Chrome-Plated Lug Nuts From the People's Republic of China; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-570-808]

Chrome-Plated Lug Nuts From the People's Republic of China; Final

Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping administrative review.

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

SUMMARY: On July 9, 1996, the Department of Commerce (the Department)

published in the Federal Register the preliminary results of its

administrative review of the antidumping duty order on chrome-plated

lug nuts (lug nuts) from the People's Republic of China (PRC) (61 FR

36025). This review covers shipments of this merchandise to the United

States during the period September 1, 1994 through August 31, 1995. We

gave interested parties an opportunity to comment on our preliminary

results. Based upon our analysis of the comments received we have

changed the results from those presented in the preliminary results of

review.

EFFECTIVE DATE: November 15, 1996.

FOR FURTHER INFORMATION CONTACT: Tamara Underwood (202-482-0197),

Elisabeth Urfer (202-482-4052), or Maureen Flannery (202-482-4733),

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 stated, all citations to the statute are

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

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

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

stated, all citations to the Department's regulations are references to

the regulations as amended by the interim regulations published in the

Federal Register on May 11, 1995 (60 FR 25130).

SUPPLEMENTARY INFORMATION:

Background

The Department published in the Federal Register an antidumping

duty order on lug nuts from the PRC on April 24, 1992 (57 FR 15052). On

September 12, 1995, the Department published in the Federal Register

(60 FR 47349) a notice of opportunity to request an administrative

review of the antidumping duty order on lug nuts from the PRC covering

the period September 1, 1994, through August 31, 1995.

On September 28, 1995, in accordance with 19 CFR 353.22(a),

Consolidated International Automotive Inc. (Consolidated) requested

that we conduct an administrative review of China National Automotive

Industry I/E Corp. (China National); China National Machinery &

Equipment Import and Export Corporation, Jiangsu Co., Ltd. (Jiangsu);

Jiangsu Rudong Grease Gun Factory (Rudong); China National Automotive

Industry I/E Corp., Nantong Branch (Nantong); China National Automotive

Industry Shanghai Automobile Import & Export Corp. (Shanghai

Automobile); Tianjin Automotive Import & Export Co. (Tianjin); China

National Automobile Import and Export Corp., Yangzhou Branch

(Yangzhou); and Ningbo Knives

[[Page 58520]]

& Scissors Factory (Ningbo). We published a notice of initiation of

this antidumping duty administrative review on October 12, 1995 (60 FR

53165).

On July 9, 1996, the Department published in the Federal Register

the preliminary results of its administrative review of the antidumping

duty order on lug nuts from the PRC (61 FR 36025). There was no request

for a hearing. The Department has now completed this review in

accordance with section 751 of the Act.

Scope of Review

On April 19, 1994, the Department issued its ``Final Scope

Clarifications on Chrome-Plated Lug Nuts from Taiwan and the PRC.'' The

scope, as clarified, is described in the subsequent paragraph. All lug

nuts covered by this review conform to the April 19, 1994 scope

clarification.

Imports covered by this review are one-piece and two-piece chrome-

plated lug nuts, finished or unfinished. The subject merchandise

includes chrome-plated lug nuts, finished or unfinished, which are more

than \11/16\ inches (17.45 millimeters) in height and which have a

hexagonal (hx) size of at least \3/4\ inches (19.05 millimeters) but

not over one inch (25.4 millimeters), plus or minus \1/16\ of an inch

(1.59 millimeters). The term ``unfinished'' refers to unplated and/or

unassembled chrome-plated lug nuts. The subject merchandise is used for

securing wheels to cars, vans, trucks, utility vehicles, and trailers.

Zinc-plated lug nuts, finished or unfinished, and stainless-steel

capped lug nuts are not included in the scope of this review. Chrome-

plated lock nuts are also not subject to this review.

