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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-822]

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

China; Final Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative

Review.

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SUMMARY: The Department of Commerce published the preliminary results

of the administrative review of the antidumping duty order on certain

helical spring lock washers from the People's Republic of China in the

Federal Register on November 9, 1998 (63 FR 60299). This review covers

sales of this merchandise to the United States during the period

October 1, 1996 through September 30, 1997. We gave interested parties

an opportunity to comment on our preliminary results. Based upon our

analysis of the comments received, we have made changes to the margin

calculations presented in the preliminary results of the review. The

final weighted-average dumping margins are listed below in the section

entitled Final Results of Review.

[[Page 13402]]

We have determined that sales have been made below normal value

during the period of review. Accordingly, we will instruct the Customs

Service to assess antidumping duties based on the difference between

export price and normal value.

EFFECTIVE DATE: March 18, 1999.

FOR FURTHER INFORMATION CONTACT: Sally Hastings or Vince Kane, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230; telephone: (202) 482-3464 or (202) 482-2815, respectively.

Applicable Statute and Regulations

Unless otherwise stated, all citations to the statute are

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

date of the amendments made to the Tariff Act of 1930, as amended (the

Act) by the Uruguay Round of Agreements Act (URAA). In addition, unless

otherwise stated, all citations to the Department of Commerce's ( the

Department's) regulations are to 19 CFR Part 351 (1998).

Background

The Department published the preliminary results of this review of

the antidumping duty order on Helical Spring Lock Washers (HSLWs) from

the People's Republic of China (PRC) in the Federal Register on

November 9, 1998 (63 FR 60299). On December 9, 1998, the petitioner,

Shakeproof Assembly Components Division of Illinois Tool Works,

submitted comments on the Department's preliminary results and on

December 18, 1998, the respondent, Zhejiang Wanxin Group, Co., Ltd.

(ZWG), submitted a rebuttal to the petitioner's comments. We held a

hearing on January 13, 1999. The Department has now completed this

review in accordance with section 751 of the Act.

Scope of Review

The products covered by this review are HSLWs of carbon steel, of

carbon alloy steel, or of stainless steel, heat-treated or non-heat-

treated, plated or non-plated, with ends that are off-line. HSLWs are

designed to: (1) Function as a spring to compensate for developed

looseness between the component parts of a fastened assembly; (2)

distribute the load over the larger area for screws or bolts; and, (3)

provide a hardened bearing surface. The scope does not include internal

or external tooth washers, nor does it include spring lock washers made

of other metals, such as copper.

HSLWs subject to this review are currently classifiable under

subheading 7318.21.0030 of the Harmonized Tariff Schedule of the United

States (HTSUS). Although the HTSUS subheading is provided for

convenience and customs purposes, the written description of the scope

of this proceeding is dispositive.

This review covers one exporter of HSLWs from the PRC, ZWG, and the

period October 1, 1996 through September 30, 1997.

Comparisons

We calculated export price and normal value (NV) based on the same

methodology used in the Preliminary Results, with the following

exceptions:

(1) Based on the petitioner's comments, we have recalculated

factory overhead (FOH), selling, general and administrative (SG&A)

expenses and profit in plating costs as in the second and third

administrative reviews of this case, and revised the inland freight

expense for imported steel (see Comments 2 and 3, respectively.);

(2) We have updated the surrogate value for brokerage and handling

based on a submission in Stainless Steel Wire Rod From India for the

POR 97-98 dated May 12, 1998;

(3) At verification, we learned of a recalculation of a supplier

distance which resulted in a change in freight expenses (see Factors

Memorandum dated March 9, 1999 and verification exhibit 14).

Analysis of Comments Received

Comment 1: Use of Market Economy Import Prices to Value Non-Imported

Steel Wire Rod

The petitioner argues that the Department's use of imported steel

prices to value ZWG's domestically sourced steel wire rod (SWR) is

contrary to the statute. In addition, the petitioner contends that the

decision in Lasko Metal Products, Inc. v. United States, 810 F.Supp.

