[Federal Register Volume 61, Number 84 (Tuesday, April 30, 1996)]
[Notices]
[Pages 19026-19045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10555]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-843]
Notice of Final Determination of Sales at Less Than Fair Value:
Bicycles From the People's Republic of China
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: April 30, 1996.
FOR FURTHER INFORMATION CONTACT: Katherine Johnson at (202) 482-4929,
Shawn Thompson at (202) 482-1776, or James Terpstra at (202) 482-3965,
Office of Antidumping Investigations, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 by the Uruguay
Rounds Agreements Act (URAA).
Final Determination
As explained in the memoranda from the Assistant Secretary for
Import Administration dated November 22, 1995, and January 11, 1996,
the Department of Commerce (the Department) has exercised its
discretion to toll all deadlines for the duration of the partial
shutdowns of the Federal Government from November 15 through November
21, 1995, and December 16, 1995, through January 6, 1996. Thus, the
deadline for the final determination in this investigation has been
extended by 28 days, i.e., one day for each day (or partial day) the
Department was closed. As such, the deadline for this final
determination is no later than April 22, 1996.
We determine that bicycles from the People's Republic of China
(PRC) are being sold in the United States at less than fair value
(LTFV), as provided in section 735 of the Tariff Act of 1930, as
amended (the Act). The estimated margins are shown in the ``Suspension
of Liquidation'' section of this notice.
Case History
Since the preliminary determination on November 1, 1995 (60 FR
56575, November 9, 1995), the following events have occurred:
On November 6, 1995, Bo An Bike Co., Ltd. (hereinafter Bo An),
CATIC Bicycle Co., Ltd. (hereinafter CATIC), Shenzhen China Bicycles
Co. (Holdings) Ltd. (hereinafter CBC), Giant China Co., Ltd.
(hereinafter Giant), Hua Chin Bicycle Co., Ltd. (hereinafter Hua Chin),
Merida Industry (Hong Kong) Co., Ltd./Merida Bicycle Co., Ltd.
(hereinafter Merida), Shenzhen Overlord Bicycle Co., Ltd. (hereinafter
Overlord), and Universal Cycle Corp. (hereinafter Universal) requested
a postponement of the final determination pursuant to 19 CFR 353.20. On
November 9, 1995, Chitech Industries, Ltd. (Hong Kong) (and affiliated
parties Tandem Industries, Ltd. (Hong Kong), Magna Technology Corp.
(Taiwan), Taiwan Tandem Co., Ltd. (Taiwan), and Shun Lu Bicycle Co.
(aka Shunde Tandem Bicycle Parts Company) (hereinafter Chitech) made a
similar request.
On November 9 and 20, 1995, respondents alleged clerical errors in
the preliminary determination. Also, on
[[Page 19027]]
November 20, 1995, petitioners and all respondents, except Chitech,
requested a hearing. On December 4, 1995, the Department amended the
preliminary determination and postponed the final determination. (See,
Amendment to Preliminary Determination of Sales at Less Than Fair Value
and Postponement of Final Determination: Bicycles from the People's
Republic of China, 60 FR 64016 (December 13, 1995)).
In December, January, and February, we verified the respondents'
questionnaire responses. Additional published information (PI) on
surrogate values was submitted by petitioners and respondents on March
6, 1996. Petitioners and respondents submitted case briefs on March 26,
1996, and rebuttal briefs on April 2, 1996. A public hearing was held
on April 3, 1996.
On January 31 and February 5, 1996, Chitech and CBC, respectively,
requested that the Department reconsider its decision not to publish an
amended preliminary determination with respect to these two companies.
On February 9, 1996, these requests were denied.
Finally, the respondents have made numerous submissions requesting
that the Department rescind the investigation (See, Comment 7 in the
General Comments section below).