Chrome-plated lug nuts are currently classified under subheadings

7318.16.00.15, 7318.16.00.45, and 7318.16.00.80 of the Harmonized

Tariff Schedule (HTS). Although the HTS subheading is provided for

convenience and customs purposes, the written description of the scope

of this proceeding is dispositive.

This review covers the period September 1, 1994 through August 31,

1995.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received case briefs from petitioner and

Rudong. We received a rebuttal brief from Rudong.

Comment 1: Petitioner concurs with the Department's decision to use

facts available (FA) for firms that refused to cooperate in the review.

Petitioner argues that, where the Department must base the entire

dumping margin for a respondent in an administrative review on the

facts available for failure to cooperate, section 776(b) of the Act

authorizes the Department to use an inference adverse to the interests

of the respondent in choosing FA.

For the seven non-responding firms, petitioner contends that the

Department should continue to apply the highest antidumping duty rate

from any prior segment of the proceeding, 44.99 percent, based upon the

final results of the second administrative review (1992-1993).

Department's Position: We agree with petitioner. In accordance with

Section 776 of the Act, we have for these final results continued to

use FA for Nantong, Yangzhou, Ningbo, Jiangsu, China National, Tianjin,

and Shanghai Automobile. These firms did not respond to the

Department's antidumping questionnaire. (See Chrome-Plated Lug Nuts

From The People's Republic of China; Preliminary Results of Antidumping

Duty Administrative Review, July 9, 1996 (61 FR 36025).) Accordingly,

we have continued to use adverse FA for these firms for the final

results.

Comment 2: Petitioner asserts that the Department appropriately

determined that the PRC lug nut industry was not a market-oriented

industry (MOI) and properly applied factors of production to determine

Rudong's normal value (NV). Petitioner contends that, although the

Department assigned Rudong a separate rate based on lack of government

control of its operations, this does not mean that the entire PRC lug

nut industry is market-oriented. Petitioner cites the criteria applied

in the Department's determination in Sulfur Dyes from China, Final

Determination of Sales at Less than Fair Value (58 FR 7537) (February

8, 1993):

(1) There must be virtually no involvement by the government in

setting prices or amounts to be produced of the merchandise under

investigation.

(2) The industry producing the merchandise under investigation

should be characterized by private or collective ownership. There

may be state-owned enterprises in the industry, but substantial

state ownership weighs against a finding of market-oriented

industry.

(3) Market-determined prices must be paid for all significant

inputs, whether material or non-material, and for an all but

insignificant portion of all the inputs accounting for the total

value of the merchandise under investigation.

Petitioner maintains that, although Rudong asserts that it is the

only PRC producer of lug nuts, it failed to provide objective

corroboration of this claim. Petitioner further maintains that the

Department's attempts to obtain further information on this point have

been frustrated by lack of response from both the PRC government and

the Chinese Chamber of Commerce for Imports & Exports of Machinery &

Electronics (China Chamber). Petitioner claims that, in spite of its

efforts, the Department has been unable to determine whether there are

additional PRC producers of lug nuts. Petitioner argues that it is

insufficient for the Department to rely upon Rudong's response alone to

determine that it is an MOI. Petitioner contends that the Department

must be certain that it has obtained responses from all PRC producers

before determining whether the PRC industry is market-oriented.

Petitioner further argues that, before an industry is considered

``market oriented,'' it must demonstrate that it pays market-determined

prices for all significant inputs and for all but an insignificant

portion of all the inputs accounting for the total value of the

merchandise under review. Petitioner states that, although Rudong

claims its suppliers pay market-determined prices for all inputs,

Rudong failed to produce information that would allow evaluation of

this claim. Petitioner also contends that statements from Rudong's

suppliers regarding the absence of government control over their

industry are unsupported and unverified. Petitioner maintains that the

suppliers of water and electricity to Rudong are ``All People-owned''

and the information supplied by Rudong on vendor ownership is

contradictory.