314, 316 (1992), aff'd 43 F.3d 1442 (Fed. Cir. 1994) (Lasko) does not

apply to materials obtained in a nonmarket economy (NME) country from a

NME supplier. Therefore, the petitioner reasons that the Department

should have used Indian surrogate values to value ZWG's domestically

sourced steel.

Though the petitioner recognizes and cites section 351.408(c)(1) of

the Department's regulations, which states that:

The Secretary normally will use publicly available information to

value factors. However, where a factor is purchased from a market

economy supplier and paid for in a market economy currency, the

Secretary normally will use the price paid to a market economy

supplier. In those instances where a portion of the factor is

purchased from a market economy supplier and the remainder from a

nonmarket economy supplier, the Secretary normally will value the

factor using the price paid to the market economy supplier.

as governing the information used to value factors of production (FOP)

in NME cases, the petitioner states that neither the antidumping

statute nor court precedent(s) sanctions the Department's use of import

prices to value inputs obtained from a NME supplier in NME currency.

The petitioner argues that Congress has addressed the issue of

factor valuation in the instant case. In addition, the petitioner

quotes the Act which states that ``when insufficient information exists

to determine dumping margins by normal methods, * * * (1) normal value

shall be determined on the basis of the value of the FOP utilized and

(2) the valuation of the FOP shall be based on the best available

information regarding the values of such factors in a market economy

country or countries to be considered appropriate.'' (19 U.S.C.

1677b(c)(1)). See Lasko at 1445.

The petitioner notes that only if the Department determines that

``available information is inadequate for the purpose of determining NV

on the basis of FOP,'' does the statute allow the Department to rely on

market economy prices. Moreover, citing the legislative history of the

NME section of the statute, the petitioner asserts that Congress

rejected the use of market prices in favor of FOPs and intended that

the Department should avoid using prices ``which it has reason to

believe or suspect may be dumped or subsidized'' when determining FOPs.

See Conference Report, Omnibus Trade & Competitiveness Act of 1998,

H.R. 3 at 590 (HR Rep. 100-576).

The petitioner acknowledges that Lasko allows the Department to use

market economy prices to value an input when the NME manufacturer

directly obtains the input from a market economy country, pays for it

in market economy currency, and uses the input in the production of

subject merchandise. However, the petitioner states that Lasko does not

apply to materials obtained in a NME from NME suppliers and cannot be

used to give the Department unbridled discretion to use the import

prices of a factor as a ``short-cut'' to determine the value of all

non-imported materials. The petitioner alleges that this short-cut

methodology conflicts with the statute and Congressional intent.

Congress has

[[Page 13403]]

expressed a preference for surrogate country values methodology and

that preference will be eviscerated by the imputation of import prices

even if it advances the goal of accuracy.

The petitioner also argues that, even assuming that the Act and the

Department's regulations grant the Department discretion to use the

prices of imports to value non-imported inputs, the Department has

abused its discretion in this case. The petitioner asserts that

accuracy is not gained by the use of import prices and prices of small

quantities of imported goods may be aberrational. The petitioner argues

that the Department is required to examine the criteria adopted in

Olympia Industrial Inc. v. United States (Olympia), Slip Op. 98-49

(April 17, 1998), wherein the Department examined ``(1) the volume and

value of steel imports, (2) the type and quality of the imported steel,

and (3) consumption of imported steel by the NME producers' to

determine the reliability of steel import prices as alternative

surrogate values. The petitioner asserts that the Department's failure

to apply the Olympia criteria constitutes an abuse of discretion.

