOT or class of

customer due to lack of evidence on the record. Therefore, we averaged

NV by control number, as in the preliminary determination.

Comment 7: Initiation of This Investigation

In previous submissions to the Department, respondents' claim that

petitioners had access to Indian data and information on export prices

of bicycles which was more accurate than the Indonesian data and U.S.

retail pricing data provided in the petition. As such, they claim that,

pursuant to instructions of the U.S. Court of International Trade, the

Department was told to ``continue to explore'' whether the initiation

of this investigation was proper and to develop ``a final reviewable

record'' on this issue.

Respondents state that the Department failed to develop a complete

administrative record of the circumstances surrounding the initiation

of this antidumping investigation as directed by the U.S. Court of

International Trade instructions in China Bicycle Co. (Holdings) Ltd.,

et. al. v. United States, et. al. (Ct. No. 95-11-01426). Specifically,

respondents state that the Department should have reexamined the retail

price calculations alleged in the petition as well as the export price

information in the possession of petitioners at the time the petition

was filed.

DOC Position: We disagree with respondents. Respondents' requests

for termination of this investigation is based on a fundamental

misunderstanding of the initiation process in the context of the

overall antidumping statutory scheme. The evidentiary standard for

initiation is ``information reasonably available to the petitioner

supporting those allegations.'' 19 U.S.C. 1673a(b)(1)(1995). Inherent

in this standard is the understanding that petitioners generally will

have very limited access to foreign firms' pricing practices. As a

result, petitioners will not usually be in a position to determine if

foreign firms, on an overall weight-averaged basis, are dumping.

Pursuant to the statute and regulations, petitioners merely have to

support their dumping allegations with evidence that any sale is dumped

in order for the Department to initiate an investigation. The statute

assigns the task of performing the overall weight-averaged dumping

calculations to the Department. The Department has the authority,

pursuant to the statute, to request and analyze respondent's actual

data to determine if the respondents are dumping. Respondents, in turn,

have the opportunity to provide their information to demonstrate that

on a weight-averaged basis they are not dumping.

This does not mean, however, that petitioners need merely allege

dumping in order for the Department to initiate an antidumping duty

investigation. The Department's regulations state that the petition

shall contain ``[a]ll factual information (particularly documentary

evidence) relevant to the calculation of the United States price of the

merchandise and for the foreign market value of such or similar

merchandise.'' 19 C.F.R. 353.12(b)(7). We interpret this regulation

consistent with the evidentiary standards in the statute, i.e., the

petition must contain evidence reasonably available in support of the

allegation. Thus, all information ``relevant to the calculation of USP

and NV'' is interpreted to mean evidence supporting each element of the

calculation in the petition. This regulation is not interpreted as

imposing a stricter evidentiary standard than is provided for in the

statute. As discussed below, the petition met that statutory standard.

In this case, the Department determined that the information in the

petition constituted a reasonable basis upon which to initiate.

Moreover, the Department carefully examined respondents' subsequent

challenges to the petition data and, as a result, has made some

adjustments to the petition calculations. However, none of the

respondents' allegations justified termination of the investigation on

the basis that the petition was inadequate.

In calculating the export prices contained in the petition,

petitioners obtained U.S. retail prices and made adjustments for

retailer's gross margin, importer selling expense, and movement

charges, to estimate an ex-factory price. Respondents have not

provided, and the Department has not encountered, any evidence to

indicate that any of the retail prices and subsequent adjustments were

in anyway flawed or inaccurate.

Instead, respondents' challenge rests on the fact that petitioners

did not include in the petition the actual export price for one of the

petitioner's few purchases of Chinese bikes. However, as discussed

above, the fact that some sales may not have been sold at LTFV does not

invalidate the petition evidence that other sales were. In addition,

these purchases were not of the same types of bikes upon which the

petition calculations were based and, therefore,

[[Page 19035]]

do not challenge the data upon which the dumping allegation was based.

Respondents' further argument that certain FOB Hong Kong prices

contained in the petition should have been used instead of the retail

price information is not persuasive. As petitioners point out in their

submissions, there are significant problems with these figures, not the

least of which is that the record does not indicate the models with

which those prices are associated.

On the NV side of the margin allegation, the Department examined

respondents' allegations that the factors of production were improperly

valued. Respondents argued that petitioners should and could have

reasonably provided data from India instead of Indonesia because the

Indian data was reasonably available, and in respondent's view, India

was a more appropriate surrogate. Once again, respondents' argument is

unpersuasive. The statute does not require petitioners to investigate

and supply in the petition all possible surrogate data from all

potential surrogate countries. Petitioners are required to base their

factors of production analysis on values in an appropriate surrogate

country as defined by the statute. Petitioners selected Indonesia as

the primary surrogate based on their analysis that Indonesia was

economically comparable and a significant producer of bikes. The

Department reviewed their analysis and determined that Indonesia was an

appropriate surrogate country for the basis of a petition. In fact,

when the Department conducted its own surrogate country analysis, it

determined that both Indonesia and India were appropriate surrogate

countries. Although the Department did ultimately select India as the

primary surrogate (see, Factors Valuation Memo dated November 1, 1995),

that does not invalidate Indonesia as an appropriate surrogate. Indeed,

in this final determination, as in the preliminary determination, the

Department resorted to Indonesian values when Indian values were not

available.

Respondents also challenged the validity of certain factor values,

including the Indonesian depreciation, interest, and profit (value

added) figures. During the course of the investigation, updated

information demonstrated that the Indonesian depreciation, interest and

profit percentage used in the petition was aberrant and, as a result,

the Department adjusted these Indonesian figures. The original

depreciation, interest, and profit figures in the petition was

substantiated by a 1992 Indonesian Survey of the Indonesian bike

industry. The updated figures for 1993, which demonstrated that the

1992 figure was aberrational, were not available at the time of filing.

Thus, the 1992 figure was relevant information reasonably available to

the petitioner at the time of filing and provided a valid basis upon

which to initiate. We further note that the adjustment to the

depreciation, interest and profit figures did not eliminate the

petition margins. The Department was able to corroborate the other

petition data challenged by the respondents and, thus, made no

adjustment to them. See, Facts Available section above.

Finally, contrary to respondents' argument, the Department's

actions have been consistent with its statutory obligations as noted by

the Court during the hearing for respondents' interlocutory appeal of

the initiation issue. In reaching its final determination, the

Department has examined all of the submissions of both respondents and

petitioners on this subject and determined that none of the information

or arguments submitted by respondents provide a basis upon which the

Department should initiate a further investigation of the petition or

terminate the investigation.

Comment 8: China-Wide Rate--Adverse Facts Available

Respondents argue that the Department resorted to sampling in this

investigation and, therefore, the Department should apply the

provisions of Section 735(c)(5) of Act to calculate an antidumping duty

rate for all uninvestigated firms. Section 735(c)(5) of the Act,

``Method for determining all other rate,'' provides that this rate

should be the weighted average of margins established for exporters and

producers investigated individually, excluding margins that are de

minimis and margins that are based on ``facts available.'' Respondents

assert that the law precludes the Department from applying punitive

rates to uninvestigated firms, except in certain limited circumstances

that are not applicable in this investigation. According to

respondents, the Department's preliminary determination violated

Section 735(c) of the Act because it based the ``all others'' rate for

uninvestigated firms on adverse information from the petition.

Furthermore, respondents contend that the fact that this

investigation involves a non-market economy does not change the

prohibition against the use of punitive rates for uninvestigated firms.

Respondents argue that the Department has never informed the Chinese

government, industry representatives or any uninvestigated exporters

that they have failed to cooperate. According to respondents,

uninvestigated firms in non-market-economy cases are entitled to the

same fair treatment as uninvestigated firms in market-economy cases.

Respondents state that neither the sampling provision of the Act nor

Section 735(c) provides an exception for non-market economies.

Moreover, respondents argue that the Court of International Trade has

directed in UCF America, Inc. v. United States (No. 92-01-00049, Feb.

27, 1996) (UCF) that the ``all others'' calculation be applied without

distinction to market or non-market-economy investigations.