Petitioner contends that Rudong's submission does not address the

overarching question of the status of the Chinese steel and chemical

industries. Petitioner argues that, regardless of purported

``independence'' of Rudong's suppliers, the Department properly

recognized that the industries supplying materials must be market-

driven. Petitioner further argues that Rudong has not provided any

information concerning the steel and chemical industries nor evidence

that costs for raw materials are not distorted by government control in

the steel and chemical industries.

Rudong disagrees with petitioner regarding Rudong's MOI claim.

Rudong argues that petitioner's argument ignores Rudong's repeated

statements, certified and on the record, that, to its knowledge, it is

the only producer of lug nuts in the PRC. Rudong asserts that the

Chinese government would be able to certify this only if the government

controlled the lug nut industry. Rudong maintains that the Department

incorrectly presumes that other

[[Page 58521]]

producers exist because Rudong supplied no evidence to the contrary.

Rudong argues that the petitioner failed to produce evidence that any

other lug nut producers exist in the PRC.

Rudong argues that statements, certified and on record, from its

suppliers corroborate the absence of government control and provide

varying input prices that are sufficient evidence that Rudong purchases

its inputs at market prices. Rudong claims that input prices vary from

order to order and from supplier to supplier and that it has put on the

record certified statements from suppliers that they are free from

government control and interference. Rudong asserts that only unrelated

sectors of the steel industry are government controlled. Rudong

contends that it does not know what else it can provide to prove the

negative.

Department's Position: Rudong submitted with its January 25, 1996

questionnaire response a request that we treat the lug nuts industry as

an MOI. Rudong claims that it acquires material inputs at market prices

and that, accordingly, we should find that the Chinese lug nuts

industry is an MOI and use Rudong's home market sales and/or costs as

the basis of NV.

Rudong's support of this argument is focused narrowly on

certificates provided by its suppliers stating that they are free of

government control; however, even if Rudong's suppliers are free of

government control, this would not prove absence of government control

in the suppliers' industries. We concluded in the Amendment to Final

Determination of Sales at Less Than Fair Value and Amendment to

Antidumping Duty Order: Chrome-plated Lug Nuts from the People's

Republic of China, 57 FR 15052 (April 24, 1992) (Amended Final) that

such a narrow focus on Rudong's suppliers is not sufficient for

determining that an industry was an MOI. We stated:

The absence of explicit government involvement in these

transactions is not sufficient to warrant the conclusion that the

prices for these inputs are market-driven. Instead, it is necessary

to examine whether market forces are at work in determining the

steel and chemical prices in general within the PRC. For example, it

may be the case that the state purchases large quantities of the

input in question. Where this is so, it is reasonable to assume that

the state's purchases affect the quantity available to non-state

consumers and the prices they would pay. Also, where the state owns

many of the input producers and where the input is an important

commodity fundamental to the operation of the larger economy, it is

not at all clear that the pricing and production of those input

producers would mirror those of privately-owned, profit maximizing

enterprises.

For the [sic] reasons, it is necessary to look beyond direct

state involvement in the specific transactions between the

manufacturer under investigation and its suppliers to ascertain

whether market forces are actually at work in determining the input

prices.

Amended Final, 15053. For this administrative review, Rudong has not

demonstrated that there have been any changes to the industries from

which it sources its materials that would compel us to reconsider the

determination we made in the Amended Final. In addition, Rudong has

argued that there have been only small quantities of government

purchases in unrelated sectors of the steel industry, but has not put

any information on the record to support this point.

We agree with petitioner's contention that the record lacks

objective corroboration of Rudong's claim that it is the only PRC

producer of lug nuts. We disagree with Rudong's deduction that the lack

of response from the PRC government is indicative of the lack of

government control in the industry. We do not know why the government

failed to respond to our request for information.

Based on the foregoing, we determine the lug nuts industry in the

PRC is not an MOI for this review.