Scope of Investigation
The product covered by this investigation is bicycles of all types,
whether assembled or unassembled, complete or incomplete, finished or
unfinished, including industrial bicycles, tandems, recumbents, and
folding bicycles. For purposes of this investigation, the following
definitions apply irrespective of any different definition that may be
found in Customs rulings, U.S. Customs law, or the Harmonized Tariff
Schedule of the United States (HTSUS): (1) The term ``unassembled''
means fully or partially unassembled or disassembled; (2) the term
``incomplete'' means lacking one or more parts or components with which
the complete bicycle is intended to be equipped; and (3) the term
``unfinished'' means wholly or partially unpainted or lacking decals or
other essentially aesthetic material. Specifically, this investigation
is intended to cover: (1) Any assembled complete bicycle, whether
finished or unfinished; (2) any unassembled complete bicycle, if
shipped in a single shipment, regardless of how it is packed and
whether it is finished or unfinished; and (3) any incomplete bicycle,
defined for purposes of this investigation as a frame, finished or
unfinished, whether or not assembled together with a fork, and imported
in the same shipment with any two of the following components: (a) The
rear wheel; (b) the front wheel; (c) a rear derailleur; (d) a front
derailleur; (e) any one caliper or cantilever brake; (f) an integrated
brake lever and shifter, or separate brake lever and click stick lever;
(g) crankset; (h) handlebars, with or without a stem; (i) chain; (j)
pedals; and (k) seat (saddle), with or without seat post and seat pin.
The scope of this investigation is not intended to cover bicycle
parts except to the extent that they are attached to or in the same
shipment as an unassembled complete bicycle or an incomplete bicycle,
as defined above.
Complete bicycles are classifiable under subheadings 8712.00.15,
8712.00.25, 8712.00.35, 8712.00.44, and 8712.00.48 of the 1995 HTSUS.
Incomplete bicycles, as defined above, may be classified for tariff
purposes under any of the aforementioned HTSUS subheadings covering
complete bicycles or under HTSUS subheadings 8714.91.20-8714.99.80,
inclusive (covering various bicycle parts). The HTSUS subheadings are
provided for convenience and customs purposes. The written description
of the scope of this investigation is dispositive.
Period of Investigation
The period of investigation is April 1, 1994, through March 31,
1995.
Separate Rates
Four of the responding exporters in this investigation are located
outside the PRC. They are Merida, Giant, Hua Chin and Chitech. Further,
there is no PRC ownership of any of these companies. Therefore, we
determine that no separate rates analysis is required for these
exporters because they are beyond the jurisdiction of the PRC
government. (See, e.g., Final Determination of Sales at Less Than Fair
Value: Disposable Pocket Lighters from the People's Republic of China,
60 FR 22359, 22361, (May 5, 1995)).
The remaining five respondents are either joint ventures between
Chinese and foreign companies or are Chinese-owned companies publicly
traded on the Shenzhen stock exchange. They are CATIC, CBC, Overlord,
Universal, and Bo An. For these respondents, a separate rates analysis
is necessary to determine whether the exporters are independent from
government control.
To establish whether a firm is sufficiently independent from
government control to be entitled to a separate rate, the Department
analyzes each exporting entity under a test arising out of the Final
Determination of Sales at Less Than Fair Value: Sparklers from the
People's Republic of China, 56 FR 20588, (May 6, 1991) (Sparklers) and
amplified in 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 Carbide). Under the separate rates criteria, the
Department assigns separate rates in non-market-economy cases only if
respondents can demonstrate the absence of both de jure and de facto
governmental control over export activities.
1. Absence of De Jure Control
The respondent have placed on the administrative record a number of
documents to demonstrate absence of de jure control, including laws,
regulations, and provisions enacted by the State Council of the central
government of the PRC. Respondents have also submitted documents which
establish that bicylcles are not included on the list of products that
may be subject to central government export constraints. The Department
has reviewed these and other enactments in prior cases and has
previously determined that these laws indicate that the responsibility
for managing state-owned enterprises has been shifted from the
government to the enterprise itself (See, Silicon Carbide and Final
Determination of Sales at Less Than Fair Value: Furfuryl Alchohol from
the People's Republic of China, 60 FR 22544. (May 8, 1995) (Furfuryl
Alcohol)). In addition, as discussed in the Final Determination of
Sales at Less Than Fair Value: Certain Cased Pencils from the People's
Republic of China, 59 FR 55625, (November 9, 1994) (Pencils), the laws
governing share companies have not altered the devolution of control.
However, as stated in previous cases, there is some evidence that
the PRC central government enactments have not been implemented
uniformly among different sectors and/or jurisdictions in the PRC (See
Silicon Carbide and Furfuryl Alcohol). Therefore, the Department has
determined that an analysis of de facto control is critical in
determining whether respondents are, in fact, subject to a degree of
governmental control which would preclude the Department from assigning
separate rates.
