Pure Magnesium From the People's Republic of China: Final Results of Antidumping Duty New Shipper Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-832]

Pure Magnesium From the People's Republic of China: Final Results

of Antidumping Duty New Shipper Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

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SUMMARY: On October 23, 1997, the Department of Commerce published the

preliminary results of the new shipper administrative review of the

antidumping duty order on pure magnesium from the People's Republic of

China (62 FR 55215). This review covers one manufacturer/exporter of

the subject merchandise to the United States, Taiyuan Heavy Machinery

Import and Export Corporation, and the period of review is May 1, 1996,

through October 31, 1996. We gave interested parties an opportunity to

comment on our preliminary results.

We have determined that U.S. sales have been made below the normal

value, and we will instruct the U.S. Customs Service to assess

antidumping duties based on the difference between Export Price and

Normal Value.

EFFECTIVE DATE: January 21, 1998.

FOR FURTHER INFORMATION CONTACT: Everett Kelly or Brian C. Smith,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW.,

Washington, DC 20230; telephone: (202) 482-4194 or (202) 482-1766,

respectively.

SUPPLEMENTARY INFORMATION: Unless otherwise indicated, all citations to

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

the effective date of the amendments made to the Tariff Act of 1930, as

amended (the Act), by the Uruguay Round Agreements Act (URAA). In

addition, unless otherwise indicated, all citations to the Department

of Commerce (the Department) regulations are to those codified at 19

CFR part 353 (April 1997). Where appropriate, references are made to

the Department's final regulations, codified at 19 CFR part 351 (62 FR

27296), as a statement of current departmental practice.

Background

On October 23, 1997, the Department published in the Federal

Register (62 FR 55215) the preliminary results of its new shipper

administrative review of the antidumping duty order on pure magnesium

from the PRC (62 FR 55215). On November 13, the petitioner 1

and Taiyuan Heavy Machinery Import and Export Corporation (Taiyuan)

submitted publicly available information on surrogate values for

factors of production for consideration in the final results. On

November 18, the petitioner and Taiyuan each submitted case briefs. On

November 20, both parties submitted comments on the other's publicly

available information submitted on November 13. On November 26, the

parties submitted rebuttal briefs. On December 2, 1997, the Department

held a public hearing.

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\1\ The petitioner includes the following entities: Magnesium

Corporation of America, International Union of Operating Engineers,

Local 564, and the United Steelworkers of America, Local 8319.

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Scope of Order

The product covered by this order is pure primary magnesium

regardless of chemistry, form or size, unless expressly excluded from

the scope of this order. Primary magnesium is a metal or alloy

containing by weight primarily the element magnesium and produced by

decomposing raw materials into magnesium metal. Pure primary magnesium

is used primarily as a chemical in the aluminum alloying,

desulfurization, and chemical reduction industries. In addition, pure

primary magnesium is used as an input in producing magnesium alloy.

Pure primary magnesium encompasses products (including, but not

limited to, butt ends, stubs, crowns and crystals) 2 with

the following primary magnesium contents:

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\2\ Since the antidumping duty order was issued, we have

clarified that the scope of the original order includes, but is not

limited to, butt ends, stubs, crowns and crystals. See May 22, 1997,

instructions in U.S. customs and November 14, 1997, Final Scope Rule

of Antidumping Duty Order on Pure Magnesium from the PRC.

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(1) Products that contain at least 99.95% primary magnesium, by

weight

[[Page 3086]]

(generally referred to as ``ultra-pure'' magnesium);

(2) Products that contain less than 99.95% but not less than 99.8%

primary magnesium, by weight (generally referred to as ``pure''

magnesium); and

(3) Products (generally referred to as ``off-specification pure''

magnesium) that contain 50% or greater, but less than 99.8% primary

magnesium, by weight, and that do not conform to ASTM specifications

for alloy magnesium.

``Off-specification pure'' magnesium is pure primary magnesium

containing magnesium scrap, secondary magnesium, oxidized magnesium or

impurities (whether or not intentionally added) that cause the primary

magnesium content to fall below 99.8% by weight. It generally does not

contain, individually or in combination, 1.5% or more, by weight, of

the following alloying elements: Aluminum, manganese, zinc, silicon,

thorium, zirconium and rare earths.

Excluded from the scope of this order are alloy primary magnesium

(that meets specifications for alloy magnesium), primary magnesium

anodes, granular primary magnesium (including turnings, chips and

powder), having a maximum physical dimension (i.e., length or diameter)

of one inch or less, secondary magnesium (which has pure primary

magnesium content of less than 50% by weight), and remelted magnesium

whose pure primary magnesium content is less than 50% by weight.

Pure magnesium products covered by this order are currently

classifiable under Harmonized Tariff Schedule of the United States

(HTSUS) subheadings 8104.11.00, 8104.19.00, 8104.20.00, 8104.30.00,

8104.90.00, 3824.90.11, 3824.90.19 and 9817.00.90. Although the HTSUS

subheadings are provided for convenience and customs purposes, our

written description of the scope is dispositive.