Comment 3: Petitioner supports the Department's use of India as the

surrogate market economy country to determine valuation in the factors

of production. Petitioner submits that India meets both statutory

criteria: India is at a level of economic development comparable to

that of the PRC, and India has significant production of lug nuts.

Petitioner also supports the use of India as the surrogate country

because there is a full set of surrogate data available to value

factors of production. This eliminates the need to obtain and use

valuation data from multiple surrogate countries.

Department's Position: Except for our valuation of the steel wire

rod (see Comment 4 below), we have continued to rely on India as a

surrogate country for factor valuation because India is at a level of

economic development comparable to that of the PRC and has significant

production of lug nuts.

Comment 4: Rudong objects to the Department's use of steel prices

from the Government of India import statistics, stating that these

prices are more than twice as high as all other available data,

especially in light of the requirements for corroboration in the URAA,

and that they should be changed for the final results.

Rudong alleges that the factor value for steel should be based on

Indian market prices for steel wire rod published in Steel Scenario.

Rudong contends that Steel Scenario is a reputable professional journal

which publishes actual market prices in India. Rudong argues that

prices from Steel Scenario are corroborated by their general agreement

with the prices listed in other sources, while the surrogate prices

chosen by the Department are completely out of line with any other

source. Rudong maintains that prices from Steel Scenario are for a

period contemporaneous to the period of review (POR), whereas

Government of India import statistics are from a different period, and

must be adjusted by a potentially distortive inflation factor.

Additionally, Rudong states that Steel Scenario reports prices for the

same input product as Rudong uses to produce lug nuts, whereas the

import statistics are for a ``basket'' category. Rudong asserts that

Steel Scenario reports actual market data collected by professionals

knowledgeable in the industry and in the market; import statistics,

Rudong claims, depend upon product classifications by the importer who

may be guided more by the import duty level than the product

characteristics. Finally, Rudong argues that Steel Scenario prices are

the best information regarding such factors in the market economy

country because they are actual market values in India, while, by

contrast, import statistics reflect the customs value of imported

merchandise.

Rudong asserts that the Department's choice of import statistics

results in landed, duty-paid steel prices in India--a relatively poor

developing country--that are not only over 100% higher than the free-

market prices paid by Rudong, but also over 100% higher than the

corresponding prices in the United States, a wealthy developed country.

Rudong claims that there is no other available steel price anywhere

that approaches the extraordinarily inflated surrogate prices imputed

by the Department. Rudong suggests the Department use the Indian market

prices listed in Steel Scenario because the prices are in the same

range as those prices paid by Rudong and reflect the prevailing market

prices for the exact months of the period under review.

Rudong states that the Department's surrogate number does not agree

with any of the other available data by a wide margin. Rudong contends

that this may be because the Department incorrectly used surrogate

steel prices from a somewhat arbitrary ``basket'' HTS category

comprising ``other'' bars and rods. Rudong argues that the steel

included in this basket may be a special

[[Page 58522]]

and more expensive type used for particular purposes and not relevant

to this case. Also, Rudong contends, the Department's surrogate prices

may not agree with other available data due to simple misclassification

under the HTS. Rudong argues that, in significant part, import

statistics measure only the HTS category chosen by importers to

classify merchandise and are therefore, not a precise measure. Rudong

argues that, whatever the source of distortion, the import statistics

are not an appropriate measure of the price of steel used by Rudong,

and should not be used by the Department in the final results.

Rudong contends that the only potential distortion risked by using

Steel Scenario is that prices therein include excise and sales taxes,

and therefore may be overstated. Rudong argues that this distortion can

be adjusted for by adjusting the price downwards. Rudong argues that

the Department routinely adjusts for this tax factor when it uses

prices published in Chemical Weekly, and cites, as an example, a

memorandum to the file from the ``Bicycles Team'': ``Final

Determination in the Antidumping Duty Investigation of Bicycles from

the People's Republic of China: Factors Valuation'' (initialed April

22, 1996). Rudong maintains that even using unadjusted, overvalued

steel prices from Steel Scenario would be more reasonable than using

Indian import statistics.

