Brake Rotors From the People's Republic of China: Final 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: Final Results

of Antidumping Duty New Shipper Administrative Review

AGENCY: Import Administration, International Trade Administration, U.S.

Department of Commerce.

SUMMARY: On September 29, 1998, the U.S. Department of Commerce

published the preliminary results of the new shipper administrative

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

Republic of China (``PRC'') (``preliminary results'') (63 FR 51895).

This review covers six exporters 1 of the subject

merchandise to the United States. The period of review is April 1,

1997, through September 30, 1997. We gave interested parties an

opportunity to comment on our preliminary results.

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\1\ The six exporters are China National Machinery Import &

Export Company (CNIM), Laizhou 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 determined that U.S. sales of brake rotors have not been

made below the normal value, and we will instruct the U.S. Customs

Service not to assess antidumping duties for the six PRC exporters

subject to this review.

EFFECTIVE DATE: March 1, 1999.

FOR FURTHER INFORMATION CONTACT: Brian C. Smith or Barbara Wojcik-

Betancourt, 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 or (202) 482-0629,

respectively.

SUPPLEMENTARY INFORMATION: 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 Round Agreements Act

(``URAA''). In addition, unless otherwise indicated, all citations to

the U.S. Department of Commerce (``the Department'') regulations are to

the regulations at 19 CFR part 351 (1998).

Background

On September 29, 1998, the Department published in the Federal

Register the preliminary results of its new shipper administrative

review of the antidumping duty order on brake rotors from the PRC (see

preliminary results). In October and November 1998, the Department

conducted verification of the questionnaire responses of the six

respondents. On November 10, 1998, the Department published in the

Federal Register a notice of postponement of the final results until no

later than February 23, 1999 (63 FR 63025). On December 1, 1998, the

petitioner 2 withdrew its request for a hearing in this

proceeding. Since the six respondents never requested a hearing and the

petitioner withdrew its original request for one, no hearing was held

in this case. From December 4, 1998, through January 7, 1999, the

Department issued its verification reports. On January 21, 1999, the

petitioner submitted its case brief. CNIM, LABEF, Haimeng, GREN,

Winhere, and ZLAP (hereafter referred to as the six respondents) did

not submit case briefs. On January 28, 1999, the six respondents

submitted rebuttal briefs.

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\2\ The petitioner is the Coalition for the Preservation of

American Brake Drum and Rotor Aftermarket Manufacturers.

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Scope of Order

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, Winhere, is located in the PRC and is wholly-owned by

private individuals. Two respondents (i.e., Haimeng, ZLAP) are joint

ventures between PRC 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

[[Page 9973]]

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

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

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 Enterprise

Registration Regulations;'' 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, privately owned

enterprises 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. See Comment 1 in the ``Interested Party

Comments'' section of this notice for further discussion.

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.

As explained below, at verification, the Department found no

evidence of government involvement in each respondent's business

operations. See Comment 2 in the ``Interested Party Comments'' section

of this notice for further discussion.

Specifically, at verification, Department officials examined sales

documents that showed that each respondent negotiated its contracts and

set its own sales prices with its customers. In addition, the

Department reviewed sales payments, bank statements and accounting

documentation that demonstrated that each respondent received payment

from its U.S. customers via bank wire transfer, which was deposited

into its own bank account without government intervention. Finally, the

Department examined internal company memoranda such as appointment

notices and notes on company meetings which demonstrated that each

respondent selected its own management. See Department verification

reports for CNIM at pages 5-7 and exhibits 1-6 and 16; for LABEF at

pages 6-7 and exhibits 2-5; for Haimeng at pages 5-6 and exhibits 1-5,

7 and 17; for GREN at pages 5-6 and exhibits 3-4, 6, 9 and 19; for

Winhere at pages 4-6 and exhibits 1-6 and 16; and for ZLAP at pages 5-7

and exhibits 18, 19 and 24. This information, taken in its entirety,

supports a finding that there is a de facto absence of governmental

control of export functions. Consequently, we have determined that the

six respondents have each 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 each

respondent to the United States were made at less than fair value

(``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 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 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

exceptions: (1) we revised our surrogate value calculations for marine

insurance and foreign brokerage and handling fees to reflect correction

of mathematical errors (see Comment 4 in the ``Interested Party

Comments'' section of this notice for further discussion); and (2) we

used the verified foreign inland freight distances to value freight

expenses incurred for transporting the subject merchandise to the port

of exportation (see Comment 5 in the ``Interested Party Comments''

section of this notice for further discussion).