Petitioners argue that, contrary to respondents' claim, the

Department did not apply an ``all others'' rate. Rather, petitioners

note that the Department applied a ``China-wide'' rate, in accordance

with its well-established methodology in NME cases, including basing

the rate on adverse facts available.

DOC Position: We disagree with respondents. Respondents' statement

with respect to the Department's method of respondent selection is

incorrect. As noted in the respondent selection memorandum (see the

June 30, 1995, Memorandum to Barbara R. Stafford), the Department did

not resort to sampling when choosing mandatory respondents for this

investigation. Accordingly, the sampling provision of the Act regarding

uninvestigated firms does not apply here.

The Department acknowledges a recent decision of the Court of

International Trade, UCF America Inc. v. United States, Slip Op. 96-42

(CIT February 27, 1996), in which the Court affirmed the Department's

remand results for reinstatement of the relevant cash deposit rate, but

expressed disagreement with use of the ``PRC-wide'' rate as the

underlying basis for reinstatement.

The Court suggested that the Department lacks authority for

applying a ``PRC-wide'' rate in lieu of an ``all others'' rate. We

note, however, that section 777(A)(c) requires the Department to

determine individual dumping margins for each known exporter or

producer. Pursuant to this authority, the Department implements a

policy in NME cases whereby all exporters or producers are rebuttably

presumed to comprise a single exporter under common government control,

the ``NME entity.'' The Court has upheld our NME policy in previous

cases. See e.g., UCF America, Inc. v. United States, 870 F. Supp. 1120,

1126 (CIT 1994); Sigma Corp. V. United States, 841 F.

[[Page 19036]]

Supp. 1255, 1266-67 (CIT 1993); Tianjin Machinery Import & Export Corp.

V. United States, 806 F. Supp. 1008, 1013-15 (CIT 1992).

The ``NME-wide'' rate is consistent with section

735(c)(1)(B)(i)(I). This provision directs the agency to assign a

dumping margin for each exporter or producer individually investigated.

As discussed above, in NME cases, all producers and exporters comprise

a single exporter. Thus, we assign a single NME rate to the NME entity

just as we assign a single rate to exporters or producer in a market

economy that are deemed to comprise a single enterprise. Also, as in

all cases in which multiple exporters are treated as a single entity,

the response normally must include data for all companies that comprise

the collapsed entity. If any company fails to respond, the entire

entity receives a rate based on facts available.

To qualify for a separate rate, an NME exporter or producer must

provide a complete questionnaire response, including evidence showing

both de jure and de facto absence of government control. See Silicon

Carbide. Until such evidence is presented, a company is presumed to be

part of the NME entity and receives the ``NME-wide'' rate.

Consequently, whenever the NME enterprise has been investigated or

reviewed, calculation of an ``all others'' rate under section

735(c)(1)(B)(i)(II) is unnecessary because all exporters or producers

either qualify for a separate company-specific rate, or are part of the

NME enterprise, and receive the ``NME-wide'' rate. Thus, normally in an

NME case, there can be no exporters or producers who have not been

investigated or reviewed. Only when the respondents in an investigation

account for all exports and all respondents qualify for a separate rate

is an ``all others'' rate required. See PVA. Under those circumstances,

the NME entity has not been investigated and, pursuant to the statute,

would be entitled to an ``all others rate.''

Application of our NME policy to the instant investigation is

consistent with the Department's standard practice in NME cases. The

official copy of the questionnaire was sent to MOFTEC, an agency of the

PRC government. The cover letter of the questionnaire stated our long-

standing policy that the Department presumes that a single antidumping

margin is appropriate for all exporters in an NME country. However,

because of the large number of companies potentially comprising the NME

entity, we requested that the response include only the nine largest

companies. We issued the questionnaire to those nine largest exporters.

We also notified the government that we might be able to investigate a

limited number of voluntary respondents wishing to claim separate rates

treatment, but only if they submitted complete questionnaire responses.

We provided courtesy copies of the questionnaire to law firms and

companies who contacted us. In addition, the cover letter also laid out

our policy on voluntary respondents (see below), and we enclosed with

the questionnaire a copy of our respondent-selection memorandum.

Regarding our position on voluntary respondents, the Department

informed respondents at the onset of this investigation that due to a

lack of resources, we would only be able to investigate nine individual

producers/exporters. We addressed the issue of voluntary responses in

our respondent-selection memorandum, stating we would investigate and

verify voluntary responses on a ``space available'' basis, up to the

number of any non-responding firms from the list of the nine mandatory

respondents. We further indicated that if the number of voluntary

respondents was larger than the Department could investigate, we would

select randomly from the pool of voluntary respondents the additional

exporters to be investigated.

On August 7, we received responses from only three of the nine

exporters named as mandatory respondents. We also received only six

full voluntary questionnaire responses. All of the participating

companies established that they qualified for separate rates and have

received their own dumping margins for purposes of the final

determination. Because the six non-responding mandatory respondents are

presumed to be part of the single NME enterprise, that entire NME

enterprise is deemed to be uncooperative and it received a rate based

on adverse facts available. Any company that did not submit a full

questionnaire response, including information establishing entitlement

to a separate rate, is also deemed to be part of the NME enterprise

and, therefore, is subject to that rate.

Comment 9: China-Wide Rate--Submission of Section A by Exporters

Respondents contend that, even if the Department finds that the

amendment of Section 735(c) of the Act does not change the Department's

practice in NME cases, the presumption of control has been rebutted

successfully by a group of 12 uninvestigated Chinese exporters. They

argue that these 12 exporters have cooperated with the Department, and

have expressed their intention to provide any information the

Department requires in order to determine a separate rate for them.

Respondents believe that it would be unfair and contrary to law for the

Department to apply punitive margins against the 12 uninvestigated

companies.

In addition, respondents argue that the Department should accept as

timely submissions made by the 12 exporters showing their entitlement

to a separate rate. According to respondents, these submissions were

timely because the Department did not establish any specific deadline

for the submissions and, therefore, the general deadlines of 19

C.F.R.353.31 should apply.

Even assuming the 12 exporters' voluntary submissions were

untimely, respondents argue that the Department has no grounds to use

adverse information against these companies. Respondents assert that

Section 735(c)(5) of the Act does not require a company to request to

be a voluntary respondent in order to avoid the application of an

adverse rate. Furthermore, respondents argue that Section 735(c) of the

Act and the Court's ruling in UCF require that these exporters receive

a rate based on the weighted-average margin of investigated companies.

Finally, respondents argue that the lack of guidance in this

investigation stands in contrast to the instructions issued in the

antidumping duty investigation on honey from the PRC (see, Preliminary

Determination of Sales at Less Than Fair Value: Honey from the PRC, 60

FR 14725, March 20, 1995, (Honey)) where the Department requested

MOFTEC to transmit the questionnaire to ``all companies that process

honey for export to the United States and to all companies that were

engaged in exporting honey to the United States during the period of

investigation. . . .'' Respondents claim that the Department did not

issue these instructions in the instant investigation.

Petitioners assert that, contrary to respondents' claim, the 12

exporters have not cooperated in this investigation because they

ignored the Department's clear directive and submitted only partial and

untimely questionnaire responses. In addition, petitioners assert that

respondents have mischaracterized the Court's decision in UCF, stating

that the Court in that case did not rule on the issue of whether the

Department is allowed to use an adverse ``PRC-wide'' rate in an

investigation, but rather whether, in the course of an administrative

review, the Department was required to apply to unreviewed PRC

exporters the ``all others'' rate established in the original

investigation. In addition, petitioners note that UCF

[[Page 19037]]

concerned pre-URAA law. Petitioners assert that under the URAA, the

Department may apply a China-wide rate to companies that have not

established their entitlement to separate rates in an investigation.

DOC Position: We disagree with respondents. The information

submitted by the 12 exporters at issue was not a sufficient basis upon

which the Department could determine that these companies should

receive rates separate from the China-wide rate. The companies merely

provided volume and value data through a China Chamber of Commerce.

This submission did not include a request for separate rates treatment

from any of these exporters, nor did it provide information sufficient

to demonstrate that they were entitled to separate rates. Moreover,

although these exporters subsequently filed full Section A

questionnaire responses which included explicit claims for separate

rates treatment, these Section A responses were submitted two months

late. The cover letter to the questionnaire clearly identified the

deadline for submission of section A responses from any party wishing

to participate in the investigation as August 7, 1995. Because no

request for extension of this deadline was made by these parties, their

Section A responses were untimely under 19 C.F.R. 353.31.

