Notice of Preliminary Determinations of Sales at Less Than Fair Value and Postponement of Final Determinations: Brake Drums and Brake Rotors From the People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-845, A-570-846]

Notice of Preliminary Determinations of Sales at Less Than Fair

Value and Postponement of Final Determinations: Brake Drums and Brake

Rotors From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce

EFFECTIVE DATE: October 10, 1996.

FOR FURTHER INFORMATION CONTACT: Brian C. Smith or Michelle A.

Frederick, Import Administration, International Trade Administration,

U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone: (202) 482-1766 or (202) 482-0186,

respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the statute are

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

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Rounds Agreements Act (URAA).

Preliminary Determinations

We determine preliminarily that brake drums and brake rotors from

the People's Republic of China (PRC) are being, or are likely to be,

sold in the United States at less than fair value (LTFV), as provided

in section 733 of the Act. The estimated margins are shown in the

``Suspension of Liquidation'' section of this notice.

Case History

Since the initiation of these investigations (61 FR 14740, April 3,

1996), the following events have occurred:

On April 4, 1996, the Department sent a survey to the PRC's

Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and to the

China Chamber of Commerce for Import & Export of Machinery &

Electronics Products (China Chamber) requesting the identification of

producers and exporters, and information on production and sales of

brake drums and brake rotors exported to the United States. We received

a facsimile from the China Chamber identifying three brake drum

exporters and six brake rotor exporters to the United States on April

25, 1996.

On April 29, 1996, the United States International Trade Commission

(ITC) issued affirmative preliminary injury determinations in these

cases (see ITC Investigation No. 731-TA-744). The ITC found that there

is a reasonable indication that an industry in the United States is

threatened with material injury by reason of imports from the PRC of

brake drums, and that there is a reasonable indication that an industry

is materially injured by reason of imports from the PRC of brake

rotors.

The Department issued antidumping questionnaires \1\ to the China

Chamber and MOFTEC, on May 8, 1996, with instructions to forward the

document to all producers/exporters of brake drums and brake rotors and

to inform these companies that they must respond by the due dates. We

also sent courtesy copies of the antidumping duty questionnaire to all

identified companies. In May, June, and July, 1996, 18 PRC companies

submitted their section A, C, and D responses.

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\1\ The questionnaire is divided into four sections. Section A

requests general information concerning a company's corporate

structure and business practices, the merchandise under

investigation that it sells, and the sales of the merchandise in all

of its markets. Sections B and C request home market sales listings

and U.S. sales listings, respectively (section B does not normally

apply in antidumping proceedings involving the PRC). Section D

requests information on the factors of production of the subject

merchandise.

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On June 1, 1996, we postponed both preliminary determinations until

not later than October 3, 1996 (61 FR 29073, June 7, 1996) because we

determined these investigations to be extraordinarily complicated

within the meaning of section 733(c)(1)(B)(i) of the Act.

On June 7, 1996, we received a fax from Zheijiang Asia-Pacific

Machine & Electric Group Co., stating that it did not export brake

rotors or brake drums to the United States during the period of these

investigations.

On July 15, 1996, the Department requested that interested parties

provide published information (PI) for valuing the factors of

production and for surrogate country selection. We received comments

from the interested parties in August 1996.

After receiving complete questionnaire responses from the 18 PRC

companies, we determined that, due to limited resources, we would only

be able to analyze the responses of the seven largest brake rotor PRC

exporters and the five largest brake drum PRC exporters to the United

States (a total of 10 PRC companies, two of which export both brake

drums and brake rotors). (See Respondent Selection section below.)

In July and August, we issued supplemental questionnaires to the 10

selected respondents only. We received responses to these

questionnaires during August and September 1996. On September 18, 1996,

less than 20 days before the preliminary determinations, the petitioner

alleged that critical circumstances exist with respect to imports of

brake drums and brake rotors from the PRC. The Department will make its

determination as to whether it finds critical circumstances not later

than 30 days after the date of the petitioner's submission in

accordance with section 353.16(b)(2)(ii).

Also, on September 13, the petitioner submitted additional PI which

we were not able to consider for the preliminary determinations.

However, we will consider this information for the final

determinations.

On September 18, 1996, counsel for Shenyang/Laizhou submitted

additional comments on PI. We have considered Shenyang/Laizhou's

submission, and we have rejected the claims made therein for these

preliminary determinations.

On September 20, 1996, counsel for Southwest Technical Import &

Export Corporation (Southwest) submitted revised sales and factors of

production databases, explaining that the only change to it's previous

databases was what it had reported as a factor amount for plastic

tarpaulins. For these preliminary determinations, we have incorporated

the most recently submitted factor information Southwest reported for

plastic tarpaulins into our analysis but we have not used the databases

Southwest most recently

[[Page 53191]]

submitted due to time constraints. We will consider using these

databases in our final determinations.

On September 30, 1996, we requested shipment data from the

respondents in order to examine the petitioner's critical circumstances

allegation.

Postponement of Final Determinations

From September 13 through 16, 1996, all participating respondents

requested that, pursuant to section 735(a)(2)(A) of the Act, in the

event of affirmative preliminary determinations in these

investigations, the Department postpone its final determinations until

not later than 135 days after the publication of the affirmative

preliminary determinations in the Federal Register. In accordance with

19 CFR 353.20(b), because our preliminary determinations are

affirmative, these respondents account for a significant proportion of

exports of brake drums and brake rotors, and we are not aware of the

existence of any compelling reasons for denying the request, we are

granting respondents' request and are postponing the final

determinations until 135 days after the publication of this notice in

the Federal Register.

Scope of the Investigations

The products covered by these two investigations are (1) certain

brake drums and (2) certain brake rotors.