2. Absence of De Facto Control
The Department typically considers four factors in evaluating
whether each respondent is subject to de facto governmental control of
its export functions: (1) Whether the export prices are set by or
subject to the approval of a governmental authority; (2) whether
[[Page 19028]]
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 has asserted and we verified the following: (1) it
establishes its own export prices; (2) it negotiates contracts, without
guidance from any governmental entities or organizations; (3) it makes
its own personnel decisions; and (4) it retains the proceeds of its
export sales, uses profits according to its business needs and has the
authority to sell its assets and to obtain loans. In addition,
respondents' questionnaire responses indicate that company-specific
pricing during the POI does not suggest coordination among exporters.
During verification proceedings, Department officials viewed such
evidence as sales documents, company correspondence, and bank
statements. Regarding personnel decisions, we reviewed such evidence as
the discussion of the selection of the board of directors in contracts
between joint venture companies and minutes from the board of director
meetings. This information supports a finding that there is a de facto
absence of governmental control of export functions. Consequently, we
have determined that the above-mentioned respondents have met the
criteria for the application of separate rates.
China-Wide Rate
Six of the mandatory respondents did not respond to the
questionnaire. Hence, we are applying a single antidumping rate to
these exporters as well as all other exporters of PRC-manufactured
bicycles based on our presumption that the export activities of these
respondents who failed to completely respond and to establish that they
meet the criteria for a separate rate are controlled by the PRC
government. (See, Comments 8 and 9 in the General Comments section
below).
Facts Available
Pursuant to sections 776(a) and (b) of the Act, we have based the
China-wide rate on facts available, using adverse inferences, because
the non-responding companies have failed to cooperate to the best of
their ability. Given that this margin involves data contained in the
petition, we are required to corroborate this data, to the extent
practicable, pursuant to section 776(c) of the Act. (See, also,
Statement of Administrative Action (SAA) at 200). We have identified
several major items (i.e., depreciation, interest, and profit, as well
as the factor values for frames, forks, and rims) contained in the
petition which individually comprise a significant portion of the
normal value (NV) calculations. We compared the data in the petition to
secondary data which includes but is not limited to the same type of
data used as the basis for the petition and the audited financial
reports of two of the largest Indian bicycle producers.
As a result of our analysis, we found that, with the exception
noted immediately below, the secondary information for these factor
values are comparable to those provided in the petition. Accordingly,
this petition information has been corroborated.
However, after analyzing the figure contained in the petition for
depreciation, interest and profit, we found, as did both petitioners
and respondents, that this figure does not reflect usual cost and
profit in the Indonesian bicycle industry. Specifically, the 1992
figure of 57.91 percent provided in the petition does not correspond
with the 1993 figure of 22.84 percent and the 1991 figure of 22 percent
provided by respondents on September 19 and 25, 1995. (For further
discussion see Memorandum to Barbara R. Stafford re: Factors Valuation
dated November 1, 1995). Therefore, we find that the 57.91 percent
figure is not corroborated (i.e., has no probative value in determining
depreciation, interest, and profit).
We have used the 1991 figure for depreciation, profit, and interest
in recalculating the margins in the petition. We did not use the more
current 1993 figure because the study containing it was issued only in
draft form.
Fair Value Comparisons
To determine whether sales of bicycles from the PRC to the United
States were made at LTFV, we compared Export Price (EP) and/or
Constructed Export Price (CEP) to the NV, as specified in the ``United
States Price'' and ``Normal Value'' sections of this notice.
United States Price
For all responding exporters, with the exception of CATIC, which
had only CEP sales, we based United States Price (USP) on EP in
accordance with section 772(a) of the Act, as the subject merchandise
was sold directly to the first unaffiliated purchaser in the United
States prior to importation and CEP methodology was not otherwise
indicated.
In addition, for Giant, CBC, CATIC, and Chitech, where sales to the
first unaffiliated purchaser took place after importation into the
United States, we based USP on CEP, in accordance with section 772(b)
of the Act.
We corrected respondents' data for errors and omissions found at
verification. See, Concurrence Memorandum and company-specific
calculation memoranda for details. In addition, we made company-
specific adjustments as follows:
1. Bo An
We calculated EP based on packed, FOB Hong Kong port prices to
unaffiliated purchasers in the United States. We made deductions from
the starting price, where appropriate, for foreign inland freight and
brokerage and handling (which includes containerization, documentation
fees, the Hong Kong terminal handling charge and PRC brokerage costs)
and Hong Kong duty. As all foreign inland freight and brokerage and
handling were provided by PRC suppliers, these services were valued in
India.