[[Page 9974]]

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. 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 from Office of Policy to Louis Apple, dated

January 22, 1998). In addition, based on publicly available information

placed on the record, we 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.

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 the 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 Final Results Valuation Memorandum from the Team to the File, dated

February 23, 1999 (``Final Results Valuation Memorandum'').

We calculated surrogate values based on the same methodology used

in the preliminary results with the following exceptions: (1) we

revised our calculation for factory overhead, selling, general and

administration expenses (``SG&A''), and profit to correct for

mathematical errors (see Comment 4 in the ``Interested Party Comments''

section of this notice for further discussion); (2) we corrected, where

appropriate, clerical errors found at verification; (3) we assigned an

additional freight amount to ZLAP for using an unaffiliated

transportation company to move the unfinished castings from the casting

workshop to the processing workshop which had not been accounted for in

our preliminary results; and (4) we used the verified supplier

distances to value freight expenses incurred for the transportation of

materials to the factory (see Comment 5 in the ``Interested Party

Comments'' section of this notice for further discussion).

Currency Conversion

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

and section 351.415 of the Department's regulations based on the rates

certified by the Federal Reserve Bank.

Interested Party Comments

We gave interested parties an opportunity to comment on the

preliminary results. We received comments only from the petitioner. We

received rebuttal comments only from the six respondents.

General Issues

Comment 1: Procedure for Renewing Business Licenses As Evidence of PRC

Government Control

The petitioner contends that the six respondents have not met the

de jure and de facto absence of government control criteria because the

procedure by which PRC companies renew their business licenses with

provincial administrations for industry and commerce in the PRC

(``administration bureaus'') is evidence of de jure control.

Specifically, the petitioner argues that the record shows that the

renewal of each respondent's business license is conditioned on

providing the administration bureau in each respondent's respective

province relevant documentation such as balance sheets, profit and loss

statement, articles of association and feasibility reports. For

example, the petitioner alleges that both Haimeng and Winhere are

controlled by the PRC government because each respondent provided the

administration bureau a copy of its feasibility report and/or articles

of association. Specifically, the petitioner contends that Winhere's

articles of association state that in order for the articles to take

effect, they must be approved by the Administrative Committee of Yantai

Economic and Technical Development Zone (``YETDZ''). The petitioner

contends that because YETDZ is a PRC government agency, the need for it

to approve Winhere's articles of association or review Winhere's

feasibility report is evidence of government control over the operation

and management of Winhere. With regard to Haimeng, the petitioner

contends that because Haimeng filed a feasibility report with the

Longkou Foreign Economics and Trade Committee (``LFETC'') (i.e., a PRC

government entity), this act is further evidence of government control

over the operations and management of Haimeng. The petitioner maintains

that although the respondents did not specify in their submissions or

questionnaire responses all of the documentation they provided to

provincial administration bureaus, the Department should consider the

existence of this PRC government requirement for business license

issuance or renewal to indicate PRC government de jure control.

The six respondents maintain that the submission of financial data

to PRC administration bureaus is not proof of PRC government control.

Citing the Department's verification reports, the respondents maintain

that the Department reviewed the documents submitted by all respondents

at verification and that these documents establish an absence of de

jure control. The respondents further state that under the Enterprise

Registration Regulations, PRC companies are required to submit annual

financial data and to report the list of names of the company board of

directors to PRC administration bureaus in order to maintain their

business licenses. According to the respondents, providing such

information is a regulatory requirement and by no means indicates

government control of a PRC company's export activities. The

respondents also state that the petitioner has provided no rational

explanation for why the Department should suspect that there is hidden

PRC government control behind each respondent's basic regulatory filing

requirement. Finally, the respondents state that the Court of

International Trade (``CIT'') has approved of the Department's separate

rate analysis, particularly the Department's review of PRC exporters'

business licenses, articles of association, and other corporate

documentation as

[[Page 9975]]

evidence of de jure independence from government control. Therefore,

the respondents contend that in light of the substantial evidence on

the record of this proceeding demonstrating each respondent's de jure

independence from government control, the Department should reject the

petitioner's argument. In support of their arguments, the respondents

cite to Writing Instrument Mfrs Ass'n. v. United States Department of

Commerce, 984 F. Supp. 629, 642-43 (CIT 1997); Sigma Corp. v. United

States, 841 F. Supp. 1255, 1266 (CIT 1993); and Tianjin Machinery

Import & Export Corp. v. United States, 806 F. Supp.1088, 1014 (CIT

1992). DOC Position.