Brake Drums

Brake drums are made of gray cast iron, whether finished,

semifinished, or unfinished, ranging in diameter from 8 to 16 inches

(20.32 to 40.64 centimeters) and in weight from 8 to 45 pounds (3.63 to

20.41 kilograms). The size parameters (weight and dimension) of the

brake drums limit their use to the following types of motor vehicles:

automobiles, all-terrain vehicles, vans and recreational vehicles under

``one ton and a half,'' and light trucks designated as ``one ton and a

half.''

Finished brake drums are those that are ready for sale and

installation without any further operations. Semi-finished drums are

those on which the surface is not entirely smooth, and has undergone

some drilling. Unfinished drums are those which have undergone some

grinding or turning.

These brake drums are for motor vehicles, and do not contain in the

casting a logo of an original equipment manufacturer (OEM) which

produces vehicles sold in the United States (e.g., General Motors,

Ford, Chrysler, Honda, Toyota, Volvo). Brake drums covered in this

investigation are not certified by OEM producers of vehicles sold in

the United States. The scope also includes composite brake drums that

are made of gray cast iron, which contain a steel plate, but otherwise

meet the above criteria.

Brake drums are classifiable under subheading 8708.39.5010 of the

Harmonized Tariff Schedule of the United States (HTSUS). Although the

HTSUS subheading is provided for convenience and Customs purposes, our

written description of the scope of this investigation is dispositive.

Brake Rotors

Brake rotors are made of gray cast iron, whether finished,

semifinished, or unfinished, ranging in diameter from 8 to 16 inches

(20.32 to 40.64 centimeters) and in weight from 8 to 45 pounds (3.63 to

20.41 kilograms). The size parameters (weight and dimension) of the

brake rotors limit their use to the following types of motor vehicles:

automobiles, all-terrain vehicles, vans and recreational vehicles under

``one ton and a half,'' and light trucks designated as ``one ton and a

half.''

Finished brake rotors are those that are ready for sale and

installation without any further operations. Semi-finished rotors are

those on which the surface is not entirely smooth, and has undergone

some drilling. Unfinished rotors are those which have undergone some

grinding or turning.

These brake rotors are for motor vehicles, and do not contain in

the casting a logo of an original equipment manufacturer (OEM) which

produces vehicles sold in the United States (e.g., General Motors,

Ford, Chrysler, Honda, Toyota, Volvo). Brake rotors covered in this

investigation are not certified by OEM producers of vehicles sold in

the United States. The scope also includes composite brake rotors that

are made of gray cast iron, which contain a steel plate, but otherwise

meet the above criteria.

Brake rotors are classifiable under subheading 8708.39.5010 of the

HTSUS. Although the HTSUS subheading is provided for convenience and

Customs purposes, our written description of the scope of this

investigation is dispositive.

Periods of Investigations

The periods of these investigations (POI) comprise each exporter's

two most recent fiscal quarters prior to the filing of the petition.

Nonmarket Economy Country Status

The Department has treated the PRC as a nonmarket economy country

(NME) in all past antidumping investigations (see, e.g., Final

Determination of Sales at Less Than Fair Value: Silicon Carbide from

the People's Republic of China, 59 FR 22585 (May 2, 1994) (Silicon

Carbide) and Final Determination of Sales at Less Than Fair Value:

Furfuryl Alcohol from the People's Republic of China, 60 FR 22545 (May

8, 1995) (Furfuryl Alcohol)). Neither respondents nor petitioners have

challenged such treatment. Therefore, in accordance with section

771(18)(C) of the Act, we will continue to treat the PRC as an NME in

these investigations.

When the Department is investigating imports from an NME, section

773(c)(1) of the Act directs us to base normal value (NV) on the NME

producers' factors of production, valued, to the extent possible, in a

comparable market economy that is a significant producer of comparable

merchandise. The sources of individual factor prices are discussed

under the NV section below.

Surrogate Country

The Department has determined that India, Nigeria, Pakistan, Sri

Lanka, Egypt and Indonesia are countries comparable to the PRC in terms

of overall economic development (see Memorandum from David Mueller to

Gary Taverman, dated May 21, 1996).

According to the available information on the record, we have

determined that India is a significant producer of comparable

merchandise. Accordingly, we have calculated NV using Indian prices to

value the PRC producers' factors of production, when available and

where appropriate. We have obtained and relied upon PI wherever

possible. In cases where we have not used Indian data because they

involved prices considered aberrational, we have used Indonesian import

prices as surrogate values.

Respondent Selection

In NME cases, we presume a single rate is applicable to all

exporters and we attempt to examine the sales of all exporters during

the POI. We sent a survey to MOFTEC and the China Chamber to determine

the identity of producers and exporters of brake drums and brake

rotors. We sent the antidumping questionnaire to MOFTEC and to the

China Chamber with a list of the names of possible exporters and/or

producers of the brake rotors and brake drums. We also sent courtesy

copies to the named exporters and producers. The following PRC

companies submitted full questionnaire responses in a timely manner:

China North Industries Dalian Corporation

China National Automotive Industry Import & Export Corp. and its

affiliates Shandong Laizhou CAPCO Industry Corporation and CAPCO USA

[[Page 53192]]

Shenyang Honbase Machinery Corporation, Ltd.

Yantai Import & Export Corporation

China North Industries Guangzhou Corporation

Southwest Technical Import & Export Corporation and its affiliates

Yangtze Machinery Company and MMB International, Inc.

China National Machinery & Equipment Import & Export (Xinjiang)

Corporation, Ltd.

Qingdao Metals & Machinery Import & Export Corporation

Beijing Xinchangyuan Automobile Fittings Corporation, Ltd.

China National Machinery Import & Export Corporation

Laizhou Luyuan Automobile Fittings Corporation, Ltd.

