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

DEPARTMENT OF COMMERCE

International Trade Administration

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

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

Brake Drums and Brake Rotors From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce

EFFECTIVE DATE: February 28, 1997.

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

Frederick, Import Administration, International Trade Administration,

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

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

respectively.

THE APPLICABLE STATUTE: Unless otherwise indicated, all citations to

the Tariff Act of 1930, as amended (the Act) are references to the

provisions effective January 1, 1995, the effective date of the

amendments made to the Act by the Uruguay Rounds Agreements Act (URAA).

FINAL DETERMINATIONS: We determine that brake drums and brake rotors

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

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

provided in section 735 of the Act.

Case History

Since the amended preliminary determination in the brake drum

investigation (Amended Preliminary Determination of Sales at Less Than

Fair Value: Brake Drums from the People's Republic of China, 61 FR

60682 (November 29, 1996)), the following events have occurred:

The petitioner, the Coalition for the Preservation of American

Brake Drum and Rotor Aftermarket Manufacturers, and all of the

respondents 1 requested a hearing.

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\1\ The respondents in the brake drums case are: (1) China

North Industries Guangzhou Corporation (CNIGC); (2) Qingdao Metal,

Minerals & Machinery Import & Export Corporation (Qingdao); (3)

China National Machinery Import & Export Corporation (CMC); (4)

Beijing Xinchangyuan Automobile Fittings Corporation, Ltd.

(Xinchangyuan); and (5) Yantai Import/Export Corporation (Yantai).

The respondents in the brake rotors case are: China National

Automotive Industry Import & Export Corporation (CAIEC), Shandong

Laizhou CAPCO Industry (Laizhou CAPCO) and their U.S. affiliate

CAPCO International USA (CAPCO USA)(collectively CAIEC/Laizhou

CAPCO); CNIGC; China North Industries Dalian Corporation (Dalian);

Shenyang Honbase Machinery Co., Ltd., Lai Zhou Luyuan Automobile

Fitting Co., Ltd. (collectively Shenyang/Laizhou) and their U.S.

affiliates MAT Automotive, Inc., and Midwest Air Technologies, Inc.

(MAT); Southwest Technical Import & Export Corporation, Yangtze

Machinery Corporation (collectively Southwest), and its U.S.

affiliate MMB International, Inc. (MMB); China National Machinery

and Equipment Import & Export (Xinjiang) Corporation, Ltd.

(Xinjiang); and Yantai.

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From October 1996 through January 1997, we verified the

questionnaire responses of the selected respondents. In January 1997,

we issued our verification reports.

Interested parties submitted additional information on surrogate

values on January 9 and 10, 1997, for consideration in the final

determinations. Also in January 1997, at the Department's request, we

received revised computer tapes incorporating data corrections

identified at the verifications from the following respondents: CAIEC,

Dalian, Qingdao, Shenyang/Laizhou, Southwest, Xinchangyuan and

Xinjiang.

The petitioner and all of the respondents submitted case briefs on

January 21, 1997, and rebuttal briefs on January 27, 1997. The

Department held a public hearing for these investigations on January

29, 1997.

Scope of the Investigations

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

brake drums and (2) certain brake rotors.

Brake Drums

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

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

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

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

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

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

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

half.''

Finished brake drums are those that are ready for sale and

installation without any further operations. Semi-finished drums are

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

some drilling. Unfinished drums are those which have undergone some

grinding or turning.

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

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

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

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

investigation are not certified by OEM producers of vehicles sold in

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

are made of gray cast iron, which contain a steel

[[Page 9161]]

plate, but otherwise meet the above criteria.

Brake drums are classifiable under subheading 8708.39.5010 of the

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

HTSUS subheading is provided for convenience and Customs purposes, our

written description of the scope of this investigation is dispositive.

Brake Rotors:

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

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

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

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

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

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

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

half.''

Finished brake rotors are those that are ready for sale and

installation without any further operations. Semi-finished rotors are

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

some drilling. Unfinished rotors are those which have undergone some

grinding or turning.

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

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

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

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

investigation are not certified by OEM producers of vehicles sold in

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

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

meet the above criteria.

Brake rotors are classifiable under subheading 8708.39.5010 of the

HTSUS. Although the HTSUS subheading is provided for convenience and

Customs purposes, our written description of the scope of this

investigation is dispositive.

Period of Investigations

The period of these investigations (POI) comprises each exporter's

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

For Southwest, the POI is June 1995-December 1995. For all other

respondents, the POI is July 1995-December 1995.

Separate Rates

Each of the participating respondents in these investigations claim

to be eligible for individual dumping margins. Of those, CAIEC/Laizhou

CAPCO, CMC, CNIGC, Dalian, Qingdao, Southwest, Xinjiang and Yantai

claim to be owned by ``all the people.''

The ownership structure of the remaining respondents is as follows:

(1) Shenyang/Laizhou are affiliated parties. Shenyang is owned

entirely by GRI Honbase, a Hong Kong company which is U.S. owned.

Laizhou is a joint venture between GRI Honbase and ``all the people.''

The share in Laizhou owned by ``all the people'' is a minority share.

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

PRC company, Beijing Changyuan Automotive Parts Factory. The PRC

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

As stated in the Final Determination of Sales at Less than Fair

Value: Silicon Carbide from the People's Republic of China, 59 FR

22585, 22586 (May 2, 1994) (Silicon Carbide) and in the Final

Determination of Sales at Less than Fair Value: Furfuryl Alcohol from

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

Alcohol), ownership of a company by ``all the people'' does not require

the application of a single rate. Accordingly, each of these

respondents is eligible for separate rate consideration.

To establish whether a firm is sufficiently independent from

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

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

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

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

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

Department assigns separate rates in nonmarket economy cases only if

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

facto governmental control over export activities.

1. Absence of De Jure Control

Each of the respondents has placed on the administrative record a

number of documents to demonstrate absence of de jure control,

including laws, regulations and provisions enacted by the State Council

of the central government of the PRC. Each has also submitted documents

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

the list of products that may be subject to central government export

constraints. In addition, the respondents Xinchangyuan and Laizhou each

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

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

this law authorize joint venture companies to make their own

operational and managerial decisions.

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

respondents have submitted in this record and found that they establish

an absence of de jure control. See Notice of Final Determination of

Sales at Less Than Fair Value: Certain Partial-Extension Steel Drawer

Slides With Rollers From the People's Republic of China, 60 FR 54472

(October 24, 1995) (Drawer Slides); see also Furfuryl Alcohol. We have

no new information in these proceedings which would cause us to

reconsider this determination.

However, as in previous cases, there is some evidence that the PRC

central government enactments have not been implemented uniformly among

different sectors and/or jurisdictions in the PRC. (See Silicon Carbide

and Furfuryl Alcohol.) Therefore, the Department has determined that an

analysis of de facto control is critical in determining whether

respondents are, in fact, subject to a degree of governmental control

which would preclude the Department from assigning separate rates.

2. Absence of De Facto Control

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental control of

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

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

respondent has authority to negotiate and sign contracts and other

agreements; (3) whether the respondent has autonomy from the government

in making decisions regarding the selection of management; and (4)

whether the respondent retains the proceeds of its export sales and

makes independent decisions regarding disposition of profits or

financing of losses (see Silicon Carbide and Furfuryl Alcohol). These

factors are not necessarily exhaustive and other relevant indicia of

government control may be considered.

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

Xinchangyuan, Xinjiang, and Yantai asserted, and we verified, the

following: (1) They establish their own export prices; (2) they

negotiate contracts, without guidance from any governmental entities or

organizations; (3) they make their own personnel decisions; and (4)

they retain the proceeds of their export sales, use profits according

to their business needs and have the authority to sell their assets and

to obtain loans. In addition, the questionnaire responses submitted by

the above-referenced respondents

[[Page 9162]]

indicate company-specific pricing during the POI which does not suggest

coordination among exporters. During the verification proceedings,

Department officials viewed such evidence as sales documents, company

correspondence, and bank statements. This information supports a

finding that there is a de facto absence of government control of the

export functions of these companies. Consequently, we have determined

that these exporters have met the criteria for the application of

separate rates.

CNIGC and Dalian also claimed separate rates and provided

additional documentation at verification in support of their claims

that there is a de facto absence of government control of the export

functions of their companies. However, for the final determinations, we

have denied these respondents separate rates. Since the preliminary

determinations, we have collected additional information which

indicates that CNIGC and Dalian are still branches of the national

corporation, China North Industries Corporation (NORINCO), which is

controlled by the PRC government (see Comment 1 for further

discussion).

China-Wide Rate

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

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

substantially greater than the total quantity and value of brake drums

and brake rotors reported by all PRC companies that submitted responses

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

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

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

Accordingly, we are applying in each investigation a single antidumping

deposit rate--the China-wide rate--to all exporters in the PRC (other

than those named above and those exporters which cooperated with our

investigations but which were not selected as respondents and received

separate rates), based on our presumption that those respondents who

failed to show that they are entitled to separate rates are under

common control by the PRC government. See, e.g., Final Determination of

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

China, 61 FR 19026 (April 30, 1996) (Bicycles).

Facts Available

The China-wide antidumping rate is based on adverse facts

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

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

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

such information by the deadlines for the submission of the information

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

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

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

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

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

in reaching the applicable determination under this title.'

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

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

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

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

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

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

secondary information, including information drawn from the petition.

When multiple companies are treated as a single enterprise, the

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

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

enterprise on the facts available. Additionally, as discussed above,

those PRC exporters that have not qualified for a separate rate have

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

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

information, that single enterprise is considered to have failed to

cooperate to the best of its ability. Accordingly, consistent with

section 776(b)(1) of the Act, we have applied in each investigation the

higher of the applicable margin from the petition or the highest rate

calculated for a respondent in each proceeding as total adverse facts

available. In both cases, based on our comparison of the calculated

margins for the other respondents in these proceedings to the estimated

margins in the petitions, we have concluded that the petition is the

most appropriate record information on which to form the basis for the

China-wide rate in the brake drums and brake rotors investigations.