Petitioner contends that the Department should rely on the same

surrogate values from Indian import statistics for valuing raw

materials and packing costs that were used in the preliminary results.

Petitioner states that the tariff descriptions provide narrow coverage

for nearly all raw materials and packing materials used by the Chinese

producer, which avoids the problem of over inclusiveness.

Petitioner argues that the Department should continue to use Indian

import statistics for steel valuation. Petitioner states that these

data include material from which Rudong produced lug nuts during the

period of review, and therefore are the most accurate information on

this issue.

Petitioner argues that the Department should continue to decline

use of steel price data submitted by Rudong as the Department did in

the preliminary results, because they are for rounds and not steel wire

rod. Petitioner asserts that steel rounds are not the raw material used

in lug nut production. Petitioner contends that applying such data

would distort the value of steel. Petitioner submits that the use of

steel wire rods in the production of lug nuts was verified by the

Department.

Additionally, petitioner asserts that the steel prices submitted by

Rudong represent sales prices in two Indian cities and may not be

representative of steel prices in India generally. Petitioner claims

that the Indian import statistics provide nationwide average prices for

steel in India.

Petitioner further contends that the steel scrap data used by the

Department reflect that the production process of lug nuts begins with

the steel wire rod, not the further-fabricated steel rounds. Petitioner

notes that the respondent failed to point out that the Department would

have to adjust the scrap calculations to eliminate scrap accounted for

by the production of rounds from rod. Petitioner claims that other

adjustments--to energy and labor--would also be necessary to pretend

that the production process starts with rounds, instead of rod.

Rudong contends that petitioner's assertions are wrong, and that,

even under petitioner's analysis, the Department should use the

surrogate prices submitted by Rudong. Rudong states that it submitted

prices for both wire rod and rounds because it is unclear why steel

wire rod data is preferable to steel rounds data. In addition, Rudong

contends that, although the broad category of product reported in

Rudong's submission was for ``iron and steel,'' it is apparent that the

category ``wire rod'' consists of steel and not iron.

Department's Position: We agree with Rudong, in part. We agree with

Rudong that the information in Steel Scenario is more contemporaneous

with the POR; however, the data submitted by Rudong do not indicate the

grade and specifications of the metal. We noted in Chrome-Plated Lug

Nuts From the People's Republic of China; Final Results of Antidumping

Administrative Review, 60 FR 48687 (September 20, 1995), covering the

1991-1992 and 1992-1993 administrative review periods that the Indian

import statistics are more specific in that they indicate the carbon

content of the steel, whereas by contrast, Steel Scenario does not

specify either the carbon content of the steel or other chemicals

present in the steel. Carbon level is a more important determinant of

price than size. We further note that Steel Scenario prices include

taxes and levies, without indicating the amount of taxes and levies

included. Our objective is to value steel at prices at which it is

available in the surrogate country. Furthermore, we are not convinced

that the prices shown in Steel Scenario are more representative of

prices available in India than are import statistics. While Rudong has

put on the record of this review data that would allow us to adjust for

taxes, it has not assuaged our other concerns regarding the use of

Steel Scenario.

However, in reviewing the Indian import data for steel wire rod, in

comparison with prices of steel wire rod imported into other countries,

we found that Indian import prices were significantly higher than

prices of imports into other countries we examined. We compared the

same ``basket'' HTS number for the United States, the European Union,

Canada, and Indonesia and found that steel wire rod import prices to be

relatively the same in these areas, and significantly lower than Indian

steel wire rod import prices. Indonesia is also comparable to the PRC

in terms of level of economic development and Indonesia has some lug

nut production, albeit not as great as India. (See Memorandum to Laurie

Parkhill from David Mueller, dated March 15, 1996, ``Chrome-Plated Lug

Nuts from the People's Republic of China: Non-market Economy Status and

Surrogate Country Selection,'' and Memorandum to the File from

Elisabeth Urfer, dated June 14, 1996, ``India: Significant Production

of Comparable Merchandise,'' which are on file in the Central Records

Unit (room B099 of the Main Commerce Building).) Therefore, for these

final results we have used Indonesian steel wire rod import prices.