The respondent, on the other hand, argues that the Department

correctly used ZWG's imported SWR prices to value all of its SWR

production inputs in the preliminary results. Moreover, the respondent

states that this valuation methodology is supported by the Department's

prior practice, the Department's regulations, court decisions and the

Act. The respondent also states that ZWG's purchase of imported SWR

satisfies all the conditions of section 351.408(c)(1) of the

Department's regulations. Thus, the respondent asserts that the

Department is obligated by that provision of the regulations to use the

price paid for imported SWR to value all the SWR consumed by ZWG. The

respondent adds that this regulation codifies the decision of the

United States Court of Appeals for the Federal Circuit (CAFC) in Lasko,

and Departmental practice in a number of recent NME cases such as

Collated Roofing Nails from the PRC, 62 FR 51410, 51416 (October 1,

1997), Helical Spring Lock Washers from the PRC, 62 FR 61794, 61795

(November 19, 1997) and Melamine Institutional Dinnerware from the PRC,

62 FR 1707, 1710 (January 13, 1997). In support of this argument, the

respondent cited the following section from Lasko:

[T]he purpose of the Act is to prevent dumping, an activity defined

in terms of the market-place. The Act sets forth procedures in an

effort to determine margins ``as accurately as possible.'' * * *

Where we can determine that an NME producer's input prices are

market determined accuracy, fairness and predictability are enhanced

by using those prices. Therefore, using surrogate values when

market-based values are available would, in fact be contrary to the

intent of the law.

Id. at 1446. The CAFC in Lasko also stated that the Departmental

practice is a legitimate policy choice in interpreting and applying the

statute. Id.

The respondent asserts that it demonstrated at verification that

the price it paid for the SWR imported from the United Kingdom through

a market economy trading company was paid for in a market economy

currency (U.S. dollars). These purchases accounted for almost one-half

of its total SWR purchases during the period of review (POR). Thus, the

amount of imported SWR purchased during the POR was not insignificant.

(The respondent notes that the Department considered the amount of

imported SWR purchased by ZWG during the third administrative review to

be meaningful. This amount was less than that imported by ZWG during

the current POR.) Moreover, based on the Department's verification

report and exhibits, the respondent states that the imported SWR is the

same, and has the same range of sizes, as the SWR sourced domestically

by ZWG. In addition, the respondent argues that because the prices paid

by ZWG (for imported SWR) deviated from the average price by less than

one percent, they cannot be considered aberrational.

With regard to Olympia, the respondent asserts that the case is

distinguishable from the situation in this review. In Olympia, the

issue was whether the prices charged by a NME (PRC) trading company,

which imported market economy steel and resold it to PRC producers in

renmimbi, were reliable. The respondent argues that even if Olympia was

applicable, the Department should determine that ZWG's import prices

are reliable because verification demonstrated that (1) ZWG imported

SWR from market economy suppliers and paid for the SWR in a market

economy currency, (2) the imported SWR was used in the production of

HSLWs, and (3) the deviation in price among the producers of imported

SWR was not more than one percent.

Department's Position: We have continued to use the price of the

imported input to value SWR for ZWG in accordance with 19 CFR

351.408(c)(1). In our view, this is consistent with the purpose of the

antidumping statute identified in Rhone Poulenc, Inc. v. United States,

899 F.2d 1185 (Fed. Cir. 1991), i.e., to determine antidumping margins

as accurately as possible. It is also consistent with the CAFC's ruling

in Lasko. As discussed in Lasko, the Department has developed practices

which emphasize accuracy, fairness, and predictability in establishing

NV for NME producers. Clearly, because the input imported by ZWG is the

same material as that domestically purchased by ZWG and ZWG's imports

of this input were not insignificant, the import price is the most

accurate price for valuing this factor. Moreover, because use of this

import price does not involve selecting among several possible

surrogate values for the input in question, it also enhances the

predictability of the valuation methodology.

We disagree with the petitioner that use of import prices for

valuing domestically sourced inputs in this situation is inconsistent

with the Act. First, although we agree that Lasko addressed the use of

import prices only for the portion of the input that was imported,

Lasko did not prohibit the Department from using the import prices for

the remaining domestically sourced portion. Indeed, for the reasons

discussed above, we believe the use of the import price for the SWR

domestically sourced by ZWG achieves the goals articulated in Lasko. We

also believe that reliable import prices for the same input are a

better means of valuing an input than surrogate values. This position

is reflected in section 351.408(c)(1) of the Department's regulations

acknowledged by the petitioner. Second, there is no information in the

instant case that the imports were dumped or subsidized and, hence, to

be avoided as the legislative history of section 773(c) of the Act

directs. (Omnibus Trade and Competitiveness Act of 1988, H.R. Conf.