We agree with the six respondents based on the Department's past

practice in analyzing the existence or absence of de jure government

control over PRC exporters' business activities. We find that the

petitioner has misapplied the separate rates test as articulated in

Silicon Carbide. With regard to the issue of business licenses, in

prior cases, we have analyzed the Enterprise Registration Regulations,

which outlines the requirements PRC companies must follow in order to

receive or renew a business license. Specifically, articles 5 and 15 of

this PRC law state that a PRC company applying for a business license

with a state or provincial industrial and commercial bureau must

provide a copy of its organizational rules and regulations, capital

credits certificate, capital verification certificate and capital

guarantee, and other related documents and proofs. Since Silicon

Carbide, we have interpreted this article to mean that PRC companies,

upon applying or renewing their business license, must demonstrate to

the business license issuing authority that they are incorporated and

have the capital to conduct business within the scope of their

operation. See, e.g., Silicon Carbide, 61 FR 22588, 22589. For some

companies, the documents they have been required to provide to

administration bureaus to show that they qualify for a business license

have included a copy of the financial statement (which shows the

company's capital) and articles of association or feasibility report

(i.e., business plan) (especially if the company is a start-up

company). See, e.g., article 15 of the Enterprise Registration

Regulations.

With regard to Winhere, verification exhibits (i.e., exhibits 1, 3

and 4) show that the feasibility report and articles of association are

documents which note the company's investment capital situation,

business plan, organizational structure, and general profit

projections. This type of documentation, which Winhere provided YETDZ

for receiving its business license, is consistent with article 15 of

the Enterprise Registration Regulations and, as such, is a routine

regulatory requirement and not evidence of de jure government control

over export activities. With regard to Haimeng, verification exhibits

(i.e., exhibits 1 through 3) show that Haimeng's feasibility report

notes the investment capital, scope of production, foreign and domestic

investment equipment, joint-venture agreement, general sales and market

plan, organizational structure, and general profit projections. This

feasibility report along with the articles of incorporation, provided

by Haimeng to the LFETC for receiving its business license, is

consistent with article 15 of the Enterprise Registration Regulations

and, as such, is a routine regulatory requirement and not evidence of

de jure government control over export activities. We have also found

that this business license requirement applies not only to PRC

companies that are ``owned by the whole people,'' but also to other

types of ownership such as joint ventures or collectively owned

enterprises. See, e.g., article 2 of the Enterprise Registration

Regulations.

Based on the foregoing discussion, we find the petitioner's claim

that the procedure by which PRC companies must renew their business

licenses is evidence of de jure control over export activities to be

without merit and inconsistent with our analysis of this issue in

previous PRC cases. As stated in the ``Separate Rates'' section above,

we have found the PRC law referred to above, along with other PRC laws

such as the Industrial Enterprises Law, the 1990 Regulation Governing

Rural Collectively-Owned Enterprises of PRC, the 1992 Business

Operation Provisions, and the 1994 Foreign Trade Law of the People's

Republic of China, to sufficiently establish an absence of de jure

control of companies ``owned by the whole people,'' joint ventures,

privately owned enterprises or collectively owned enterprises.

Comment 2: Lack of Detail Contained in the Verification Reports

The petitioner claims that the Department's verification reports

are not sufficiently detailed in order for the petitioner to evaluate

the comprehensiveness and accuracy of the verification process, and

whether the respondents have demonstrated de jure and de facto absence

of government control over their export activities. The petitioner

states, among other things, that the verification reports in general

contain vague, broad statements and conclusions. Specifically, the

petitioner points to the sections of each respondent's verification

report where the Department discusses its examination of (1) the

business licenses and articles of incorporation; (2) the restrictions

on how export revenue is used; and (3) the sales terms, prices and

contractual correspondence for pre-selected sales, in particular, as

sections lacking detail. The petitioner states that the lack of detail

in the verification reports indicates that the Department did not

sufficiently examine the separate rates issue at verification. Finally,

the petitioner contends that the lack of content in the verification

reports has injured petitioner's right to a fair administrative

procedure and sets a poor precedent for future cases.