Furthermore, in order to perform a separate rates analysis, the

Department needs to have not only the Section A separate rates

questionnaire response but also complete pricing data from each

exporter. The separate rates analysis focuses on the relationships

between exporters and the government, export prices and who sets them,

and control over export revenue. While the Section A response may

contain information on the ownership and control structures of the

entities being examined, the Department must also have complete pricing

data in order to analyze whether export pricing and business decisions

of a NME exporter are being made at the direction of the NME

government. As we stated above, the Department has never granted a

separate rate to any exporter without first receiving a full

questionnaire response. See e.g., Honey.

Therefore, by not submitting complete questionnaire responses in a

timely manner, these exporters failed to provide the Department with

the information necessary to perform a separate rates analysis. In

addition, by not placing the necessary pricing information on the

record, petitioners were denied the opportunity to examine the

responses and comment on whether it was appropriate for these exporters

to obtain separate rates. As a result, the 12 companies at issue do not

qualify for separate rates and therefore are considered to be part of

the single NME enterprise.

Similarly, the exporters' argument that the Department should base

their margin on a weighted-average of the margins calculated for the

responding companies is without merit. See Comment 8. The only

situation where the Department would apply a weighted-average margin to

an NME exporter not specifically investigated is one in which the

exporter provides a complete questionnaire response and makes a claim,

and establishes eligibility, for separate rates. (See e.g., Honey.) In

Honey, unlike in this case, the Department received 28 complete

questionnaire responses. The Department only had the resources to fully

analyze and verify four of those companies selected from the pool of

exporters which submitted complete responses. Thus, petitioners had the

opportunity to comment on all 28 responses. The Department applied the

weighted-average rate calculated for the four selected respondents to

the other 24 exporters which the Department did not have the resources

to fully investigate. The Department explained that:

This change in methodology was necessitated by the particular

circumstances of this case. The parties who responded but were not

analyzed have applied for separate rates, and provided materials for

the Department to consider in this request. Although the Department

is unable, due to administrative constraints, to consider the

request for separate rates status, and to calculate a separate rate

for each of these named parties, there has been no failure on the

part of these firms to provide requested information. Because it

would not be appropriate for the Department to refuse to consider an

affirmative documented request for an examination of whether these

companies were independent of any non-respondent firms and then

assign to the cooperative firms the rate for the noncooperative

firms, which in this case is an adverse margin based on best

information available, the Department has assigned a special single

rate for these firms.'' See, Honey at 14729.

In this case, as discussed above, the 12 companies at issue did not

provide complete questionnaire responses and therefore do not qualify

for separate rates.

Regarding the exporters' arguments that the Department did not

provide sufficient guidance on this issue, we find that this argument

is contrary to the evidence in the record. In the cover letter to the

questionnaire and respondent selection memorandum, we stated explicitly

the Department's long-standing practice of treating all NME exporters

or producers as part of the NME government unless otherwise

demonstrated. In addition, all communications from the Department to

the PRC government and counsel for respondents clearly states all

deadlines and instructs respondents to contact the Department if they

have any questions regarding deadlines or any data requested. Courtesy

copies of the questionnaire, the cover letter, and the respondent

selection memorandum were provided to counsel for the 12 exporters. The

Department, with the Honey case in mind, further indicated in the

respondent selection memorandum that, even though we did not have the

resources to investigate more than nine companies, if mandatory

respondents did not respond we would be able to examine additional

exporters randomly selected from the voluntary responses received. In

the respondent selection memorandum we clearly stated that if we

received more responses than we could reasonably investigate and verify

we would have to address the issue of what rate to apply to the

responses we were unable to investigate. However, in this case, we were

able to investigate and verify all of the responses received and,

accordingly, did not have to address this issue.

By not providing complete questionnaire responses, the 12 exporters

did not make themselves available for analysis in the event that a

mandatory respondent did not respond. It was not reasonable for those

exporters at issue to assume that they should receive special treatment

separate from other companies presumed to be part of the NME entity

when the record demonstrates that they were informed of the

consequences of not requesting a separate rate in a timely manner.

Finally, the exporters' assertion that they provided all the

information requested by the Department and thus qualify for a rate

other than the country-wide rate misinterprets the Department's non-

market economy single entity presumption. As explained above, the

Department assumes that all companies are part of the NME entity unless

the companies satisfy the Department that they qualify for a separate

rate. The burden is on the exporters to come forward and demonstrate

that they are entitled to separate rates. It is not incumbent upon the

Department to ask for separate rates responses, as these exporters'

arguments seem to suggest. It is up to each company to decide whether

it wishes to seek a separate rate. In this case, these

[[Page 19038]]

companies did not submit a separate rates claim until well after the

deadline for doing so had passed. Based on the above analysis, we are

treating these exporters as part of the government controlled entity.

Comment 10: Calculation of Antidumping Rate for Uninvestigated

Exporters on Facts Available in the Petition

If the Department bases the antidumping rate for uninvestigated

exporters on facts available in the petition, respondents assert it

should use only Indian surrogate values for overhead, SG&A, and profit.

Respondents argue that the Department should not use any of the

Indonesian surrogate values used in the petition because the Department

has rejected Indonesian in favor of Indian surrogate values.

Respondents argue that the Department had no justification for using

the rejected Indonesian information for these cooperating exporters,

and that for purposes of the final determination the Department should

apply the most recent Indian data in any calculations based on facts

available for other uninvestigated shippers.

Petitioners agree with respondents that in the event the Department

does apply facts available to these exporters, it should use only

Indian surrogate values for overhead, SG&A, and profit.

DOC Position: As discussed above in the Facts Available section,

Indonesia is an appropriate surrogate and, with the exception of

depreciation, interest and profit, the Indonesian factor values in the

petition have been corroborated. Therefore, the petition rate, as

adjusted, is appropriate for use as adverse facts available.

Comment 11: Business Taxes Paid on Exports

At verification, we found that Tandem Hong Kong (Tandem HK),

Chitech's Hong Kong affiliate, pays a fee to the Shunde government for

operating within the Shunde township. This fee is based on a percentage

of the value of all sales.

According to petitioners, this fee should be considered an export

tax and deducted from USP, in accordance with 772(a)(2)(B) of the Act.

Chitech maintains that the Department should make no adjustment for

this fee because the statute requires the Department to disregard the

costs of goods and services provided by NME suppliers. In addition,

Chitech points out that the Department has never treated payments to

the PRC government as selling expenses.

DOC Position: We disagree with petitioners that this fee should be

considered an export tax or that it should be deducted. In fact, our

analysis of Chitech's questionnaire response and review of this expense

at verification suggests that this fee is more analogous to a business

license fee or an income tax, rather than a tax levied solely on

exports. We do not adjust for intra-NME transfers.

Factor Valuations

Comment 12: Indian Producer Financial Statements

Petitioners argue that the Department should not use the financial

reports of Hero or Atlas because, according to the publication Cycle

Press, Hero and Atlas produce primarily roadster-type bicycles rather

than the MTB and ATB bicycles which PRC producers ship overwhelmingly

to the United States. In addition, Hero and Atlas only export 10 and 13

percent of their production, respectively. Petitioners point out that

under the Statute and Department's proposed antidumping regulations,

the Department is required to use surrogate value data from only those

market-economy firms that are significant producers of merchandise that

is identical or the most similar to that produced by the respondents

under investigation. Therefore, petitioners maintain that the

Department should use only the financial reports of Gujarat, TI Cycles

(TI) and Roadmaster because these companies are largely export-oriented

companies and predominately manufacture MTB and ATB bicycles.

Respondents maintain that the Department should use the combined

financial reports of Hero, Atlas and Gujurat. Respondents point out

that the Department cannot use the financial data of Gujurat without

using the data of Hero and Atlas because Gujurat (1) is considered a

``sick industrial'' company by the Indian government; (2) receives

subsidies from the Indian government; and (3) is not representative of

the Indian industry as a whole.

