Certain Helical Spring Lock Washers From the People's Republic of China; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-822]

Certain Helical Spring Lock Washers From the People's Republic of

China; Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

SUMMARY: The Department of Commerce (the Department) published the

preliminary results of the administrative review of the antidumping

duty order on certain helical spring lock washers (HSLWs) from the

People's Republic of China (PRC) in the Federal Register on July 11,

1997 (62 FR 37192). This review covers sales of this merchandise to the

United States during the period October 1, 1995 through September 30,

1996. We gave interested parties an opportunity to comment on our

preliminary results. Based upon analysis of the comments received, we

changed the results from those presented in the preliminary results of

the review.

EFFECTIVE DATE: November 19, 1997.

FOR FURTHER INFORMATION CONTACT: Tamara Underwood or Maureen Flannery,

Import Administration, International Trade Administration, U.S.

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

Washington, D.C. 20230; telephone: (202) 482-4733.

Background

The Department published the preliminary results of this review of

the antidumping duty order on HSLWs from the PRC in the Federal

Register on July 11, 1997 (62 FR 37192). On August 11, 1997,

petitioner, Shakeproof Industrial Products Division of Illinois Tool

Works (SIP), and respondent, Zhejiang Wanxin Group, Co., Ltd. (ZWG),

submitted comments on the Department's preliminary results. On August

18, 1997, petitioner and respondent submitted rebuttal comments. The

Department rejected respondent's August 11, 1997 submission because it

contained new information. Respondent resubmitted comments on August

22, 1997. We held a hearing on September 22, 1997. On October 28, 1997,

the Department placed new information on the record and gave interested

parties an opportunity to comment pursuant to 19 U.S.C. section

1677m(g). The respondent submitted comments on October 31, 1997. The

Department has now completed this review in accordance with section 751

of the Tariff Act of 1930, as amended (the Act).

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 Act by the Uruguay Round of

Agreements Act. In addition, unless otherwise stated, all citations to

the Department's regulations are references to the regulations as

codified at 19 CFR Part 353 (1996).

Scope of Review

The products covered by this review are HSLWs of carbon steel, of

carbon alloy steel, or of stainless steel, heat-treated or non-heat-

treated, plated or non-plated, with ends that are off-line. HSLWs are

designed to: (1) function as a spring to compensate for developed

looseness between the component parts of a fastened assembly; (2)

distribute the load over the larger area for screws or bolts; and (3)

provide a hardened bearing surface. The scope does not include internal

or external tooth washers, nor does it include spring lock washers made

of other metals, such as copper.

[[Page 61795]]

HSLWs subject to this review are currently classifiable under

subheading 7318.21.0030 of the Harmonized Tariff Schedule of the United

States (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 one exporter of HSLWs from the PRC, ZWG, and the

period October 1, 1995 through September 30, 1996.

Analysis of Comments Received

Comment 1: Use of Import Prices to Value Steel Inputs.

Petitioner, SIP, asserts that the Department should limit the use

of imported steel prices to valuing the imported steel actually used.

Petitioner argues that, in accordance with section 1677b(c)(1) of the

Act, the Department must determine normal value (NV) ``on the basis of

the value of the factors of production utilized in producing the

merchandise.'' Petitioner contends that, although the Department used

non-surrogate, market-economy actual prices in 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)(Fans),

and affirmed in Lasko Metal Products v. United States, 43 F .3d 1442

(Fed. Cir. 1994)(Lasko), the Department only applied these values to

the actual imports. Petitioner states that the Department relied on

surrogate values to value all non-imported inputs. Petitioner claims

that the use of import prices to cover non-imported factor inputs is an

arbitrary extension of the Department's authority.

Petitioner contends that the import quantities of steel are not the

same as the domestically-sourced quantities of steel and that the

Department should value these quantities as two separate factors of

production. Petitioner states that the Act defines ``factors of

production'' to include the ``quantities of raw materials employed.''

Petitioner contends that, although the Act and Lasko affirm that the

Department can consider non-surrogate, market-economy actual prices to

be the best information and use those prices, neither the Act nor Lasko

provides justification for the Department's use of values for one

factor as the value for another factor, even if both factors are steel.

Petitioner asserts that accuracy is not enhanced by using import

prices for valuing all steel inputs. Petitioner states that the goal of

the Act is to approximate the costs where non-market economy (NME)

costs do not reflect market-determined prices. Petitioner claims that

the Department cannot use import prices to accurately and fairly

reflect the value of the domestically-sourced steel. Petitioner takes

issue with the proposed antidumping duty regulations on this point

(Antidumping Duties; Countervailing Duties; Notice of Proposed

Rulemaking (61 FR 7309, 7345, February 27, 1996)), and contends that it

is not enough to provide that the market-economy price may be

disregarded ``where the amount purchased from a market economy supplier

is insignificant.'' Petitioner suggests that it should be the other way

around: at most, only if the amount purchased within the NME is

insignificant, should the Department use the non-surrogate, market-

economy actual price to value all steel. Petitioner cites the

Department's practice of valuing inputs based on the weighted average

of prices paid in constructed value (CV) market economy cases.