The six respondents contend that the Department's verification

procedures were consistent with the verification procedures conducted

in other PRC antidumping cases. Furthermore, the respondents suggest

that the petitioner's complaints about the vagueness of and lack of

detail in the Department's verification reports result from the

petitioner's unfamiliarity with the respondents' submissions and the

procedures described in the Department's verification outlines.

Finally, the six respondents contend that the petitioner has offered no

record evidence and only speculative theories to contradict the

substantial evidence supporting a finding of de jure and de facto

absence of government control. Therefore, the six respondents maintain

that the Department should reject all of the petitioner's arguments

challenging the Department's verification procedures.

DOC Position

We agree with the six respondents. In conducting our verification

of each respondent's response, we examined substantial documentation

the respondent maintained in the ordinary course of business such as

financial statements, sales records, sales negotiation documentation,

payment and bank deposit documentation, and bank account activity

records to determine if the respondent met the criteria for de jure and

de facto absence of government control based on the separate rates

criteria specified in the verification outline. The petitioner claims

that because the Department did not provide a detailed description in

the verification reports of all information contained in the documents

examined at verification that the Department did not sufficiently

examine the separate rates issue at verification. The petitioner's

claim is without merit. We

[[Page 9976]]

examined each respondent's available documentation and specifically

requested copies of all examined documentation as verification exhibits

on the separate rates issue. See verification reports for the six

respondents at sections entitled ``De Jure Absence of Government

Control,'' and ``De Facto Absence of Government Control.'' Based on our

corroboration of the statements each respondent made regarding an

absence of de jure and de facto government control in its questionnaire

response with information contained in the relevant verification

exhibits for each respondent, and based on the Department's review of

the applicable PRC laws regarding separate rates in previous NME cases,

we find that there is substantial evidence supporting a finding of de

jure and de facto absence of government control for each respondent in

this proceeding.

Comment 3: Visit to PRC Ministry of Machinery Industry (``MMI'') and

Ministry of Foreign Trade and Economic Cooperation (``MOFTEC'')

The petitioner contends that the Department should have visited the

PRC government offices of MMI and MOFTEC as requested in its December

23, 1998, letter for purposes of examining the separate rates issue.

The petitioner contends that the Department's failure to visit MMI and

MOFTEC has made it impossible to verify completely the extent of PRC

government control over the export activities of each respondent. The

petitioner asserts that when Department officials visited these two PRC

government entities in the LTFV investigation, the Department was

denied access to important information and, as a result, the Department

used facts available in the final determination for certain companies.

The petitioner alleges that in this review, all six respondents have

withheld information demonstrating that the PRC government, through MMI

and MOFTEC, exercise control over their operations. Therefore, the

petitioner contends that none of the six respondents should be entitled

to a separate rate. As evidence that at least one respondent is

controlled by PRC government entities, the petitioner points to a

Department official's handwritten note on CNIM's articles of

association, claiming that this notation indicates that CNIM is

required by MOFTEC to furnish its sales volumes to MOFTEC and thus is

controlled by MOFTEC. In addition, the petitioner suggests that

evidence gathered during the LTFV proceeding indicates that dealings

with trading companies were handled by MOFTEC and that this connection

is evidence of PRC government control. The petitioner states that

because the Department did not and does not plan to conduct a visit of

MMI and MOFTEC in the context of this review, the Department should

resort to the use of facts available in the final results.

The six respondents argue that the petitioner's allegations

concerning the relationship of the respondents with MOFTEC and the MMI

are based on unsubstantiated speculation. The six respondents also

contend that the petitioner's allegation that the respondents withheld

relevant and material information about their relationship with MMI and

MOFTEC is unfounded. The six respondents assert they have had no

communications or relationship with MMI and MOFTEC officials. With

regard to the petitioner's specific allegation that CNIM furnished

MOFTEC with its sales volumes, CNIM states that the handwritten note in

CNIM's articles of association is the reply of CNIM officials to the

Department official's question concerning the reference to MOFTEC in

CNIM's articles of association. Specifically, CNIM's reply reflects

that CNIM furnished MOFTEC with this information for statistical

purposes (see exhibit 20A of the verification report). The respondent

also states that the Department examined relevant documents and asked

probative questions of CNIM personnel regarding all aspects of the

issue of government control and found no evidence of such control.

Therefore, the respondents maintain that based on a thorough

examination by Department officials of documentation and statements

furnished by the respondents at verification, the Department should

find an absence of de jure and de facto government control for all six

respondents.