Separate Rates

In proceedings involving non-market-economy (``NME'') countries,

the Department begins with a rebuttable presumption that all companies

within the country are subject to government control and thus should be

assessed a single antidumping duty deposit rate. To establish whether a

firm is sufficiently independent from government control to be entitled

to a separate rate, the Department analyzes each exporting entity under

a test arising out of the Final Determination of Sales at Less Than

Fair Value: Sparklers from the People's Republic of China (56 FR 20588,

May 6, 1991) and amplified in Final Determination of Sales at Less Than

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

22585, May 2, 1994) (Silicon Carbide). Under the separate rates

criteria, the Department assigns separate rates in nonmarket economy

cases only if the respondent can demonstrate the absence of both de

jure and de facto governmental control over export activities.

1. De Jure Control

Taiyuan has placed on the administrative record documents to

demonstrate absence of de jure control: the ``Law of the People's

Republic of China on Industrial Enterprises Owned by the Whole

People,'' adopted on April 13, 1988; (the Industrial Enterprises Law),

and the 1992 regulations that supplemented it, ``Regulations for

Transformation of Operational Mechanisms of State-Owned Industrial

Enterprises'' (Business Operation Provisions). We have analyzed these

laws in previous cases and have found them sufficiently to establish an

absence of de jure control of companies ``owned by the whole people,''

such as Taiyuan. (See, e.g., Final Determination of Sales at Less than

Fair Value: Furfuryl Alcohol from the People's Republic of China

(``Furfuryl Alcohol'') 60 FR 22544 (May 8, 1995)). The Industrial

Enterprises Law provides that enterprises owned by ``the whole people''

shall make their own management decisions, be responsible for their own

profits and losses, choose their own suppliers, and purchase their own

goods and materials. The Business Operation Provisions confer upon

state-owned enterprises the responsibility for making investment

decisions, the right to dispose of retained capital and assets, and the

authority to form joint ventures and to merge with other enterprises.

Taiyuan also states that pure magnesium does not appear on any

government lists regarding export provisions or export licensing, and

that no quotas are imposed on pure magnesium. In sum, in prior cases,

the Department examined both the Industrial Enterprises Law and the

Business Operations Provisions, and found that they establish an

absence of de jure control. We have no new information in this

proceedings which would cause us to reconsider this determination with

regard to Taiyuan.

2. 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.

Taiyuan asserted the following: (1) It establishes its own export

prices; (2) it negotiates contracts, without guidance from any

governmental entities or organizations; (3) it makes its own personnel

decisions; and (4) it retains the proceeds of its export sales, uses

profits according to its business needs and has the authority to sell

its assets and to obtain loans. During verification proceedings,

Department officials viewed such evidence as sales documents that

showed Taiyuan sales prices were negotiated solely by Taiyuan and its

customer. In addition, the Department generally noted no significant

indication of government involvement in Taiyuan's business operations.

Taiyuan officials are appointed by a bureau of the provincial

government, rather than the central government, and there are no other

known exporters of the subject merchandise under the control of the

provincial government. Sales documents reviewed indicated that Taiyuan

sales prices were negotiated solely by Taiyuan and its customer. In

addition, the Department reviewed sales payments, bank statements and

accounting documentation that provided evidence that Taiyuan received

payment in U.S. dollars, which was deposited into its bank account

after being converted to renminbi (RMB). See Taiyuan Sales Verification

Report. This information, taken in its entirety, supports a finding

that there is de facto an absence of governmental control of export

functions. Consequently, we have determined that Taiyuan has met the

criteria for the application of separate rates. See Notice of Final

Determination at Less Than Fair Value: Persulfates from the Peoples

Republic of China, 62 FR 27222 (May 19, 1997).

Fair Value Comparisons

To determine whether sales of the subject merchandise by Taiyuan to

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

export price (EP) to the normal value (NV), as described in the

``Export Price and

[[Page 3087]]

Constructed Export Price'' and ``Normal Value'' sections of this

notice, below.

Export Price

We calculated EP in accordance with section 772(a) of the Act,

because the subject merchandise was sold directly by the PRC exporter

to unaffiliated parties in the United States prior to importation into

the United States and the constructed export price methodology was not

warranted based on the facts of record. We calculated EP based on the

same methodology used in the preliminary results, with the following

exception:

To value foreign inland freight, we used the average rate contained

in the Indian periodical The Times of India. We have used this same

rate in numerous NME cases where India has been selected as the primary

surrogate. See Final Determinations of Sales at Less Than Fair Value:

Brake Drums and Brake Rotors from the People's Republic of China (PRC),

62 FR 9160 (February 28, 1997) (Brake Rotors)).

Normal Value

We calculated NV in accordance with section 773(c) of the Act,

which applies to non-market economy countries. In accordance with

section 773(c)(4) of the Act, we must, to the extent possible, value

the factors of production in one or more market economy countries that

(1) are at a level of economic development comparable to that of the

non-market economy country, and (2) are significant producers of

comparable merchandise. We have determined that Indonesia and India are

the countries most comparable to the PRC in terms of overall economic

development and both are significant producers of comparable

merchandise (aluminum). Further, India also produces magnesium. For

these final results, we have continued to use India as a surrogate

country because it meets the Department's criteria for surrogate

country selection.