Respondents contend that the Department should reject TI's

financial report because TI only receives 50 percent of its income from

the sale of bicycles and because it produces a wide range of other

products, notably steel tubes. Respondents also maintain that the

Department should not rely on Roadmaster's financial report because the

report is not contemporaneous with the POI and because the Department

has financial reports it can use which are contemporaneous with the

POI. Respondents also argue that the Department should ignore the

submitted statement of a Hero company official because (1) it is not

public information; (2) it lacks credibility; and (3) it is self-

serving.

DOC Position: We disagree with respondents and petitioners and have

used the financial statements of the four Indian producers which are

contemporaneous with the POI--Atlas, Hero, Gujurat, and TI. This case

is unique in that there is a wealth of high-quality surrogate data,

particularly with respect to factory overhead, SG&A and profit. The

parties have argued, for a variety of reasons, that we should reject

certain companies' from consideration. However, we find that on

balance, the financial statements of four of the India surrogate

producers are usable for our factor valuations. We rejected the fifth

company's report, Roadmaster, because it was not contemporaneous with

the POI and because we already have four good sources which contain

data within the POI.

Regarding similarity of the merchandise produced by the Indian

producers to that of the PRC respondents, we find insufficient evidence

that any producer clearly produces the most comparable merchandise. It

is possible that the Hero, Atlas and Gujurat models shown in Bicycle

Guide may not be of as high a quality as those models produced by TI

(as alleged by petitioners). However, these models do contain basic

components, designs and features associated with BMX and ATB models

which resemble, or are exactly the same, as those in the PRC models

produced by respondents. Therefore, based on data in Cycle Press and

Bicycle Guide, we conclude that all five companies to some extent

manufacture the type and quality of bicycles produced by the

respondents during the POI.

With regard to the issue of who exports the highest percentage of

its merchandise, we disagree with petitioners that the amount of

exported production of each Indian producer is a clear indication of

which company is a significant producer of the merchandise under

investigation. The information in Cycle Press does not allow the

identification of the specific quantity of bicycle types exported by

each Indian producer for overseas sale. However, we can establish from

this publication that each of the five companies exports its full line

of products to foreign markets. Although we do not know for certain

whether these companies export all of the BMX, ATB, and/or MTB bicycles

that they produce, it is reasonable to conclude that these models

produced in India are designed primarily and/or exclusively for export

markets and that the number of these bicycles sold in

[[Page 19039]]

India's domestic market is minimal. Therefore, there is no basis in the

record to conclude that one company produces more comparable

merchandise. As such, this data is not relevant to our choice of

surrogate values.

With regard to the financial condition of the companies, Gujurat

was not profitable during the POI based on its financial report. We

know that the other Indian producers were profitable based on their

financial reports. Whether or not a company is profitable, however, is

not necessarily a reason for rejecting that company's data for purposes

of surrogate valuations for factory overhead and SG&A expenses. See,

also Comment 16.

In addition, we disagree with respondents that TI's data is

unusable because it produces some non-subject merchandise. The other

Indian producers also produce non-subject merchandise, albeit to a

lesser extent. Most Indian producers, like TI, produce steel tubes (a

bicycle input). Given these facts, we cannot conclude that the use of

TI's data is inappropriate.

Based on the above analysis, we have used the 1994-1995 financial

data of Hero, Atlas, TI, and Gujurat. We have excluded from our

analysis Roadmaster's data because it is not contemporaneous with the

POI and other contemporaneous data is available.

Comment 13: Average Method for Calculating Surrogate Percentages

Respondents claim that the Department should calculate a weighted-

average factory overhead, SG&A and profit of each Indian producer.

Respondents contend that, unlike in PVA, there is a clear correlation

between the costs and production quantities for all of the Indian

bicycle producers.

Petitioners maintain that using a weighted- average method would

imply that the production experience of larger producers like Hero and

Atlas would be more relevant than that of smaller producers like

Gujurat or Roadmaster. Instead, petitioners claim that it is the

experience of the smaller producers that is more representative of, and

better reflects, the factors of production for the products made by the

PRC respondents. Petitioners also point out that in PVA, the Department

found no indication that one factor (i.e., sales volume or production)

was so important that it would require the use of weighted-average

methodology.

DOC Position: We agree in part with petitioners. The use of

production quantities from the financial data to derive weighted-

average percentages will take into account the differences between the

production capacity and sales associated with the largest Indian

producers (Hero, Atlas and TI) and the capacity and sales of

significantly smaller operations such as Gujurat. The respondents show

data suggesting the factory overhead percentages for the largest

producers, Hero and Atlas, are measurably lower than the percentages

for the significantly smaller producer (Gujurat) and that there may be

inverse relationship between the factory overhead, SG&A and profit

ratios and production. However, a myriad of other factors could also be

affecting these ratios. For example, the age of the factory, the

quality of the merchandise being produced, and the relative capital

intensivity of the manufacturing process could all affect the ratios

under consideration. Moreover, not all of the PRC respondents are

large-scale producers like the Indian producers Hero and Atlas. In

fact, we find that the total production of the largest PRC producer is

significantly less than the total production amount of either Hero or

Atlas.

Finally, we do not know the relative amount of MTB or ATB

production included in each Indian producer's total bicycle production,

as compared with the production of utilitarian roadsters. This is

important because the PRC respondents produce predominantly MTB or ATB

bicycles for export to the United States.

Given these facts, there is no basis to conclude that a weighted-

average calculation would be a more accurate measure of the costs of

Indian surrogate producers of comparable merchandise. Therefore, we

used a simple average of these financial statements consistent with our

normal practice because, barring evidence to the contrary, we assume

that all of these surrogate values are equally representative of the

surrogate experience.

Comment 14: Calculating Surrogate Percentages from TI's Financial Data

Respondents maintain that the Department should exclude from TI's

financial report the expense data separately reported for two TI

subsidiaries which do not produce bicycles and which are consolidated

into TI's report. Alternatively, respondents argue that the Department

should use a ratio based on the amount of bicycle sales in terms of

total sales to determine the allocable factory overhead, SG&A, and

profit associated with bicycles exclusively. Finally, respondents urge

the Department to remove the excise duty amounts from TI's SG&A expense

calculation because the tax is a neutral item, bicycles are exempt from

the tax, and Indian law allows any Indian producer to recover this duty

amount.

Petitioners maintain that TI's financial data reasonably reflects

the performance of its bicycle division and is corroborated by the

similar financial experience of other Indian producers such as Gujurat

and Roadmaster. Moreover, petitioners maintain that the Department

should not make an adjustment to the expense data in TI's financial

report because TI's report is unconsolidated and therefore does not

include expense data from its two subsidiaries. Finally, petitioners

maintain that the Department should not exclude the excise duty from

the factory overhead or SG&A calculation because TI records this

expense in its financial report as an expense and that other Indian

producers such as Hero, Roadmaster and Gujurat account for the excise

duty liability in their financial reports by treating the duty as an

expense.

DOC Position: Respondents' claim that we should deduct the

``separately reported'' expenses of TI's subsidiaries is unsupported.

We examined the financial statements for TI's two subsidiaries and

found that expenses of TI's subsidiaries are not provided separately.

In addition, there is no evidence establishing that TI's report is a

consolidated statement that includes the subsidiaries. Indian Generally

Accepted Accounting Principles (GAAP) do not require Indian companies

to consolidate financial reports. Moreover, it appears from PI we

obtained that, in general, Indian companies do not prepare consolidated

financial statements (See World Accounting (1995) (page 44) and

International Accounting Summaries (1993) (page 5)). Therefore, we are

using the data in TI's financial report without any adjustment for the

subsidiaries' expenses.

Regarding the excise tax amount, we are removing the duty and/or

tax amount listed in TI's financial report when calculating its

surrogate percentages because it is the Department's practice to use,

if possible, tax exclusive values as surrogates in NME cases (See,

Final Determination of Sales At Less Than Fair Value: Disposable Pocket

Lighters from the PRC, 60 FR 22359 (May 5,1995) and Final Determination

of Sales At Less Than Fair Value: Sebacic Acid from the PRC, 59 FR

280053 (May 31, 1994)). Moreover, we have found in previous cases

involving products from India that excise duties and/or taxes paid by

Indian producers were refundable to the

[[Page 19040]]

producer by the Indian government (See, Final Determination of Sales at

Less Than Fair Value: Stainless Steel Bar from India, 59 FR 66915

(December 28, 1994)). Therefore, we have not only removed the amount of

excise duty and/or tax from TI's financial data, but also from the

financial data of the other Indian producers, where possible, which we

have used to calculate surrogate percentages.

