Brake Rotors From the People's Republic of China: Preliminary Results of Antidumping Duty New Shipper Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-846]

Brake Rotors From the People's Republic of China: Preliminary

Results of Antidumping Duty New Shipper Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

SUMMARY: In response to a request from six exporters,1 the

Department of Commerce is conducting a new shipper administrative

review of the antidumping duty order of brake rotors from the People's

Republic of China (``PRC'') published on April 17, 1997 (see 62 FR

18740). The review covers the period April 1, 1997, through September

30, 1997.

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\1\ The six exporters are China National Industrial Machinery

Import & Export Company (``CNIM''), Lai Zhou Auto Brake Equipments

Factory (``LABEF''), Longkou Haimeng Machinery Co., Ltd.

(``Haimeng''), Qingdao Gren Co. (``GREN''), Yantai Winhere Auto-Part

Manufacturing Co., Ltd. (``Winhere''), and Zibo Luzhou Automobile

Parts Co., Ltd. (``ZLAP'').

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We have preliminarily determined that U.S. sales have not been made

below normal value. If these preliminary results are adopted in our

final results of administrative review, we will instruct the U.S.

Customs Service to assess no antidumping duties for the six PRC

exporters subject to this review.

Interested parties are invited to comment on these preliminary

results. Parties who submit case briefs in this proceeding should

provide a summary of the arguments not to exceed five pages and a table

of statutes, regulations, and cases cited.

EFFECTIVE DATE: September 29, 1998.

FOR FURTHER INFORMATION CONTACT: Brian Smith, Everett Kelly, or Barbara

Wojcik-Betancourt, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-

1766, (202) 482-4194, or (202) 482-0629 respectively.

SUPPLEMENTARY INFORMATION: Unless otherwise indicated, all citations to

the Tariff Act of 1930, as amended (``the

[[Page 51896]]

Act''), are references to the provisions effective January 1, 1995, the

effective date of the amendments made to the Act by the Uruguay Round

Agreements Act. In addition, unless otherwise indicated, all citations

to the Department of Commerce (``the Department'') regulations are to

the regulations at 19 CFR part 351, 62 FR 27296 (May 19, 1997).

Background

On November 3, 1997, the Department received requests from CNIM,

GREN, Haimeng, LABEF, Winhere and ZLAP (hereafter referred to as ``the

six respondents'') for a new shipper review pursuant to section

751(a)(2)(B) of the Act and Sec. 351.214(b) of the Department's

regulations.

Section 751(a)(2) of the Act and Sec. 351.214(b)(2)(i) of the

Department's regulations govern determinations of antidumping duties

for new shippers. These provisions state that, if the Department

receives a request for review from an exporter or producer of the

subject merchandise stating that it did not export the merchandise to

the United States during the period covered by the original less-than-

fair-value (``LTFV'') investigation (the ``POI'') and that such

exporter or producer is not affiliated with any exporter or producer

who exported the subject merchandise during that period, the Department

shall conduct a new shipper review to establish an individual weighted-

average dumping margin for such exporter or producer, if the Department

has not previously established such a margin for the exporter or

producer. The regulations require that the exporter or producer shall

include in its request, with appropriate certifications: (i) The date

on which the merchandise was first entered, or withdrawn from

warehouse, for consumption, or, if it cannot certify as to the date of

first entry, the date on which it first shipped the merchandise for

export to the United States or if the merchandise has not yet been

shipped or entered, the date of sale; (ii) a list of the firms with

which it is affiliated; (iii) a statement from such exporter or

producer, and from each affiliated firm, that it did not, under its

current or a former name, export the merchandise during the POI, and

(iv) in an antidumping proceeding involving inputs from a nonmarket

economy country, a certification that the export activities of such

exporter or producer are not controlled by the central government. 19

CFR 351.214(b) (ii) and (iii).

The six respondents' requests were accompanied by information and

certifications establishing the effective date on which they first

shipped and entered brake rotors. Each of the six respondents also

claims it has no affiliated companies which exported brake rotors from

the People's Republic of China (``PRC'') during the POI. In addition,

each of the six respondents also certified that its export activities

are not controlled by the central government. Based on the above

information, the Department initiated a new shipper review covering the

six respondents (Brake Rotors from the People's Republic of China:

Initiation of New Shipper Antidumping Duty Administrative Reviews (62

FR 64206, December 4, 1997)). The Department is now conducting this

review in accordance with section 751 of the Act and 19 CFR 351.214.