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

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

practicable, corroborate that information from independent sources

reasonably at the Department's disposal. The Statement of

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

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

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

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

practicable, the Department may use uncorroborated information.

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

margins in the petition to the extent practicable. The petitioner based

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

brake rotors and deducted from these prices a distributor mark-up. We

compared the starting prices used by the petitioner to prices derived

from U.S. import statistics and found that the similarity to the import

statistics corroborated the starting prices in the petition. See Notice

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

Welded Non-Alloy Steel Pipe from South Africa, 61 FR 24271 (May 14,

1996). We found that the deduction for the distributor mark-up was

sufficiently documented for purposes of corroboration by examining

affidavits submitted by industry experts.

The normal value (NV) was based on factors of production employed

by the petitioner to produce brake drums and brake rotors, and to the

extent possible, surrogate factor values which were obtained from

Indian publicly available information. When analyzing the petition, the

Department examined and confirmed the accuracy of the NV data as

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

with values obtained from publicly available information collected in

these and previous non-market economy (NME) investigations. However, in

examining the factors which served as the basis for NVs calculated in

the petition, the Department found that petitioner treated certain

factory overhead items as direct materials. Therefore, we have

recalculated NV in the petition by treating these items as part of

factory overhead. In addition, we assigned an Indian surrogate value to

one material for which a value based on a U.S. price was assigned

previously in our NV calculations (See Margin Corroboration Memorandum

from the team to Gary Taverman, dated February 12, 1997). Thus, the

highest revised petition rate for brake drums is 86.02 percent. The

highest revised petition rate for brake rotors is 43.32 percent.

Fair Value Comparisons

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

to the United States by the PRC exporters receiving separate rates were

sold at less

[[Page 9163]]

than fair value, we compared the ``United States Price'' (USP) to NV,

as specified in the ``United States Price'' and ``Normal Value''

sections of this notice.

United States Price

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

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

the first unaffiliated purchaser in the United States prior to

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

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

the Act, we compared POI-wide weighted-average EPs to the factors of

production.

Shenyang/Laizhou/MAT and Southwest/MMB both claimed that their

sales are EP, not CEP, transactions and that the Department should

treat their sales accordingly. However, the Department has determined

that the sales of these two companies are CEP transactions (see Comment

14 for Shenyang/Laizhou/MAT and Comment 16 for Southwest/MMB).

We corrected the respondents' data for errors and minor omissions

found at verification. For CMC, Xinjiang and Yantai, we calculated EP

in accordance with our preliminary determinations. In addition, we made

company-specific adjustments as follows:

1. CAIEC/Laizhou CAPCO

We calculated EP and CEP in accordance with our preliminary

calculations, except that we (a) corrected credit expenses, inland

freight, repacking, indirect selling expenses, and inventory carrying

expenses; (b) removed credit returns from CAPCO's U.S. sales database;

(c) recalculated commissions based on the verified commission rates;

(d) revised brokerage and handling expenses; and (e) deducted from the

U.S. price of certain sales an inspection charge based on information

obtained at verification.

2. Qingdao

We calculated EP in accordance with our preliminary calculations

except that we excluded U.S. sales of one product that was found to be

outside the scope of the investigation.

3. Shenyang/Laizhou/MAT

We calculated EP and CEP in accordance with our preliminary

calculations except that we have recalculated credit and indirect

selling expenses based on information obtained at verification.

4. Southwest/MMB

We calculated EP and CEP in accordance with our preliminary

calculations except that we have adjusted the gross unit price for

certain U.S. sales where the price was incorrectly reported. We then

recalculated the credit and indirect selling expenses to take into

account revised prices.

5. Xinchangyuan

We calculated EP in accordance with our preliminary calculations

except that we did not deduct foreign brokerage and handling expenses

based on information derived at verification (see Comment 21 below). In

addition, we excluded U.S. sales of three products that were found to

be outside the scope of the investigation.

Normal Value

A. Factors of Production

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

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

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

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

economy currency, we used the actual price paid for the input to

calculate the factors-based NV in accordance with our practice. See

Lasko Metal Products v. United States, 437 F. 3d 1442, 1443 (Fed. Cir.

1994). We valued the remaining factors using publicly available

information from India where possible. Where appropriate Indian values

were not available, we used publicly available information from

Indonesia.

B. Factor Valuations

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

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

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

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

value factors. As appropriate, we adjusted input prices to make them

delivered prices. For those values not contemporaneous with the POI, we

adjusted for inflation using wholesale price indices or, in the case of

labor rates, consumer price indices, published in the International

Monetary Fund's International Financial Statistics. For a complete

analysis of surrogate values, see the Preliminary Determinations

Factors Memorandum, dated October 3, 1996, and the Final Determinations

Factors Memorandum, (Final Factors Memorandum) dated February 24, 1997.

We have noted changes to surrogate valuation since the preliminary

determinations as follows:

To value unfinished castings used in producing rotors, we used a

purchase price for unfinished castings contained in the 1995-96

financial report of the Indian producer, Jayaswals Neco Limited

(Jayaswals), because only this producer's financial report contained a

POI purchase value for unfinished castings used to produce brake rotors

that are within the scope of our investigation (see Comment 15).

To value copper, copper powder, ferromanganese, ferrosilicon, other

ferrosilicon, ferrochromium, manganese, limestone, lubrication oil,

adhesive tape, corrugated cartons, nails, polyethylene, fiberboard,

steel angles, steel stamp, steel straps, printed and unprinted labels,

instruction sheets, wood brackets, wood pallets and wood crates, we

used import prices for months contemporaneous with the POI for which

such data were available from Monthly Statistics of the Foreign Trade

of India (Monthly Statistics). Where submitted data encompassed part of

the POI but also encompassed months outside the POI, we limited our use

of such data to the portion contemporaneous with the POI.

To value pig iron, steel scrap and iron scrap, we used the input-

specific prices contained in the 1995-96 financial report of the Indian

producer, Shivaji Works Limited (Shivaji) because Shivaji produces

goods which are in the same general category as the subject merchandise

(e.g., products similar to what the respondents produce) and because we

find that the separate line-item values for pig iron, steel scrap and

iron scrap contained in Shivaji's report are more specific than the

prices for these same inputs contained in the Indian publication Steel

Authority of India Limited (SAIL) or in Monthly Statistics (see Comment

7).

To value steel sheet, steel strip and steel wire rod, we used POI

prices from SAIL and not from Monthly Statistics (see Comment 7).

To value scrap wood, we have used a price from a 1990 U.S.

government publication, Marketing Opportunities for Social Forestry

Produce in Uttar Pradesh, because the price is more specific to the

input than the value previously obtained from Monthly Statistics.

We could not obtain a product-specific price from India to value

lug nuts for PRC companies which purchased this input from non-market

economies (NME). Therefore, we used Indonesian import data covering

July through November 1995 from

[[Page 9164]]

Indonesian Foreign Trade Statistical Bulletin (see Bicycles).

To value barge rates, we relied on information from an August 1993

cable from the U.S. consulate in India. Since the preliminary

determinations, the respondents submitted new prices for coke, ball

bearings and LPG gas for consideration in the final determinations.

However, we have continued to rely on the values assigned to these

inputs in the preliminary determinations for our final determinations

(see Comment 7 and Final Factors Memorandum for further discussion).

To value factory overhead, SG&A, and profit in the brake drums and

brake rotors cases, we calculated a simple average using the financial

reports of Jayaswals, Kalyani Brakes Limited (Kalyani), Krishna

Engineering Works (Krishna), Nagpur Alloy Castings Limited (Nagpur),

and Rico Auto Industries Limited (Rico) because these companies

produced both brake drums and brake rotors within the scope of these

investigations during the POI. We did not use the financial reports of

Ennore Foundaries Limited (Ennore), Electrosteel Castings Limited

(Electrosteel), Bhagwati Autocast Limited (Bhagwati), or Shivaji in the

surrogate factory overhead, SG&A, and profit percentage calculations

because there was no indication in the reports or any corroborating

publicly available information showing that these companies produced

brake drums or brake rotors within the scope of these investigations

during the POI (see Comment 5).

Where appropriate, we have removed from the surrogate overhead and

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

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

to the percentages calculated as a result of reclassifying expenses

contained in the financial reports.

For the Indian companies, we treated the line item labeled ``stores

and spares consumed'' as part of factory overhead where possible and

not part of materials consumed because stores and spares are not direct

materials consumed in the production process. Publicly available

information examined in the preliminary determination indicates that

Indian accounting practices require Indian companies to record molding

inputs (i.e., all types of sand, bentonite, lead powder, steel pellets

(if used for sand cores or molding), coal powder and waste oil) under

``stores and spares consumed.'' Therefore, we are considering these

molding inputs as indirect materials (i.e., a part of factory

overhead), and are not valuing them as materials. In addition to the

molding materials mentioned above, based on our verification findings,

we find that additional materials previously valued as direct inputs

such as dextrin, parting spray, rust inhibitor, antirust, steel shot,

cutting oil, cleaning agent, and dehydration oil, are in fact indirect

materials not incorporated into the final product. Therefore, we have

also considered these additional materials part of factory overhead

(see Comment 8). We have continued to treat rustproofing oil, limestone

and firewood as direct materials and valued them accordingly (see

Comment 8).

We have considered the line item labeled ``raw materials consumed''

to include direct materials such as pig iron, steel scrap, and steel

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

overhead. The designation of these items is consistent with standard

accounting procedures and recent determinations (see Final

Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from

the People's Republic of China, 61 FR 14062 (March 29, 1996) (PVA) and

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

goods manufactured rather than on the cost of goods sold. We also

included interest and/or financial expenses in the SG&A calculation. In

addition, we only reduced interest and financial expenses by amounts

for interest income if the Indian financial report noted that the

income was short-term in nature (see Comment 6). Where a company did

not distinguish interest income as a line item within total ``other

income'' we used the relative ratio of interest income to total other

income as reported for the Indian metals industry in the Reserve Bank

of India Bulletin. (For a further discussion of other adjustments made,

see Final Factors Memorandum).