2. CBC
We calculated EP and CEP based on packed, delivered prices to
unaffiliated customers. Where appropriate, we made deductions from the
starting price for discounts and rebates and credit notes. We also made
deductions, where appropriate, for foreign inland freight, foreign
brokerage and handling, Hong Kong duty, U.S. freight and warehousing
expenses, ocean freight and marine insurance, and U.S. duty and harbor
fees. With the exception of foreign inland freight, movement charges
were provided by market-economy suppliers and paid for in market-
economy currency. Regarding foreign inland freight, this service was
provided by a PRC supplier. Accordingly, we valued this expense in
India.
Further, we made additions to CEP for interest revenue received
from the unaffiliated customers. In accordance with section 772(d)(1)
of the Act, we deducted from CEP the following expenses that related to
economic activity in the United States: commissions, direct selling
expenses, including advertising, warranties, and credit expenses, and
indirect selling expenses, including inventory carrying costs. Finally,
we made an adjustment for CEP profit in accordance with section
772(d)(3) of the Act. (See,
[[Page 19029]]
Comments 1 and 2 in the General Comments section below.)
3. CATIC
We calculated CEP based on packed, FOB U.S. warehouse prices, or
delivered prices, to unaffiliated customers. We made deductions from
the starting price for discounts, where appropriate. We also made
deductions for foreign brokerage and handling, freight expenses, ocean
freight and marine insurance, U.S. brokerage and handling, and U.S.
duty and harbor fees. We deducted from CEP the following expenses that
related to economic activity in the United States: commissions, direct
selling expenses, including advertising, warranty, credit, and
repacking, and indirect selling expenses, including inventory carrying
costs. Finally, we made an adjustment for CEP profit in accordance with
section 772(d)(3) of the Act. (See, Comments 1 and 2 in the General
Comments section below.)
4. Giant
We calculated EP and CEP based on packed, FOB PRC port or CIF U.S.
port or delivered prices to unaffiliated purchasers. We made deductions
from the starting price, where appropriate, for the following: foreign
brokerage and handling, U.S. brokerage, international freight (which
includes U.S. inland freight), U.S. duty, loading and containerization,
and marine insurance (which also includes U.S. inland insurance, harbor
maintenance fees and merchandise processing fees). All of the above
expenses were provided by market-economy carriers and paid for in
market-economy currencies. We also deducted an amount for foreign
inland freight but since this service was provided by a PRC supplier,
we valued this expense in India. We also deducted from the starting
price, where appropriate, discounts and rebates.
In accordance with section 772(d)(1) of the Act, we deducted from
CEP the following expenses that related to economic activity in the
United States: direct selling expenses, including warranties,
advertising, and credit expenses, and indirect selling expenses,
including inventory carrying costs. Finally, we made an adjustment for
CEP profit in accordance with section 772(d)(3) of the Act. (See,
Comments 1 and 2 in the General Comments section below.)
5. Hua Chin
We calculated EP based on packed, FOB Hong Kong port prices to
unaffiliated purchasers in the United States. We made deductions from
the starting price, where appropriate, for foreign inland freight and
Hong Kong terminal handling fees. As all foreign inland freight and
handling fees were provided by PRC suppliers, these services were
valued in India.
6. Merida
We calculated EP based on packed, FOB Hong Kong port prices to
unaffiliated purchasers in the United States. We made deductions from
the starting price, where appropriate, for foreign inland freight and
brokerage and handling (which includes containerization, documentation
fees, the Hong Kong terminal handling charge and PRC brokerage costs)
and Hong Kong duty. As all foreign inland freight and brokerage and
handling were provided by PRC suppliers, these services were valued in
India.
7. Overlord
We calculated EP based on packed. FOB Hong Kong port prices to
unaffiliated purchasers in the United States. We made deductions from
the starting price, where appropriate, for foreign inland freight,
brokerage and handling and Hong Kong duty. As all foreign inland
freight and brokerage and handling were provided by PRC suppliers,
these services were valued in India.