Comment 15: Gujurat's Profit Percentage

Petitioners maintain that the Department should not use the profit

percentage derived from Gujurat's financial data in the overall profit

percentage calculation because Gujurat's profit percentage is negative.

Respondents assert that the Department should calculate a weighted

average profit percentage using Gujurat's actual financial data.

DOC Position: Consistent with how constructed value (CV) is

calculated in market-economy cases, we conclude that in selecting a

surrogate value for profit under section 773(c)(1), it is inappropriate

to use data from sales made below the cost of production. Gujurat's

negative profit indicates that the company may be selling its product

below the cost of production. Therefore, we have treated Gujurat's

negative profit ratio as zero, but have included the zero amount when

calculating the overall surrogate profit average.

Comment 16: Treatment of Pre-Painting Chemicals

In the preliminary determination, we valued all chemicals used to

produce the subject merchandise because we considered such materials to

be direct inputs and not part of factory overhead. Respondents argue

that the chemicals it uses to pre-treat parts prior to painting are not

material inputs, but rather factory overhead costs (i.e., consumables).

Respondents point out that it is Department practice to treat such

chemicals, which act as a cleaning detergent, as part of factory

overhead because these chemicals are not physically incorporated into

the subject merchandise (see Final Results of Administrative Review:

Heavy Forged Handtools, Finished or Unfinished, With or Without

Handles, from the People's Republic of China, 60 FR 49251 (September

22, 1995)(Hand Tools). Alternatively, respondents state that an amount

for ``consumables'' is noted in the financial reports of the Indian

producers used to calculate percentages for factory overhead, SG&A and

profit and that if the Department includes the ``consumables'' amount

in its factory overhead calculation, then the Department should not

value the chemical inputs reported in the Section D database because it

would be double-counting.

Petitioners maintain that the chemicals the respondents use are not

detergents applied to the parts to remove oxidation or dirt but

chemicals used to pre-treat parts prior to painting which are

incorporated into the subject merchandise. Therefore, petitioners

maintain that these chemicals are direct materials and should be valued

accordingly. Petitioners are silent on whether valuing the chemicals

would be double-counting if the Department included in its factory

overhead calculation an amount for ``consumables.''

DOC Position: We agree with petitioners. We examined all of the

respondents' production processes at verification and found that the

chemicals in question are essential for producing the finished product

and are incorporated into the product (i.e., in pre-treating the

components, the chemicals permeate the components and are not

completely washed off). These chemicals appear to be significant inputs

into the manufacturing process rather than miscellaneous or

occasionally used materials, i.e., cleaning supplies which might

normally be included in consumables. Moreover, the chemicals which we

would be valuing are chemicals such as hydrochloric acid, sulfuric

acid, and caustic soda (to name a few) which we have routinely valued

in prior NME cases involving the production of non-chemical finished

products (e.g., lock-washers). Therefore, we treated these chemicals as

direct material inputs. We considered that such significant material

inputs would not normally be considered consumables and, therefore, no

double counting would occur.

Comment 17: Fasteners and Chainguard Screws

In the preliminary determination, we valued fasteners and

chainguard screws using an average import value from the HTS

subcategory ``other screws and bolts with nuts or washers threaded''

from Monthly Statistics (April 1993-March 1994).

Respondents claim that the average value we used from Monthly

Statistics was aberrational as it is based on a basket category of

import statistics which includes other products. Therefore, respondents

urge the Department to use Indonesian surrogate values for nuts and

bolts. The respondents cite Final Determination of Sales at Less Than

Fair Value: Certain Partial-Extension Steel Drawer Slides with Rollers

From the People's Republic of China, 60 FR 54472, 54477 (October 24,

1995) (Drawer Slides) and the Final Determination of Sales at Less Than

Fair Value: Sulfur Dyes, Including Sulfur Vat Dyes, from the PRC, 58 FR

7537, 7540 (1993) in support of their argument.

Petitioners claim that the respondents have not demonstrated that

the average value the Department used from Monthly Statistics is

aberrational, or why the statistical category for ``other screws and

bolts with nuts or washers threaded'' is not the best information

available. Moreover, petitioners assert that the per kilogram average

price of the material to value the chainguard screws and fasteners

should not be used without accounting for the labor, overhead, and

other costs necessary to produce the finished part, e.g., a screw.

Therefore, petitioners contend that the Department should continue to

use the value from Monthly Statistics to value chainguard screws and

fasteners.

DOC Position: We agree with respondents that the value used in the

preliminary determination was a basket category. We have recently found

two sources of Indonesian PI which are more specific to these two

different inputs, fasteners and screws. These sources are

contemporaneous with the POI and are more specific to the factor inputs

we are trying to value. Accordingly, we used these sources to value

fasteners and screws for purposes of the final determination. See,

Factor Valuation Memo dated April 22, 1996.

Comment 18: Labor

In the preliminary determination, we used a 1990 labor rate

applicable for laborers working in the Indian transport equipment

sector noted in Yearbook of Labor Statistics (YLS) to value skilled,

unskilled and indirect labor. Respondents claim that the Department

should use instead the labor rate applicable for Indian laborers

working in the sector called ``manufacture of fabricated metal

products, except machinery and equipment.''

DOC Position: We disagree with respondents. We have no reason to

believe that the Indian transport equipment sector does not include

bicycle production and, therefore, that the rate we used in the

preliminary determination does not capture the wages paid to the

laborers in the Indian bicycle industry.

Fabricated metal products could include a host of products other

than bicycles. Moreover, since the respondents have not provided

concrete evidence that bicycle production is included in the fabricated

metal

[[Page 19041]]

products sector or not included in the transport equipment sector,

there is no basis to change our calculation.

Common Company-Specific Comments

Unreported Sales

Comment 19: Unreported EP Sales--CBC

At verification, we discovered that CBC failed to report a small

number of EP sales to the United States. Petitioners argue that the

Department should base the final margin for these sales on facts

available. They state that CBC had sufficient time to amend the U.S.

sales listing, but did not do so. As facts available, they advocate

using the highest reported amounts for charges and expenses contained

in CBC's EP sales listing. (The price information is contained in a

verification exhibit.)

CBC agrees that the Department should apply facts available to

these sales. However, CBC maintains that the Department should use the

average, rather than the highest, amount for charges and expenses that

CBC reported for its other EP sales. CBC states that the sales in

question were omitted from the sales listing because the company had to

file its response prior to their shipment. Therefore, CBC characterizes

this omission as attributable more to the company's attempt to comply

with the response deadline rather than as a deliberate failure to

respond to a Departmental request.

DOC Position: We disagree with both parties. In an investigation,

the Department is not required to examine every sale made during the

POI. In this case, the sales at issue represent an insignificant

portion of CBC's total sales by volume and value. Consequently, we have

excluded them for purposes of our final determination.

Comment 20: Unreported EP Sales--Chitech

The petitioners argue that the Department should assign the highest

margins to EP sales not included in the sales database because of

Chitech's date of sale methodology. The petitioners argue that these

unreported sales are subject to this investigation because even though

the invoice date is outside the POI, the sales were actually confirmed

and booked during the POI.

The respondent points out that it consistently applied its date of

sale methodology to report its POI sales of subject merchandise. In

addition, the respondent points to its submissions showing where the

terms of sale changed from the order up to the invoice. Respondents

note that the alternative date of sale proposed by the petitioners is

merely the date that the respondent receives payment from its bank.

DOC Position: We disagree with petitioners that there were any

unreported EP sales. Chitech consistently applied our date of sale

methodology for reporting its U.S. sales of subject merchandise during

the POI. Chitech used the invoice date to report its POI sales because

the terms of sale can and do change up to the invoice date. We examined

Chitech's date of sale methodology at verification and found no

discrepancies.