Verification

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

information submitted by all selected respondents for use in our final

determinations. We used standard verification procedures, including

examination of relevant accounting and production records and original

source documents provided by the respondents.

Critical Circumstances

Section 735(a)(3) of the Act provides that, in a final

determination, the Department will determine whether:

(A)(i) there is a history of dumping and material injury by reason

of dumped imports in the United States or elsewhere of the subject

merchandise, or

(ii) the person by whom, or for whose account, the merchandise was

imported knew or should have known that the exporter was selling the

subject merchandise at less than its fair value and that there would be

material injury by reason of such sales, and

(B) there have been massive imports of the subject merchandise over

a relatively short period.

Because there is no history of dumping and material injury by

reason of dumped imports for either brake drums or brake rotors, we

conducted our analysis under section 735(a)(3)(A)(ii) of the Act

(importer knowledge of dumping and material injury).

1. Importer Knowledge of Material Injury

Pursuant to the URAA, and in conformance with the WTO Antidumping

Agreement, the statute now includes a provision requiring the

Department to determine, when relying upon section 735(a)(3)(A)(ii) to

determine whether critical circumstances exist, whether the importer

knew or should have known that there would be material injury by reason

of the less than fair value sales. In this respect, the preliminary

finding of the International Trade Commission (ITC) is instructive,

especially because the general public, including importers, is deemed

to have notice of that finding as published in the Federal Register.

Thus, the Department has determined that a preliminary ITC finding of a

reasonable indication of present material injury to the U.S. industry,

when coupled with massive imports and a high rate of dumping by a given

exporter (see Importer Knowledge of Dumping section, below) permits the

conclusion that importers of the subject merchandise from such

exporters knew or should have known that such imports would cause

injury to the domestic industry. When the ITC has preliminarily found

no reasonable indication that a U.S. industry is experiencing present

material injury by reason of the dumped subject merchandise, but only a

threat of such injury, the Department has determined that it is not

reasonable to conclude that an importer knew or should have known that

its imports would cause material injury. (See Decision Memorandum

Regarding Imputed Knowledge of Material Injury.)

Because the ITC preliminarily determined that there is no

reasonable indication that the U.S. brake drums industry is

experiencing present material injury, but only a reasonable indication

of threat of material injury,

[[Page 9165]]

we find that the ``importer knowledge of material injury'' prong is not

met with respect to brake drums. Therefore, we find that critical

circumstances do not exist with respect to brake drums, and it is not

necessary to examine the other critical circumstances criteria for this

product. Because the ITC preliminarily determined that there is a

reasonable indication that the U.S. brake rotors industry is, in

contrast, experiencing present material injury, we determine that

critical circumstances exist with respect to those exporters of brake

rotors which we have determined are responsible for massive imports and

high dumping margins, as described below.

2. Importer Knowledge of Dumping

In determining whether an importer knew or should have known that

the exporter was selling the subject merchandise at less than fair

value, the Department normally consider margins of 15 percent and 25

percent or more sufficient to impute knowledge of dumping for CEP sales

and EP sales respectively.

Since the company-specific margins in the final determinations for

brake drums and brake rotors are below 15 percent for CEP sales (with

the exception of brake rotors sales made by Southwest) and below 25

percent for EP sales, we have not imputed importer knowledge of dumping

and injury with respect to any firms except Southwest in the brake

rotors investigation. Therefore, we have only analyzed the brake rotor

shipment data of Southwest.

3. Massive Imports

When examining the volume and value of trade flow data, the

Department typically compares the export volume for equal periods

immediately preceding and following the filing of the petition.

Pursuant to 19 CFR 353.16(f)(2), unless the imports in the comparison

period have increased by at least 15 percent over the imports during

the base period, we will not consider the imports to have been

``massive.'' In order to determine whether there have been massive

imports of brake rotors for the companies for which we have determined

that there is knowledge of dumping and material injury, we compared

sales from August 1995 to February 1996 (the comparison period) to

sales from March 1996 to September 1996 (the base period).

In determining whether imports have been ``massive,'' pursuant to

19 CFR 353.16(f), we will normally consider, in addition to the volume

and value of imports, any seasonal trends affecting the merchandise and

the share of domestic consumption accounted for by the imports. There

is no indication on the record that brake rotors are a seasonal

product. Also, we were unable to consider the share of U.S. consumption

represented by the selected respondents, because we have insufficient

information with regard to the selected respondents'' market share of

domestic consumption. Based on our analysis of Southwest, we determine

that the increase in imports was less than 15 percent with respect to

that firm. Because imports from Southwest have not been massive, we

determine that critical circumstances do not exist with respect to

imports of subject merchandise from this company.

4. Unexamined Respondents/China-Wide Entity

As indicated in Preliminary Critical Circumstances Determinations,

61 FR 55269 (October 25, 1996), and in the Preliminary Determinations,

61 FR 53190 (October 10, 1996), the Department does not believe it is

appropriate to find critical circumstances with respect to respondents

whose individual data have not been analyzed due to the Department's

own administrative constraints. Therefore, we do not consider critical

circumstances to exist with regard to the non-analyzed cooperative

respondents in the brake rotors case.

With respect to the China-wide entity, we are imputing knowledge of

dumping, based on the China-wide dumping rate. As noted above, we have

determined that importers knew or should have known that there would be

material injury to the U.S. brake rotors industry based on the ITC's

preliminary determination of a reasonable indication of present

material injury for brake rotors. In the absence of shipment data for

the China-wide entity, we have determined based on the facts available,

and making the adverse inference permitted under section 776(b) of the

Act because this entity did not provide an adequate response to our

questionnaire, that there were massive imports of brake rotors. See

Preliminary Critical Circumstances Determinations, 61 FR at 55269.

Furthermore, we note that the record indicates a post filing surge in

U.S. brake rotor imports from the PRC which is not accounted for by the

cooperating respondents. Therefore, for the China-wide entity, we

determine that critical circumstances exist with respect to imports of

brake rotors.

5. Conclusion

With regard to brake rotors, we find that critical circumstances

exist only for companies subject to the China-wide rate.

With regard to brake drums, we find that critical circumstances do

not exist.

Interested Party Comments

General Comments

Comment 1: Separate Rates--CNIGC and Dalian

The petitioner maintains that there is sufficient evidence on the

record to deny CNIGC and Dalian separate rates in these cases. It

points out that these respondents failed to demonstrate at verification

that they were (1) not part of NORINCO, a trading company which is

monitored, if not controlled, by the PRC government; (2) not part of

the NORINCO Group, an organization controlled by the People's

Liberation Army (PLA); and (3) independent from the Ministry of Foreign

Trade and Economic Cooperation (MOFTEC), because they withheld all

information concerning their relationship with MOFTEC. The petitioner

further contends that the PRC government deliberately withheld

information which might have revealed that CNIGC and Dalian were part

of the NORINCO Group.

CNIGC and Dalian maintain that they demonstrated at verification

the absence of both de jure and de facto government control over their

export activities and that they have established through documentation

that they are separate from NORINCO and are entitled to a separate

rate. In addition, they argue that there is no information on the

record that supports the claim that they are affiliated with the PRC

government. Moreover, the two respondents contend that the PRC

government did not fail to cooperate with the Department because they

answered the Department's questions to the extent possible. However, if

the Department decides that the PRC government was uncooperative, then

they maintain that the Department cannot impute this lack of

cooperation to CNIGC or Dalian. They cite to Notice of Court Decision;

Exclusion From the Application of the Antidumping Duty Order, in Part;

Termination of Administrative Review in Part; and Amended Final

Determination: Certain Compact Ductile Iron Waterworks Fittings and

Glands from the People's Republic of China, 60 FR 2078 (January 6,

1995) and Final Determination of Sales at Less Than Fair Value: Certain

Helical Spring Lock Washers from the People's Republic or China, 58 FR

48833 (September 20, 1993) in support of their arguments.

[[Page 9166]]

DOC Position

The Department's NME separate rates policy is based upon a

rebuttable presumption that NME entities operate under government

control and do not merit separate rates. This presumption can only be

overcome by a respondent's affirmative showing that it operates without

de jure or de facto government control.

CNIGC and Dalian have met their affirmative evidentiary burden with

respect to the Department's criteria of de jure control, insofar as

they have provided copies of business licenses and applicable

government statute granting them the right to operate as independent

trading companies.

These two respondents have also provided evidence that purportedly

demonstrates absence of de facto control. However, other evidence

supports a conclusion that Dalian and CNIGC remain under the control of

the national corporation, NORINCO. Dalian and CNIGC were, until 1988

and 1991, respectively, legal and operational subsidiaries of NORINCO.

Although PRC law and regulations mandated the legal and operational

separation of these branches from their parent, evidence on the record

suggests that the two respondents have only partially severed their

ties to NORINCO, and are still recognized in the PRC and overseas as

branches of NORINCO.

At the Department's visit to NORINCO's Beijing office, we obtained

a NORINCO brochure which identifies CNIGC and Dalian as branches of

NORINCO. The brochure continued to be distributed to the public as of

the time of verification in late 1996. See exhibit 3 of the NORINCO

verification report, dated January 8, 1997. This is consistent with the

verification finding that NORINCO still maintains an office within the

headquarters of CNIGC. See CNIGC verification report dated January 8,

1997, at 6. It is also consistent with 1995 information obtained from

the U.S. Department of Defense which states that ``Norinco Guangzhou

[CNIGC] is a leading branch of NORINCO,'' and with a 1996 Company

Intelligence International article indicating that CNIGC is a branch of

NORINCO. Thus, it appears that the de facto relationship between

government-controlled NORINCO and its branches, including Guangzhou and

Dalian, has not been entirely severed.