8. Chitech
We calculated EP based on packed. FOB Hong Kong prices and CEP
based on packed, duty-paid, FOB U.S. warehouse prices to unaffiliated
customers. Were appropriate, we made deductions from the starting price
for various discounts. We also made deductions for foreign brokerage
and handling, freight, Hong Kong import and export fees, terminal
handling fees, ocean freight and marine insurance, U.S. brokerage and
handling, and U.S. duty and harbor fees.
In accordance with section 772(d)(1) of the Act, we deducted from
CEP the following expenses that related to economic activity in the
United States: commissions, direct selling expenses, including
advertising, warranties, and credit expenses, and indirect selling
expenses, including inventory carrying costs. Finally, we made an
adjustment for CEP profit in accordance with section 772(d)(3) of the
Act. (See, Comments 1 and 2 in the General Comments section below.)
9. Universal
We calculated EP based on packed, FOB Hong Kong or FOB Huangpu port
prices to unaffiliated purchasers in the United States. We made
deductions from the starting prices for foreign inland freight, which
was provided by a PRC supplier and therefore was valued using Indian
surrogate values. In addition, we deducted from the FOB Hong Kong
prices terminal handling charges, document fees, import/export
declaration fees, handling fees and courier fees.
Normal Value
In accordance with section 773(c) of the Act, we calculated NV
based on factors of production reported by the responding exporters.
Where an input was sourced from a market economy and paid for in
market-economy currency, we have used the actual price paid for the
input to calculate NV, when possible, in accordance with Department
practice. See, Lasko Metal Products v. United States, 437.3d 1442, 1443
(Fed. Cir. 1994) (Lasko).
In instances where inputs were sourced domestically, we valued the
factors using PI from India where possible. Where appropriate Indian
values were not available, we used PI from Indonesia.
Valuation of Bicycle Parts and Components
As in our preliminary determination, we valued certain parts and
components purchased by some respondents in the PRC, using the average
market-economy prices reported by other respondents for the same part
or component, as discussed below. However, unlike in our preliminary
determination, we used the average actual market-economy price reported
by the other respondents rather than the ranged public version of those
prices. We did this because we determined that the manner in which the
actual prices were ranged, i.e., either higher or lower, could
potentially introduce distortion into the calculation. (See, Comment 3
in the General Comments section below).
The nine responding exporters reported that they purchased a large
number of different components (e.g., brake sets) and sub-components
(e.g. brake arms) for use in assembling finished bicycles. The vast
majority of these purchased inputs are sub-components. These inputs,
both components and sub-components, vary in terms of material
composition (e.g., carbon steel versus aluminum), size, design (e.g.,
cantilever versus side-pull brakes), and other relevant physical
characteristics.
Some inputs were purchased from market-economy suppliers and paid
for in convertible currency. Following our normal practice, we used the
actual price paid for these inputs, where
[[Page 19030]]
possible. However, where the input was not purchased from a market-
economy supplier and paid for in a market-economy currency, it was
necessary to develop a surrogate value.
For certain components and sub-components, differences in material
content and design result in large price differentials. For example,
there is a substantial difference in the price of a frame tube made
from high-tensile steel versus one made with chrome-molybdenum;
therefore, using a surrogate value for a frame tube of high-tensile
steel would unreasonably distort the calculation of NV for a bicycle
with a chrome-molybdenum frame. In reality, for certain components, a
specific design or material composition can result in a distinctly
different input.
With respect to the factors of production methodology, the Court of
Appeals has noted that ``there is much in the statute that supports the
notion that it is Commerce's duty to calculate margins as accurately as
possible and to use the best information in doing so.'' See, Lasko.
Therefore, to minimize distortions and ensure the most accurate margin
calculation possible, we developed a hierarchy for selection of
surrogate values for parts and components based on the need for
specificity with respect to design or material composition or both. Our
first choice under that hierarchy is to use data from India (e.g., the
component prices from the Delhi Market Report) or Indonesia (e.g., the
average unit values from the Indonesian study) if it is specific with
respect to design and material composition or if we could not
determine, based on the evidence, whether significant variations in the
price data stemmed from design or material composition. Where design or
material composition appeared to have a significant impact on price but
design or material-specific data was not available in a surrogate
country, we used the average actual market-economy prices from market-
economy suppliers to the PRC. However, we used this data strictly as a
second alternative to design- or material-specific data from India or
Indonesia, where available.
In one instance, a respondent reported factors of production for a
number of piece-parts produced by its affiliated supplier, e.g., fork
arms. We did not value those subcomponents because we had no factor
values for fork arms. Instead, we valued the smallest component that
incorporated these sub-components, e.g., completed fork set.