These import prices are also for a basket category of steel wire rod

imports, as are the Indian import prices, but are consistent with steel

wire rod prices in other countries. They also do not include taxes.

(See memorandum to the file from Tamara Underwood, ``Comparison of

Steel Prices in the 1994-1995 Administrative Review on Lug Nuts from

the PRC'' dated October 30, 1996.)

Comment 5: Petitioner submits that the Department should continue

to use as the surrogate labor rate data from the Economist Intelligence

Unit's Investing, Licensing, and Trading Conditions Abroad (IL&T), as

the Department did for the preliminary results.

Department's Position: We disagree with petitioner with regard to

the use of the IL&T data. For the final results, we have recalculated

the labor rates, using data from the Yearbook of Labor Statistics

(YLS). As we stated in the Notice of Final Determination of Sales at

Less Than Fair Value: Bicycles From the People's Republic of China, 61

FR 19026, April 30, 1996, the IL&T reports estimates based not on

actual wage rates, but on rates stipulated in various

[[Page 58523]]

Indian laws. See Memorandum to the File From Tamara Underwood, ``Labor

Valuation Changes in Lug Nuts Final Calculation'', dated November 6,

1996. Therefore, we have not used IL&T data for the final results. The

YLS provides wage rates on an industry-specific basis. We used the

daily wage rate specified for SIC code 381, ``manufacture of fabricated

metal products, except machinery and equipment,'' because the

description of the various industries this category covers was the best

match for the lug nut industry. Having found the IL&T data to be an

inappropriate source for wage rates, it would be inappropriate to use

the IL&T data to differentiate among skill levels. Because the YLS

provides wage rates from 1990, we inflated the data for the review

period, using the consumer price index, published in the International

Monetary Fund's International Financial Statistics.

Final Results of Review

As a result of the comments received, we have changed the results

from those presented in our preliminary results of review. Therefore,

we determine that the following margins exist as a result of our

review:

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

Margin

Manufacturer/exporter Time period (percent)

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

Jiangsu Rudong Grease Gun Factory, also

known as China Nantong HuangHai Auto

Parts Group Co., Ltd..................... 09/01/94-08/31/95 2.70

China National Machinery & Equipment

Import & Export Corp., Nantong Branch.... 09/01/93-08/31/94 44.99

PRC rate.................................. 09/01/94-08/31/95 44.99

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between United States price and NV may vary from the

percentages stated above. The Department will issue appraisement

instructions directly to the Customs Service.

Furthermore, the following deposit rates will be effective upon

publication of these final results for all shipments of lug nuts from

the PRC entered, or withdrawn from warehouse, for consumption on or

after the publication date, as provided for by section 751(a)(1) of the

Act: (1) For Rudong and Nantong, which have separate rates, the cash

deposit rates will be the company-specific rates stated above; (2) for

the companies named above which did not respond to our questionnaire

(China National, Jiangsu, Yangzhou, Ningbo, Shanghai Automobile, and

Tianjin), and for all other PRC exporters, the cash deposit rate will

be the PRC rate stated above; (3) for non-PRC exporters of subject

merchandise from the PRC, the cash deposit rate will be the rate

applicable to the PRC supplier of that exporter.

These deposit rates shall remain in effect until publication of the

final results of the next administrative review.

This notice also serves as a final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective orders (APOs) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d)(1). Timely written notification

of the return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

Dated: November 6, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-29243 Filed 11-14-96; 8:45 am]

BILLING CODE 3510-DS-P