We note that in the instant investigation, NORINCO has not made a

claim of independence from government control. Furthermore, there is

evidence on the record that NORINCO is controlled by the PRC

government. See, e.g., organizational chart submitted to the file on

October 3, 1996, describing NORINCO as under the control of the PRC's

State Council, and Foreign Broadcast Information Service reports.

In view of CNIGC's and Dalian's continuing ties to NORINCO, and in

the absence of a showing that NORINCO is independent from government

control, the two respondents fail to overcome the presumption of de

facto government control. Thus, we have not assigned separate rates to

these companies.

Comment 2: Treatment of Non-Selected Respondents

The petitioner maintains that the Department had sufficient

resources to investigate all of the responding PRC companies in these

investigations. The petitioner further states that the Department

should, at a minimum, request shipment data from non-selected

respondents in order to determine whether critical circumstances exist

for those companies, especially since U.S. import statistics indicate

that massive imports of one product type (i.e., brake rotors) has

occurred. The petitioner cites to Bicycles in support of its argument.

Eight respondents (i.e., the ten respondents except for Shenyang/

Laizhou and Southwest) (hereafter referred to as ``the eight

respondents'') state that the Department's sampling methodology is not

contrary to law. However, the eight respondents claim that the

Department should not impute knowledge of likelihood of material injury

to U.S. importers merely because of the existence of dumping,

maintaining that there is no inherent causal relationship between

dumping and injury. Therefore, the eight respondents argue that the

Department should find critical circumstances exist only if it

determines that importers knew or should have known that there was

likely to be material injury because of sales of brake drums and brake

rotors at less than fair value.

DOC Position

We disagree in part with the petitioner and the respondents. In

accordance with section 777A(c)(2) of the Act, given our limited

resources, we had to limit the number of respondents examined in these

cases in order to lessen the administrative burden on the Department,

and we did so by choosing the largest exporters to the United States

(see Honey and Bicycles). As for requesting shipment data from the non-

selected respondents which have cooperated in these investigations, we

did not do so due to the Department's own administrative constraints,

which limited our ability to examine questionnaire responses or request

shipment data for analysis. With respect to importer knowledge of

material injury by reason of sales at less than fair value, the

Department's position has changed since the preliminary determination.

This decision is now based on the ITC's preliminary determination, in

conjunction with massive imports and a high level of dumping. (See

``Importer Knowledge of Material Injury'' section of this notice and

Decision Memorandum from the team to Richard W. Moreland, dated

February 24, 1997).

Comment 3: Facts Available

The petitioner argues that the Department should resort to facts

available and deny all of the respondents separate rates. According to

the petitioner, throughout these proceedings the respondents have

submitted to the Department ``boiler plate'' answers in response to the

antidumping questionnaire, significantly revised their responses during

the course of the proceedings, and requested numerous extensions of

time to submit their incorrect data. In addition, the petitioner claims

that the Department found a large number of errors at verification for

the respondents and lists both general and respondent-specific

instances upon which the Department should base an adverse facts

available determination (see the petitioner's January 21, 1997, case

brief, at 13-20.)

The petitioner also contends that the Department should deny

separate rates to the companies under investigation because they

withheld information regarding their relationship with MOFTEC, and

because it could not be determined from a meeting at the Ministry of

Machinery Industry and letters sent to MOFTEC whether the respondents

have any relationship with any level of the PRC government. The

petitioner further urges the Department to assign the China-wide rate

to all of the respondents, claiming that not doing so may cause a

massive diversion of shipments of the subject merchandise between PRC

companies, with exports being shifted to companies assigned lower

rates.

The eight respondents first contend that the petitioner erroneously

equates ``facts available'' with ``adverse assumptions.'' They argue

that the Act has been amended so that the Department cannot

automatically make an adverse inference when applying facts available,

but rather must consider all evidence on the record in

[[Page 9167]]

determining whether adverse inferences are warranted.

The eight respondents and Southwest argue that there is no instance

in these proceedings that would justify the Department resorting to

adverse inferences or resorting to facts available. They state that (1)

there were no instances in any of the verifications in which the

Department was unable to verify particular information; (2) the errors

described by petitioner often were adverse to the respondents; and (3)

when the Department did find errors, the Department was able to obtain

and verify the correct information. Moreover, they maintain that there

is no evidence that they failed to cooperate by not acting to the best

of their ability to comply with Departmental requests for information

or that the errors discovered during verification undermined the

validity of any responses.

With respect to separate rates, all of the respondents stated that

they had made adequate showings of independence.

Respondent Shenyang/Laizhou states that the Department may use

facts available in making its determination if necessary information is

not on the record or if a respondent: (1) Withholds requested

information, (2) fails to provide requested information by the

deadlines for the submission of the information, or in the form and

manner requested, (3) significantly impedes an investigation, or (4)

provides unverifiable information. (See Section 776 of the Act).

Information that is adverse to a respondent may be used by the

Department when the respondent ``has failed to cooperate by not acting

to the best of its ability to comply with a request for information.''

(See Section 776(b) of the Act). Shenyang/Laizhou notes that none of

these conditions are present in its case and that although a few

discrepancies were noted at verification, they were resolved during

verification.

Furthermore, all respondents urge the Department to make those

corrections to the corresponding databases which were brought to the

attention of the Department prior to and during verification.

Lastly, all respondents address the list of verification errors

noted by the petitioner as reason for facts available, arguing that

while the Department verified every factor input, for those that were

in error, the corrections were clerical and minor in nature. They

further assert that with respect to the areas affected by these errors,

there are alternative verified data on the record that allow for

recalculation of the relevant factors.

DOC Position

We agree with all respondents that neither an across-the-board

denial of separate rates nor an across-the-board recourse to ``total''

facts available is warranted in these investigations. First, regarding

the petitioner's concern over the massive diversion of shipments of

brake drums and rotors between exporters if the Department does not

assign the China-wide rate to all exporters, the Department has

established that the companies receiving separate rates in these

investigations operate independently of each other and of government

entities with respect to their exports of the subject merchandise.

Thus, these respondents have been assigned rates based on their

different cost and pricing structures. It would be a normal phenomenon

that respondents with lower dumping margins would experience an

increase in sales of the subject merchandise as a result of an increase

in customers' demand for products with lower duty margins.

Second, we disagree with the petitioner that the other companies

(i.e., not including CNIGC and Dalian) in these investigations should

be denied separate rates based on the facts available. The information

submitted on the record by each of these companies, as well as the

Department's verification findings, show that these respondents under

investigation have met the qualifying criteria for separate rates (see

``Separate Rates'' section for further discussion). The records in

these investigations affirmatively indicate the absence of de jure and

de facto control by government entities over those responding

companies' operations with respect to the products under investigation.

In its verification, the Department found no evidence that these

respondents are controlled by MOFTEC or the Ministry of Machinery

Industry, or any level of the PRC government.

Third, we disagree with the petitioners depiction of the

respondents'' ``numerous'' extension requests and errors. In this

instance, the number of extensions granted was not extraordinary, nor

did these extensions prevent the petitioner from commenting on the

responses or the Department from making its preliminary determinations.

Lastly, with respect to the errors listed by the petitioner, a

review of the respondents' response revisions indicates that such

revisions were not unduly extensive. We do not believe that failure to

initially submit an error-free response, or the correction of these

errors, should result in the use of facts available because we found no

basis to conclude that these errors affect the overall integrity of the

response. Moreover, in an antidumping investigation, it is not unusual

to encounter errors throughout the proceeding up to the commencement of

verification.

As described in Ferrosilicon from Brazil: Final Results of

Antidumping Duty Administrative Review, 61 FR 59407 (November 22,

1996), errors that are not substantial do not affect the integrity of

the response. In addition, the errors in question do not warrant

wholesale rejection of the reported data since all such deficiencies

can be corrected using verified data on the record.

Comment 4: CEP Deductions and Circumstance-of-Sale (COS) Adjustments

Southwest argues that the Department should not make adjustments to

CEP transactions for indirect selling expenses, credit and profit

because making an adjustment to one side of the equation without making

a comparable adjustment to the other results in an unfair calculation.

Alternatively, Southwest suggests that if the Department makes these

adjustments to the U.S. price then the Department should make similar

adjustments to NV.

The petitioner states that section 772(c)(2)(D) of the Act requires

the Department to reduce CEP by the selling expenses associated with

economic activity in the United States, and that the Act provides no

exception for cases involving NMEs. As for making COS adjustments, the

petitioner states that section 773(a)(6)(C) of the Act does not require

the Department to make COS adjustments to NV unless it has been

established to the satisfaction of the administering authority that

such adjustments are warranted.

DOC Position

We agree with the petitioner. Section 772(d)(1) of the Act requires

the Department to reduce CEP by the selling expenses associated with

economic activity in the United States (see SAA at 153, Final

Determination of Sales at Less Than Fair Value: Certain Pasta from

Italy, 61 FR 30326 (June 14, 1996), and Bicycles at 19031. Moreover,

section 772(d)(3) of the Act requires us to make a deduction for profit

associated with CEP selling expenses (see SAA at 154, and Bicycles, at

19032). As for COS adjustments to NV, given the imprecise nature of the

information about direct and indirect selling expenses in the record in

these cases (e.g., the financial reports of

[[Page 9168]]

Indian producers), we have no basis to conclude that such adjustments

are warranted in these cases (see Bicycles at 19031).

Comment 5: Indian Producer Financial Statements

The respondents, except for Southwest, argue that the Department

should only use data from financial statements of Indian producers of

brake drums and brake rotors to calculate factory overhead, SG&A and

profit percentages in respective investigations. In addition, the

respondents maintain that the Department should only consider using

data from the financial statements of Ennore, Jayaswals, Kalyani,

Krishna, Nagpur, and Rico because these Indian companies produce the

subject merchandise. The respondents claim that the financial reports

of Electrosteel and Shivaji should not be used to derive the

percentages because neither company produces the subject merchandise.