Other Factor Valuations
Where possible, we used public information for the surrogate
values. The selection of the surrogate values was based on the quality
and contemporaneity of the data. Where possible, we attempted to value
material inputs on the basis of tax-exclusive domestic prices. As
appropriate, we adjusted input prices to make them delivered prices.
For those values not contemporaneous with the POI, we adjusted for
inflation using wholesale price indices or, in the case of labor rates,
consumer price indices, published in the International Monetary Fund's
International Financial Statistics. For a complete analysis of
surrogate values, see the Factors Calculation Memorandum to Barbara R.
Stafford from the team, dated April 22, 1996.
To value caustic soda, methylene dichloride, zinc hydroxide, oxalic
acid, sulfuric acid, nitric acid, chromic nitric acid, tartaric acid,
and sodium carbonate we used public information from POI issues of the
Indian publication Chemical Weekly. For chromic anhydride, various
phosphates, various chromates, sodium bichromate, dimethyl benzene, and
acetylene and carbon dioxide, we relied on POI import prices contained
in Monthly Statistics.
Regarding sodium bichromate, sodium chromate, and potassium
chromate, we could not find POI prices for these exact inputs.
Therefore, we used a POI import price based on a basket category
containing chromates and dichromates in Monthly Statistics to value
these inputs. For dimethyl benzene, we obtained a price for a similar
chemical from Monthly Statistics.
To value argon gas and oxygen, we relied on 1994 Indonesian price
data in the Statistical Bulletin because we could not locate a price
from Indian publications.
With regard to hydrochloric acid, we relied on a 1993 Indian export
price quote from Chemical Weekly because the prices for this input in
other known Indian publications are based on an Indian import category
that is not exclusive to hydrochloric acid (See, Final Determination of
Sales at Less Than Fair Value: Coumarin from the People's Republic of
China, 59 FR 66895 (December 28, 1995.))
We valued degreaser using information from the only known Indian
publication which contained such a price, The Analyst's Import
Reference 1993, Chemical & Pharmaceutical Products (The Analyst).
We valued paint using Indian price data from Monthly Statistics. We
could not find a material price for solvent (thinner) from publicly
available information. Therefore, we used Indian price data from
Monthly Statistics for a similar chemical, which also dilutes paint.
To value diesel fuel, we used a POI Indian price from the
publication AP Worldstream. To value liquefied petroleum gas, we used a
POI price from the periodical Financial Times of India.
For the valuation of electricity, we used an average 1992
industrial rate from the publication Current Energy Scene in India
because this publication contained data more contemporaneous to the POI
than other known publications.
With regard to labor, we used data from the United Nations'
publication Yearbook of Labor Statistics. Following the method
established in the Final Determination of Sales at Less Than Fair
Value: Polyvinyl Alcohol from the PRC, 61 FR 14062 (March 29, 1996)
(PVA), we find no basis to assume the skill level of the surrogate
value, nor do we have agreement among parties regarding use of this
labor rate for skilled and unskilled labor rate assumptions. Thus, we
applied a single labor value to all reported labor factors, including
indirect labor (See Comment 18 below for further discussion).
To value scrap metal, we relied on Indian data from Monthly
Statistics. We treated the scrap metal as a by-product and deducted its
value from the cost of manufacture (COM) for CBC, Chitech, Giant,
Merida, and Overlord. This adjustment was not appropriate for the
remaining respondents.
For nuts and bolts and screws, we used product-specific published
prices contained from the Indonesian publication Indonesian Foreign
Trade Statistics for Imports (See Comment 17 below for further
discussion).
For certain subcomponents we had no published prices or publicly
ranged market prices from which to choose. Therefore, we valued these
specific components based on the content of material (e.g., steel ,
plastic or rubber). To value components made of steel, we used an
average tax-exclusive 1994 domestic steel price from the Indian
publication Statistics for Iron and Steel. For components made of
plastic and/or rubber, we used Indian price data from Monthly
Statistics.
To value factory overhead, SG&A, and profit, we calculated simple
average percentages based on the data from the four financial
statements of Indian surrogate producers which are contemporaneous with
the POI, i.e., Atlas, Hero, Gujurat and TI. We made certain adjustments
to the percentages calculated as a result of reclassifying
[[Page 19031]]
expenses contained in the financial reports. We calculated a simple
average of the profit ratios for the three Indian surrogate producers
which were profitable during the POI. We also included the profit ratio
of a fourth company; however, we set this additional profit ratio to
zero because this company was not profitable during the POI (See
Comment 15 below for further discussion).