Petitioner cites Notice of Final Determination of Sales at Less Than

Fair Value: Collated Roofing Nails from Korea (62 FR 25895, 25897, May

12, 1997) as an example of this practice.

Petitioner also asserts that, if the Department values all steel at

the import price, it can drastically distort the NME producer's costs

when, for example, the NME producer uses imported steel to fulfill half

of its steel requirements and domestic steel to fulfill the remainder

of its steel requirements. Petitioner adds that the major defect in the

Department's approach is that it fails to recognize that an NME

producer will import factors at prices which are less than the prices

it would otherwise pay for the input. Petitioner concludes that the

Department's methodology does not promote either accuracy or fairness.

Respondent asserts that the Department correctly used the imported

steel price to value all of its steel inputs in the preliminary results

and should continue to do so in the final results. Respondent states

that the imported steel meets all criteria established by the

Department for using market-economy prices and that the Department is

obliged to use the price paid for that input to value all of the

respondent's consumption of that input. Respondent argues that the

Department's methodology in the preliminary results is fully supported

by the Department's prior practice, the proposed and final regulations,

the court decisions, and the statute. Respondent maintains that the

Department's established practice of valuing all of the production

input using the NME producer's actual import prices for that input is

legitimate and does enhance accuracy, as affirmed in Lasko: ``Where we

can determine that an NME producer's input prices are market

determined, accuracy, fairness, and predictability are enhanced by

using those prices. Therefore, using surrogate values when market-based

values are available would, in fact be contrary to the intent of the

law.'' 43 F.3d 1442, 1446 (Fed. Cir. 1994). Respondent maintains that

the decision in Lasko confirms that surrogate values are merely the

best approximation of what the NME producer might pay if the NME

producer were operating in a market economy. Respondent also adds that

the court stated in Lasko that the Department's practice is a

``legitimate policy choice . . . in interpreting and applying the

statute.'' 43 F.3d at 1446. Respondent claims that Lasko upheld the

Department's market-economy input methodology as consistent with the

statute. Respondent also cites the Department's position in the Notice

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

Institutional Dinnerware Products from the People's Republic of China

(62 FR 1798, 1710, January 13, 1997)(Melamine), which states that ``the

market economy price is the most appropriate basis for determining the

value of the [input] purchased from the PRC suppliers.'' Respondent

concludes that when the NME producer actually purchases a market-

economy input and pays in market economy currency, there is no need to

use the best approximation.

Respondent asserts that the CV calculation methodology referenced

by petitioner is irrelevant to NME cases. Respondent states that,

pursuant to 19 U.S.C. Sec. 1677b(a)(2), CV applies to market-economy

cases and not to NME cases. Respondent claims that, pursuant to 19

U.S.C. Sec. 1677b(c), the Department is required to use a selected

import price or a surrogate price to value an NME producer's production

costs. Respondent asserts that petitioner's argument that the

Department's practice distorts the NME producer's costs ignores

commercial reality and is contrary to the court rulings and the basic

principles underlying NME cases. Respondent argues that, contrary to

petitioner's argument, NME producers will purchase domestic materials

when the domestic price is less than the import price. Respondent

claims that in Sigma Corp. v. United States, 117 F.3d 1401 (Fed. Cir.

1997) (Sigma), the court suggested that the Department may not assume

that the NME producers purchase domestic materials at a higher

delivered price than that for imported materials.

[[Page 61796]]

Department's Position

We disagree with petitioner. In general, the purpose of the

antidumping statute is to ``determine margins as accurately as

possible.'' Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1190

(Fed. Cir. 1991). Section 773 (c)(4) of the Act, the provision for

factors of production methodology, was intended to be used when NME

prices and costs are unreliable, i.e., not market-based. See, e.g., S.

Rep. No. 93-1298, 93d Cong., 2d Sess. 174 (1974). The purpose of

section 773(c) is to determine what the firm's prices or costs would be

if such prices or costs were determined by market forces.

Because the statute does not explicitly address the situation in

which an NME producer imports some inputs from market economies, cf. 19

U.S.C. Sec. 1677b(c), the Department has determined that if an NME

producer reports prices that are based on inputs from market-economy

suppliers, it is appropriate to use those prices instead of a surrogate

value, if the amounts purchased are meaningful, i.e., they are not

insignificant. The Department has applied this practice consistently in

recent years, See Melamine, 62 FR at 1710, and has received affirmation

of this practice in court decisions. See, e.g., Lasko, 43 F.3d at 1446,

as cited by respondents. The Department subsequently codified this

practice in Section 351.408(c)(1) of the Antidumping Duties;

Countervailing Duties; Final Rule, published in the Federal Register on

May 19, 1997 (62 FR 27296, 27413) (Final Rule). As explained in the

background section of the those regulations, the only situation in

which we would not rely on the price paid by an NME producer to a

market economy supplier is where the quantity of the input purchased

was insignificant. See Final Rule, 62 FR at 27366.

In factor valuation, the Department has developed practices which

emphasize accuracy, fairness, and predictability. The Department stated

that ``the simplest example of a value based on market principles in a

proceeding involving an NME is a price paid in convertible or market

economy currency for an input sourced from a market economy country.''