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 (see

Comment 17). 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. Where import values were used, we

added an amount for surrogate freight attributable to the lesser of

either the distance from the source to the factory or the nearest port

to the factory (see Comment 18). For those values not contemporaneous

with the POR, we adjusted for inflation using wholesale price indices

published in the International Monetary Fund's International Financial

Statistics. For a complete analysis of surrogate values, see the

January 14, 1998, Calculation Memorandum (Calculation Memorandum). We

note changes to surrogate valuation since the preliminary results as

follows:

To value ferrosilicon, we used a simple average of prices

applicable during the POR from Metal Bulletin, and the Iron and Steel

Newsletter (see Comment 6).

To value calcinate dolomite and fluorite powder, we have used

prices from Monthly Statistics of the Foreign Trade of India (Monthly

Statistics) (see Comments 8 and 9, respectively).

To value barium chloride, we used prices from United Nations Import

Statistics (see Comment 10).

To value electricity, we used the August 1996 rate in Business

World (see Comment 12).

To value truck freight rates, we used the average rate contained in

the Indian periodical The Times of India.

To value factory overhead, SG&A, and profit, we used the financial

report of Southern Magnesium and Chemicals Ltd. (SMCL) because this

company is a producer of the subject merchandise and the data from the

report is contemporaneous to the POR (see Comment 2).

We have considered the line item labeled ``stores and spares

consumed'' to include the reducing vessel and have treated the reducing

vessel as part of factory overhead because the reducing vessel is not a

direct material consumed in the production process. Although the SMCL

financial report may have treated the reducing vessel as a direct

material and included the reducing vessel as part of line item ``raw

materials consumed,'' we have, in calculating the surrogate overhead

percentage, reduced SMCL's cost of materials consumed and increased

overhead by the amount attributable to the reducing vessel costs (see

Comment 1). We have not included in the surrogate overhead and SG&A

calculations the excise duty amount listed in SMCL's financial report

(see Brake Rotors at 9164). 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. Where the financial

report did not distinguish short-term 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 and

chemicals industry in the Reserve Bank of India Bulletin (RBI

Bulletin). For a further discussion of other adjustments made, see

January 14, 1998, Calculation Memorandum).

Interested Party Comments

We gave interested parties an opportunity to comment on the

preliminary results. We received comments and rebuttal comments from

the petitioner and Taiyuan.

Comment 1: Treatment of the Reducing Vessel. The petitioner claims

that evidence on the record demonstrates that the reducing vessel is

not part of factory overhead and that the Department must treat and

value the reducing vessel as a direct material regardless of which

public information it uses to calculate a value for factory overhead.

The petitioner also refers to a U.S. Bureau of Mines (BOM) study of the

silicothermic process of magnesium production which treats the reducing

vessel as a direct material cost and not part of factory overhead. If

the Department decides to use the financial report of SMCL (an Indian

producer) to value factory overhead, the petitioner argues, then it

should also take into consideration the fact that the data in the

financial report demonstrate that the vessel is treated as a direct

material rather than as part of stores and spares. The petitioner

points out that even though Indian accounting standards state that a

material can be considered part of factory overhead if it assists the

manufacturing process but does not enter physically into the

composition of the finished product, this is not necessarily the case

with reducing vessels. Alternatively, the petitioner argues that if the

Department decides to use data from the RBI Bulletin, then it should

take into consideration the fact that public information on the record

demonstrates that the cost of the reducing vessel is not captured in a

calculated factory overhead rate using data from the RBI Bulletin,

because the cost of the vessel is neither indirect nor minor. The

petitioner claims that if the Department uses the RBI Bulletin to

calculate factory overhead, then the Department needs to make an

adjustment to the factory overhead rate to account for the cost of the

reducing vessel.

Taiyuan contends that the reducing vessel is not a raw material

which is part of the direct cost of production. Rather, Taiyuan

maintains that the reducing vessel is a reusable piece of equipment

that does not physically enter into the finished product, and that

[[Page 3088]]

Indian general accounting principles treat such items as part of

overhead costs. Therefore, Taiyuan maintains that the Department should

continue to consider the reducing vessel as part of factory overhead.

DOC Position: We agree with Taiyuan. The reducing vessel is not

incorporated into the finished product. Rather, it is equipment

necessary for producing the subject merchandise which eventually needs

to be replaced after continuous use. Although we conclude that SMCL

treated the reducing vessel as a direct material in its 1995-96

financial report, we do not find that the reducing vessel should be

considered a direct material rather than an indirect material for

purposes of antidumping law. To the extent possible, we have adjusted

the direct material amount reflected in SMCL's financial report by

removing from the cost of direct materials and adding to factory

overhead an amount for the reducing vessel based on data contained in

SMCL's 1994-95 financial report. We have treated the reducing vessel

cost as part of factory overhead and have used the SMCL 1995-96

financial report to calculate a factory overhead percentage (see

Comment 2 for further discussion).

Comment 2: Surrogate Values for Factory Overhead, SG&A and Profit.