DOC Position

We agree with the six respondents. There is nothing on the record

of this proceeding that suggests that a Department visit to MMI or

MOFTEC is warranted. In the LTFV investigation, the petitioner provided

us with documentary evidence in support of its claim that two

respondents were still controlled by the PRC government, which prompted

the Department to visit MMI. Thus, in the LTFV investigation,

documentation submitted by the petitioner justified the Department's

visit to MMI in order to examine in greater depth the relationship

between MMI and two respondents in the LTFV proceeding. However, on the

record of this administrative review, we have no evidence of a similar

relationship between any of the six respondents and MMI or MOFTEC.

Therefore, we determined that there was no basis on which to visit MMI

or MOFTEC.

Furthermore, the petitioner incorrectly claims that the same

situation with regard to the two respondents in the LTFV investigation

applies to all six respondents in this review by placing on the record

from the LTFV proceeding the Department's verification report at MMI.

We find that the information in that report has no bearing on our

findings in this segment of the proceeding. Specifically, the

information in the MMI verification report from the LTFV investigation

contained information on government control specific to two PRC

companies which are not part of this review. In contrast, in this

review, there is substantial evidence on the record which indicates

that none of the six respondents are subject to government control.

There is no evidence on this record to the contrary, and we find that

the petitioner's claim that the six respondents have withheld

information on the separate rates issue to be without merit. With

regard to the petitioner's specific allegation that CNIM furnished

MOFTEC with its sales volumes and that this event constitutes

government control, we find that CNIM's explanation contained in the

verification exhibit in response to our question on this matter is

acceptable and does not indicate government control over export

activities. Moreover, it is not unusual for CNIM or any other PRC

company to provide MOFTEC with sales statistics. For example, in

numerous antidumping cases involving products from the PRC, the

Department has sent initial antidumping questionnaire surveys (i.e.,

mini-section A questionnaires) to MOFTEC to gather information from

which we could select mandatory respondents, and these questionnaires

have requested total sales quantity and value data from each PRC

exporter of the subject merchandise. See, e.g., Notice of Preliminary

Determinations of Sales at Less Than Fair Value and Postponement of

Final Determinations: Brake Drums and Brake Rotors from the People's

Republic of China, 61 FR 53190, 53192 (October 10, 1996).

Comment 4: Calculation of Foreign Brokerage and Handling and Marine

Insurance Values, and Factory Overhead, SG&A and Profit Percentages

The petitioner contends that in the preliminary results, the

Department made mathematical errors in calculating

[[Page 9977]]

the foreign brokerage and handling and marine insurance values.

Specifically, the petitioner contends that since the Department used

the financial data of five Indian producers of the subject merchandise

to calculate the surrogate value percentages for factory overhead, SG&A

and profit, the Department erred in calculating the surrogate

percentages because it calculated average percentages using a

denominator of seven instead of a denominator of five. The petitioner

requests that the Department correct these errors for the final

results.

The six respondents agree that the arithmetic errors made in the

Department's calculation of the surrogate values mentioned above should

be corrected for the final results.

Doc Position

We agree with both the petitioner and the respondents and have made

the appropriate corrections in our final results. See Final Results

Valuation Memorandum for further details.

Comment 5: Application of Facts Available to Respondents' Reported

Distances For Foreign Inland Freight and Suppliers

The petitioner maintains that at verification the Department did

not examine all of the transportation distances (i.e., foreign inland

freight and supplier distances) reported by the respondents because the

Department's verification reports did not note that all reported

distances were examined. Therefore, the petitioner contends that

because the Department's verification reports noted errors in the

transportation distances that five respondents (i.e., CNIM, LABEF,

GREN, Winhere, and ZLAP) reported in their responses, the Department

should find the distances reported by the companies to be unreliable

and thus resort to facts available.