(See Fans, Comment 1.) In this instant case, the amount of steel

imported is approximately equal to one-third of the amount used to

produce the subject merchandise during the period of review. We

consider this to be a meaningful amount, i.e., it is not insignificant,

for purposes of using the market-economy input price to value all of

the steel used to produce the subject merchandise. In this respect, the

Department's determination to value all steel inputs using the market-

economy input prices respondent actually paid is consistent with these

goals and practices.

Petitioner's contention that imported steel and domestically-

produced steel constitute separate factors of production is, in effect,

just another way of arguing that we should value them separately. There

is no evidence that the imported steel is physically different from the

domestically-sourced steel, such that the imported steel should be

considered a different factor of production from the domestically-

sourced steel.

Therefore, in accordance with the Department's established

practice, we continue to use the actual imported steel prices to value

steel inputs because these prices represent the actual market-based

prices incurred by the respondent in producing the subject merchandise

and, as such, are the most accurate and appropriate values for this

particular factor for the purpose of calculating NV.

Comment 2: Adjusting Imported Steel Prices for Inflation.

Petitioner asserts that if the Department uses import prices for

the final results, the Department should adjust the import prices to

reflect the period of review (POR) where those import prices are used

to value non-imported steel used to produce HSLWs. Petitioner

recognizes that the Department has not made adjustments in the past to

values based on market-economy prices, but argues that the Department's

approach does not apply to the facts of this case.

Respondent asserts that the prices for imported steel already

reflect the POR price levels because ZWG imported the steel during the

POR and, therefore, the prices do not need adjustment.

Department's Position: We agree with respondent. Because the prices

for the steel imports used to value the steel factor are POR prices,

there is no need for any further adjustment to account for inflation.

Comment 3: Movement Expenses for Imported Steel.

Petitioner asserts that the Department should value imported steel

by including all costs, such as brokerage and handling fees and

transportation from the port to the factory, and adjust these costs for

inflation. Petitioner cites Sebacic Acid from the People's Republic of

China; Final Results of Antidumping Duty Administrative Review (62 FR

10530, March 7, 1997) (Sebacic Acid), where the Department added PRC

brokerage and freight from the port to the factory for market-economy

inputs. Petitioner states that, although the preliminary results

mention that the Department ``made further adjustments to account for

the freight costs incurred between the port and ZWG,'' a review of the

calculations reveals that this adjustment may have not be included.

Department's Position: We agree with petitioner in part. While we

agree that the Department should value the non-surrogate, market-

economy actual prices by including all expenses such as brokerage and

handling and transportation from the port to the factory, the facts of

this case make changes to the preliminary results unnecessary. See the

proprietary version of ``Memo to the File: Analysis for the Final

Results of the Third Administrative Review of Certain Helical Spring

Lock Washers from the People's Republic of China,'' dated November 10,

1997 (Final Analysis Memo), for a discussion on movement adjustments.

Comment 4: Steel Scrap.

Petitioner asserts that the Department grossly distorted the net

cost of the steel input to the Chinese producer by using a non-

surrogate import price for steel and a surrogate value for steel scrap.

Petitioner claims that scrap value is based on a relationship between

steel (from which the scrap steel generated) and scrap which can be

recycled. Petitioner maintains that the steel scrap value in India (the

surrogate country) is different from the scrap value in the United

Kingdom (the non-surrogate country from which ZWG purchased the steel).

Petitioner suggests that the Department correct this distortion by

using the scrap value in the United Kingdom or applying the ratio of

scrap value-to-steel value in India to the imported (U.K.) steel value

in order to value the Chinese producer's scrap.

Respondent states that the Department correctly valued steel scrap

in the preliminary results. Respondent argues that petitioner failed to

provide any supporting evidence for its arguments. Respondent maintains

that petitioner failed to provide any factual evidence showing that

Indian import prices of steel scrap are not appropriate to value the

steel scrap generated by ZWG from the consumption of steel wire rod

from the United Kingdom. Respondent contends that petitioner further

failed to provide any links between steel wire rod prices and steel

scrap prices.

Respondent also asserts that the Department must use a surrogate

value for steel scrap because respondent sold the steel scrap in the

PRC in PRC currency. Respondent adds that

[[Page 61797]]

petitioner failed to provide any surrogate information on the value of

steel scrap.

Department's Position: We disagree with petitioner's assertions

that we distorted the cost of the steel input by valuing steel using

actual prices respondent paid for U.K. steel and valuing scrap using

surrogate prices from India. Petitioner did not provide any evidence to

support its claim of a clear relationship between the prices of steel

and scrap. Even if petitioner had established that such a relationship

exists, there are no data on the price of scrap imported from the

United Kingdom into the PRC.