The petitioner claims that the Department must use the financial

statement of SMCL rather than the RBI Bulletin to value factory

overhead, SG&A and profit because the Indian producer uses the

silicothermic process employed by Taiyuan's supplier and therefore

consumes the reducing vessel in producing magnesium. In addition, the

petitioner claims that the data contained in SMCL's financial statement

are more specific to magnesium production and more contemporaneous to

the period of review (POR) than the data in the RBI Bulletin.

Taiyuan argues that the Department should use the data on the

chemicals and metals industry from the RBI Bulletin to value factory

overhead, SG&A and profit because the Department has used these data in

numerous NME cases and because it has a high degree of reliability

given that it contains data compiled from many companies. Taiyuan

argues that the Department should not rely on the SMCL financial report

to calculate these surrogate percentages because that financial report

is not publicly available published information. Taiyuan also alleges

that the SMCL financial report is not in accordance with Indian

generally accepted accounting principles (GAAP) because SMCL may have

considered the reducing vessel as part of direct materials and Indian

GAAP require that materials which assist in the manufacturing process,

but which do not enter physically into the finished product, are not to

be considered as direct materials. Finally, Taiyuan argues that the

SMCL financial report is unusable because information in the report

indicates that SMCL was unable to produce and sell product during

periods of high demand, undertook major capital improvement projects

and maintained an abnormally high level of raw material stocks, all of

which may have distorted its factory overhead, SG&A and profit ratios.

DOS Position: We agree with the petitioner. In numerous NME cases,

we have expressed a preference for using the ``most product-specific

information possible from the surrogate market'' (see, e.g., Brake

Rotors at 9168). We find that SMCL's 1996 financial report is for an

Indian producer of the subject merchandise and more specific than the

industry-wide data for metals production contained in the 1992-93 RBI

Bulletin. Moreover, we find that the 1996 SMCL financial report

contains data which is more contemporaneous to the POR than data

contained in the 1992-93 RBI Bulletin. In addition, we find that the

SMCL financial report is publicly available information within the

meaning of 19 CFR 351.301. As for Taiyuan's argument that SMCL's

financial report is not in accordance with Indian GAAP, we find that

the financial report has been audited by an Indian accounting firm and

that even though SMCL may have treated the reducing vessel as a direct

material in its financial report, this designation does not necessarily

indicate that the financial report is not in accordance with Indian

GAAP. With regard to the argument that SMCL's financial report is not

usable because of possible production, capital investment and inventory

irregularities, we note that there is no evidence in the financial

report which indicates that these factors were abnormal for Indian

producers in general. In addition, we find that Taiyuan has not

provided any evidence which indicates that the data contained in the

1996 SMCL financial report is not reasonably representative of the

production and selling experience of other producers of the subject

merchandise in India during the time period in question.

Comment 3: Calculation of SG&A. Taiyuan contends that the

Department should deduct from SG&A certain selling expenses (i.e.,

royalty, selling commission, and advertisement) normally deducted from

EP and CEP and also an amount reflected in the RBI Bulletin for ``other

expenses'' and then take the remainder and divide it by the sum of

total SG&A and COM to derive the SG&A percentage. Taiyuan cites to the

Department's Antidumping Manual which states that SG&A should be

expressed as a percentage of the cost of goods sold.

The petitioner contends that the Department should not deduct the

royalty, selling commissions, or advertisement expenses from SG&A

because it has made no such deductions to EP and because it cannot make

a circumstance-of-sale (COS) adjustment based on the data on the

record. Moreover, the petitioner maintains that the Department should

not deduct ``other expenses'' from SG&A because there is no evidence

that this expense category includes expenses already reported

separately in the response (i.e., packing costs). Finally, the

petitioner states it is the Department's established practice to

include only the COM in the denominator of the SG&A ratio.

DOC Position: We agree in part with the petitioner. We have not

made a COS adjustment to NV. In NME proceedings, the Department does

not generally adjust NV for COS differences given (a) the imprecise

information for distinguishing between direct and indirect selling

expenses in the surrogate SG&A source (i.e., SMCL's financial report);

and (b) the absence of non-NME information about what direct selling

expenses are included in EP (except where CEP is used) (see Final

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

People's Republic of China, 61 FR 19026, 19031 (April 30, 1996)

(Bicycles)). As for accounting for expenses already reported separately

in the response (i.e., packing expenses), we note that SMCL's financial

report does not provide a separate line item for packing expenses.

Since there is no information in the financial report which indicates

that SMCL incurs packing expenses, we have not removed any packing

expenses from the SG&A calculation. Regarding the calculation of the

SG&A percentage, we have used the cost of goods manufactured, not the

cost of goods sold, in the denominator of the SG&A ratio consistent

with our current practice, which is not reflected in the Antidumping

Manual (see Brake Rotors at 9164).

Comment 4: Material Consumption Figures. The petitioner argues that

the Department should not have subtracted the monthly values reported

as negative from the total amount of material consumed because it is

impossible that Taiyuan's supplier consumed negative amounts of inputs

in any months in

[[Page 3089]]

which it produced magnesium ingots. Instead, the petitioner argues that

the Department should require Taiyuan to provide additional information

on its supplier's actual consumption figures for the inputs and months

for which the supplier provided negative values. Alternatively, the

petitioner argues that the Department should not reduce the quantities

of the factors of production consumed by the amount of the reported

negative consumption figures.