The six respondents state that there is no basis for the

application of either facts available or adverse inferences to the

reported transportation distances. Specifically, the six respondents

maintain that the petitioner has failed to demonstrate that application

of facts available is warranted under the statute, because (1) all

necessary information for transportation distances is on the record;

(2) no respondent withheld or failed to provide information requested

in a timely manner and in the form required; (3) no respondent impeded

the review proceeding; and (4) the Department was able to verify all of

the respondent's submitted transportation distances. With regard to the

petitioner's allegation that because the Department's verification

reports did not state that all distances reported by each respondent

were examined even though some errors in reported transportation

distances were noted in the reports, the six respondents assert that

the Department clearly noted in the verification reports for all

respondents that it checked all of the distances reported by the

respondents. Moreover, the six respondents state that if the petitioner

had compared the distances reported in the Department's verification

reports with the distances reported in each respondent's Section D

submission, the petitioner would discover that the Department did in

fact verify all of the reported distance information. Additionally, the

six respondents assert that even if the Department had elected not to

examine all of the reported distances, the Department has the

discretion not to verify all reported information. Furthermore, the six

respondents note, contrary to the petitioner's assertions, that the

errors in the reported transportation distances noted in the

verification reports were either minor in nature or were to the

detriment of the affected respondent. Finally, the six respondents

point out that the Department verified the correct distances and thus

should use them in the final results.

Doc Position

We agree with the six respondents. At verification, we examined all

of the distances reported by each respondent using maps to check each

respondent's reported distances (see ``Distances'' section of

verification reports for the six respondents). As noted in the

verification reports, we found several minor errors. In addition, the

respondents informed the Department of some minor clerical errors they

found in preparation for verification at the commencement of

verification. However, these errors did not affect the overall

integrity of each respondent's data. Hence, we find the application of

facts available is unwarranted in this case and have used the corrected

transportation distance information noted in the verification reports

for each respondent in the final results.

Company-Specific Issues

Comment 6: Duties and Responsibilities of GREN's General Manager

The petitioner argues that verification exhibit documentation does

not support a finding that GREN's general manager has autonomy from the

government in making decisions regarding the selection of management.

Therefore, because the respondent did not demonstrate de facto absence

of government control, the petitioner argues that the Department should

use facts available and deny GREN a separate rate.

GREN states that the petitioner's argument is without merit. First,

the respondent points out that a specific verification exhibit (i.e.,

exhibit four referred to in the GREN verification report) explains the

selection process for GREN's factory general manager. In addition, the

respondent maintains that all responses to the Department's questions

and all documents reviewed at verification concerning personnel and

management selection were consistent with information provided in

GREN's questionnaire responses and fully support a determination that

GREN's personnel and management selection decisions are free from

government involvement. The respondent contends that the petitioner is

merely asserting that the absence of additional documentation renders

the findings of the Department's verification report and exhibits

insufficient to prove the absence of government control over management

regarding the hiring or firing of employees. Because, in its opinion,

the petitioner's conclusory allegation is illogical and contradicted by

the substantial evidence in the GREN verification reports and exhibits,

the respondent maintains that the Department should reject petitioner's

argument and conclude that substantial record evidence supports a

finding of GREN's independence from government control.

DOC Position

We agree with the respondent. In conducting our verification of

this issue at GREN, we examined all documentation such as management

appointment notices issued and approved by GREN's board of directors

and meeting minutes for the election of the general manager (see

verification exhibit 4 and exhibit 2 of GREN's April 7, 1998,

submission). We discussed with GREN the selection process for the

general manager. Based on our examination of statements in GREN's

response and documentation provided by GREN at verification, we found

no evidence that refuted or contradicted GREN's statements in its

response regarding whether its management selected its personnel

without government interference. Therefore, we find that the

petitioner's claim of de facto government control in the case of GREN

is unsubstantiated by any evidence on the record.

[[Page 9978]]

Comment 7: Relationship Between CNIM and its Supplier of the Subject

Merchandise and the PRC Government

The petitioner argues that the Department's verification report did

not provide sufficient information on whether CNIM met the separate

rates criteria. First, the petitioner claims that the separate rate

test should apply to CNIM's supplier of the subject merchandise,

Hanting, because Hanting did not provide sufficient evidence that it is

unaffiliated with CNIM. The petitioner further adds that there is a

reason to suspect that CNIM and Hanting are affiliated parties because

CNIM supplied control numbers in its sales response which are identical

to the control numbers Hanting provided in its factors of production

(``FOP'') response. Second, the petitioner argues that there is no

documentary evidence in the verification report that supports a finding

that CNIM does not coordinate its selling and pricing activities with

other PRC exporters of the subject merchandise or with the China

Chamber of Commerce (``CCC''). Moreover, the petitioner adds that the

items the Department routinely examines to determine whether a

respondent meets the separate rates criteria (i.e., sales records, bank

records and accounting ledgers) are not likely to reveal activities of

price or selling coordination among PRC entities and the government or

the PRC government's role in setting prices. Furthermore, the

petitioner argues that the Department did not fully examine this issue

at verification because there is no mention in the verification report

that documentation such as letters, facsimiles, emails, phone logs,

memoranda of phone conversations, and travel and expense records were

examined, or that the Department officials visited the CCC. Finally,

the petitioner argues that there is no documentary evidence in the

verification report that supports a finding that no PRC government

entity had a role in setting prices for CNIM. To determine whether CNIM

was subject to PRC government control, the petitioner argues that the

Department should have examined letters, facsimiles, emails, phone

logs, memoranda of phone conversations, and travel and expense records

of CNIM.