Alternatively, if the Department uses financial data from Shivaji's

report, then the eight respondents claim that the Department must also

use Electrosteel's financial data because both companies produce grey

iron castings which are similar to the subject merchandise. The

respondents cite to 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 1708 (January 13, 1997) (Melamine),

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

Roller Bearings and Parts Thereof, Finished or Unfinished, from the

Hungarian People's Republic, 52 FR 17428 (May 8, 1987), and Bicycles in

support of their arguments.

The respondent Southwest maintains that all but Ennore's financial

report should be used to calculate the percentages because there is no

publicly available information indicating that Ennore produced the

subject merchandise during the POI. It argues that a letter from Ennore

(submitted on the record by other respondents) that stated that this

company produces brake drum castings should be rejected as ``private

information.''

The petitioner states that the Department should use the financial

reports of Ennore, Jayaswals, Kalyani, Krishna, Nagpur, Rico and

Shivaji to calculate percentages for both investigations and that the

Department should calculate the percentages based on the petitioner's

calculations of the data as shown in its case brief.

DOC Position

The Department disagrees with certain of the respondent's specific

statements, while agreeing in general, that the companies selected for

calculation of factory overhead, SG&A, and profit should reflect the

Department's preference for ``the most product-specific information

possible from the surrogate market'' as noted in Melamine. Based on

publicly available information, we find that Jayaswals, Kalyani,

Krishna, Nagpur and Rico produced both brake drums and brake rotors

within the scope of these investigations and sold during the POI.

Therefore, we are using these Indian producers' financial reports to

calculate surrogate percentages for use in both investigations. We are

not using the financial data of Electrosteel or Ennore because we have

no publicly available information which indicates that these companies

produced subject merchandise during the POI. Although the eight

respondents submitted a letter from Ennore which stated that it

produces brake drums, we have relied on publicly available information

instead of the private correspondence as the basis for our decision

because we normally prefer to rely on publicly available information

and consider the contents of the correspondence files of a company, by

nature, not to be publicly available information. We are not using

Shivaji's financial report for these calculations because publicly

available information, along with information from the U.S. consulate

in India, establishes that Shivaji did not produce subject merchandise

during the POI.

Comment 6: Adjustments to Indian Financial Reports' Data

The eight respondents argue that, when calculating SG&A, the

Department should offset the interest and financial expenses by the

amount of financial gains (i.e., items such as ``operating income,

miscellaneous receipts, miscellaneous income, and other interest

income'') when calculating SG&A. They contend that adding the financial

expenses to SG&A without reducing those amounts by any corresponding

operating income results in imprecise and overstated selling expenses.

They cite to the Notice of Final Results of Antidumping Duty

Administrative Review: Frozen Concentrated Orange Juice from Brazil

(Orange Juice), 55 FR 26721 (June 29, 1990) (Comment 8) in which the

Department offset financial expenses with short-term operating income.

The petitioner argues that the Department should not offset

financial expenses against financial gains, citing Bicycles, and claims

that section 773(a)(7) of the Act states that an offset to NV is only

required upon sufficient showing that differences exist justifying the

adjustment.

DOC Position

We agree with the respondents that we should offset interest

expense by the amount of short-term interest income when calculating

G&A, as in Orange Juice and in accordance with Departmental practice.

However, we disagree that operating income or all of miscellaneous

receipts should be in the offset. We do not include in our offset long-

term interest income nor short-term income from activities such as

rental. Thus, we reduced interest expenses by amounts for interest

income for those items identified in the financial reports as being

related to short-term interest, and utilized the April 1995 Indian

Reserve Bank Bulletin to allocate a portion of ``other income'' or

``miscellaneous receipts'' as short-term interest income for those

companies which did not specify a breakdown of their non-operating

income.

The petitioner's reliance on section 773(a)(7) of the Act and

Bicycles is misplaced. Section 773(a)(7) deals with level of trade

adjustments. The comment in Bicycles to which the petitioner refers

deals with a circumstance-of-sale (COS) adjustment. 61 FR at 19031

(Comment 1). This adjustment is not a COS adjustment but simply a

reduction in the total amount of SG&A expenses based on short-term

income received by the Indian producer.

Comment 7: Surrogate Values for Certain Material Inputs

The petitioner asserts that the Department should value pig iron,

steel sheet, steel wire rod and steel scrap using POI import prices

from the Indian publication Monthly Statistics rather than the POI

domestic prices from the Indian publication SAIL or from the financial

reports of certain Indian producers because the prices in Monthly

Statistics are exclusive of taxes and duties whereas the prices in SAIL

and in the financial reports are not. If the Department elects not to

use pig iron prices from Monthly Statistics, then the petitioner urges

the Department to use Indian Iron & Steel Company Limited (IISCO)

prices rather than SAIL prices for the same reason noted above. The

petitioner claims that the Department should not value ball bearing

cups by using prices from Indian Customs Daily Lists provided by

International Data Services (IDS) because IDS data is of

[[Page 9169]]

inferior quality and is therefore unreliable. For coke, the petitioner

maintains that the article containing domestic prices submitted by all

of the respondents on January 10, 1997, indicates that the prices are

controlled by the Indian government and therefore should not be

considered.

The eight respondents maintain that in past NME cases the

Department has expressed a clear preference for using tax-exclusive

domestic prices rather than import prices when valuing factors of

production. In addition, they state that in previous NME cases, the

Department has used SAIL data when the specificity of the steel product

has been most important in valuing the factor. They cite to Drawer

Slides and to the Notice of Final Results of Administrative Review:

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

China, 61 FR 41994, 41997 (August 13, 1996) in support of their

argument. For ball bearing cups, the respondents maintain that the IDS

data is publicly available information and is more specific to imports

of ball bearing cups than the category of ``other ball/roller bearing

parts'' listed in Monthly Statistics. For coke, they state that the

data from Economic Times of Mumbai provide prices for coke which are

contemporaneous with the POI and specific to Indian foundry industries.

DOC Position

We disagree in part with both the petitioner and the respondents.

The fact that domestic prices may include taxes is not determinative

when deciding which prices are preferable for use in valuing the

factors of production. For pig iron, steel scrap and iron scrap, we

find that the separated line item prices for each of these inputs in

Shivaji's 1995-96 report are more specific than the prices contained in

SAIL, Monthly Statistics or IISCO. Therefore, the prices in Shivaji's

report are more reflective of prices paid for inputs used by domestic

producers of castings (i.e., products of the same general category as

the subject merchandise). We have also removed, where possible, any

taxes included in the prices obtained from Shivaji's report.

The Department normally prefers to use prices that are

representative of prices in effect during the POI. For ball bearing

cups, we find that the IDS data is less representative of prices in

effect during the POI than the prices contained in Monthly Statistics

because the IDS data, selected by the respondents, consist of a single

transaction at a single port for a single customer and do not appear to

be more product-specific than the Monthly Statistics data. Therefore,

we have valued this input using prices from Monthly Statistics.

For coke, though the prices from Economic Times of Mumbai are POI

prices, we find that these prices are clearly government administered.

Since we have a POI coke value from Monthly Statistics in these

investigations which is not government administered, we have used these

prices to value this input.

Comment 8: Treatment of Indirect Materials

All of the respondents urge that, in calculating NV, the Department

should continue to consider molding inputs as indirect materials and

part of factory overhead, rather than as materials consumed. In

addition, Southwest maintains that the Department should also treat

dextrin, steel shot, antirust, cutting oil, cleaning agent, dehydrating

oil, and rustproofing oil as indirect materials and part of factory

overhead. In order for a material to be considered a direct material,

Southwest argues that the material must be physically incorporated into

the finished product, citing the Compendium of Statements and Standards

published by the Institute of Chartered Accountants of India. Finally,

Shenyang/Laizhou claims that limestone and firewood should be treated

as indirect materials because they are not physically incorporated into

the final product.

The petitioner did not comment on this issue.

DOC Position

We have continued to treat molding materials listed in the

``Factors of Production'' section of this notice as indirect materials

because although these inputs are used to produce the subject

merchandise, these inputs are not incorporated into the final product

and are also categorized as ``stores and spares consumed'' based on

Indian accounting standards. According to the Compendium of Statements

and Standards, in order for a material to be considered as part of

factory overhead, it must ``assist the manufacturing process, but * * *

not enter physically into the composition of the finished product.'' We

agree that dextrin, steel shot, antirust, cutting oil, cleaning agent

and dehydrating oil are indirect materials and should be treated as

part of factory overhead, because the function of these materials is to

``assist'' in the manufacturing process and do not enter physically

into the composition of the finished product. With respect to

rustproofing oil, we find that this input is a direct material because

it is used as a packaging material. As for limestone and firewood, we

find that limestone is a direct material which is consumed during the

smelting process as flux (i.e., a material resulting from the

production process which removes undesirable substances, like sand,

from the metal bath) and that firewood is an energy input used in the

production process.

Comment 9: Surrogate Value for Rustproofing Oil

Southwest claims that if the Department treats rustproofing oil as

a direct material, then the Department should value it using the value

of lubrication oil because other respondents, such as CAIEC/Laizhou

CAPCO, use rustproofing oil for the same process. Thus, the Department

should use the same surrogate value for all respondents (i.e.,

lubrication oil).

The petitioner did not comment on this issue.

DOC Position

We disagree with Southwest. We found at the verification of

Southwest's factory that it used a rustproofing oil, not lubrication

oil, to coat its finished brake rotors for packaging. In contrast,

although we found that CAIEC/Laizhou CAPCO used an oil to protect its

brake rotors before packaging, it is clear that CAIEC/Laizhou CAPCO

uses lubrication oil and not rustproofing oil. However, given that we

could not obtain a surrogate value for rustproofing oil, we have used

the value of lubrication oil to value this input for all respondents.