Moreover, we compared the prices of steel scrap imported into

India, Indonesia, Canada, the European Community, the United Kingdom,

and the United States during a period contemporaneous with the POR. We

were unable to obtain statistics on prices of steel scrap imported into

Pakistan, Sri Lanka, and Egypt, which were potential surrogate

countries. Our analysis of the Indian imports of steel scrap from the

Monthly Statistics of the Foreign Trade of India (MFTI) show that the

price of steel scrap imports into India are not aberrational. (See

``Memo to the File: Comparison of Steel Scrap Values for the Final

Results of the Third Administrative Review of Certain Helical Spring

Lock Washers from the People's Republic of China'' (Steel Scrap Price

Comparison Memo), November 7, 1997.) Therefore, in accordance with our

established practice of valuing factors of production using surrogate

values that are demonstrated to be a reliable reflection of prices

during the POR, we are continuing to use Indian import price from MFTI

to value steel scrap for the final results.

Comment 5: Hydrochloric Acid.

Petitioner argues that the Department included three aberrational

values for determining the average hydrochloric acid (HCL) value.

Petitioner claims that, because the Department has consistently avoided

using aberrational values, these aberrational values should be omitted

in the final results.

Respondent asserts that the Department correctly valued HCL using

Chemical Weekly's FOB prices, except for freight costs associated with

the HCL. Respondent argues that because petitioner failed to identify

any specific data as aberrational and failed to provide any supporting

evidence for its argument, the Department should reject petitioner's

argument.

Department's Position: We agree with petitioner. We analyzed the

HCL values published in each of the Chemical Weekly issues used for

this review and found that two issues, February 14-20, 1996, and April

15-20, 1996, contained values at least 12 times the average value. The

values of these two issues seem to be related to exceptionally low

quantities of HCL exports. We excluded these values from the final

calculations. We found a clerical error in the transcription of one HCL

price from the July 27-31, 1996, issue, used to calculate a surrogate

value in the preliminary results. Therefore, in the final calculations,

we have corrected this price. (See Final Analysis Memo.)

Comment 6: Adjustments for Chemical Purity.

Respondent asserts that the Department should calculate the ratio

of the purity of chemical inputs consumed to the purity of the

chemicals as sold commercially and apply this ratio to the Indian

import data. Respondent argues that the Department adopted this

methodology in past NME cases and refers to the calculation memoranda

for several proceedings, including Notice of Final Determination of

Sales at Less Than Fair Value: Collated Roofing Nails from the People's

Republic of China (62 FR 25899, May 12, 1997) and Notice of Final

Determination of Sales at Less Than Fair Value: Beryllium and High

Beryllium Alloys from the Republic of Kazakstan (62 FR 44293, January

17, 1997).

Petitioner asserts that there is insufficient information on the

record for the Department to adjust values for chemical concentration.

Petitioner argues that to adjust chemical concentrations, the

Department must ascertain the actual chemical concentration from which

the value was derived and must determine which additional chemicals

were used to dilute or alter the concentration of the chemical.

Petitioner argues that the Department must value the additional

chemicals. Petitioner adds that even this suggested methodology may

result in underreporting the value of the diluted chemical because of

the additional costs of performing the dilution, such as labor,

equipment, and energy.

Department's Position: We agree, in part, with respondent's

assertions that we should make adjustments for chemical purity, as we

have done in previous cases. For inputs where the chemical

concentration levels of the HTS categories are defined in the Indian

import statistics, and where respondent reported chemical concentration

levels used, we have made adjustments accordingly.

However, there is no evidence on the record with regard to the

chemical concentration levels associated with all chemical inputs in

the MFTI. Absent any evidence that they do not reflect standard

concentrations commonly sold, an adjustment is unwarranted. Where the

information regarding the level of chemical concentration is

insufficient, we have not made any adjustment. (See Final Analysis

Memo.)

Comment 7: HCL Concentration.

Petitioner asserts that the Department erred in adjusting HCL

concentration. Petitioner argues that the Department purportedly

adjusted HCL surrogate values to match the reported concentration

although the surrogate data did not indicate concentration level.

Petitioner also asserts that, because the HCL used to make HSLWs is

already diluted, the Department must, in calculating the value of the

diluted HCL, include the value of the diluting water or chemical.

Respondent contends that the Department will double-count water if

it values the water for diluting HCL separately from factory overhead

and electricity values, as suggested by petitioner. Respondent claims

that the water inputs were included in factory overhead for the

production factory and were included and valued in electricity inputs

for the plating factory in the preliminary calculations.

Department's Position

We agree, in part, with petitioner regarding an adjustment to the

value of HCL based on concentration level. As we mentioned in Comment

6, for inputs where the chemical concentration levels are defined in

the surrogate value source, and where respondent reported chemical

concentration levels used, we have made adjustments. However, there is

no evidence on the record with regard to the HCL concentration level

associated with the HCL prices in Chemical Weekly. Absent any evidence

that they do not reflect standard concentrations commonly sold, an

adjustment is unwarranted. Therefore, we have not adjusted the

surrogate value for HCL for concentration level in the final results.

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

Saccharin from the People's Republic of China, 59 FR 58818, Comment 4,

November 15, 1994 (Saccharin).)

We disagree with petitioner's assertions that the diluting agent,

water or another chemical, should be included in calculating the value

of the HCL. We have no basis to conclude that respondent did not report

all input amounts required to produce HSLWs, regardless of the manner

in which the input enters the production process.