Xianghe Zichen Casting Corporation

Jiuyang Enterprise Corporation

Hebei Metals and Machinery Import & Export Corporation

Yenhere Corporation

Longjing Walking Tractor Works Foreign Trade Import & Export

Corporation

Jilin Provincial Machinery and Equipment Import & Export

Corporation, Ltd.

Shanxi Machinery and Equipment Import & Export Corporation.

Given that we did not have the administrative resources to analyze

the responses of all participating exporters, we determined that our

investigations would be limited to the analysis of the sales of the

seven largest PRC brake rotor exporters and the five largest brake drum

exporters to the United States. As two PRC companies exported both

brake drums and brake rotors, this constituted a total of ten

companies. The identification of the largest exporters of each like

product was based on the data supplied by those PRC companies which

submitted a full questionnaire response. (See, Memorandum from the team

to Barbara R. Stafford for a discussion on selection of respondents

(Respondent Selection Memorandum), dated July 19, 1996.) For the brake

drums investigation, we selected (1) China National Machinery Import &

Export Corporation (CMC); (2) China North Industries Guangzhou

Corporation (Guangzhou Norinco); (3) Qingdao Metals & Machinery Import

& Export Corporation (Qingdao); (4) Yantai Import & Export Corporation

(Yantai); and (5) Beijing Xinchangyuan Automobile Fittings Corporation,

Ltd. (Xinchangyuan).

For the brake rotors investigation, we selected (1) China National

Automotive Industry Import & Export Corp. and its affiliates Shandong

Laizhou CAPCO Industry Corporation, CAPCO USA (CAIEC/CAPCO); (2) China

North Industries Dalian Corporation (Dalian Norinco); (3) Shenyang

Honbase Machinery Corporation., Ltd., (Shenyang); (4) Guangzhou

Norinco; (5) Southwest; (6) China National Machinery & Equipment Import

& Export (Xinjiang) Corporation, Ltd., (a.k.a. Xinjiang); and (7)

Yantai.

On July 23, 1996, counsel for Shenyang (one of the 10 respondents

selected by the Department) requested that Laizhou Luyuan Automobile

Fittings Corporation, Ltd., (Laizhou), also be included in the group of

selected respondents. Laizhou is, in fact, included among the selected

respondents because the Department determined that Shenyang and Laizhou

are affiliated parties within the meaning of section 771(33) of the

Act, and the two producers were collapsed and treated as one respondent

in the investigation of brake rotors. (See August 8, 1996, Memorandum

from the team to Barbara R. Stafford (Affiliated Parties Memorandum.))

Separate Rates

Each of the selected respondents has requested a separate, company-

specific rate. The following respondents are companies owned by all the

people: (1) CAIEC/CAPCO; (2) CMC; (3) Dalian Norinco; (4) Guangzhou

Norinco; (5) Qingdao; (6) Xinjiang; (7)Yantai; and (8) Southwest.

The ownership structure of the remaining respondents is as follows:

(1) Shenyang and Laizhou are affiliated parties (hereinafter

Shenyang/Laizhou). Shenyang is owned entirely by GRI Honbase, a Hong

Kong company which is U.S. owned. Laizhou is a joint venture between

GRI Honbase and ``all the people.'' The share in Laizhou owned by ``all

the people'' is a minority share; and

(2) Xinchangyuan is a joint venture between a U.S. company and a

PRC company, Beijing Changyuan Automotive Parts Factory. The PRC

company is the majority shareholder and is owned by ``all the people.''

As stated in Silicon Carbide and Furfuryl Alcohol, ownership of a

company by all the people does not require the application of a single

rate. Accordingly, each of these respondents is eligible for

consideration for a separate rate.

To establish whether a firm is sufficiently independent from

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

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

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

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

amplified in Silicon Carbide. Under the separate rates criteria, the

Department assigns separate rates in nonmarket 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 respondents 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. They have also submitted documents which

establish that brake drums and brake rotors are not included on the

list of products that may be subject to central government export

constraints. In addition, respondents Xinchangyuan and Laizhou each

submitted the ``Law of the People's Republic of China on Chinese-

Foreign Contractual Joint Ventures'' (April 13, 1988). The articles of

this law authorize joint venture companies to make their own

operational and managerial decisions.

In prior cases, the Department has analyzed the laws which the

respondents have submitted in this record and found that they establish

an absence of de jure control. See Notice of 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

(October 24, 1995); see also Furfuryl Alcohol. We have no new

information in these proceedings which would cause us to reconsider

this determination.

However, as 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 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

[[Page 53193]]

proceeds of its export sales and makes independent decisions regarding

disposition of profits or financing of losses (see Silicon Carbide and

Furfuryl Alcohol).

CAIEC/CAPCO, CMC, Qingdao, Shenyang/Laizhou, Southwest,

Xinchangyuan, Xinjiang, and Yantai have asserted the following: (1)

They establish their own export prices; (2) they negotiate contracts,

without guidance from any governmental entities or organizations; (3)

they make their own personnel decisions and; (4) they retain the

proceeds of their export sales, use profits according to their business

needs and have the authority to sell their assets and to obtain loans.

In addition, respondents' questionnaire responses indicate that

company-specific pricing during the POI does not suggest coordination

among exporters. This information supports a preliminary finding that

there is a de facto absence of governmental control of the export

functions of these companies.

Consequently, we determine preliminarily that these exporters have

met the criteria for the application of separate rates. We will examine

this matter further at verification.

Dalian Norinco and Guangzhou Norinco also claimed separate rates

and provided documentation in support of their claims. However, we have

denied these entities separate rates in these preliminary

determinations for the following reasons.