Comment 10: Foreign Inland Freight

The eight respondents maintain that the Department should not

deduct an amount for foreign inland freight from EP or CEP because that

expense was incurred by the factories and not by the trading companies.

According to these respondents, the original places of shipment were

the seaports where the suppliers delivered the merchandise for shipment

to the United States. Citing Notice of Final Results of Antidumping

Duty Administrative Review: Titanium Sponge from the Russian

Federation, 61 FR 58525 (November 15, 1996), (Titanium Sponge from

Russia), they claim that the Department should consider the seaports

from which the subject merchandise was shipped to be the original

places of shipment and to deduct only the movement charges incurred in

transporting the merchandise from the PRC to the U.S. customers from EP

and CEP. Alternatively, they maintain that if the Department does

deduct the foreign inland freight from the factories to the seaports

from EP and CEP, then the

[[Page 9170]]

Department should, at a minimum, ensure that a similar amount is

excluded from the overhead and selling expense ratios calculated for

building normal value. They contend that if the overhead and selling

expense ratios are derived from Indian producer financial statements

wherein overhead and/or SG&A contain delivery expenses, the inclusion

of such expenses in normal value with the simultaneous exclusion of

such expenses from EP and CEP would constitute double-counting.

The petitioner did not comment on this issue.

DOC Position

The Department disagrees with the respondents'' implied conclusion

that in these investigations, the cost of transporting the subject

merchandise from the factory to the PRC port of exportation should be

treated as a component of the factories'' total costs (i.e., as a

factor in the construction of normal value) instead of as a deduction

from the price to the U.S. customer. While it is true that, in Titanium

Sponge from Russia, the Department did not deduct factory-to-port

movement charges from the U.S. starting price, and instead included

``in normal value an amount for the inland freight,'' the circumstances

in that particular case were very different from those of the instant

investigations. Our normal methodology is to strip all movement

charges, including all foreign inland freight, from the U.S. price

being compared to NME normal value based on factors of production. The

facts in these instant investigations differ from those in Titanium

from the Russian Federation, wherein (1) the subject merchandise

produced in an NME country was sold to an exporter located in a market

economy without knowledge on the part of the producer of the United

States as the ultimate destination and (2) the exporter took physical

possession of the subject merchandise. Since neither of these

conditions apply to these instant investigations, the comparison to

Titanium from the Russian Federation is misplaced, and the Department

has followed its normal methodology.

The respondents in these investigations are either (1) PRC self-

exporting producers, such as Xinchangyuan or (2) PRC trading companies,

such as CMC, which purchased subject merchandise from PRC producers. We

are therefore deducting the surrogate value for the cost of

transporting the subject merchandise from the factories to the port of

exportation from the U.S. price, whether EP or CEP, in keeping with our

past practice. See Bicycles. As to the respondents'' claim that the

overhead and/or SG&A rates applied in calculating normal value may

already contain the cost of transporting the merchandise to the port as

a selling expense, and that the deduction of foreign inland freight

charges from the U.S. price constitutes a double-counting of expenses,

we have ensured that any expense line-item which refers to ``freight,''

``movement,'' ``carriage,'' or ``transportation'' of goods, as well as

the portion of ``vehicle maintenance'' and ``vehicle depreciation''

expenses applicable to product delivery, have been removed from the

total SG&A costs and total overhead costs contained in the financial

statements of Indian companies used in calculating NV.

Comment 11: Use of Exchange Rates

The eight respondents maintain that when calculating the exchange

rate used in converting Indian surrogate values into U.S. dollars, the

Department should use the buying exchange rates for U.S. dollars

contained in Federal Exchange Bulletin, because the issue here is not

how many dollars it takes to purchase one Indian rupee, but rather how

many rupees are required to purchase one U.S. dollar.

The petitioner argues that the Department should not reject its use

of daily Indian rupee-U.S. dollar exchange rates from the Federal

Reserve Bank of Chicago and argues that there is no merit in

respondents' request for the Department to abandon the use of these

exchange rates in favor of simple average rates in the Federal Exchange

Bulletin.

DOC Position

We agree with the petitioner. Based on Policy Bulletin 96-1: Import

Administration Exchange Rate Methodology, we have used daily noon

buying rates to establish the Indian rupee exchange rates used in these

investigations. The daily noon buying rates are based on the rates in

New York for cable transfers, which are certified by the New York

Federal Reserve Bank for customs purposes, as required by section 522

of the Act. This information has been downloaded from an electronic

bulletin board maintained by the Chicago Federal Reserve Bank. (See

``Currency Conversion'' section of this notice for further discussion).

Comment 12: Currency Conversion

The eight respondents urge the Department to round to the nearest

one-thousandth of a dollar when converting Indian rupee values to U.S.

dollars, because rounding to the nearest one-hundredth of a dollar

often can cause significant distortions.

The petitioner did not comment on this issue.

DOC Position

We disagree with the respondents. In converting values from Indian

rupees to U.S. dollars, we have derived U.S. values and rounded those

values to the nearest one-hundredth, not one-thousandth, of a dollar

because we do not find their use to have a significant effect on the

margins.

Company-Specific Issues

Qingdao

Comment 13: Calculation of Total Material Cost

The petitioner claims that the Department did not include the cost

of wire rod scrap when it calculated the total material cost for each

model in the factors of production database for Changzhi Automobile

Parts Factory (Changzhi), Qingdao's supplier. The petitioner urges the

Department to include this factor in its calculation of total material

cost.

Changzhi states that the Department correctly did not separately

value wire rod scrap.

DOC Position

We agree with the petitioner. We verified that Changzhi reported a

separate factor amount for wire rod scrap in the factors of production

database. Therefore, for the final determination, we have valued this

factor accordingly.

Shenyang/Laizhou/MAT

Comment 14: EP vs. CEP Sales Classification

Shenyang/Laizhou maintains that the Department incorrectly

classified U.S. sales made prior to importation through its U.S.

affiliate, MAT, as CEP transactions, and requests that the sales be

reclassified as EP transactions.

The petitioner maintains that the Department should continue to

treat these sales as CEP transactions.

DOC Position

We agree with the petitioner that these sales are properly treated

as CEP sales. With respect to EP sales, section 772 (a) of the Act

states that:

The term ``export price'' means the price at which the subject

merchandise is first sold (or agreed to be sold) before the date of

importation by the producer or exporter of the subject merchandise

outside of the United States to an unaffiliated purchaser in the

United States or to an unaffiliated purchaser for exportation to the

United States . . .

[[Page 9171]]

Based on Department practice, we examine several criteria for

determining whether sales made prior to importation through an

affiliated sales agent to an unaffiliated customer in the United States

are EP sales, including: (1) Whether the merchandise was shipped

directly from the manufacturer to the unaffiliated U.S. customer; (2)

whether the sales follow customary commercial channels between the

parties involved; and (3) whether the function of the U.S. selling

agent is limited to that of a ``processor of sales-related

documentation'' and a ``communications link'' with the unrelated U.S.

buyer. Where all criteria are met, the Department has regarded the

routine selling functions of the exporter as ``merely having been

relocated geographically from the country of exportation to the United

States,'' and has determined the sales to be EP sales. Where all

conditions are not met, the Department has classified the sales in

question as CEP sales. See, e.g., Final Determination of Sales at Less

Than Fair Value: Large Newspaper Printing Presses and Components

Thereof, Whether Assembled or Unassembled, from Germany (LNPP from

Germany), 61 FR 38166, 38174 (July 23, 1996).

In this case, the sales through MAT meet the first two criteria

described above. However, with respect to the third criterion, the

record evidence in this case indicates that MAT is not merely a

processor of sales-related documentation nor a ministerial

communication link between the factories and their unaffiliated

customers. On the contrary, MAT is instrumental in determining the

terms of sale. In the questionnaire responses and at verification,

company officials repeatedly stated that the U.S.-based president of

MAT and owner of the Shenyang and Laizhou factories is solely

responsible for all production, distribution, and sales decisions.

Indeed, the case brief submitted by Shenyang/Laizhou concedes that

instructions regarding pricing are sent from MAT's office in the United

States. See case brief at 20. We are not persuaded by the argument that

the U.S.-based president of MAT directs sales activities in his role as

owner of the factories rather than as president of MAT, nor by the

argument that his U.S. sales activities are ``simply the consequence of

(the U.S.-based president of MAT) being a U.S. citizen and resident.''

Id. The fact is that the U.S.-based president of MAT operationally

controls both the factories and MAT from his U.S. office, with the

result that MAT directs the factories, not the opposite. Therefore, the

sales through MAT are properly classified as CEP sales.

Comment 15: Surrogate Value for Purchased Unfinished Castings

Shenyang/Laizhou argues that the Department should use Laizhou's

casting-related factors of production to calculate a surrogate value

for castings purchased by Shenyang from unaffiliated PRC suppliers

because Laizhou's valued factors for castings are more reflective of

Shenyang's costs for castings if it had produced the castings itself.

Alternatively, the respondent argues that the Department should derive

a casting value based on the financial statements of Indian casting

producers Nagpur and Jayaswals. According to the respondent, these

financial statements are the only sources on the record that provide

data for purchases or consumption of unfinished gray cast iron castings

by producers of brake rotors.

The petitioner maintains that the Department should not value

castings using the Laizhou factors of production given that there is

reliable public information on the record regarding the price of input

castings in India. The petitioner requests that the Department continue

to use the inventory value for castings in Shivaji's financial

statements as it did in the preliminary determination.

DOC Position

We disagree with the respondent that the unfinished castings

purchased by Shenyang should be valued using the casting-related

factors of production reported by Laizhou because, in NME cases, we

value a respondent's factors based on its actual production experience

during the POI. In this case, Shenyang purchased its unfinished

castings during the POI and did not produce them, and thus we have

valued these factors accordingly (see Notice of Final Determination of

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

China (PRC), 59 FR 66895, (Comments 4 and 5) (December 28, 1994). The

Department values inputs purchased in an NME using surrogate values

derived from publicly available information in a market economy of a

similar stage of development. The record of this investigation includes

financial statements of Indian producers of brake rotors which provide

reliable surrogate values for the purchase price of input castings, and

there is therefore no need to build up a casting purchase value using

the factors of production reported by Laizhou.