[[Page 61798]]

Therefore, the value of the diluting agent is accounted for in the

values for water and other chemical inputs.

Comment 8: Freight Costs.

Respondent disputes the Department's addition of freight costs to

the imported steel prices and to the input prices obtained from MFTI

because these prices include foreign inland freight and ocean freight

costs. Respondent asserts that, by adding the freight costs to these

prices, the Department double-counted the freight costs. Respondent

argues that, in Sigma, the court prohibited the Department from such

double-counting. Respondent suggests that the Department value the

freight cost of PRC-sourced material based on the reported distance and

method of transportation from the importing seaport to the factory,

where that cost is lower than the calculated freight costs based on

actual distance and method of transportation from the domestic

supplier. Respondent contends that these adjustments are in accordance

with the Sigma ruling.

Petitioner asserts that a change to the Department's adjustment to

material inputs for domestic freight costs is not warranted. Petitioner

argues that respondent has not indicated why or to what extent any

inland freight expense should be adjusted to accord with Sigma.

Department's Position: We agree with respondent that the Department

should adjust freight costs of the inputs in accordance with Sigma. In

Sigma, the court ruled that the Department overvalued freight when it

added to the surrogate value for a material input, which was obtained

from the import statistics of the surrogate country, an amount for

freight from the NME supplier factory to the NME factory. The court

reasoned that a manufacturer would minimize its material and freight

costs by purchasing imported material if the cost of transportation

from the port to the factory were less than the cost of transportation

from the domestic supplier to the factory. For the final results, we

adjusted the CIF surrogate values by revaluing freight expenses based

on the shorter of two distances: the distance from the port of import

to the factory or the distance from the actual supplier to the factory.

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

Collated Roofing Nails from the People's Republic of China (62 FR

51410, 51414, October 1, 1997) (Roofing Nails).) In situations where an

input is purchased from several suppliers, we adjusted the value for

inland freight by comparing the distance from the port of import to the

factory to the distance from each supplier to the factory. We then

multiplied the shorter of the distances for each supplier by the

proportion of the input purchased from each supplier to calculate the

weighted average inland freight expense for each input.

Comment 9: HCL Freight Expense.

Respondent asserts that the Department should not add freight costs

for transporting HCl from PRC suppliers to respondent's factories to

the Chemical Weekly price because the Chemical Weekly price is an FOB

Indian export price. Respondent argues that because the price is an FOB

Indian seaport price, it includes both the ex-factory price of HCl and

the transportation costs thereof from an Indian factory to an Indian

seaport. Respondent maintains that the Department double-counted

freight costs for HCl by adding PRC domestic freight costs to the

domestic transportation costs included in the surrogate value.

Respondent adds that the Department did not include the domestic

freight costs in the respondent's country when the Department used

Chemical Weekly's FOB Indian seaport price in past NME cases.

Respondent cites the April 22, 1996 Factors Valuation Memorandum for

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) (Bicycles) and the October 22, 1995 Valuation Memorandum for the

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

Polyvinyl Alcohol from the People's Republic of China (61 FR 14057,

March 29, 1996) (Polyvinyl Alcohol), in which the Department did not

add freight to the surrogate value.

Petitioner asserts that the Department should continue to add

domestic PRC freight costs to the value for HCL because specific

distance and transportation modes for moving the HCL from the supplier

to respondent's factory, and for moving the HCL in the surrogate

country from supplier to port of export, are not identified on the

record. Petitioner argues that respondent reported the HCL

transportation distance as short and the mode as truck, while

transportation distance and mode are unknown for the Indian HCL

surrogate value.

Department's Position

We agree with respondent that freight costs for transporting HCL

from the PRC suppliers to the factory should not be added to the

surrogate value. When we use, as a surrogate for respondent's materials

costs, the cost of the material in a surrogate country, this cost

should include the cost of transporting the merchandise to the consumer

in the surrogate country. In the preliminary results, we relied on

Chemical Weekly for a surrogate value for HCL. The HCL prices in

Chemical Weekly are based upon FOB export prices from the surrogate

country, India. FOB export prices by definition include the cost of

transporting the merchandise from the Indian supplier to the Indian

port. We consider this cost to be equivalent to the cost of

transporting the merchandise from the Indian supplier to the Indian

consumer. See the factor valuation memos for Bicycles and Polyvinyl

Alchohol. Therefore, for these final results we have not added any

additional freight to the FOB value.

Petitioner's assertions that the record does not provide specific

information from which the Department can calculate freight costs is

moot because there is no need to calculate such costs.

Comment 10: Wood Pallets.

Respondent asserts that the Department should value the wood pallet

input by using HTS 4403.2000, ``sawlogs and veneerlogs in rough w/n

striped of bark or merely rough down,'' instead of HTS 4415.1000,

``cases, boxes, crate, drum and similar packings--cable drums of

wood,'' because respondent produces finished pallets itself. Respondent

states that because it uses the same wood to produce wood brackets and

wood pallets, the Department should value wood for pallets using the

same HTS number it used to value wood brackets, HTS 4403.2000.