Rep. No. 100-576, at 590 (1988), reprinted in 1988 U.S.C.C.A.N. 1547,

1623-1624.)

Further, we disagree with the petitioner's characterization that

import data can only be used when ``available information is

inadequate'' for valuing a factor. When ``available information is

inadequate'' for using the factors methodology, section 773(c)(2) of

the Act directs the Department to base NV on the price of merchandise

that is comparable to the subject merchandise and is sold by a market

economy country at a comparable level of economic development. In

deciding to use the import price of the NME input rather than a

surrogate value for the input, the Department relies instead upon the

language in section 773(c)(1) of the Act regarding the use of ``best

available information'' to value factors

[[Page 13404]]

of production. See Lasko, 43 F. 3d at 1446.

Regarding the petitioner's argument that the Department has abused

its authority in this case even if it has the discretion to use import

prices, we disagree. The quantity of imported SWR is not small in

relation to ZWG's requirements for production of the subject

merchandise. As ZWG has noted, imported SWR supplied nearly one-half of

the company's SWR requirements for producing the subject merchandise.

In addition, the petitioner has not pointed to any other fact

surrounding the importation of SWR which would lead us to question the

import transactions.

Finally, we agree with the respondent's characterization of Olympia

and find that it is not applicable in this review. In the instant case,

SWR was purchased from a market economy supplier through a market

economy trading company and paid for in a market economy currency. In

Olympia, the imports in question were made through an NME trading

company. In a remand, the Court of International Trade (CIT) in Olympia

requested the Department to explain why the prices paid by the NME

trading company could not be used instead of resorting to a value in a

surrogate country. In that case, the CIT simply required the Department

to test the reliability of the prices paid due to the involvement of an

NME trading company. (Olympia, Slip Op. 99-18 (February 17, 1999).)

Because we are not dealing with an NME trading company in this case,

there is no need to test the reliability of the price actually paid for

the SWR used by ZWG.

Therefore, in accordance with section 351.408(c)(1) of the

Department's regulations and Department's practice, we continue to use

the actual imported steel prices to value ZWG's steel inputs because

these prices represent the actual market-based prices incurred by ZWG

in producing the subject merchandise and, as such, are the most

accurate and appropriate values for this particular factor for the

purpose of calculating NV.

Comment 2: Factory Overhead, SG&A Expenses In Plating Costs

The petitioner asserts that the Department erred in the preliminary

results by failing to include FOH, SG&A, and profit for the plating

operation. The Department's calculations for NV should reflect that the

plating company and lock washer facility are separate, non-integrated

entities. The petitioner argues that because the Department did not use

a surrogate value for plating, but rather calculated surrogate values

for the factor inputs used in plating, the Department is required to

value separately the plating company's FOP and to include FOH, SG&A,

and profit for plating. This CV should then be included as a ``cost''

to the lock washer producer. Moreover, the petitioner alleges that the

Department included these costs separately in previous proceedings and

did not explain its change in methodology in its preliminary results of

review.

ZWG contends that the Department correctly calculated NV by

computing FOH, SG&A and profit for total factors to produce HSLWs. ZWG

states that the petitioner's suggestion to include FOH, SG&A, and

profit in the calculation of ZWG's plating costs and then to calculate

FOH, SG&A, and profit again for total factors to produce HSLWs,

(including the plating materials, plating energy and plating labor)

would double-count FOH, SG&A, and profit for the plating portion of

production. To illustrate that point, the respondent notes that,

although ZWG does not have plating equipment, the cost of depreciation

for plating equipment would be included in NV twice: once as a part of

plating operations and again as part of total production.

