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

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** November 19, 1997
- **Citation:** 62 FR 61794

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-30397. Public record. Not legal advice.