Taiyuan contends that if the Department recognizes adjustments to

increase material usage, then the Department should also recognize

adjustments which decrease material usage.

DOC Position: We agree with the respondent. The negative numbers do

not reflect negative consumption amounts. Rather, the negative numbers

noted in the inventory records are corrections to Taiyuan's supplier's

records to reflect actual usage. The verification report specified all

necessary corrections to reported data, and the correct information has

been used for the final results.

Comment 5: Reseller SG&A Expenses and Profit. The petitioner argues

that in calculating CV and/or EP, the Department failed to account for

expenses Taiyuan incurred in reselling its product to the United States

market. The petitioner contends that the Department should have

included in CV both surrogate producer SG&A expenses and profit (noted

in SMCL's financial statement) plus an amount of reseller SG&A expenses

and profit (noted in the RBI Bulletin). Alternatively, the petitioner

argues that the Department should reduce EP by the amount of reseller

SG&A expenses and profit in accordance with 19 U.S.C. 1677a(c)(2)(A)

and also adjust EP for reseller SG&A expenses and profit as a COS

adjustment in accordance with 19 U.S.C. 1677b(a)(6)(C)(iii).

Taiyuan states that if the Department decides to include in CV an

additional amount for the reseller's SG&A and profit, then the

Department must make a corresponding level of trade adjustment to

account for the different marketing level represented by such costs.

However, Taiyuan states that the Department should not add these

additional amounts to CV based on applicable costs to be included in

the CV to establish NV.

DOC Position: We disagree with the petitioner. In cases involving

NMEs, we do not use exporter expenses and profit in our analysis.

Instead, we obtain ratios for expenses and profit from a surrogate

country, which in this case is India, and include in NV amounts based

on the surrogate ratios. We consider those selling expenses and profit

to approximate the selling expenses incurred and profit realized by

both Taiyuan and Taiyuan's supplier of the subject merchandise.

Therefore, we have accounted for the expenses incurred and profit

realized by Taiyuan in reselling the subject merchandise to the U.S.

market. As for subtracting an amount for these expenses and profit from

export price or making a COS adjustment we have no basis to conclude

that such adjustments are warranted or feasible (see Comment 3 for

further discussion).

Comment 6: Surrogate Value for Ferrosilicon. Taiyuan argues that

the publication the Department used to value ferrosilicon in the

preliminary results (i.e., Metal Bulletin) does not provide sufficient

details on or reliable information for domestic values. Instead,

Taiyuan claims that the Department should use a ferrosilicon import

value submitted on November 13, 1997, from the publication Iron and

Steel Newsletter (Iron and Steel). According to respondent, this

information is more specific and reliable.

The petitioner contends that the Department should not derive an

import value from data in Iron and Steel because the value (1) Is

either based on imports from NME countries (i.e., Russia) or from

countries that are not ferrosilicon producers (i.e., Germany, the

Netherlands); and (2) does not most closely correspond to the actual

input consumed by Taiyuan. In addition, the petitioner contends that

the import data on ferrosilicon contained in Iron and Steel are not

representative of the price paid by purchasers in India nor are these

import values most contemporaneous with the POR. Furthermore, the

petitioner argues that the Department should not use price data from a

1995-96 Indian producer financial statement submitted on November 20,

1997, because the price is aberrationally low when compared with the

data from Monthly Statistics and Metal Bulletin. Therefore, the

petitioner maintains that the Department should continue to use data

from Metal Bulletin to value ferrosilicon.

DOC Position: We disagree in part with the petitioner. We have used

a simple average POR value for all grades of ferrosilicon from two

publications (i.e., Metal Bulletin and Iron and Steel). We find the

July 1996 value of ferrosilicon in Metal Bulletin is no more

representative or contemporaneous to the POR than is the July and

August 1996 values of ferrosilicon in Iron and Steel. Therefore, we

have used both values in the average price calculation. However, we

have not removed an amount for excise or sales taxes from the domestic

ferrosilicon value listed in Metal Bulletin because the publication

does not indicate that the price is inclusive of these taxes. We have

not included the values or quantities of ferrosilicon exported to India

by countries listed in Iron and Steel which the Department has

determined are NMEs (i.e., Russia, Kazakhstan). We have included the

values and quantities of ferrosilicon from countries listed in Iron and

Steel that are market economies but which the petitioner claims are not

known to be producers of ferrosilicon because these countries are the

exporters of record and are market economies that are determining the

price of ferrosilicon that they sell to the Indian market. We have no

evidence on the record which indicates that the ferrosilicon exported

from these countries originates in NMEs.

Comment 7: Surrogate Value for Dolomite. Taiyuan argues that the

Department should not continue to use the April 1995-March 1996 value

from a 1995-96 financial report of a single company (i.e., Indian

Ferroalloy) to value dolomite because that price is unreliable and

because there is no information in the financial report which indicates

the type of dolomite referenced in that report. Instead, Taiyuan

contends that the Department should use an indexed and averaged import

value for three grades of dolomite from the Indian government

publication 1994 Index Numbers of Wholesale Prices in India (Index

Numbers). According to respondent, the data have been updated in this

publication and are more contemporaneous to the POR than the data from

a single company.