Respondent argues that, during the investigation, the Department

verified that respondent produces finished pallets. Respondent contends

that because the Department added the value for finished wood pallets,

using HTS 4415.1000, and the values for wood, nails, and packing labor

in the NV calculation, the Department double-counted the costs of wood,

nails, and packing labor.

Respondent also asserts that, even if the Department determines not

to use input values under HTS 4403.2000, the Department should use HTS

4415.2000 to minimize double-counting. Respondent argues that MFTI

classifies wood pallets under HTS 4415.2000, which states ``pallet box,

pallets, and other load boards of wood.'' Respondent maintains that in

comparison to the MFTI definition of HTS 4415.1000, ``cases, boxes,

crates, drums, and similar packing cable drums of wood,'' it is clear

that MFTI includes a wood pallet in HTS 4415.2000.

Petitioner asserts that the Department correctly valued pallets

using the surrogate value for the finished pallet. Petitioner states

that the Department can

[[Page 61799]]

choose to value the finished pallets or construct the value of the

pallet from labor, material (including scrap), tools, energy,

transportation, and overhead. Petitioner argues that, if all the inputs

are not available, the Department must use surrogate values. Petitioner

adds that the Department should include the cost of brackets and labor,

etc., to account for additional packing expense in addition to using

surrogate values for pallets.

Department's Position: We agree with respondent that we should

value pallets using HTS 4403.2000, a surrogate value for the wood used

to construct the wood pallets, because respondent constructs the

pallets, instead of HTS 4415.100, a surrogate value for the finished

pallet, as used in the preliminary results. In the preliminary results,

because we valued finished pallets, as well as materials used to

construct the pallets, such as nails and wood brackets, we overstated

the value of pallets. This change in methodology is in accordance with

the Department's determination in the Final Results of Antidumping

Administrative Review of Heavy Forged Hand Tools, Finished or

Unfinished, With or Without Handles, from the People's Republic of

China (61 FR 15028, Comment 3, April 4, 1996) (Hand Tools). In Hand

Tools, the Department determined that ``we should value the pallets

using the factor and surrogate values for wood, nails, and packing

labor, separately, rather than for the complete pallet. The information

on the record at the time of the preliminary results indicates that the

factories make the pallets from wood and nails rather than purchase the

completed pallet.''

We agree with petitioner's assertions that the Department should

include the cost of labor, material, tools, energy, transportation, and

overhead in constructing the value for the pallet. Respondent

separately reported consumption amounts for wood, depending upon its

application, and for nails; thus, respondent reported materials used to

construct the finished pallet. (See Respondent's January 21, 1997 and

February 21, 1997 submissions.) We have no basis in the record to

conclude that the packing labor amounts required to construct the

pallets is not included in the reported input amounts for packing

labor, or that the energy amounts required to construct the pallets are

not included in the reported amounts for energy. We also consider, in

this instant case, that expenses for tools and transportation of pallet

materials are included in overhead. Therefore, because the expenses for

labor, tools, energy, transportation, and overhead incurred in the

construction of wood pallets have been valued as mentioned above, we

find that further adjustments are not warranted.

Comment 11: Error in Valuing Wood Pallets and Coal.

In the preliminary results, the Department used data from the

February 1995 (April 1994 to February 1995) and August 1996 (April 1995

to August 1996) issues of MFTI to value wood pallets and coal inputs.

Respondent asserts that the Department should value inputs using data

most contemporaneous with the POR when determining the final results.

Specifically, respondent requests that the Department use data from the

March 1996 (April 1995 to March 1996) issue of MFTI, rather than the

April 1994 to February 1995 data, to value wood pallets. Respondent

argues that the April 1995 to March 1996 data are most contemporaneous

with the POR.

Petitioner asserts that the Department should use only the April

1995 to August 1995 data from MFTI to value coal and wood pallets.

Petitioner argues that these values for a five-month period most

closely reflect the values for the POR.

Petitioner also asserts that the Department included the wholesale

price index (WPI) for March 1995 when inflating the value, although

March 1995 was not included in either data source used in the

preliminary results. Petitioner argues that if the Department uses both

data sources, the Department should not include the WPI for March 1995

in the inflator calculation.

Department's Position: We agree with both respondent's and

petitioner's premise that the Department should use data most

contemporaneous with the POR to value inputs for the final results. For

the final results, we obtained and used Indian import statistics from

MFTI for the period September 1995 through June 1996 to value wood for

pallets and coal for the final results. Therefore, we have used values

for a ten-month period that most closely reflects the POR.

We agree with petitioner's assertion that the Department should not

have included the WPI for March 1995 in the calculation of the inflator

for coal and wood. However, because we have not used the March 1995

data in the final results, we have not included the March 1995 WPI in

the calculation of the inflator.

Comment 12: Labor.

Petitioner asserts that the Department should use a different

category for valuing plating labor if the Department bases labor values

from the 1995 Yearbook of Labour Statistics (YLS). Petitioner argues

that the plating labor should be valued using categories 351,

``manufacture of industrial chemicals,'' and 352, ``manufacture of

other chemical products,'' instead of using category 381, ``manufacture

of fabricated metal products.''