In January 1998, the six respondents submitted responses to the

Department's antidumping questionnaire. In March and April 1998, the

six respondents and the petitioner submitted publicly available

information and comments for consideration in valuing the factors of

production. Also, the Department issued supplemental questionnaires to

the six respondents, each of which submitted responses to those

questionnaires in April 1998. On May 4, 1998, we postponed the

preliminary results until no later than September 24, 1998. (See 63 FR

25821, May 11, 1998).

On July 31, 1998, the respondents and petitioners submitted

additional comments on publicly available information submitted for use

in the preliminary results.

Scope of Review

The products covered by this review are brake rotors 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 have 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. Excluded from the scope of the

review are brake rotors made of gray cast iron, whether finished,

semifinished, or unfinished, with a diameter less than 8 inches or

greater than 16 inches (less than 20.32 centimeters or greater than

40.64 centimeters) and a weight less than 8 pounds or greater than 45

pounds (less than 3.63 kilograms or greater than 20.41 kilograms).

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 review

is dispositive.

Period of Review

The period of review (``POR'') covers the period April 1, 1997,

through September 30, 1997.

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. One of the respondents

(i.e., Winhere), although wholly-owned by Hong Kong individuals, is

located within the PRC. Two respondents (i.e., Haimeng, ZLAP) are joint

ventures between Chinese and foreign companies. The three other

respondents are either wholly owned by all the people (i.e., CNIM) or

collectively owned (i.e., GREN, LABEF). Thus, for all six respondents,

a separate rates analysis is necessary to determine whether the

exporters are independent from government control (see Notice of Final

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

People's Republic of China (Bicycles) 61 FR 56570 (April 30, 1996)).

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

the 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

[[Page 51897]]

Carbide). Under the separate rates criteria, the Department assigns

separate rates in NME 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

Each respondent has placed on the administrative record documents

to demonstrate absence of de jure control, including 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),

``The Enterprise Legal Person Registration Administrative

Regulations,'' promulgated on June 13, 1988, the 1990 ``Regulation

Governing Rural Collectively-Owned Enterprises of PRC,'' the 1992

``Regulations for Transformation of Operational Mechanisms of State-

Owned Industrial Enterprises' (Business Operation Provisions), and the

1994 ``Foreign Trade Law of the People's Republic of China.''

In prior cases, we have analyzed these laws and have found them to

sufficiently establish an absence of de jure control of companies

``owned by the whole people,'' joint ventures, or collectively owned

enterprises. 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), and Preliminary Determination of

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

Slides with Rollers from the People's Republic of China (Drawer Slides)

60 FR 29571-29576 (June 5, 1995). We have no new information in this

proceeding which would cause us to reconsider this determination with

regard to the six respondents mentioned above.

2. De Facto Control

As stated in previous cases, there is some evidence that certain

enactments of the PRC central government 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 the respondents are, in fact, subject to a degree

of governmental control which would preclude the Department from

assigning separate rates.

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 (``EPs'') 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).

Each respondent asserted the following: (1) It establishes its own

EPs; (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. Additionally, the respondents'

questionnaire responses indicate that company-specific pricing during

the POI does not suggest coordination among exporters. This information

supports a preliminary finding that there is de facto absence of

governmental control of the export functions of these respondents.

Consequently, we have preliminarily determined that each entity has met

the criteria for the application of separate rates (see Pure Magnesium

from the People's Republic of China: Preliminary Results of Antidumping

Duty New Shipper Administrative Review, 62 FR 55215, October 23, 1997).

Fair Value Comparisons

To determine whether sales of the subject merchandise by each

respondent to the United States were made at LTFV, we compared the EP

to the normal value (``NV''), as described in the ``Export Price'' and

``Normal Value'' sections of this notice, below.

Export Price

We used EP methodology in accordance with section 772(a) of the

Act, because the subject merchandise was sold directly to unaffiliated

customers in the United States prior to importation and constructed

export price methodology was not otherwise indicated.

1. CNIM

We calculated EP based on packed, FOB foreign port prices to the

first unaffiliated purchaser in the United States. Where appropriate,

we made deductions from the starting price (gross unit price) for

foreign inland freight and foreign brokerage and handling in the PRC in

accordance with section 772(c) of the Act. Because foreign inland

freight and foreign brokerage and handling fees were provided by NME

companies, we based those charges on surrogate rates from India. (See

Surrogate Country section below). To value foreign inland freight, we

used the average truck freight rate contained in the Indian periodical

The Times of India. We have used this same rate in numerous NME cases

in which 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, 62 FR 9164 (February 28,

1997) (Brake Rotors). To value foreign brokerage and handling expenses,

we relied on public information reported in the antidumping

investigation of stainless steel bar from India.