In identifying appropriate Indian financial statements for

valuation of castings, we have excluded the statements of producers

which did not manufacture rotors during the POI, since castings for

rotors may have significantly different prices from castings for other

products. Also, we have sought data on purchases of castings from

casting suppliers, since it is reasonable to assume that such castings

are unfinished or at most semi-finished. We believe that purchased

casting data are more reliable than casting inventoried values, which

may reflect large quantities of finished castings, and also more

reliable than casting consumption values, which may include large

quantities of castings produced internally rather than purchased from

outside suppliers. Given these criteria, the Jayaswals financial

statements provide the only appropriate Indian surrogate value for

unfinished castings on the record, and we have relied on that value.

For a more extensive discussion of our valuation of unfinished

castings, please refer to the final factors valuation memorandum.

Southwest/MMB

Comment 16: EP vs. CEP Sales Classification

The respondent maintains that sales made by its U.S. affiliate

(MMB) should be considered EP and not CEP transactions because (1) the

price of the merchandise is set by Southwest, not by MMB, prior to

importation; (2) the customary commercial channel is to ship the

merchandise directly to the customer; and (3) MMB maintains no

inventory in the United States. Southwest cites to The Final

Determination of Sales at Less Than Fair Value: Certain Stainless Steel

Rod from France, 58 FR 68865 (December 29, 1993) (Stainless Steel Rod)

in support of its argument.

The petitioner asserts that the Department should continue to treat

these sales as CEP.

DOC Position

We disagree with Southwest. Our verification findings indicate that

Southwest's sales through MMB were properly classified as CEP sales.

When we requested at verification evidence that Southwest sets U.S.

prices, rather than MMB, Southwest was only able to provide negotiation

and sales correspondence for one customer purchase order (which covered

an insufficient number of the total POI invoices of subject

merchandise). Further, the only documentation Southwest provided at

verification to

[[Page 9172]]

support its claim was documentation that it had been requested to

prepare prior to verification. We find this failure to be significant,

especially given that the respondent originally stated in its response

that MMB is ``not a mere conduit of sales by Southwest'' and that MMB's

salesman ``negotiates the final prices with MMB's customers.'' (see

Southwest's supplementary sales response, dated August 27, 1996, at A-

2). With regard to Southwest's reference to Stainless Steel Rod, we

note that unlike the U.S. affiliate in that case, MMB's sales of brake

rotors do not involve a situation in which the U.S. affiliate had no

flexibility to set the price (i.e., price is set by the parent

company). Therefore, we find no compelling evidence in Southwest's

responses or in our verification findings to treat these sales as EP

sales.

Comment 17: Treatment of Bartered Scrap

The petitioner argues that no adjustment for bartered steel scrap

should be made because the respondent did not provide a surrogate value

to the Department.

Yangtze, Southwest's supplier, claims that the Department should

grant it a credit for the scrap (i.e., turnings and shavings) sold or

bartered by it and that a surrogate value for steel scrap is already on

the record.

DOC Position

We agree with Yangtze. It is Department practice to subtract the

sales revenue of by-products such as steel scrap from the production

costs of the subject merchandise (see Notice of Final Determination of

Sales at Less Than Fair Value: Sebacic Acid from the People's Republic

of China, 59 FR 28053 (May 31, 1994). Moreover, we have a surrogate

value for steel scrap on the record. Therefore, we have granted Yangtze

a credit for the turnings and shavings it sold or bartered during the

POI.

Comment 18: Credit Expense

Southwest maintains that if credit expenses are deducted from CEP,

then the Department should use the date of the U.S. affiliate's invoice

and not the date when Southwest shipped the subject merchandise from

the PRC.

The petitioner maintains that the Department should use the PRC

date of shipment to calculate this expense.

DOC Position

We disagree with Southwest that the Department should use the date

of the U.S. affiliate's invoice to calculate credit expenses. When

merchandise produced by the foreign-based exporter's affiliated factory

(Yangtze) is shipped from the factory through the foreign-based

exporter (Southwest) and then directly to an unaffiliated U.S. customer

without entering the inventory of a U.S. affiliate (MMB), then it is

the Department's standard practice to calculate credit expenses based

on the date of shipment from the factory to the U.S. customer.

Therefore, we have based credit expenses for this respondent on the

number of days between the date of shipment to the U.S. customer and

the date of payment. See Final Determination of Sales at Less Than Fair

Value: Hot-Rolled Carbon Steel Flat Products from Italy, 58 FR 37152

(July 9, 1993).

Comment 19: Misreported Weights for Unfinished Castings

The petitioner maintains that Yangtze incorrectly reported the

weights for all of its unfinished casting models listed in the sales

and factors of production databases, and the factors for those

unfinished castings.

The respondent maintains that it did not misreport the weights of

its unfinished castings in the factors of production database. The

respondent argues that the Department should use the reported standard

weights for unfinished castings rather than the actual weights because

the reported weights are reflected in its accounting records and those

weights were used to allocate raw materials used in making all castings

(i.e., unfinished castings and finished castings). Respondent further

maintains that using the actual weights rather than the standard

weights would be distortive because they overstate the constructed

value for each unfinished casting. Respondent cites To Notice of Final

Determination of Sales at Less Than Fair Value: Minivans from Japan, 57

FR 21937 (1992) in support of its argument.

DOC Position

We disagree with the respondent. At verification, we found that the

difference in weight of an unfinished casting compared to a finished

casting for the same model is large in magnitude. We know that using

the standard weights for allocating inputs for unfinished castings from

Yangtze's accounting records distorts the actual production costs of

the subject merchandise. Using the standard weights will also

undervalue the factors used to produce unfinished castings and distort

the actual production cost of the brake rotors, because the standard

weights are lower than the actual weights. Therefore, the reasons for

using standard weights in the Minivans case do not apply in this case.

If we do not take into account the actual weight of the unfinished

brake rotor, then we would not be considering that there is a yield

loss between a finished and unfinished product. However, in actuality,

the yield loss is not as high for an unfinished product as a finished

product, and therefore, the cost allocations are inaccurate as

reported. Yangtze has not offered any alternative allocation

methodology to account for these distortions. Furthermore, Yangtze did

not even realize that its reported weights for unfinished brake rotors

were based on its standard accounting system until Department officials

found that the weights for unfinished brake rotors were incorrectly

reported at verification.

In sum, in light of the distortive effects which would result from

using Yangtze's theoretical standard weights, which bear no resemblance

to the actual weights of unfinished castings, we are using the actual

weights as the basis for allocation for those castings.

Comment 20: Welfare Fund

The petitioner alleges that Southwest failed to establish an

absence of de facto or de jure government control because verification

demonstrated that Southwest places a portion of its profits in a fund

called ``the public welfare fund'' and claims that this fund is set up

for payment of profits to the PRC government. For these reasons, the

petitioner urges the Department to resort to facts available and deny

Southwest a separate rate.

Southwest maintains that the Department found at verification that

``the public welfare fund'' is an employee welfare fund retained by the

respondent.

DOC Position

We disagree with the petitioner. Southwest, like all the other

respondents, is required to maintain an accounting system based on

current PRC accounting standards. Included in the standard chart of

accounts is an account entitled ``public welfare fund.'' We examined

the activity in this account during the POI and found that no payments

were made to the PRC government. In addition, Southwest has

demonstrated both a de jure and de facto absence of government control.

(See ``Separate Rates'' section, above). Therefore, the Department sees

no reason to deny Southwest a separate rate.

[[Page 9173]]

Yantai

Comment 21: Misreported Factors

The petitioner maintains that Laizhou Magnetic Iron Powder (MIP)

Factory incorrectly reported its usage of five packing material factors

for all models in the factors of production database. As a result of

these errors, the petitioner urges the Department to resort to facts

available for these materials.

Respondent maintains that the petitioner's request for use of facts

available for Laizhou MIP's packing costs is misplaced. According to

the respondent, of the six types of packing materials used by Laizhou

MIP, the factory consistently and conservatively over-reported usage

for five of the materials. For the sixth material, plastic bags,

Laizhou MIP maintains that the magnitude of its under-reporting was

less than one gram per bag.

DOC Position

We disagree for the most part with the petitioner's request that

the Department utilize facts available in determining Laizhou MIP's

usage of packing materials. For five of the six materials in question--

cartons, nails, steel strap, pallet wood, and tape--the usages reported

were found to be significantly overstated by the respondent. With

respect to one packing material, plastic bags, the samples examined at

verification indicate that Laizhou MIP did underreport usage by a

relatively minor amount. We have corrected all of these usages using

the verification findings as non-adverse facts available.

Currency Conversion

We made currency conversions into U.S. dollars based on the

official exchange rates in effect on the dates of the U.S. sales as

certified by the Federal Reserve Bank.

Section 773A(a) of the Act directs the Department to convert

foreign currencies based on the dollar exchange rate in effect on the

date of sale of the subject merchandise, unless it is established that

a currency transaction on forward markets is directly linked to an

export sale. When a company demonstrates that a sale on forward markets

is directly linked to a particular export sale, the Department will use

the rate of exchange in the forward currency sale agreement.

Section 773A(a) also directs the Department to use a daily exchange

rate in order to convert foreign currencies into U.S. dollars unless

the daily rate involves a fluctuation. It is the Department's practice

to find that a fluctuation exists when the daily exchange rate differs

from the benchmark rate by 2.25 percent. The benchmark is defined as

the moving average of rates for the past 40 business days. When we

determine a fluctuation to have existed, we substitute the benchmark

rate for the daily rate, in accordance with established practice.