On August 19, 1996, the petitioner argued that Dalian Norinco and

Guangzhou Norinco are not eligible for separate rates. Based on an

article appearing in Business Week, the petitioner alleged that these

two companies are still part of NORINCO, which it claims is owned and

controlled by the People's Liberation Army (PLA). Subsequently, the

Department conducted additional research on this issue. Based on

additional information and articles found by the Department, and placed

on the record of these investigations, we have concluded preliminarily

that Guangzhou Norinco and Dalian Norinco are still branches of the

national corporation, NORINCO, which is controlled by the PLA. (See

Concurrence Memorandum.) Therefore, the record does not support a

preliminary finding of an absence of de facto control of export

functions by the government. Accordingly, we determine preliminarily

that Dalian Norinco is ineligible for a separate rate in the

investigation of brake rotors and that Guangzhou Norinco is ineligible

for separate rates for the investigations of brake drums and brake

rotors.

China-Wide Rate

U.S. import statistics indicate that the total quantity and value

of U.S. imports of brake drums and brake rotors from the PRC is

substantially greater than the total quantity and value of brake drums

and brake rotors reported by all PRC companies that submitted responses

in both the brake drums and brake rotors cases. Given these significant

discrepancies, we have no choice but to conclude that not all exporters

of PRC brake drums and brake rotors responded to our questionnaire.

Accordingly, we are applying a single antidumping deposit rate--the

China-Wide rate--to all exporters in the PRC (other than the eight

named above as receiving separate rates), based on our presumption that

Dalian Norinco, Guangzhou Norinco, and those respondents who failed to

constitute a single enterprise, are under common control by the PRC

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

Value: Bicycles from the People's Republic of China, 61 FR 19026 (April

30, 1996) (Bicycles).

This China-Wide antidumping rate is based on adverse facts

available. Section 776(a)(2) of the Act provides that ``if an

interested party or any other person--(A) withholds information that

has been requested by the administering authority; (B) fails to provide

such information by the deadlines for the submission of the information

or in the form and manner requested, subject to subsections (c)(1) and

(e) of section 782; (C) significantly impedes a proceeding under this

title; or (D) provides such information but the information cannot be

verified as provided in section 782(i), the administering authority * *

* shall, subject to section 782(d), use the facts otherwise available

in reaching the applicable determination under this title.''

In addition, section 776(b) of the Act provides that, if the

Department finds that an interested party ``has failed to cooperate by

not acting to the best of its ability to comply with a request for

information,'' the Department may use information that is adverse to

the interests of that party as the facts otherwise available. The

statute also provides that such an adverse inference may be based on

secondary information, including information drawn from the petition.

When multiple companies are treated as a single enterprise, the

enterprise must submit a complete, consolidated response. If it fails

to do so, the Department may base the margin calculation for the

enterprise on the facts available. As discussed above, all PRC

exporters that have not qualified for a separate rate (except those

uninvestigated respondents that fully cooperated in the investigations)

have been treated as a single enterprise. Because some exporters of the

single enterprise failed to respond to the Department's requests for

information, that single enterprise is considered to be uncooperative.

Accordingly, consistent with section 776(b)(1) of the Act, we have

applied in each case, as total facts available, the higher of the

applicable margin from the petition or the highest rate calculated for

a respondent in that proceeding. In the present cases, based on our

comparison of the calculated margins for the other respondents in these

proceedings to the estimated margins in the petitions, we have

concluded that the petition is the most appropriate record information

on which to form the basis for dumping calculations in the brake drums

investigation. We have concluded that the highest calculated rate among

the selected respondents in the brake rotors case is the most

appropriate record information on which to form the basis for dumping

calculations in the brake rotors investigation. Accordingly, the

Department has based the margin for brake drums on information in the

petition and has based the margin for brake rotors on the highest

calculated margin among the selected brake rotors respondents. In these

cases, the highest petition rate for brake drums is 105.56 percent. The

highest calculated margin for brake rotors 64.56 percent.

Section 776(c) of the Act provides that where the Department relies

on ``secondary information,'' the Department shall, to the extent

practicable, corroborate that information from independent sources

reasonably at the Department's disposal. The Statement of

Administrative Action (SAA), accompanying the URAA clarifies that the

petition is ``secondary information.'' See SAA at 870. The SAA also

clarifies that ``corroborate'' means to determine that the information

used has probative value. Id. However, where corroboration is not

practicable, the Department may use uncorroborated information.

In accordance with section 776(c) of the Act, we corroborated the

margins in the petition to the extent practible. The petitioners based

export prices on prices charged by U.S. distributors of brake drums and

deducted from these prices a distributor mark-up. We compared the

starting prices used by petitioner to prices derived from U.S. import

statistics and found that the similarity to the import statistics

corroborated the starting prices in the petition. See,

[[Page 53194]]

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

Circular Welded Non-Alloy Steel Pipe from South Africa, 61 FR 94, 24271

(May 14, 1996). We also find that the deduction for the distributor

mark-up is sufficiently documented for purposes of corroboration by

examining affidavits submitted by industry experts. The normal value

was based on factors of production employed by the petitioner to

produce brake drums, and to the extent possible, surrogate factor

values which were obtained from Indian PI. When analyzing the petition,

the Department examined and confirmed the accuracy of the normal value

data as provided in the petition by comparing the values used in the

petition with values obtained from PI collected in these and previous

NME investigations.

Accordingly, we have corroborated, to the extent practicable, the

data contained in the petition.

Rate for Respondents Not Selected

As stated above, several PRC companies which submitted full

questionnaire responses in a timely manner and which claimed

eligibility for separate rates were not chosen by the Department

respondents in either investigation. It would be inappropriate to

assign these fully cooperative respondents a rate based on ``facts

available,'' that would also apply PRC exporters of brake drums or

brake rotors who refused to cooperate in these investigations.