The petitioner contends that the Department should continue to use

the 1995-96 dolomite value from Indian Ferroalloy's financial report

because the report provides a more contemporaneous value that is

specific to the grade of dolomite used in magnesium production.

DOC Position: We agree with the petitioner. We have used the April

1995-March 1996 value from Indian Ferroalloy's financial report because

it is more representative and more contemporaneous to the POR than the

data contained in Index Numbers. We also have not used the data in

Index Numbers because, although the Indian government publication

appears to provide POR values for dolomite, there is no explanation how

the product-specific indices were determined or why 1994 prices were

selected for

[[Page 3090]]

indexation. We have not removed an amount for excise or sales taxes

from the domestic dolomite value listed in Indian Ferroalloy's

financial report because the financial report does not indicate that

the price is inclusive of these taxes.

Comment 8: Surrogate Value for Calcinated Dolomite (i.e.,

Calcinate). Taiyuan argues that it is the Department's policy to use,

to the extent possible, statistics from a single country when

developing the values for the factors of production. According to

respondent, the Department used import statistics from Indonesia to

value calcinated dolomite in the preliminary results. Taiyuan claims

that because India is the primary surrogate country in this case, the

Department should use the April-July 1996 Indian import value for

calcinated dolomite from Monthly Statistics which Taiyuan furnished in

its November 13, 1997, submission.

DOC Position: We agree with Taiyuan. We have used the April-July

1996 import value from Monthly Statistics to value calcinated dolomite.

Comment 9: Surrogate Value for Fluorite Powder. Taiyuan argues that

the April 1995-March 1996 value from Monthly Statistics the Department

used in the preliminary results to value fluorite powder provides

unreliable information during the POR. Taiyuan claims that the

Department should use the April-July 1996 fluorite value import value

from Monthly Statistics contained in its November 13, 1997, submission.

The respondent argues that the data from this publication are more

contemporaneous to the POR than the data used in the preliminary

results.

DOC Position: We agree with Taiyuan. We have used the April-July

1996 import value from Monthly Statistics to value fluorite powder

because it is more contemporaneous to the POI than is the April 1995-

March 1996 import value.

Comment 10: Surrogate Value for Barium Chloride. The petitioner

contends that the Department should use the January-December 1996

Indian import value from United Nations Import Statistics instead of

the Indonesian import value used in the preliminary results. The

petitioner maintains that even though the Indian import value includes

imports from the United States while the U.S. export data does not show

exports of barium chloride to India, the export data of one country may

not correspond to the import data of another for any number of reasons,

including shipment of goods through intermediate countries. The

petitioner also argues that if the Department continues to use the

Indonesian import data to value barium chloride, the Department should

not derive a hypothetical volume and value of U.S. imports into

Indonesia and remove those amounts from the Indonesian import data

since the Indonesian import data is not separately broken out by

country of origin and because there is no necessary correlation between

two different countries' import and export data.

Taiyuan argues that the Department should use the Indonesian import

data rather than the Indian import data to value barium chloride

because the Indian import data contains imports from the United States

while U.S. export data does not show exports of barium chloride to

India. Taiyuan also maintains that the U.S. quantity and value data

contained in the Indonesian import data is aberrational and that the

Department should therefore remove the U.S. data from Indonesian import

data by taking the volume and value of imports of barium chloride from

all countries reported in the Indonesian import data and subtracting

the volume and value of exports of barium chloride to Indonesia

reflected in U.S. export data.

DOC Position: We agree with the petitioner. Since India is the

primary surrogate country in this case, we have used the Indian import

prices to value barium chloride. We have used the January-December 1996

Indian import price from United Nations Import Statistics to value

barium chloride because the data in United Nations Import Statistics

for this material is more contemporaneous to the POR than the Indian

import prices contained in Monthly Statistics. We do not agree that the

Indian import data are necessarily in error because they do not

correlate with U.S. export data. The lack of correlation between two

different countries' import and export data could result from various

factors such as the reporting of intermediate destinations on export

declarations. Therefore, we have no basis to conclude that the Indian

data are erroneous.

Comment 11: Surrogate Value for Coal. Taiyuan argues that the April

1995-March 1996 import value from Monthly Statistics the Department

used in the preliminary results is unreliable. Instead, Taiyuan claims

that the Department should use an indexed and averaged import value for

coal from the Index Numbers. As asserted by the respondent, the data

are current to the POR and thus need no index calculation.

The petitioner maintains that the Department should not use the

prices from Index Numbers because those prices are domestic prices for

coal produced in India, which are subject to government control. In

addition, the petitioner asserts that the prices from this publication

predate the POR by more than two years and are for a range of coal

grades, none of which are used by Taiyuan. If the Department decides to

use a domestic Indian coal price, then the petitioner contends that the

Department should calculate an average price from Index Numbers using

only the ``heat-intensive'' grades of coal listed in the publication.