Petitioner also asserts that the Department should use different

values for skilled and unskilled labor. Petitioner argues that the use

of one average labor value does not accurately reflect the cost of

labor mix used to produce HSLWs. Petitioner references Sulfanilic Acid

from China; Preliminary Results of Antidumping Duty Administrative

Review (62 FR 25917, May 12, 1997) (Sulfanilic Acid), where the

Department selected surrogate values broken out into skilled labor and

unskilled labor from the Economist Intelligence Unit's Investing,

Licensing and Trading Conditions Abroad (ILT).

Petitioner further asserts that the Department should reject labor

values used in the preliminary results because these values do not

include fringe benefits and bonuses. Petitioner suggests that the

Department use ILT because it was used in other cases covering the same

POR and does include those benefits.

Respondent states that the Department correctly selected category

381 in the YLS as the labor category equivalent to ZWG's plating labor.

Respondent argues that categories 351 and 352, suggested by petitioner,

only include labor information related to the manufacture of industrial

chemicals and other chemical products. Respondent states that its

plating factory did not manufacture any chemicals or chemical products.

Rather, respondent argues, the plating factory consumes chemicals and

chemical products in plating HSLWs, which are metal products.

Respondent contends that the plating factory is engaged in the

manufacture of metal products, which is classified as category 381 in

YLS.

Respondent agrees with the Department's use of one labor value.

Respondent asserts that petitioner did not provide any information

showing separate values for skilled and unskilled labor and that no

such data are available to the Department.

Respondent agrees with the Department's use of YLS to value labor

inputs. Respondent argues that the Department should not use ILT

because the Department has consistently rejected it as a source for

surrogate labor values because the data are not based on actual data.

Finally, respondent requests that the Department value labor for

the final results using updated labor rates.

[[Page 61800]]

Department's Position: We disagree with petitioner's suggestion

that the Department should use categories 351 and 352 for valuing

plating labor. The labor used in plating HSLWs represents labor used in

the manufacture of fabricated metal products. Though the labor used in

plating utilizes chemicals, it is not used to manufacture chemicals. We

have continued to value all labor using category 381.

We disagree with petitioner's assertion that the Department should

use ILT to value labor because it provides different values for skilled

and unskilled labor and includes fringe benefits and bonuses. The

Department has routinely used YLS to value labor because the ILT

reports labor rate estimates based on rates stipulated in various

Indian laws and not based upon actual wage rates.

Additionally, we disagree with petitioner's assertion that the YLS

data used in the preliminary results does not include fringe benefits

and bonuses. The Department considers the ILO statistics, such as the

YLS data, to be fully loaded with respect to all labor expenses. (See

Polyvinyl Alcohol, 61 FR at 14061.) Accordingly, because the use of YLS

is consistent with the Department's established practice, the YLS has

been determined to include all expenses associated with labor, and the

ILT data have been determined to be an inappropriate source for wage

rates, we have continued to use YLS for the final results. (See Certain

Helical Spring Lock Washers From the People's Republic of China; Final

Results of Antidumping Administrative Review, 61 FR 66255, 66259,

December 17, 1996, Chrome-Plated Lug Nuts from the People's Republic of

China; Final Results of Antidumping Duty Administrative Review, 61 FR

58519, 58522, November 15, 1996.)

Comment 13: Water.

Respondent requested that the Department calculate ZWG's production

cost without valuing water. Respondent asserts that the Department

double-counted the water input by valuing water in addition to valuing

factory overhead for ZWG. Respondent contends that the reported water

input for ZWG represents water used at the HSLW production factory, not

at the plating factory. Respondent claims that because the HSLW

factory's water was supplied by a public utility during the POR, was

not physically incorporated into the HSLWs, and was not a major

indirect material input which could be separately valued, ZWG's water

consumption meets the criteria established in Saccharin for inclusion

in factory overhead. Respondent argues that the Department has

established the practice of including the value of water inputs in the

value of factory overhead where water is supplied by a public utility

or by a nearby body of water and refers to Saccharin, Sebacic Acid,

Sulfanilic Acid from the People's Republic of China (61 FR 53711,

October 15, 1996), Polyvinyl Alcohol, Disposable Lighters from the

People's Republic of China (60 FR 22359, May 5, 1995), Silicon Carbide

from the PRC ( 59 FR 22585, May 2, 1994), and Coumarin. Respondent adds

that in Sebacic Acid, the Department stated that it presumes factory

overhead values obtained from the Reserve Bank of India Bulletin, the

factory overhead source used in the instant review, to include values

for water.

Petitioner asserts that the Department correctly valued water in

the preliminary determination. Petitioner states that respondent

correctly cited Saccharin where the Department considered water an

overhead item. Petitioner argues that respondent failed to mention that

the Department also stated in Saccharin that water required for a

particular segment of the production process may ``be more typical of

items that are accounted for as direct material inputs, rather than as

overhead item, and as such, valued separately.'' Petitioner asserts

that the Department should value water as a separate input factor in

plating because water is directly incorporated into the final product.