2. GREN

We calculated EP based on packed, CIF U.S. port prices to the first

unaffiliated purchaser in the United States. Where appropriate, we made

deductions from the starting price for foreign inland freight and

foreign brokerage and handling in the PRC, marine insurance and

international freight, in accordance with section 772(c) of the Act. As

all foreign inland freight and handling fees were provided by NME

suppliers or paid for in a NME currency, we valued these services using

the Indian surrogate values discussed above. For marine insurance, we

used public information reported in the antidumping investigation of

sulfur dyes, including sulfur vat dyes, from India. For ocean freight,

we used rates from the U.S. Federal Maritime Commission because GREN

used NME freight carriers.

3-6. Haimeng, LABEF, Winhere, and Zlap

We calculated EP based on packed, FOB foreign port prices to the

first unaffiliated purchaser in the United States. Where appropriate,

we made deductions from the starting price for foreign inland freight

and foreign brokerage and handling. As all foreign inland freight and

handling fees were provided by NME suppliers or paid for in a NME

currency, we valued these services using the Indian surrogate values

discussed above.

Normal Value

A. Non-Market Economy Status

In every case conducted by the Department involving the PRC, the

PRC has been treated as a NME country.

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None of the parties to this proceeding has contested such treatment.

Accordingly, we calculated NV in accordance with section 773(c) of the

Act, which applies to NME countries.

B. Surrogate Country

Section 773(c)(4) of the Act requires the Department to value the

NME producer's factors of production, to the extent possible, in one or

more market economy countries that (1) are at a level of economic

development comparable to that of the NME country, and (2) are

significant producers of comparable merchandise. We determined that

India is a country comparable to the PRC in terms of overall economic

development (see Memorandum to Louis Apple, dated January 22, 1998). In

addition, based on publicly available information placed on the record,

we have determined that India is a significant producer of the subject

merchandise. Accordingly, we considered India the primary surrogate

country for purposes of valuing the factors of production as the basis

for NV because it meets the Department's criteria for surrogate country

selection. Where we could not find surrogate values from India, we

valued those factors using values from Indonesia.

C. Factors of Production

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

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

which produced the subject merchandise for the exporters which sold the

subject merchandise to the United States during POR. To calculate NV,

the reported unit factor quantities were multiplied by publicly

available Indian or Indonesian values.

The selection of the surrogate values applied in this determination

was based on the quality, specificity, and contemporaneity of the data.

As appropriate, we adjusted input prices to make them delivered prices.

For those values not contemporaneous with the POR and quoted in a

foreign currency, 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 Preliminary Results Valuation Memorandum from the Team to the File,

dated September 24, 1998.

To value pig iron and iron scrap, we used domestic price data from

the April 1996-March 1997 financial report of Lamina Foundries (Lamina)

because the prices reported therein are most contemporaneous to the POR

and best represent the costs of those inputs. We removed excise and

sales taxes from the pig iron and scrap values because the financial

report indicated that these taxes were included in the values. For

steel scrap, lubrication oil and limestone, we used the April 1996-

March 1997 import value from Monthly Statistics of the Foreign Trade of

India (Monthly Statistics). For ferrosilicon and ferromanganese, we

used the March-May 1997 import value from Monthly Statistics.

For coking coal, we used a 1996-1997 price from the publication

Federation of Indian Chambers of Commerce. To value firewood, we used a

1990 domestic value from the USAID publication, Marketing Opportunities

for Social Forestry in Uttar Pradesh. To value electricity, we used an

April 1996-July 1996 average price for electricity from Business World.

We valued labor based on a regression-based wage rate, in

accordance with 19 CFR 351.408(c)(3).

To value selling, general and administrative (SG&A) expenses,

factory overhead and profit, we calculated simple averages based on

financial data from only five Indian producers. We used only those

producers' financial reports because they were most contemporaneous

with the POR and because we have publicly available information that

demonstrates that these companies are producers of the subject

merchandise (i.e., Jayaswals Neco Limited (``Jayaswals''), Kalyani

Brakes Limited (``Kalyani''), Krishna Engineering Works (``Krishna''),

Nagpur Alloy Castings Ltd. (``Nagpur''), and Rico Auto Industries

Limited (``Rico'')). Where appropriate, we have removed from the

surrogate overhead and SG&A calculations the excise duty amount listed

in the financial reports (see Brake Rotors at 9160). We also made

certain adjustments to the percentages calculated as a result of

reclassifying expenses contained in the financial reports.