DOC Position: We disagree with Taiyuan. Taiyuan has offered no

reason for finding that the April 1995-March 1996 coal import price

from Monthly Statistics is unreliable. We have not used the coal prices

from Index Numbers because, although that Indian government publication

appears to provide POR values for coal, there is no explanation for how

the product-specific indices were determined or why 1994 prices were

selected for indexation.

Comment 12: Surrogate Value for Electricity. Taiyuan argues that

the Department should not use the August 1996 price in Business World

to value electricity because this publication is not one normally

considered by the Department in previous NME cases. Taiyuan maintains

that the Department should use instead a 1995 value from the

publication Confederation of India Industrial Handbook (``Industrial

Handbook''), which has been used in previous NME cases, because the

publication provides electricity rates applicable for rural areas in

India. Taiyuan argues that since its producer is located in a rural

area in the PRC, the rural electricity rates contained in Industrial

Handbook would more accurately reflect the electricity costs incurred

by the PRC producer.

The petitioner contends that the Department should not use the

rates in Industrial Handbook to value electricity because the rates it

contains are not contemporaneous with the POR. In addition, the

petitioner argues that in previous NME cases the Department has not

adjusted a surrogate value to account for the fact that a production

facility is located in a particular type of region within a country and

should not do so in this case. Moreover, the petitioner contends that

the data in Industrial Handbook identify different rates for rural and

urban customers for only two Indian states, and that for the other

states, the publication only provides one set of rates without making

any distinction between urban and rural areas.

DOC Position: We agree with the petitioner. We have used the August

1996 industrial electricity rate

[[Page 3091]]

contained in Business World because it is more contemporaneous to the

POR than the 1995 industrial electricity rate contained in Industrial

Handbook. We do not agree with Taiyuan that we should use the rural

electricity rate in Industrial Handbook because Taiyuan's supplier is

located in a rural area in the PRC. The 1995 Industrial Handbook lists

differentiated rural industrial rates for only one Indian state. This

indicates that in general rural electricity rates are not different

than urban electricity rates in India. Therefore, we find that the

cited rural rates from Industrial Handbook would not be representative

of rural rates for India as a whole.

Comment 13: Inclusion/Exclusion of Provident Fund and Employees'

Welfare Expenses in COM. Taiyuan contends that the labor portion of the

NV calculation already includes provident fund and employees' welfare

expense contributions. Therefore, when calculating COM, Taiyuan

maintains that including these expenses in the overhead would result in

double-counting.

The petitioner maintains that the Department's new regression-based

wage rate methodology uses wage rates from the Yearbook of Labor

Statistics (Labor Statistics) published by the International Labor

Office (ILO) and that these rates are based on cash payments received

by employees. The petitioner contends that since provident fund

payments and employee welfare expenses are not cash payments to

employees, Taiyuan is incorrect that these costs are included in the

surrogate value for labor. Therefore, the petitioner maintains that the

Department should include these expenses in the factory overhead rate

calculation.

DOC Position: We agree with Taiyuan. The regression-based wage rate

we have used to value labor in this case is based on wage rates

contained in Labor Statistics. Information contained in Labor

Statistics states that the Indian wage rate is a comprehensive wage

rate which also includes employers' social security expenditures and

welfare services. Therefore, consistent with Department practice, we

have not included provident fund payments and employee welfare expenses

in the numerator of the factory overhead rate calculation. See Final

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

the People's Republic of China 61 FR 14057, 14061 (March 29, 1996)

(Comment 5).

Comment 14: Adjustment of the Surrogate Value for No. 2 Flux.

Taiyuan states that the Department made a clerical error in its

preliminary results when it did not multiply the flux no. 2 surrogate

value by the percentage purity of the input used by Taiyuan's suppliers

as specified in the preliminary results calculation memorandum, in

effect assuming the value to be for 100 percent pure flux.

The petitioner maintains that the value the Department calculated

for no. 2 flux incorporates the percentage factor.

DOC Position: We agree with the petitioner. We have rechecked our

calculation and find that our calculation is not in error.

Comment 15: Inclusion of Transportation Fee in Electricity Rate.

Taiyuan claims that in the preliminary results the Department

incorrectly included a transportation fee in its surrogate value

calculation for electricity. Therefore, Taiyuan maintains that the

Department should exclude the transportation fee from its electricity

value calculation.

DOC Position: We agree with Taiyuan and have removed the

transportation fee from the electrical surrogate value calculation.

Comment 16: Packing Cost Calculation. Taiyuan claims that in the

preliminary results the Department incorrectly determined the packing

labor cost by calculating a cost based on labor hours rather than on

labor minutes as reported in the response. Therefore, Taiyuan maintains

that the Department should recalculate the packing labor cost using the

reported labor minute factor.

DOC Position: We agree with Taiyuan and have calculated a labor

cost based on the labor minutes reported in Taiyuan's response.

Comment 17: Deduction of Taxes from Surrogate Values Assigned to

Raw Materials. Taiyuan contends that in any case where the Department

uses financial statements of Indian producers to establish surrogate

values for raw material inputs, the Department should follow the normal

practice used in Brake Rotors to calculate a tax-exclusive value (see

Brake Rotors at 9163). To ensure that surrogate values are exclusive of

all taxes, Taiyuan states that the excise duty amount between 15 and 20

percent plus a minimum of 4 percent for sales taxes should be deducted

from any domestic purchase prices.