Further, section 773A(b) directs the Department to allow a 60-day

adjustment period when a currency has undergone a sustained movement. A

sustained movement has occurred when the weekly average of actual daily

rates exceeds the weekly average of benchmark rates by more than five

percent for eight consecutive weeks. (For an explanation of this

method, see Policy Bulletin 96-1: Currency Conversions, 61 FR 9434

(March 8, 1996).) Such an adjustment period is required only when a

foreign currency is appreciating against the U.S. dollar. The use of an

adjustment period was not warranted in this case because the Indian

rupee did not undergo a sustained movement.

Continuation, and Termination in Part, of Suspension of Liquidation

Brake Drums

In accordance with section 735(c) of the Act, we are directing the

Customs Service to continue to suspend liquidation of all entries of

brake drums from the PRC, except for the exporter/producer combinations

listed below, that are entered, or withdrawn from warehouse, for

consumption on or after October 10, 1996, which is the date of

publication of our notice of preliminary determination in the Federal

Register:

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

Exporter(s) Producer(s)

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

CMC....................................... Xinchangyuan

Qingdao................................... Changzhi

Xinchangyuan.............................. Xinchangyuan

Yantai.................................... Longkou Bohai; Laizhou MIP.

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

With respect to the above companies, the suspension of liquidation

ordered on or after October 10, 1996, will be terminated and any cash

deposit or bonds will be released.

Under the Department's NME methodology, the zero rate for each

exporter is based on a comparison of the exporter's U.S. price and NV

based on the factors of production of a specific producer (which may be

a different party). Therefore, the exclusion of the above-mentioned

companies from an antidumping duty order (should one be issued) applies

only to subject merchandise sold through the exporter/producer

combinations noted above. Merchandise that is sold by an above-

mentioned exporter but manufactured by producers not noted above for

that exporter will be subject to the order, if one is issued (see

Notice of Final Determination of Sales At Less Than Fair Value: Cased

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

1994) and Drawer Slides). Entries of such merchandise will be subject

to the ``China-wide'' rate.

For imports of brake drums that are sold by CAIEC/Laizhou CAPCO,

Hebei Metals and Machinery Import & Export Corporation, Jiuyang

Enterprise Corporation, Longjing Walking Tractor Works Foreign Trade

Import & Export Corporation and Shanxi Machinery and Equipment Import &

Export Corporation, we are directing the Customs Service to suspend

liquidation at a rate indicated below.

As stated in the preliminary determination, it would be

inappropriate to assign these fully cooperative respondents a rate

based on ``facts available'' that would also apply to PRC exporters who

refused to cooperate. However, for this final determination, all of the

rates determined for the selected brake drum respondents were either

zero or entirely based on facts available.

We note that the Act is silent with respect to a situation in an

NME investigation in which all of the rates determined for the selected

respondents are either zero, de minimis or based on facts available.

However, section 735(c)(5)(B) of the Act, which deals with the

analogous ``all others'' determination, allows us to ``use any

reasonable method to establish the estimated all-others rate for

exporters and producers not individually investigated, including

averaging the estimated weighted average dumping margins determined for

the exporters and producers individually investigated.'' The SAA at 873

explicitly recognizes that if the latter approach ``results in an

average that would not be reasonably reflective of potential dumping

margins for non-investigated exporters or producers, Commerce may use

other reasonable methods.'' CNIGC, the only one of the five examined

companies which did not receive a de minimis or zero rate, became

subject to a rate based on facts available because it was found not to

be entitled to a separate rate, rather than due to a failure to provide

data on its sales practices. Furthermore, this company's volume of

sales of brake drums to the U.S. market is one of the largest in the

investigation. Given the unique circumstances of this case, we do not

consider that a weighted-average which includes that company's adverse

facts available rate is reasonably reflective of potential

[[Page 9174]]

dumping margins for cooperative non-investigated exporters or producers

who submitted full questionnaire responses. Therefore, in order not to

give undue weight to CNIGC in determining a rate for non-examined

companies which is reasonably reflective of potential dumping margins,

we have assigned to these companies a rate which is the simple average

of the dumping margins determined for the exporters and producers

individually investigated.

We are also directing the Customs Service to continue to suspend

liquidation of entries sold by the PRC brake drum companies subject to

the China-wide rate, that are entered, or withdrawn from warehouse, for

consumption on or after October 10, 1996.

The Customs Service will require a cash deposit or posting of a

bond equal to the estimated duty margins by which the normal value

exceeds the USP, as shown below. These suspension of liquidation

instructions will remain in effect until further notice.

The weighted-average dumping margins are as follows:

Brake Drums

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

Manufacturer/Producer/Exporter Weighted-average margin percentage

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

CMC/Xinchangyuan.................... 0.00 (Excluded).

Qingdao/Changzhi.................... 0.00 (Excluded).

Xinchangyuan/Xinchangyuan........... 0.00 (Excluded).

Yantai/Longkou Botai Machinery 0.00 (Excluded).

Company or Laizhou MIP.

CAIEC/Laizhou CAPCO................. 17.20.*

Hebei Metals and Machinery Import & 17.20.*

Export Corporation.

Jiuyang Enterprise Corporation...... 17.20.*

Longjing Walking Tractor Works 17.20.*

Foreign Trade.

Import & Export Corporation Shanxi 17.20.*

Machinery and Equipment Import &

Export Corporation.

China-Wide Rate..................... 86.02.

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

* Rate is based on the simple average of rates determined for the

selected respondents.

Brake Rotors

In accordance with section 735(c) of the Act, we are directing the

Customs Service to continue to suspend liquidation of all entries of

brake rotors from the PRC except for the exporter/producer combinations

listed below, that are entered, or withdrawn from warehouse, for

consumption on or after October 10, 1996:

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

Exporter(s) Producer(s)

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

CAIEC or Laizhou CAPCO.................... Laizhou CAPCO.

Shenyang or Laizhou....................... Shenyang or Laizhou.

Xinjiang.................................. Zibo Botai Manufacturing

Co., Ltd.

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

With respect to the above companies, the suspension of liquidation

ordered on or after October 10, 1996, is to be terminated and any cash

deposit or bonds are to be released. However, if any of the above-

referenced companies sell subject merchandise which is not manufactured

by the producers noted above for those companies, then those entries

will be subject to the ``China-wide'' rate (for a full explanation, see

the ``Brake Drums'' section above).

For imports of brake rotors that are sold by Hebei Metals and

Machinery Import & Export Corporation, Jilin Provincial Machinery &

Equipment Import & Export Corporation, Jiuyang Enterprise Corporation,

Longjing Walking Tractor Works Foreign Trade Import & Export

Corporation, Qingdao Metals, Minerals & Machinery Import & Export

Corporation, Shanxi Machinery and Equipment Import & Export

Corporation, Xianghe Zichen Casting Corporation and Yenhere

Corporation, we have assigned these companies a weighted-average

dumping margin based on the calculated margins of the selected brake

rotors respondents, excluding margins which were zero, de minimis or

based on facts available (see Preliminary Determinations).

Because we have determined that critical circumstances exist with

respect to the PRC brake rotor companies which have received the China-

wide rate, we are directing the Customs Service to continue to suspend

liquidation of entries sold by these companies, that are entered, or

withdrawn from warehouse, for consumption on or after July 12, 1996,

which is 90 days prior to the date of publication of our notice of

preliminary determination in the Federal Register.

The Customs Service will require a cash deposit or posting of a

bond equal to the estimated duty margins by which the normal value

exceeds the USP, as shown below. These suspension of liquidation

instructions will remain in effect until further notice.

The weighted-average dumping margins are as follows:

Brake Rotors

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

Manufacturer/producer/exporter Weighted-average margin percentage

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

CAIEC and Laizhou CAPCO/Laizhou 0.00 (Excluded).

CAPCO.

Shenyang and Laizhou/Shenyang or 0.00 (Excluded).

Laizhou.

Xinjiang/Zibo Botai Manufacturing 0.00 (Excluded).

Co. Ltd.

Yantai Import & Export Corporation.. 3.56.

Southwest Technical Import & Export 16.35.

Corporation, Yangtze Machinery

Corporation, and MMB International,

Inc.

..................................

Hebei Metals and Machinery Import & 8.63.*

Export Corporation.

Jilin Provincial Machinery & 8.63.*

Equipment Import & Export Corp.

Jiuyang Enterprise Corporation...... 8.63.*

Longjing Walking Tractor Works 8.63.*

Foreign Trade Import & Export

Corporation.

Qingdao Metals, Minerals & Machinery 8.63.*

Import & Export Corp..

Shanxi Machinery and Equipment 8.63.*

Import & Export Corporation.

Xianghe Zichen Casting Corporation.. 8.63.*

Yenhere Corporation................. 8.63.*

China-Wide Rate..................... 43.32.

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

* Rate is based on the weighted-average of calculated rates that are not

zero or based on facts available.

China-Wide Rate

China-Wide Rates have been assigned to brake drums and brake rotors

exporters based on the revised highest petition rates. The China-Wide

rate applies to all entries of subject merchandise except for entries

from exporters/factories that are identified individually above under

each product type.

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

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

the ITC will determine, within 45 days, whether these imports are

causing material injury, or threat of material injury, to an

[[Page 9175]]

industry in the United States. If the ITC determines that material

injury, or threat of material injury, does not exist, for one or both

proceedings, that proceeding or both proceedings will be terminated and

all securities posted will be refunded or canceled. If the ITC

determines that such injury does exist in both proceedings, the

Department will issue antidumping duty orders directing Customs

officials to assess antidumping duties on all imports of the subject

merchandise entered, or withdrawn from warehouse, for consumption on or

after the effective date of the suspension of liquidation.

These determinations are published pursuant to section 735(d) of

the Act.

Dated: February 24, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-5029 Filed 2-27-97; 8:45 am]

BILLING CODE 3510-DS-P