Finally, to value the packing materials, corrugated cartons,
uncorrugated cartons, bubble wrap/foam paper, staples, adhesive tape,
rope, packing paper, polypropylene, polyethylene, recycled plastic
cups, inner recycled paper boxes, and plastic bags, we relied on Indian
data from Monthly Statistics. To value glue, we used an average price
based on Indian price data for two types of glue products from the
publication Chemical Weekly.
Critical Circumstances
For purposes of the preliminary determination, we determined that
critical circumstances existed only with respect to Hua Chin. However,
the margin for Hua Chin in the amended preliminary determination was de
minimis; in effect, making this issue moot for Hua Chin. Since this
amended determination we have not received any information which would
cause us to reconsider our analysis. Because Hua Chin's final margin is
also de minimis, this issue continues to be moot.
Verification
As provided in section 782(i) of the Act, we verified the
information submitted by respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and production records and original
source documents provided by respondents.
Interested Party Comments
General Comments
Comment 1: CEP Deductions and COS Adjustments
According to petitioners, the plain language of Section 772(d) of
the Act requires the deduction of all selling expenses from CEP in the
calculation of USP. Petitioners assert that the CEP deduction is not
contingent upon whether circumstance of sale (COS) adjustments or an
offset to NV can be made. Moreover, petitioners note that CEP offsets
are no longer automatic under the new law. In line with this argument,
petitioners claim that no level of trade (LOT) adjustment or CEP offset
is warranted in the instant investigation because the record does not
demonstrate that NV is at a more advanced LOT than CEP. However, should
the Department decide to make an adjustment, petitioners provide their
own calculation showing that this should equal 0.096 percent of COM.
Furthermore, petitioners contend that the Department should make
COS adjustments for EP sales, and assert that the Department can
differentiate between direct and indirect selling expenses in both the
United States and surrogate data if certain assumptions are made.
However, petitioners maintain that, if the Department believes that it
is difficult to segregate all direct from indirect expenses for EP
sales, at a minimum the Department should adjust for U.S. commissions.
Respondents argue that no deduction for CEP selling expenses should
be made. Respondents state that such a deduction would blatantly
disregard the Department's stated policy concerning selling expenses in
non-market-economy (NME) cases. Specifically, respondents contend that,
as in past cases, the financial statements used to determine surrogate
SG&A do not distinguish between direct and indirect selling expenses.
Consequently, respondents assert that any adjustment made for purposes
of calculating an offset would require an arbitrary division of these
expenses among direct and indirect selling, G&A, and manufacturing
expenses. As precedent on this issue, respondents cite Final
Determination of Sales at Less Than Fair Value: Oscillating Fans and
Ceiling Fans from the People's Republic of China, 56 FR 55271, (October
25, 1991); Final Determination of Sales at Less Than Fair Value:
Refined Antimony Trioxide From the People's Republic of China, 57 FR
6801 (Feb. 28, 1992); and Final Determination of Sales at Less Than
Fair Value: Certain Helical Spring Lock Washers From the People's
Republic of China, 58 FR 48833 (Sept. 20, 1993).
However, respondents state that, if a CEP deduction is made, the
Department should not add selling expenses to NV. Respondents maintain
that the Department has the authority to disregard selling expenses
because the language of the NME provision of the statute only requires
an addition for general expenses. Nonetheless, respondents maintain
that, if selling expenses are added to NV, the Department should make a
corresponding offset, capped by the amount of the CEP deductions.
Finally, for the same reasons that the data on the record of this
case is not suitable for calculating adjustments to NV, respondents
contend that this data is likewise unusable for purposes of making COS
adjustments.
DOC Position: Regarding the necessity of making CEP deductions, we
have reevaluated our practice in this area and have concluded that CEP
deductions are required by the plain language of the statute, which
states in section 772(c)(2)(d) that CEP ``shall be reduced'' by the
selling expenses associated with economic activity in the United
States. The statute provides no exception for cases involving non-
market-economy countries. Consequently, we have made deductions to CEP
for all selling expenses associated with economic activity in the
United States, in accordance with our practice. (See, e.g., Preliminary
Determination of Sales at Less Than Fair Value and Postponement of
Final Determination: Certain Pasta from Italy, 61 FR 1344, (January 19,
1996)) (Pasta). However, we disagree with petitioners that we should
deduct those U.S. selling expenses incurred in third country markets
which are not associated with selling activity occurring in the United
States. The SAA makes it clear that we only adjust for selling expenses
associated with economic activity in the United States. SAA at 153.