In utilizing the financial data of the Indian companies, we treated

the line item labeled ``stores and spares consumed'' as part of factory

overhead because stores and spares are not direct materials consumed in

the production process. Based on publicly available information, we

have considered the molding materials (i.e., sand, bentonite, coal

powder, steel pellets, lead powder, waste oil) to be indirect materials

included in the stores and spares consumed category of the financial

statements. 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 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 the Preliminary

Results Valuation Memorandum.

To value PRC inland freight, we used the April 1994 truck rate from

the Times of India.

In accordance with, the decision of the Court of Appeals for the

Federal Circuit in Sigma Corp. v. United States, 117 F. 3d 1401 (1997)

we revised our methodology for calculating source-to-factory surrogate

freight for those material inputs that are valued based on CIF import

values in the surrogate country. Therefore, we have added to CIF

surrogate values from India a surrogate freight cost using the shorter

of the reported distances from either the closest PRC port of

exportation to the factory, or from the domestic supplier to the

factory on an import-specific basis.

To value adhesive tape, corrugated cartons, pallet wood, nails,

polyethylene material for bags, plastic straps and steel strips, we

used April 1996-March 1997 import values from Monthly Statistics of

India.

Currency Conversion

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

and Sec. 351.415 of the Department's regulations based on the rates

certified by the Federal Reserve Bank.

Preliminary Results of the Review

We preliminarily determine that the following margins exist for the

six respondents during the period April 1, 1997, through September 30,

1997:

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

Percent

Manufacturer/producer/exporter margin

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

China National Industry Machinery, Import & Export Company

(CNIM)...................................................... 0.00

Lai Zhou Auto Brake Equipments Factory (LABEF)............... 0.00

Longkou Haimeng Machinery Co., Ltd. (Haimeng)................ 0.00

Qingdao Gren Co. (GREN)...................................... 0.00

Yantai Winhere Auto-Part Manufacturing Co., Ltd. (Winhere)... 0.00

Zibo Luzhou Automobile Parts Co., Ltd. (ZLAP)................ 0.00

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

Interested parties may request disclosure within 5 days of the date

of publication of this notice and may

[[Page 51899]]

request a hearing within 10 days of publication. Any hearing, if

requested, will be held at the earliest convenience of the parties.

Case briefs from interested parties may be submitted not later than 63

days after the date of publication. Rebuttal briefs, limited to issues

raised in the case briefs, may be filed not later than 70 days after

the date of publication. The Department will issue the final results of

this new shipper administrative review, including the results of its

analysis of issues raised in any such written comments or at a hearing,

within 90 days of issuance of these preliminary results. Upon

completion of this new shipper review, the Department will issue

appraisement instructions directly to the Customs Service. The results

of this review shall be the basis for the assessment of antidumping

duties on entries of merchandise covered by this review and for future

deposits of estimated duties.

Furthermore, upon completion of this review, the posting of a bond

or security in lieu of a cash deposit, pursuant to section

751(a)(2)(B)(iii) of the Act and Sec. 351.214(e) of the Department's

regulations, will no longer be permitted and, should the final results

yield a margin of dumping, a cash deposit will be required for each

entry of the merchandise.

If the final results should yield no margin of dumping for the six

respondents noted above, then the Department will instruct the Customs

Service to liquidate all entries of the subject merchandise during the

POR both produced and exported by GREN, Haimeng, LABEF, Winhere and

ZLAP, and subject merchandise exported by CNIM but manufactured by

Hanting Casting Factory without regard to antidumping duties.

The following deposit requirements will be effective upon

publication of the final results of this new shipper antidumping duty

administrative review for all shipments of brake rotors from the PRC

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

publication date, as provided by section 751(a)(1) of the Act: (1) The

cash deposit rate for each reviewed company will be that established in

the final results of this new shipper administrative review; (2) the

cash deposit rate for PRC exporters who received a separate rate in the

LTFV investigation will continue to be the rate assigned in that

investigation; and (3) the cash deposit rate for all other PRC

exporters will continue to be 43.32 percent, the PRC-wide rate

established in the LTFV investigation.

These requirements, when imposed, shall remain in effect until

publication of the final results of the next administrative review.

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 351.402(f)(2) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

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

with this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This 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 351.214(d).

Dated: September 23, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-26062 Filed 9-28-98; 8:45 am]

BILLING CODE 3510-DS-P