ZWG disagrees with the petitioner that the Department has changed

its methodology from earlier reviews. Although the calculation was set

up differently, the respondent states that the methodology used in the

preliminary results of this review is mathematically identical to the

methodology used in all previous reviews.

Department's Position: The respondent is correct that the

methodology used for calculating NV in the preliminary results is

mathematically identical with the result that would have been obtained

had we applied the methodology used in previous reviews. Nevertheless,

we have decided, for purposes of clarity, to set up the calculation in

the same manner as in the second (1994-95) and third (1995-96) reviews

of this case. Thus, in these final results, we have calculated NV in

the following manner: (1) we added ZWG's costs of direct materials

(including transportation), labor, and factory overhead in order to

obtain ZWG's cost of manufacturing; (2) we calculated ZWG's SG&A and

profit and added these to the cost of manufacturing in order to obtain

ZWG's cost of production; (3) we performed the same calculation to

obtain the plating company's cost of production; and, (4) we calculated

the NV of the subject merchandise by adding ZWG's and the plating

company's costs of production.

This calculation does not result in treating the cost of production

for plating as an input into ZWG's production process, in the sense

that the SG&A and profit calculated for ZWG does not include SG&A and

profit calculated for the plating activity. Since the Department does

not accord any significance to transactions between NME enterprises

(e.g., we do not consider using prices between NME producers and NME

trading companies), we do not attempt to construct the price that would

exist between an NME supplier (the plating company) and the NME

producer of the subject merchandise (the HSLW producer).

Comment 3: Inland Freight Expense for Imported Steel

The petitioner argues that the Department incorrectly calculated

freight expenses for domestically sourced SWR. The petitioner

acknowledges that under Sigma Corporation v. United States, 117 F.3d

1401 (Fed. Cir. 1997) (Sigma), where surrogate values are based on CIF

imports in the surrogate country, the Department must not ``double

count'' in determining the freight amount assigned to the FOP. However,

the petitioner argues that in this case Sigma does not apply because

the Department is using the price at which the PRC producer actually

imports SWR. Thus, for domestically sourced SWR, the Department should

use the distance between the supplier and ZWG. This does not violate

the principles of the Sigma case because ZWG had a choice between

domestic and foreign sourcing of its SWR and made a voluntary business

decision to purchase SWR from both sources.

The respondent asserts that Sigma should apply to all situations

where the Department uses actual CIF import prices to value

domestically sourced inputs. The respondent contends that the

Department's methodology reflects the reasoning of the CAFC in Sigma as

it recognizes that market economy producers would tend to purchase

inputs from the closer of an import source or domestic source and

treats the actual CIF price of SWR as a ``surrogate value'' for SWR in

determining freight costs. Thus, because surrogate values are merely

the best approximation of what a PRC producer would pay if the producer

were operating in a market economy, the respondent states that the

Department should continue to apply Sigma to all distances to ZWG's

material input suppliers in China.

Department's Position: We agree with the petitioner that Sigma does

not apply in a situation where the Department

[[Page 13405]]

values an input using the price actually paid by the NME producer.

However, we do not agree that we should assign a freight value based on

the distance to the NME supplier for that portion of the input that is

domestically sourced. Because we are using an actual import value and

have the actual distance that the imported merchandise had to be

shipped, we are using that import value and that freight amount to

value SWR, whether the SWR is imported or not.

Comment 4: Surrogate Truck Value

The petitioner contends that the Department incorrectly used a rate

for foreign inland truck freight from a Times of India article

published on April 20, 1994 (Times of India rate). Instead, the

petitioner suggests that the Department use the truck freight rates

listed in the U.S. Embassy cable dated August, 1993. The petitioner

argues that the Times of India rate applies only to company-owned

trucks and, since the Department has found that the trucks used by the

respondent ZWG during the POR were not company-owned, the Department

should use a different freight rate. The petitioner states that the

Embassy cable rate was used as the truck rate by the Department in both

the final determination of the HSLWs investigation and the most recent

HSLWs administrative review. Furthermore, in Heavy Forged Hand Tools,

Finished or Unfinished, With or Without Handles, From the People's

Republic of China: Preliminary Results of Antidumping Duty

Administrative Reviews, 62 FR 60684, (November 12, 1997), (Hand Tools),

the Department distinguished between company and non-company owned

trucks. In Hand Tools, the non-company-owned trucks were assigned a

truck rate based on the Embassy cable.