Comment 21: Unreported CEP Sales--Dynacraft

The petitioners argue that Dynacraft should not be rewarded for its

failure to report these sales and suggest that these sales should be

based on adverse facts available.

The respondent points out that the Department's practice is to

generally disregard an inadvertent omission of a minor amount of sales.

Alternatively, if the Department elects to calculate margins on these

sales, the Department has all of the required information (except for

credit expenses) to calculate margins using actual and verified expense

data for these sales.

DOC Position: Dynacraft inadvertently omitted these sales from its

U.S. sales database because it had incorrectly considered this group of

sales as being non-subject merchandise produced in Taiwan. We did not

collect the sales invoices for these unreported sales at verification.

The sales were all for one specific model sold at the same price. This

model also happens to be one of the higher priced models reported by

Chitech. We determined that including these sales in our calculations

would have no effect, or a negligible effect, on the margin calculated

for Chitech. Moreover, this situation does not appear to warrant the

use of adverse facts available. Therefore, we have not included these

sales in our analysis.

Warranty and Bad Debt Expenses

Comment 22: Accrued vs. Actual Warranty and Bad Debt Expenses

Giant USA (GUSA) sets aside a budgeted amount for warranty and bad

debt expenses each fiscal year and reported the actual amount in its

section C database. The petitioners argue that the Department should

use these accrued amounts as the basis for calculating these expenses

rather than the actual expenses GUSA incurred in warranty and bad debt

expenses during the POI because the accrued amounts are based on the

historical experience of the company and are not influenced by

distortions such as fluctuations in volumes of sales.

Giant argues it is Department practice to deduct actual, rather

than accrued, expenses from USP. The respondent cites to Final Results

of Administrative Review: AFBs (Other Than TRBs) and Parts Thereof From

France, 60 FR 10900, 10917 (February 28, 1995) and Final Results of

Administrative Reviews: Roller Chain, Other Than Bicycle, From Japan,

57 FR 46535 (October 9, 1992) in support of its argument. In addition,

respondent contends that the Department should treat GUSA's bad debt

expenses as indirect selling expenses, in accordance with its normal

practice. In support, respondent cites Certain Cut-to-Length Carbon

Steel Plate From Germany; Final Results of Antidumping Administrative

Review, 61 FR 13834 (Mar. 28, 1996).

DOC Position: With respect to warranty expenses, we disagree with

respondents that we always use actual expenses. Our practice is

normally to use historical expenses unless our analysis of the actual

expenses suggests that historical expenses are inappropriate. (See,

Final Determination of Sales at Less Than Fair Value: Color Picture

Tubes from Japan, 52 FR 44171 (November 18, 1987)). Giant's accrued

amounts are reflective of historical experience. As such, we used the

accrued amounts. The actual POI amounts only reflected a short period

of GUSA's warranty experience, whereas the accrued expenses were

reflective of Giant's actual historical experience. Regarding the issue

of whether bad debt should be classified as a direct or indirect

expense, we agree with respondent. Accordingly, we have classified bad

debt as an indirect selling expense and have treated it as such for

purposes of the final determination.

Comment 23: Warranty Expenses

Petitioners argue that the Department should use the historical

average warranty costs incurred by Motiv, CATIC's affiliated reseller

in the United States, rather than the reported POI costs as the basis

for its warranty expense adjustment. Petitioners assert that Motiv's

POI warranty costs may be aberrational and historical warranty costs

take into account fluctuations in sales volume.

Respondent argues that because petitioners use a historical average

warranty amount reported as a dollar amount per bicycle, and the

reported POI warranty costs are reported as a percentage of each gross

sales dollar, they are making an apples to oranges comparison.

Respondent states that,

[[Page 19042]]

although Motiv's total warranty costs change from year to year, there

is nothing on the record to suggest that there is any fluctuation in

Motiv's historical warranty costs as a percentage of gross sales

dollars. Moreover, respondent argues that to impute to each bicycle the

same per-unit cost would create distortions because Motiv's other

expenses are allocated by value, not by volume.

DOC Position: We agree with petitioners. Our examination of Motiv's

historical warranty costs indicate that the reported POI warranty costs

may not be reflective of what Motiv's true warranty expenses will be on

its POI sales. Accordingly, we used the historical warranty expenses.

Findings at Verification

Comment 24: Discrepancies in Weights and Distances

At verification, we found a number of discrepancies in the weights

and distances reported by Overlord and used in the calculation of

surrogate freight on components. Petitioners assert that the Department

should correct the reported data, based on the findings at

verification. In addition, petitioners argue that the Department should

impute these findings to all of Overlord's components not examined at

verification by adjusting the reported weights and distances by the

average percentage difference observed at verification.

Overlord maintains that the Department should only correct for the

errors found at verification.

DOC Position: We agree with respondent. At verification, we found

no consistent pattern of under- reporting. For example, we found that

the weight differences ranged from an over-reporting of 200 percent to

an under-reporting of 23 percent. Given the wide range of observed

differences, adjusting the weights and distances of unexamined

components would only affect the margin several points to the right of

the decimal. Consequently, we corrected Overlord's database to account

only for errors found at verification.

Comment 25: Unreported Market-Economy Movement Expenses

Petitioners maintain that Universal was not forthcoming in

providing to the Department prior to verification a clear picture of

how it incurred its movement expenses in Hong Kong. Because these

expenses were not reported, the petitioners insist that the Department

should now assign adverse amounts to each of the Hong Kong incurred

movement expenses rather than rely on the actual expense data noted in

the verification report. Petitioners recommend that the Department use

the highest rates found for any respondent for each movement expense or

use the highest rates from the data examined at verification and apply

them on a container basis, using the lowest quantity figure per

container provided by Universal.

Respondent claims that the Department's practice is to not use the

movement expenses incurred by a PRC respondent if it sourced its

transportation services from a company that was located in the PRC and

affiliated with a Hong Kong company. The respondent cites to Drawer

Slides and Final Determination of Sales at Less Than Fair Value:

Ferrovanadium and Nitrided Vanadium from the Russian Federation, 60 FR

27957, 27962 (May 26, 1995) (Ferrovanadium) in support of its argument.

In addition, the respondent states that if the Department intends to

use expenses incurred in Hong Kong, then the Department should not

apply adverse facts available in this situation because it has the

actual expenses.

DOC Position: At verification, we found that Universal pays its

customs broker in Hong Kong, in Hong Kong dollars, for five services:

(1) terminal handling charges; (2) handling fees; (3) document fees;

(4) courier fees; and (5) import and export fees. Universal did not

report these expenses because the Hong Kong broker is a subsidiary of a

PRC company. Universal assumed that this data could not be used by

Department. The NME questionnaire requests a respondent to report all

movement expenses paid to a market-economy supplier.

We used the average rates established at verification for each

expense noted above and the quantity amounts per container for each

U.S. model provided in the October 2, 1995, submission to calculate the

Hong Kong incurred model-specific expenses for those expenses that are

incurred on a container basis. For Hong Kong import & export fees, we

used the rate found among the other respondents. The fact that

Universal failed to report these expenses is not a basis for adverse

inference because Universal's interpretation of the questionnaire

instructions, although in error, was not unreasonable.

Other Company-Specific Comments

Petitioners made several arguments that certain expenses incurred

by the Hong Kong and Taiwan affiliates of the PRC bike producers should

be treated as direct selling expenses and be subject to COS

adjustments. Because we are not making COS adjustments in this case,

these issues are moot. See Comment 1 in General Comments section above.

Bo An

Comment 26: Market-Economy Based Movement Charges

Petitioners have stated that the Department should assign adverse

facts available to Bo An's movement charges because Bo An has been less

than forthcoming concerning movement charges purchased from market-

economy suppliers and paid for in market-economy currency. Moreover,

according to petitioners, the verification exhibits contradict Bo An's

statement in its Section C response that ``Bo An did not use any

market-economy suppliers for shipment of the goods.'' Petitioners agree

that this information should clearly have been reported earlier in the

investigation and that the Department should now assume that Bo An made

full use of all potential market-economy based movement and handling

services between the PRC factory and the loading of the ocean-going

vessel in Hong Kong. Accordingly, the Department should apply the

highest calculated freight rates found for any respondent in this

investigation to all Bo An's movement and handling expenses.