Petitioner contends that although in prior NME cases the Department

has adjusted for taxes only where the quoted price was specifically

identified as being inclusive of excise and/or sales taxes, in this

review, Taiyuan has not identified a single surrogate value that is

specifically identified as being inclusive of taxes.

DOC Position: We agree in part with Taiyuan. Consistent with

Department practice, we have removed, where applicable, an amount for

excise taxes (i.e., 15 percent since 1995 based on information

contained in the record) and an amount for sales taxes (i.e., 4

percent) from the domestic Indian values we are using in our

calculations. Only one of the Indian publications we used for domestic

values (i.e., sulfuric acid from Chemical Weekly) noted that the price

was inclusive of excise and sales taxes. Therefore, we only removed tax

amounts from prices we obtained from Chemical Weekly. Our decision in

this case is consistent with the Department's decision in Brake Rotors

where we removed taxes from prices for certain steel products obtained

from an Indian government steel publication (i.e., Statistics for Iron

and Steel) because data in the publication indicated that taxes were

included in the prices.

Comment 18: Use of Import Surrogate Values Net of Any Additional

Amount for Domestic Inland Freight. Taiyuan argues that if the

Department uses Indian import statistics for surrogate values of raw

material inputs, it cannot add a constructed freight charge. Taiyuan

cites Sigma Corp. v. United States (Sigma), 117 F.3d 1401 (CAFC July 7,

1997) in which Taiyuan claims the Court held that using such a

methodology was beyond the limits of permissible approximation. Sigma

at 15.

Petitioner argues that the Department properly calculated inland

freight for raw materials in the preliminary results. Petitioner

contends that Taiyuan misread the Sigma ruling. Petitioner states that,

in Sigma, the Court did not determine that no additional amount for

inland freight could be included in CV. According to petitioner,

Sigma's ruling requires only that, when the surrogate value for an

input is based on a CIF import value, any additional amount for freight

for that input may not exceed the calculated freight costs of shipping

the material from respondents' seaports in the PRC to their factories.

DOC Position: We agree in part with the petitioner. Although the

holding in Sigma permits, rather than dictates, the methodology

referenced by the petitioner, it also does not dictate the outcome

urged by Taiyuan. Instead, it leaves to the discretion of the

Department the determination of a freight component which is not

excessive. We do not find that the import values contained in Indian

publications include all of the freight cost associated with

transporting the imported input to the factory. Therefore, in

accordance with Sigma decision, we

[[Page 3092]]

have included a freight amount equal to the lesser of: (1) The

calculated freight cost of shipping material from the PRC port Taiyuan

uses to export finished goods to its PRC factory or (2) the cost of

shipping material from the domestic supplier to the factory. See Final

Determination of Sales at Less Than Fair Value: Collated Roofing Nails

From the People's Republic of China, 62 FR 51410,51413 (October 1,

1997).

Currency Conversion

We made currency conversions pursuant to section 773A(a) of the Act

and 19 CFR 353.60 based on the rates certified by the Federal Reserve

Bank.

Final Results of the Review

As a result of our comparison of EP and NV, we determine that the

following weighted-average margin exists for the period May 1, 1996,

through October 31, 1996:

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

Percent

Manufacturer/producer/exporter margin

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

Taiyuan Heavy Machinery Import and Export Corporation...... 69.53

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

The Customs Service shall assess antidumping duties on all

appropriate entries. Individual differences between export price and

normal value may vary from the percentage stated above. We have

calculated an importer-specific duty assessment rate based on the ratio

of the total amount of AD duties calculated for the examined sales made

during the POR to the total value of subject merchandise entered during

the POR. This rate will be assessed uniformly on all entries of that

particular importer made during the POR. The Department will issue

appraisement instructions concerning the respondent directly to the

U.S. Customs Service.

Furthermore, the following deposit rates shall be required for

merchandise, entered, or withdrawn from warehouse, for consumption on

or after the publication date of these final results of administrative

review, as provided for by section 751(a)(1) of the Tariff Act: (1) The

cash deposit rate for Taiyuan will be the rate indicated above; (2) for

previously reviewed or investigated companies not listed above that

have a separate rate, the cash deposit rate will continue to be the

company-specific rate published for the most recent period; (3) for all

remaining PRC exporters, the cash deposit rate will be 108.26 percent,

the PRC-wide rate established in the LTFV investigation; and (4) for

non-PRC exporters, the cash deposit rate will be the rate applicable to

the PRC supplier of that exporter.

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

This notice serves as the final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

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

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

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

conversion to judicial protective order is hereby requested. Failure to

comply with the regulations and terms of the APO is a sanctionable

violation.

This new shipper administrative review and notice are in accordance

with section 751(a)(2)(B) of the Act (19 U.S.C. 1675(a)(2)(B)) and 19

CFR 353.28(c).

Dated: January 14, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-1400 Filed 1-20-98; 8:45 am]

BILLING CODE 3510-DS-P