Therefore, we have assigned the cooperative respondents in the brake

drums case a weighted-average dumping margin based on the calculated

margins, which were not de minimis, of the selected brake drum

respondents, and we have assigned the cooperative respondents in the

brake rotors case a weighted-average dumping margin based on the

calculated margins, which were not de minimis, of the selected brake

rotors respondents.

Fair Value Comparisons

To determine if the brake drums and brake rotors from the PRC sold

to the United States by the eight PRC exporters receiving separate

rates were made at less than fair value, we compared the ``United

States Price'' (USP) to the NV, as specified in the ``United States

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

United States Price

We based USP on export price (EP) in accordance with section 772(a)

of the Act, when the brake drums or brake rotors were sold directly to

the first unaffiliated purchaser in the United States prior to

importation and when constructed export price (CEP) methodology was not

otherwise indicated. In accordance with section 777A(d)(1)(A)(i) of the

Act, we compared POI-wide weighted-average export prices (EPs) to the

factors of production.

We have determined preliminarily that certain PRC entities and

certain U.S. entities are affiliated parties within the meaning of

section 771(33) of the Act:

(1) As discussed above, GRI Honbase owns a controlling interest in

Sheyang/Laizhou. GRI Honbase is, in turn, owned by a U.S. party that

also owns a majority interest in Midwest Air Technologies, Inc.(MAT),

and MAT Automotive, Inc., the parties in the U.S. which first purchase

the brake rotors produced by Shenyang/Laizhou. Thus, we determine

preliminarily that Shenyang/Laizhou, MAT and MAT Automotive are

affiliated parties.

(2) Southwest wholly owns MMB International, Inc., the U.S.

importer. Thus, we determine preliminarily that Southwest and MMB

International, Inc., are affiliated parties.

While the merchandise produced by Shenyang/Laizhou and Southwest

was shipped directly from the manufacturer to the unaffiliated U.S.

customer, the terms of all sales made through U.S. affiliates were

negotiated in the United States by the affiliates. Therefore, we find

that the responsibilities of the U.S. affiliates go well beyond those

of ``a processor of sales related documentation'' or a ``communications

link,'' and have redesignated the sales in question as CEP. (See

Concurrence Memorandum.)

Therefore, for all sales of brake rotors made by Shenyang/Laizhou

and those sales of brake rotors by Southwest made in the United States,

before or after importation, we have redesignated these sales as CEP

sales in accordance with section 772(b) of the Act. (See Concurrence

Memorandum.)

For CAIEC/CAPCO, whose 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.

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 credit expenses, and

indirect selling expenses. Finally, we made an adjustment for CEP

profit in accordance with section 772(d)(3) of the Act. We deducted an

amount from CEP for profit by applying the surrogate value profit rate

for brake drums and brake rotors to the sum of selling expenses

incurred in the U.S. See Bicycles, 61 FR 19031.

We made company-specific adjustments as follows:

1. CAIEC/CAPCO

We calculated EP and CEP based on packed, FOB Qingdao port or CIF

U.S. port prices to unaffiliated purchasers in the United States, as

appropriate. We made deductions from the starting price, where

appropriate, for the following services which were provided by market

economy suppliers: U.S. inland freight and U.S. duty expenses (which

also included harbor maintenance fees and merchandise processing fees).

We also deducted from the starting price, where appropriate, an amount

for foreign inland freight, foreign brokerage and handling, marine

insurance and U.S. inland insurance. However, when these movement

services were provided by nonmarket economy suppliers, we valued them

using Indian rates. In some cases international freight and marine

insurance were provided by nonmarket economy suppliers, and in others

by market economy suppliers. For the former, the deduction was based on

Indian surrogate values. For the latter, we deducted the market economy

value for the services from the starting price. We have also

recalculated credit expenses using an interest rate that is an average

of the interest rates of all U.S. dollar fixed and variable loans with

a maturity of over one month and under one year as reflected in Federal

Reserve statistics (see Final Results of Administrative Review: Certain

Cut-to-Length Carbon Steel Plate from Sweden (61 FR 15772, 15780)

(Steel Plate))).

2. CMC

We calculated EP based on packed, CIF U.S. port prices to

unaffiliated purchasers in the United States. We made deductions from

the CIF U.S. port price, where appropriate, for foreign inland freight

and foreign brokerage and handling, marine insurance and international

freight. As all foreign inland freight and handling fees were provided

by nonmarket economy suppliers and or paid for in a non-market economy

currency, we valued these services using Indian rates.

3. Qingdao

We calculated EP based on packed, CNF U.S. port prices to

unaffiliated purchasers in the United States. We made deductions from

the CNF U.S. price, where appropriate, for foreign inland freight,

brokerage & handling and international freight. As all these expenses

were provided by nonmarket

[[Page 53195]]

economy suppliers, we valued these services using Indian rates.

4. Shenyang/Laizhou

We calculated CEP based on packed, CIF U.S. port prices to

unaffiliated purchasers in the United States. We made deductions from

the starting price, where appropriate, for international freight (which

includes ocean freight and U.S. inland freight), and marine insurance

(which includes U.S. inland insurance). In some cases international

freight and marine insurance were provided by nonmarket economy

suppliers, and in others by market economy suppliers. For the former,

the deduction was based on Indian surrogate values. For the latter, we

deducted the market economy value for the services from the starting

price. We also deducted from the starting price, where appropriate, an

amount for foreign inland freight. Because these movement services were

provided by nonmarket economy suppliers, these services were valued

using Indian rates.