Bo An contends that the Department should not assign market-economy

values to goods and services obtained through a non-market-economy

transaction. Bo An points out that it has already certified for the

record that it arranges for transportation through the PRC affiliates

of Hong Kong transportation companies and that the Department found no

evidence at verification to contradict this information. Finally,

respondent cites Drawer Slides and Ferrovanadium as evidence that the

Department's practice has been to determine whether a good or service

obtained through a market-economy transaction is sourced from a market

economy rather than merely purchased in it.

DOC Position: We agree with respondent. Because these movement and

handling services were provided by a company located in the PRC, we

conclude that these charges do not reflect a market-economy based

price. Therefore, in our final determination we have continued to apply

a surrogate country cost to value these charges.

CBC

Comment 27: Brokerage and Handling Expenses

Petitioners argue that the Department should base brokerage and

handling

[[Page 19043]]

expenses for CBC's CEP sales on facts available because CBC failed to

provide any support for its claimed amount at verification. As facts

available, petitioners assert that the Department should use the amount

that it calculated during verification based on an examination of CBC's

sales information.

DOC Position: We agree. Accordingly, we have based brokerage and

handling for CEP sales on the information reviewed at verification.

Comment 28: Interest Expense and Interest Revenue

At verification, we found that CBC received interest revenue on EP

sales although it did not report this revenue in its sales listing. In

addition, we also noted that CBC incurred sales-specific interest

expenses, which likewise had not been reported. CBC requests that the

Department add interest revenue to its USPs. Moreover, CBC argues that

the Department should ignore the interest expenses observed at

verification because they represent affiliated party transactions, as

evidenced by intra-company invoices between CBC and its Hong Kong

affiliate.

Contrary to CBC's assertions, petitioners maintain that the

interest expenses in question are similar to movement expenses because

they were actually paid by CBC on every sale. They state that CBC

failed to provide any credible evidence supporting its claim that these

payments are intra-company transfers. Moreover, they state that failure

to report these expenses should lead to the application of adverse

inferences against CBC. Specifically, they argue that the Department

should subtract from CBC's reported EP sales prices interest expenses

equal to the highest expenses (as a percentage of invoice price)

observed during verification. Regarding interest revenue, petitioners

state that the Department should ignore the amounts collected at

verification because CBC failed to provide complete information in a

timely fashion.

DOC Position: Regarding interest expenses, we disagree with CBC

that these expenses represent affiliated party transactions. At

verification, we reviewed actual payment advices issued by the

unaffiliated bank. These payment advices showed that interest expenses

were actually charged by the bank on each transaction, independent of

any affiliated party transfers that may have occurred. However, we have

not made an adjustment for these expenses, because we are not making

COS adjustments on EP sales. See, Comment 1 in General Comments section

above.

Regarding interest revenue, we found at verification that CBC

charged this revenue in order to cover the actual interest expenses

that it incurred on each sale. Therefore, adjusting for interest

revenue without making the corresponding adjustment for interest

expenses would result in an EP that is overstated. Accordingly, we also

have made no adjustment for interest revenue for purposes of the final

determination.

Comment 29: Freight Rebates

At verification, we found that Western States Importers (WSI),

CBC's U.S. affiliate, did not use the eligibility criteria specified in

its freight rebate program when calculating the freight rebates

reported in its CEP sales listing. According to petitioners, the

Department should recalculate these rebates by applying the eligibility

criteria set forth in WSI's program brochures.

According to CBC, no adjustment is warranted. CBC states that these

rebates operate as a customer-specific price allowance and as a general

expense to WSI, as evidenced by the fact that WSI's accounting system

does not track freight rebates on a transaction-specific basis. CBC

asserts that, indeed, given the limitations of WSI's accounting system,

reporting freight rebates on a customer-specific basis was the only

feasible way to capture these costs. Moreover, CBC argues that there is

no evidence on the record to support the contention that allocating

these rebates on a customer-specific basis is distortive.

DOC Position: We do not have sufficient information on the record

to reallocate WSI's freight rebates according to the eligibility

criteria specified in the rebate program brochures, as requested by

petitioners. Moreover, we agree with CBC that it would not be

distortive to allow these rebates on a customer-specific basis, based

on our finding at verification that they operate as a customer-specific

price allowance, rather than as a transaction-specific expense.

Therefore, we have accepted the expenses as reported for purposes of

the final determination.

Comment 30: Different Control Numbers for Identical Products

At verification, we found CBC had assigned different control

numbers to a small number of products which appeared to have identical

physical characteristics; however, CBC reported different factors of

production for these products. In addition, we found that CBC assigned

the same control number (and same factors of production) to a small

number of products which appeared to be physically different.

Petitioners assert that the Department should resort to facts

available to calculate the factors of production for each of the

products in question. As facts available for the physically identical

products, petitioners maintain that we should use the highest COM

calculated for any of the products which are within the identical

grouping. As facts available for the non-identical products,

petitioners assert that the Department should calculate separate

production costs using ratios derived from the different prices

reported for the different models.

According to CBC, the Department should not make adverse inferences

as to the COM of the bicycles in question. CBC states that it explained

all of the discrepancies at verification and that it documented most of

these explanations.

DOC Position: Regarding the different control numbers reported for

physically identical products, we agree with petitioners. Contrary to

its assertion, at verification CBC could not explain why the factors of

production for these models differed. Moreover, it is difficult to

imagine how models sharing the same control number could have different

production costs. Because CBC failed to report its data in a consistent

fashion, we find that applying an adverse inference to facts available

is reasonable and appropriate in this case. Therefore, we have used the

highest COM calculated for any of the products which are within the

identical grouping to the products in question.

Regarding the same control numbers reported for potentially non-

identical products, we agree with CBC. The documents reviewed at

verification support CBC's assertion that the control numbers in

question were assigned correctly to identical products. Accordingly, we

find no basis to adjust the costs reported for these products, as

suggested by petitioners.

Comment 31: Component Sourcing

At verification, we found that CBC sourced certain components in

both a market and non-market economy. Petitioners argue that the

Department should rely exclusively on the prices paid to the market-

economy suppliers.

DOC Position: We agree and we have made the appropriate corrections

for purposes of the final determination.

CATIC

Comment 32: Treatment of handling charges incurred by Motiv and

classification of Motiv's selling expenses

Petitioners argue that the Department should treat handling charges

incurred

[[Page 19044]]

by Motiv for returns of bicycles during the POI as a direct selling

expense. At verification we found that Motiv did not report handling

charges incurred for bicycles that were returned by a certain customer.

Petitioners argue that this expense is a direct selling expenses

because it was incurred to return subject merchandise during the POI,

and that the Department should treat it as such for purposes of the

final determination.

Respondent claims that this expense is properly categorized as

indirect because there were no sales associated with the returns.

Petitioners also argue that certain advertising, after-market

telephone support, and bad debt expenses reported by Motiv as indirect

selling expenses should be classified as direct selling expenses.

Respondent contends that each of those expenses were properly

classified as indirect selling expenses.

DOC Position: These expenses has been deducted from U.S. price as

part of the CEP deductions. Because we are not making a corresponding

CEP offset (See, Comment 1), the classification of these expenses as

direct or indirect is moot.

Comment 33: Commission Expenses

Petitioners urge the Department to ensure that the commission

expense adjustment includes all payments by Motiv to outside sales

representatives during the POI. Motiv's questionnaire responses state

that its independent sales representatives perform various functions in

facilitating customer orders for Motiv. Petitioners state that the

record is unclear as to whether Motiv's reported commission amounts

cover its payments for all the services provided by its outside sales

representatives. Respondent did not comment on this issue.

DOC Position: We verified that the payments to Motiv's outside

sales representatives covered all services performed by these sales

representatives.

Comment 34: Finance Expense

Petitioners use information from Motiv's and CATIC's financial

statements to demonstrate that CATIC may have incurred a certain

finance expense on behalf of Motiv. Petitioners contend that the

Department should either include this finance expense in Motiv's U.S.

selling expenses or should add the expense to the NV for bicycles

produced by CATIC.