The respondent states that the fact that CNIM and Hanting reported

the same control numbers simply reflects good communication between the

two companies in preparing their antidumping response, which is

consistent with the Department's questionnaire requirements, and has

nothing to do with the affiliation issue or the separate rates issue.

With regard to the sales documentation which the Department examined at

verification, the respondent states that the Department's thorough

examination of such documentation demonstrated that CNIM personnel

were, in fact, solely involved in the sales and pricing activities, and

that the sales records did not identify any other PRC exporter or the

CCC as a party to CNIM's sales transactions. Finally, the respondent

maintains that all documentation reviewed by the Department at

verification represents substantial evidence which supports a finding

that there is no coordination of selling or pricing activities between

CNIM and other PRC exporters or the CCC.

DOC Position

We agree with the respondent. The petitioner's claim that CNIM and

Hanting are affiliated parties is without merit. At verification, we

examined CNIM's long-term and short-term investments in its affiliates

by examining investment entries in CNIM's short-term and long-term

investment subledgers (see verification exhibit 19 of the Department's

verification report for CNIM). We also tied these subledgers to CNIM's

financial statements. We also examined at verification Hanting's short-

term and long-term investments. As a result of our examination, we

found no evidence that CNIM made investments in Hanting (or vice versa)

or that CNIM is otherwise affiliated with Hanting. The petitioner

erroneously concludes that, because CNIM supplied the same control

numbers as Hanting supplied in its FOP response, CNIM and Hanting must

be affiliated parties. In issuing the antidumping questionnaire, the

Department instructed CNIM to furnish, by control number, for each of

its sales to the U.S. market, the factors used by its supplier to

produce the merchandise sold by CNIM. This reporting requirement

applies to both affiliated and unaffiliated suppliers of the subject

merchandise and is separate from the affiliation issue.

We also disagree with the petitioner's claim that CNIM coordinated

its selling and pricing activities with other PRC exporters of the

subject merchandise or with the CCC, and that a PRC government entity

had a role in setting prices for CNIM. At verification, we extensively

examined CNIM's accounting records and sales documentation and found no

evidence to support these claims. Although we did not examine the

additional types of documentation suggested by the petitioner for the

first time in its case brief (i.e., letters, facsimiles, emails, phone

logs, memoranda of phone conversations, and travel and expense

records), we did examine the type of documentary evidence (including

sales documentation and records, bank records and accounting ledgers)

that we normally rely on in NME cases. The Department considers such

evidence to be sufficient to establish whether there is a de facto

absence of government control in selling and pricing activities of the

respondent or whether the respondent is coordinating with other PRC

exporters in selling the subject merchandise. In this case, we find

that the substantial evidence on this record supports a finding that

CNIM did not coordinate its selling and pricing activities with other

PRC exporters of the subject merchandise or with the CCC, and that no

PRC government entity had a role in setting prices for CNIM.

Final Results of the Review

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

following weighted-average margins exist for the period April 1, 1997,

through September 30, 1997:

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

Margin

Manufacturer/producer/exporter (percent)

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

China National Machinery Import & Export Company (CNIM).... 0.00

Laizhou 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

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

[[Page 9979]]

We will instruct the U.S. Customs Service not to assess antidumping

duties on entries of the subject merchandise from the above-referenced

PRC exporters made during the POR.

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 Act: (1) The cash

deposit rates for CNIM, LABEF, Haimeng, GREN, Winhere, and ZLAP will be

the rates indicated above; (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; (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; and (4) the cash

deposit rate for non-PRC exporters of subject merchandise from the PRC

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 351.402(f) 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 351.214(d).

Dated: February 23, 1999.

Holly A. Kuga,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-5014 Filed 2-26-99; 8:45 am]

BILLING CODE 3510-DS-P