We have also deducted from CEP credit expenses incurred on behalf

of U.S. sales. We note that our practice is to calculate a credit

period from the date that the merchandise is shipped to the

unaffiliated U.S. customer to the date that payment from that customer

is received. In CEP cases where the merchandise is shipped to the U.S.

customer from the inventory of a U.S. affiliate, the credit period

begins from the point of shipment from U.S. inventory. However, in the

case of Laizhou/Shenyang, merchandise is shipped to the U.S. customer

directly from the foreign port. Therefore, we have relied on a credit

period beginning with the date of the bill of lading at the foreign

port. Thus, we have recalculated credit expenses and have also used an

interest rate based on the method used in Steel Plate.

5. Southwest

We calculated EP and CEP based on packed, CIF customer's warehouse,

CIF Hong Kong, or CIF U.S. port prices to unaffiliated purchasers in

the United States, as appropriate. We made deductions from the starting

price, where appropriate, for the following: foreign inland freight,

marine insurance (which includes domestic inland insurance), foreign

brokerage and handling, international freight, transloading charges in

Hong Kong, U.S. customs duty, and U.S. customs brokerage (which

includes U.S. inland freight). International freight and transloading

charges were provided for certain transactions by non-market economy

carriers and for other transactions by market economy carriers. For the

former, the deduction was based on Indian surrogate values. For the

latter, we deducted the market economy value for the services from the

starting price. The foreign inland freight, marine insurance, and

foreign brokerage and handling expenses were valued using Indian rates

because these services were provided by a nonmarket economy supplier.

We have also deducted from CEP credit expenses incurred on behalf

of U.S. sales. As with Shenyang/Laizhou (noted above), Southwest's

merchandise is shipped to the U.S. customer directly from the factory.

Southwest reported its credit expenses based on the shipment date from

the U.S. port. Therefore, we have recalculated credit expenses to

reflect the date of shipment from the factory and have also used an

interest rate based on the method used in Steel Plate.

6. Xinjiang

We calculated EP based on packed, FOB Qingdao port prices to

unaffiliated purchasers in the United States. We made deductions from

the FOB Qingdao price for foreign inland freight. As all foreign inland

freight charges were provided by nonmarket economy suppliers, we valued

this service at an Indian rate.

7. Xinchangyuan

We calculated EP based on packed, C&F or CIF U.S. port prices to

unaffiliated purchasers in the United States. We made deductions from

the C&F or CIF U.S. price, where appropriate, for foreign inland

freight and brokerage and handling, and marine insurance. As all

foreign inland freight, brokerage and handling, and marine insurance

were provided by nonmarket economy suppliers, these services were

valued using Indian rates. We also deducted ocean freight which was

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

currencies.

8. Yantai

We calculated EP based on packed, CIF U.S. port prices to

unaffiliated purchasers in the United States. We made deductions from

the CIF U.S. price, where appropriate, for foreign inland freight,

foreign brokerage and handling and marine insurance. As all these

expense were provided by nonmarket economy suppliers, these services

were valued in India. In addition, we deducted international freight

which was provided by market economy suppliers and paid for in market

economy currencies.

Normal Value

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

based on factors of production reported by the factories in the PRC

which produced brake drums and/or brake rotors for the eight exporters.

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

economy currency (i.e., bolts), we used the actual price paid for the

input to calculate the factors-based NV in accordance with our

practice. See Lasko Metal Products v. United States, 437 F. 3d 1442,

1443 (Fed. Cir. 1994) (``Lasko''). We valued the remaining factors

using PI from India where possible. Where appropriate Indian values

were not available, we used PI from Indonesia.

Factor Valuations

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. Where we

were not able to rely on domestic prices, we used import prices to

value factors. We did not remove from the import data import prices

that respondents alleged were dumped and/or subsidized because they did

not demonstrate that inclusion of these values caused depressive

distortions in the import prices (see Concurrence Memorandum). 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 from the team

to Barbara R. Stafford, (Factors Memorandum) dated October 3, 1996.

To value calcium carbonate, we used public information from POI

issues of the Indian publication Chemical Weekly. For dextrin, copper,

copper powder, ferromanganese, ferrosilicon of greater than 55% purity,

other ferrosilicon, and manganese metal, we relied on import prices

contained in the April through July 1995 issues of Monthly Statistics

of the Foreign Trade of India (Monthly Statistics).

To value ferrochromium, we used Indian import price data from the

April through June 1995 issues of Monthly Statistics. To value iron

scrap, steel scrap, and pig iron, we used domestic prices from public

information contained in the annual report of Shivaji Works Ltd., an

Indian producer of brake

[[Page 53196]]

drums, because these prices best represent the cost of those incurred

by an Indian producer of brake drums and brake rotors.

To value lead-based rust inhibitor, non-lead-based rust inhibitor,

shot and angular grit (if used for sand cores), turnings and shavings

(if used for sand cores), lubrication oil, ball bearing cups, steel

angles, steel plate, and steel stamp, we used Indian import price data

from the April through July 1995 issues of Monthly Statistics. To value

parting spray, we used Indian import price data from the April and May

1995 issues of Monthly Statistics. Shenyang/Laizhou purchased castings

for rotors from an unaffiliated nonmarket economy supplier. Shenyang/

Laizhou provided the financial statements of two Indian producers,

Shivaji and Bhagwati, as a source for surrogate values for castings. To

value this input, we used the cast iron casting price noted in

Shivaji's financial statement only. Although the other financial

statement submitted by Shenyang/Laizhou listed a price for castings,

there was no indication that such castings were used to produce

merchandise comparable to the merchandise subject to these

investigations.