The respondent maintains that the petitioner has misread the Times

of India article and that the freight rates quoted therein do not apply

only to company-owned trucks. The respondent believes that a

distinction between freight rates incurred by company-owned and non-

company-owned trucks is irrelevant and urges the Department to continue

to use the rates published in Times of India.

Department's Position: We disagree with the petitioner. The Times

of India rate is solely for trucks and provides a specific foreign

inland truck rate, whereas the Embassy cable rate is for all modes of

transportation in the surrogate country and provides a less specific

rate for foreign inland trucks. The Department stated in its Final

Determination of Sales at Less Than Fair Value: Certain Helical Spring

Lock Washers from the People's Republic of China, 58 FR 48833

(September 20, 1993), that the August 3, 1993 cable from India (Embassy

cable) appears to be an aggregate of various rates: trucking, shipping

and rail. We note that in Hand Tools and Hand Tools, Final Results

Antidumping Duty Administrative Reviews for 1996-1997, 63 FR 16758

(April 6, 1998), the Department did not consider the aggregate nature

of the Embassy cable rate.

Also, it should be noted that the Times of India rate was used by

the Department in the last two HSLWs administrative reviews.

Final Results of the Review

As a result of our analysis of the comments received, we determine

that the following weighted-average margins exist:

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

Margin

Manufacturer/exporter Time period (percent)

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

Zhejiang Wanxin Group Co., Ltd.... 10/01/96-09/30/97 3.85

PRC Rate.......................... 10/01/96-09/30/97 128.63

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Pursuant to

section 351.212(b)(1) of the Department's regulations, we have

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

of the total amount of antidumping duties calculated for the examined

sales to the total entered value of those sales. In order to estimate

the entered value, we subtracted international movement expenses from

the gross sales value. This rate will be assessed uniformly on all

entries of that specific importer made during the POR. The Department

will issue appraisement instructions directly to the U.S. Customs

Service.

Furthermore, the following deposit rates will be effective upon

publication of these final results for all shipments of HSLWs from the

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

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

(1) for ZWG, which has a separate rate, and all ZWG exports through

market-economy trading companies, the cash deposit rate will be the

company-specific rate established in these final results of review; (2)

for all other PRC exporters, the cash deposit rate will be the PRC rate

which is 128.63 percent, which is the All Other PRC Manufacturers,

Producers and Exporters rate from the Final Determination of Sales at

Less Than Fair Value: Certain Helical Spring Lock Washers from the PRC,

58 FR 48833 (September 20, 1993); and (3) for non-PRC exporters of

subject merchandise from the PRC, the cash deposit rate will be the

rate applicable to the PRC supplier of that exporter. These deposit

rates shall remain in effect until publication of the final results of

the next administrative review.

This notice also serves as a final reminder to importers of their

responsibility under section 351.402(f) of the Department's regulations

to file a certificate regarding the reimbursement of antidumping duties

prior to liquidation of the relevant entries during this review period.

Failure to comply with this requirement could result in the Secretary's

presumption that reimbursement of antidumping duties occurred and the

subsequent assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with section 351.305(a)(3) of the Department's

regulations. Timely written notification of the return/destruction of

APO materials or conversion to judicial protective order is hereby

requested. Failure to comply with the regulations and the terms of an

APO is a sanctionable violation.

This administrative review and notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: March 9, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-6535 Filed 3-17-99; 8:45 am]

BILLING CODE 3510-DS-P