Department's Position: We disagree with respondent and have

continued to include the water inputs as material inputs in the

calculations of production cost of ZWG's factory. Following the

Department's criteria in Saccharin, we value water if it is required

for a particular segment of the production process. (See Saccharin, 59

FR 58818, Comment 7, November 15, 1994.) Based upon respondent's

description of the production process, we consider respondent's use of

water in the acid treatment as required for that particular segment,

because the steel wire rod must be rinsed with water after an acid

bath. (See Exhibit 5 of respondent's January 21, 1997 submission.)

Because the water for ZWG's HSLW production factory is a required input

for a particular segment of the HSLW production process, the

Department's practice is to value it separately like other direct

material inputs required in the production process. Moreover, in

determining whether an input should be valued separately or considered

valued in overhead, the Department stated in Bicycles that, the input

in question should be valued separately if it is ``* * * essential for

producing the finished product * * *.'' and if this input appears ``* *

* to be [a] significant input[s] into the manufacturing process rather

than miscellaneous or occasionally used materials, i.e., cleaning

supplies which might normally be included in consumables.'' Based upon

respondent's submission, water is a significant input into the

manufacturing process. (See Exhibit 9 of the proprietary versions of

respondent's January 21, 1997 submission and Final Analysis Memo.)

Unlike the instant case, in Sulfanilic Acid, the Department

included the water value in the factory overhead value because

respondents pumped water from their own wells for use in the production

process and recirculated the water. (See Sulfanilic Acid, 61 FR at

53716.) However, in Saccharin, the Department valued water purchased by

respondent separately, because it was considered to be a direct input

in the production of the finished product. (See Saccharin, Comment 7.)

Also, in Porcelain-on-Steel Cooking Ware From the People's Republic of

China; Final Results of Antidumping Duty Administrative Review, 62 FR

32757, 32759, 32762, June 17, 1997, the Department considered water

consumed in the production process as a direct material input and

valued it as such. Although respondent's HSLW factory purchased water

from a public utility, that alone is not dispositive as to how it

should be valued. Here, as in Saccharin and Porcelain-on-Steel, the

water was also a required input in a particular segment of the

production process. Therefore, we have valued it as a separate input.

Disposable Pocket Lighters and the other cases on which respondent

relies, do not indicate whether respondent purchased the water,

consumed the water as a direct input, or required the water for

producing the finished product. Moreover, with regard to considering

the Reserve Bank of India Bulletin (RBIB) factory overhead values as

inclusive of water values, the Department stated in Disposable Pocket

Lighters that, ``the RBIB data did not indicate to the contrary.'' (See

Disposable Pocket Lighters, 60 FR at 22367.)

In the instant case, as we have explained, water purchased from the

public utility is not an incidental input into the production process.

Rather, it is a direct input required for a particular segment of the

production process. Additionally, there is no basis for

[[Page 61801]]

determining whether water is included in the factory overhead value in

the RBIB, and thus no basis for an adjustment. Therefore, in the final

results, we are continuing to value water for ZWG's factory in

accordance with the Department's practice in the previous segments of

this case, as well as its position in previous cases.

Comment 14: Aberrational Factor Values.

Respondent asserts that the Department should not use data from the

June 1996 MFTI to value trisodium phosphate (HTS 2835.23.00), cases,

boxes, crates, and drums (HTS 4415.10.00), and pallets and load boards

(HTS 4415.20.00), because respondent claims that the data are

aberrational.

Department's Position: We agree with respondent's assertion that

the value in the June 1996 MFTI for trisodium phosphate, HTS

2835.23.00, is aberrational, apparently due to the extraordinarily low

quantity reported. Because we could not obtain more contemporaneous

data to value trisodium phosphate, we have continued to use the March

1996 issue of MFTI, covering the period April 1995 through March 1996.

Respondent's comments regarding the issue of the valuation of

pallets using data in the June 1996 MFTI for cases, boxes, crates, and

drums (HTS 4415.10.00), and pallets and load boards (HTS 4415.20.00),

are moot because we did not value pallets using HTS 4415.10.00 or HTS

4415.20.00 in the final results. (See Comment 10.)

Additional Changes for the Final Results

For the final results of this review, we have updated most

surrogate values based on MFTI. Additionally, we have updated the labor

surrogate value using the 1996 YLS. (See Final Analysis Memo.)

Final Results of the Review

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

from those presented in the preliminary results of the review:

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

Margin

Manufacturer/exporter Time period (percent)

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

Zhejiang Wanxin Group Co., Ltd........ 10/01/95-09/30/96 14.15

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

The Department shall determine, and the Customs service shall

assess, antidumping duties on all appropriate entries.

Individual differences between Untied States price and normal value

may vary from the percentages stated above. The Department will issue

appraisement instructions directly to the Customs service.

Furthermore, the following deposit rates will be effective upon

publication of these final results for all shipments of HSLWs 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 ZWG, which has a separate rate, and all ZWG exports through

market-economy trading companies, the cash deposit rate will be the

company-specific rate established in these final results of review; (2)

for all other PRC exporters, the cash deposit rate will be 128.63

percent, the PRC rate established in the less-than-fair-value

investigation of this case; and (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 10, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-30397 Filed 11-18-97; 8:45 am]

BILLING CODE 3510-DS-P