We note that Shenyang/Laizhou claimed that the Indian surrogate

values for castings purchased by Shenyang in China are significantly

higher than the production experience of Laizhou, and that the Indian

values may include products other than brake rotor castings. Based on

this claim, Shenyang/Laizhou requested that the Department value the

purchased castings using the factors of production of respondent

Laizhou. We have rejected respondent's request for this preliminary

determination. It is the Department's practice to value inputs

purchased in NME countries using surrogate values for the input, rather

than to construct a value for the input based on factors of production

for that input. (See Final Determination of Sales At Less Than Fair

Value Coumarin from People's Republic of China, 59 FR 66895, (Comments

4 and 5) (December 28, 1994)). In the instant case, we are relying on

Indian castings values (which we note were placed on the record by

Shenyang/Laizhou themselves), and rejecting Shenyang/Laizhou's proposed

methodology because the respondent has provided no evidentiary support

for their claim that the surrogate values may reflect the prices of

products other than (or substantially different from) brake rotor

castings, and because the Department is required, under section

1677b(a)(4) of the Act, to value factors of production in a surrogate

market economy.

Regarding lug bolts, we could not obtain a product-specific price

from India. Therefore, we used Indonesian import data covering January

through November 1995 from the November 1995 issue of Statistical

Bulletin (see Concurrence Memorandum and Bicycles). For PRC companies

which purchased lug bolts from market economy sources and paid in

market economy currency, we used the data supplied in their

submissions. To value steel sheet, steel strip, and steel wire rod, we

relied upon public information from the SAIL publication.

To value coking coal and wood, we used import prices covering April

through July 1995 from Monthly Statistics. For liquid petroleum gas we

used domestic prices from an Indian periodical, Financial Times of

India. For electricity, we relied upon public information from

Confederation of Indian Industries Handbook of Statistics 1995 to

obtain an average price for electricity provided to medium-size

industries.

To value adhesive tape, corrugated cartons, corrugated paper,

fiberboard, labels, nails, steel straps, wood brackets, wood cases and

boxes, and wood pallets, we relied upon Indian import data from the

April through July 1995 issues of Monthly Statistics.

Regarding plastic bags and sheets, we utilized Indian import price

data for polyethylene from the April 1994 through February 1995 issues

of Monthly Statistics. For plastic tarpaulin, we used the Indian import

price for other plastic sheets from the April through July 1995 issues

of Monthly Statistics. For bags and sheets of other plastics, we used

Indian import price data from the same issues of Monthly Statistics.

To value labor, we used data from the United Nations' publication

Yearbook of Labor Statistics (YLS). Information for Indian labor rates

from Investing, Licensing & Trading Conditions Abroad was found to

represent statutory minimum Indian labor rates and not actual labor

rates (see Preliminary Determination of Sales at Less than Fair Value:

Polyvinyl Alcohol from the PRC, 60 FR 52647 (October 10, 1995) (PVA).

The original source does not name or document the skill level

represented by the YLS surrogate value, nor do we have agreement among

parties regarding use of this labor rate for skilled and unskilled

labor rate assumptions. Thus, following the method established in PVA

and in relying on YLS data, we applied a single labor value to all

reported labor factors, including indirect labor.

To value truck freight rates, we used public information from the

periodical The Times of India. For train rates, we relied upon POI

public information from the Indian Railway Conference Association,

which provides published distance-specific fees. For Indian barge

rates, we relied upon public information contained in the August 3.

1993 cable from the U.S. consulate in Bombay, originally utilized in

Final Determination of Sales at Less than Fair Value: Helical Spring

Lock Washers from the PRC, 58 FR 48833 (September 28, 1993), adjusted

for inflation. To value ocean freight rates, we used public information

from the Federal Maritime Commission common rates tariff.

To value foreign brokerage and handling, we relied on public

information reported in the antidumping investigation of Stainless

Steel Bar from India. For marine insurance, we used public information

reported in the antidumping investigation of Sulfur Dyes, Including

Sulfur Vat Dyes, from India (which is attached to the factors valuation

memorandum).

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

average using the financial statements of Rico and Shivaji. Of the five

financial statements of Indian producers submitted by interested

parties, only the statements of these two companies indicated

production comparable to the merchandise subject to these

investigations.

Where appropriate, we have removed from the surrogate overhead and

SG&A calculations, the excise duty amount listed in the financial

statements (see Bicycles, 61 FR 19039). We also made certain

adjustments to the percentages calculated as a result of reclassifying

expenses contained in the financial statements.

For both companies, we treated the line item labelled ``stores and

spares consumed'' as part of factory overhead and not part of materials

consumed because stores and spares are not direct materials consumed in

the production process. We have considered stores and spares to include

items such as filter screens, flux covering, drill bits and similar

items which are not direct inputs into the production process. In

addition, information in one of these companies' financial statements

indicates that Indian accounting practices require Indian companies to

record molding inputs (i.e., all types of sand, bentonite, lead powder,

steel pellets (if used for sand cores or moulding), coal powder and

waste oil) under ``stores and spares consumed.''

[[Page 53197]]

Therefore, we are considering these molding inputs as indirect

materials and a part of factory overhead, and we are not valuing them

as materials.

We have considered the line item labelled ``raw materials

consumed'' to include direct materials such as pig iron, steel scrap,

and steel inputs, and non-steel direct inputs and not included them in

factory overhead. The designation of these items is consistent with

standard accounting procedures and recent determinations (see PVA and

Bicycles). We also based our factory overhead calculation on the cost

of goods manufactured rather than on the cost of goods sold. In

addition, we included interest and/or financial expenses in the SG&A

calculation.

For Shivaji, we removed rent expenses from manufacturing costs and

reclassified the expense as SG&A, and kept write-offs of development

expenses in manufacturing costs. To avoid double counting, we removed

the amount for miscellaneous expenses from the SG&A calculation to

account for packing expenses. (For a further discussion of other

adjustments made, see Concurrence Memorrandum).

For Rico, we have considered technical know-how expenses as

engineering expenses and kept them in factory overhead. To avoid double

counting, we removed the amount for other expenses from the SG&A

calculation to account for packing expenses. (For a further discussion

of other adjustments made, see Concurrence Memorrandum).