Respondent claims that imputing this finance expense is at odds

with the Department's established practice and would result in double-

counting. Respondent states that since CATIC and Motiv are affiliated

companies, any interest expense would be an intra-company charge.

Respondent cites to Frozen Concentrated Orange Juice from Brazil: Final

Determination of Sales at Less Than Fair Value, 52 Fed. Reg. 8324

(March 17, 1987) and Certain Tapered Journal Roller Bearings and Parts

Thereof from Japan: Final Determination of Sales at Less Than Fair

Value, 49 Fed. Reg. 2285 (January 19, 1984) as cases in which the

Department excluded intra-company interest expenses from the margin

calculations. Respondent also states that the Department already will

have accounted for the costs of financing inventory and receivables in

its imputed calculations of inventory carrying costs and credit costs.

DOC Position: We agree with respondent. The expense identified by

petitioners is an intra-company expense and should not be included in

our calculations.

Giant

Comment 35: Interest Charge Giant USA Pays its Taiwan Affiliate

The respondent maintains that the fees GUSA pays its Taiwan parent

GMC to cover interest charges on letters of credit opened by GMC to

finance GUSA's purchases from GMC should not be deducted from USP if

the Department also deducts inventory carrying expenses and imputed

credit costs. The respondent states that deducting both the actual fees

and the imputed expenses would double-count the expenses associated

with financing shipment, inventory and receivables on U.S. sales.

The petitioners argue that the Department's verification report

makes no mention that the letter of credit fees are actual interest

expenses or the nature of the fees. Therefore, the petitioners maintain

that there in insufficient evidence to support Giant's claim that its

interest expenses will be double-counted if both letter of credit fees

and imputed credit expenses are deducted from the USP. Moreover, the

petitioners state that the letter of credit fees appear to be indirect

rather than direct selling expenses, since these fees were first paid

by GMC in opening bank accounts from which GUSA could draw funds to

finance inventory and accounts receivables. As such, the petitioners

argue that the Department should revise GUSA's reported indirect

selling expenses by including the amount of letter of credit fees.

DOC Position: We did not separately deduct the interest expense

from the USP because deducting both the actual fees and the imputed

costs (which include these fees) would be double-counting. In addition,

we did not treat the letter of credit fees as indirect selling expenses

since they have been accounted for in the calculation of inventory

carrying expenses.

Comment 36: Errors in Giant's Data

Petitioners argue that the Department should apply facts available

to Giant in its final margin analysis. Petitioners assert that the

Department found numerous errors in Giant's data during verification

which company officials were unable to explain. Petitioners cite

examples related to the price and usage data reported for Giant's

factors of production, as well as discounts reported for CEP sales.

Giant asserts that the Department should use its data for purposes

of the final determination, after correcting it for errors discovered

at verification. Respondent argues that petitioners misunderstood both

the verification reports and Giant's responses, leading to a number of

incorrect assumptions regarding the significance of the errors found.

DOC Position: We agree with Giant. The majority of the errors

discovered at verification resulted from data input problems or

calculation errors. Because these errors were minor in nature, we find

that the use of facts available is not warranted. Therefore, we have

corrected the errors found at verification and used the data reported

by Giant for purposes of the final determination.

Comment 37: Interest Revenue

Petitioners argue that the Department should deny Giant's claim for

interest revenue for purposes of the final determination. According to

petitioners, Giant did not collect all of the interest revenue that it

actually invoiced. In addition, petitioners assert that Giant

misapplied these revenues in its sales listing because it reported

revenue for sales for which the customer paid on a timely basis and for

which no revenue was due.

Respondent asserts that the Department should allow the revenue

amounts reported in its sales listing. Respondent notes that

petitioners do not dispute the fact that the company received interest

revenue, but rather disagree with the methodology used to allocate this

revenue to specific sales. Respondent maintains that, not only is its

allocation methodology consistent with the methodology used to allocate

other adjustments (e.g., credit expenses), but also petitioners failed

to object to this methodology prior to the submission of their case

brief. Moreover,

[[Page 19045]]

respondent asserts that its allocation methodology is not distortive or

inaccurate. Finally, respondent notes that the Department reviewed

Giant's interest revenue calculation at verification and found no

discrepancies.

DOC Position: We found that Giant's record keeping system does not

readily allow Giant's to report transaction-specific interest revenue.

Therefore, we are allocating interest revenue only to those sales with

no early payment discounts. Regarding bad debt expense, we agree with

respondents that it was correctly reported as an indirect selling

expense. We recommend making no adjustment to bad debt.

Overlord

Comment 38: Declaration Fees

At verification, we found that Overlord under-reported declaration

fees paid to the Hong Kong government on U.S. shipments of bicycles

through Hong Kong. Petitioners contend that the Department should

increase the reported expenses by the average percentage by which the

fees were under-reported.

DOC Position: We agree and have made the appropriate calculations

for purposes of the final determination.

Universal

Comment 39: Methodology for Reporting Prices of Market-Economy Inputs

According to the petitioners, Universal's price reporting

methodology is unacceptable. Based on Universal's unwillingness to

provide information prior to the verification regarding the methodology

it used to derive market-economy prices, and the inaccuracies

discovered during the Department's price variation tests and component

traces, the petitioners propose that, as facts available, the

Department increase prices for all market-sourced components by the

greatest disparity between reported and verified prices in the price

variation tests.

Universal argues that the Department should not increase the prices

reported for market-economy inputs because the majority of the input

prices examined by the Department were accurately reported and the few

discrepancies noted by the Department were only minor errors.

Additionally, Universal contends that its reported prices are already

overstated because these prices are charged by Universal's affiliated

supplier. Universal maintains the Department verified that reported

component prices, which are charged by Universal's affiliated supplier,

are more than the prices the affiliated supplier pays to purchase those

components from unrelated suppliers.

DOC Position: Universal failed to report the weight-average price

of market-economy inputs purchased during the POI. Rather, Universal

reported market-economy prices based on selected invoices which company

officials considered to be representative of the prices paid during the

POI. According to Universal officials, the company employed this

reporting methodology because during the POI prices for most components

remained stable. We tested ten components and found that four were

under-reported by a small percentage. We disagree with petitioners that

we should increase all of Universal's prices by the largest observed

variation. This situation does not warrant the use of adverse acts

available. Rather, as facts available, we applied the average variance

to all purchases. See, Concurrence Memo for Final Determination.

Continuation of Suspension of Liquidation

For Bo An, Giant, Hua Chin, and Overlord, we calculated a zero or

de minimis margin. Consistent the with Pencils, merchandise that is

sold by these producers but manufactured by other producers will not

receive the zero margin. Instead, such entries will be subject to the

``PRC-wide'' margin.

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

are directing the Customs Service to continue to suspend liquidation of

all entries of bicycles from the PRC, that are entered, or withdrawn

from warehouse for consumption, on or after the date of publication of

this notice 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 NV exceeds the export price as shown below. These suspension

of liquidation instructions will remain in effect until May 7, 1996.

The weighted-average dumping margins are as follows:

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

Margin

Manufacturer/producer/exporter percentage

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

Bo An...................................................... 0.00

CBC........................................................ 3.25

CATIC...................................................... 13.67

Giant...................................................... 0.97

Hua Chin................................................... 0.00

Merida..................................................... 7.44

Overlord................................................... 0.00

Chitech.................................................... 2.05

Universal.................................................. 11.06

PRC-wide rate.............................................. 61.67

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

PRC-Wide Rate

The PRC-Wide rate applies to all entries of subject merchandise

except for entries from exporters that are identified individually

above.

ITC Notification

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

ITC of our determination. As our final determination is affirmative,

the ITC will, within 45 days, determine whether these imports are

materially injuring, or threaten material injury to, the U.S. industry.

If the ITC determines that material injury, or threat of material

injury does not exist, the proceeding will be terminated and all

securities posted will be refunded or canceled. If the ITC determines

that such injury does exist, the Department will issue an antidumping

duty order directing Customs officials to assess antidumping duties on

all imports of the subject merchandise entered for consumption on or

after the effective date of the suspension of liquidation. This

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

Dated: April 22, 1996.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 96-10555 Filed 4-29-96; 8:45 am]

BILLING CODE 3510-DS-P