Southwest reported additional factors such as filter screens,

fluxing covering, and grinding wheels which it uses to produce brake

rotors. For these preliminary determinations, we have treated these

types of inputs as part of factory overhead because they do not appear

to be direct material inputs.

Verification

As provided in section 782(i) of the Act, we will verify the

information used in making our final determinations.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the

Customs Service to suspend liquidation of all entries of brake drums

and rotors 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 will require a cash deposit

or posting of a bond equal to the estimated dumping margins by which

the normal value exceeds the USP, as shown below. These suspension of

liquidation instructions will remain in effect until further notice.

CMC will be excepted from the suspension of liquidation instructions

for brake drums because its sales of brake drums were not found to have

been sold below fair value. CMC's sales of brake drums, which were

manufactured by the producer whose factors formed the basis for the de

minimis margin, will be excluded from an antidumping duty order on

brake drums should one be issued. Brake drums that are sold by CMC but

manufactured by other producers will be subject to the order, if one is

issued. (See Final Determination of Sales At Less Than Fair Value: Case

Pencils from the People's Republic of China, 59 FR 55625, (November 8,

1994)(Pencils)). CAIEC/CAPCO will be excepted from the suspension of

liquidation instructions for brake rotors because its sales of brake

rotors were not found to have been sold below fair value. CAIEC/CAPCO's

sales of brake rotors, which were manufactured by the producer whose

factors formed the basis for the de minimis margin, will be excluded

from an antidumping duty order on brake rotors should one be issued.

Brake rotors that are sold by CAIEC/CAPCO but manufactured by other

producers will be subject to the order, if one is issued. (See

Pencils).

The weighted-average dumping margins are as follows:

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

Weighted-average

Manufacturer/producer/exporter margin percentage

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

Brake Drums

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

China National Automotive Industry Import & Export

Corporation, Shandong Laizhou CAPCO Industry

Corporation, and CAPCO International USA........... 13.97

Yantai Import & Export Corporation.................. 19.07

Qingdao Metal & Machinery Import & Export

Corporation........................................ 9.70

Beijing Xinchangyuan Automobile Fittings

Corporation, Ltd................................... 11.29

China National Machinery Import & Export Corporation 0.08

Jiuyang Enterprise Corporation...................... 13.97

Hebei Metals and Machinery Import & Export

Corporation........................................ 13.97

Longjing Walking Tractor Works Foreign Trade Import

& Export Corporation............................... 13.97

Shanxi Machinery and Equipment Import & Export

Corporation........................................ 13.97

China-Wide Rate..................................... 105.56

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

Brake Rotors

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

China National Automotive Industry Import & Export

Corporation, Shandong Laizhou CAPCO Industry

Corporation, and CAPCO International USA........... 0.12

Shenyang Honbase Machinery Corporation, Ltd., and

Laizhou Luyuan Automobile Fittings Corporation,

Ltd., MAT Automotive, Inc., and Midwest Air

Technologies, Inc.................................. 64.56

Yantai Import & Export Corporation.................. 11.81

Southwest Technical Import & Export Corporation,

Yangtze Machinery Corporation, and MMB

International, Inc................................. 45.08

China National Machinery and Equipment Import &

Export (Xinjiang) Corporation, Ltd................. 13.04

Qingdao Metal & Machinery Import & Export

Corporation........................................ 42.69

Xianghe Zichen Casting Corporation.................. 42.69

Jiuyang Enterprise Corporation...................... 42.69

Hebei Metals and Machinery Import & Export

Corporation........................................ 42.69

Yenhere Corporation................................. 42.69

Longjing Walking Tractor Works Foreign Trade Import

& Export Corporation............................... 42.69

Jilin Provincial Machinery & Equipment Import &

Export Corporation................................. 42.69

Shanxi Machinery and Equipment Import & Export

Corporation........................................ 42.69

China-Wide Rate..................................... 64.56

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

[[Page 53198]]

China-Wide Rate

A China-Wide Rate has been assigned to brake drums based on the

highest margin calculated in the brake drums case and a China-Wide Rate

has been assigned to brake rotors based on the highest margin

calculated in the brake rotors case. The China-Wide rate assigned to

each product applies to all entries of that product except for entries

from exporters/factories that are identified individually above under

each product type.

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determinations. If our final determinations are affirmative,

the ITC will determine before the later of 120 days after the date of

these preliminary determinations or 45 days after our final

determinations whether these imports are materially injuring, or

threaten material injury to, the corresponding U.S. industry.

Public Comment

In accordance with 19 CFR 353.38, case briefs or other written

comments in at least ten copies must be submitted to the Assistant

Secretary for Import Administration no later than January 8, 1997, and

rebuttal briefs, no later than January 15, 1997. A list of authorities

used and a summary of arguments made in the briefs should accompany

these briefs. Such summary should be limited to five pages total,

including footnotes. We will hold a public hearing, if requested, to

afford interested parties an opportunity to comment on arguments raised

in case or rebuttal briefs. At this time, the hearing is scheduled for

January 17, 1997, at 10:00-2:00 Room 1414, at the U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230. Parties should confirm by telephone the time, date, and place of

the hearing 48 hours before the scheduled time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, U.S. Department of Commerce, Room

B-099, within ten days of the publication of this notice. Requests

should contain: (1) The party's name, address, and telephone number;

(2) the number of participants; and (3) a list of the issues to be

discussed. In accordance with 19 CFR 353.38(b) oral presentations will

be limited to issues raised in the briefs. If this investigation

proceeds normally, we will make our final determination by January 16,

1996.

This determination is published pursuant to section 733(f) of the

Act.

Dated: October 3, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-26085 Filed 10-9-96; 8:45 am]

BILLING CODE 3510-DS-P