Regarding making an offset to NV, we disagree with respondents that
an offset to NV is required in this case. While the statute requires
certain adjustments to USP, corresponding adjustments to NV are only
required upon a sufficient showing that differences exist justifying
the adjustment. See section 773(a)(7). In this case, the only
information we have about selling expenses is the financial statements
of the Indian producers. These do not specify whether Indian home
market sales are at any particular LOT or include any particular
selling expenses. Therefore, we do not have any basis upon which to
determine whether any adjustment to the surrogate expenses is
appropriate.
We disagree with petitioners' argument that COS adjustments are
required by the statute. Rather, section 773(a)(6)(C) allows NV to be
increased or decreased for differences in circumstances of sale as long
as ``it has been established to the satisfaction of the administering
authority'' that such adjustments are warranted. Given the imprecise
nature of the information about selling expenses in the record in this
case, we have no basis to conclude that such adjustments are warranted
in this case.
Finally, regarding respondents' argument that we should not add
selling expenses to NV because the statute only references general
expenses, we disagree. We have always interpreted
[[Page 19032]]
the term general expenses to refer to selling, general, and
administrative expenses. Accordingly, we included selling expenses in
NV, as is our normal practice.
Comment 2: Profit Deduction from CEP Sales
In addition to deducting selling expenses from CEP, petitioners
contend that the plain language in section 772(d) of the Act also
requires that profit be deducted from CEP. Petitioners suggest that
this deduction be based on the profit of the surrogate producers and
the ratio of CEP deductions to total U.S. expenses.
The record of this investigation does not contain sufficient
information to calculate actual total profit because, according to
respondents, there is no information on actual manufacturing costs and
overhead. Accordingly, respondents argue that no deduction for profit
should be made.
DOC Position: We agree with petitioners. Section 772(d) of the Act
requires the Department to make a deduction for profit associated with
CEP selling expenses. Section 772(f) of the Act specifies that, in
general, this calculation involves both U.S. and home market total
sales, costs, and expenses. In making this calculation in market-
economy cases, we have included respondent's home market sales, cost,
and expense data in this calculation, See, e.g., Pasta. However, in
this case we have no home market sales upon which to base this
calculation. Instead, we only have usable financial statements of four
Indian surrogate producers. In attempting to perform this calculation,
we found that there were numerous difficulties in accurately combining
the total sales, total cost, and total expense data from these
financial statements. This is because these data are expressed in
different ways on each financial statement, making any attempt to
combine them problematic. Given these difficulties, we determined that
petitioners' approach is the most reliable and consistent with the
manner in which this calculation is performed in market-economy cases.
This approach avoids the difficulties in combining data from the
financial statements because the variables are consistently and readily
identifiable across the four financial statements. See also
``Concurrence Memo'' for a complete discussion of this issue.
Comment 3: Publicly Ranged Market-Economy Prices
Petitioners agree with the basic methodology used by the Department
in the preliminary determination for valuing bicycle components.
However, petitioners maintain that the Department's use of average
publicly-ranged market-economy prices had the effect of allowing
respondents to introduce ``distortions'' into the factor values in the
manner in which the prices were ranged. Petitioners argue that the
Department should use prices for valuing bicycle components that allow
the most accurate margin calculation possible. Petitioners maintain
that no proprietary information will be disclosed as long as the
Department releases margin calculations under administrative protective
order (APO), as was done for the preliminary determination.
Chitech argues that an adjustment to the publicly ranged market-
economy prices would violate confidentiality. The other respondents
argue that petitioners' suggestion would violate 19 CFR 353.32(f)
because it would result in the unauthorized release of data to
companies that did not submit that information. Respondents further
argue that parties would be denied their right to disclosure because
the Department could not disclose such information to them.
Moreover, respondents contend that the current publicly-ranged
market-economy prices used by the Department already penalizes
companies. Respondents assert that some companies would purchase a
component from a domestic source, rather than a market-economy source,
if the domestic source offered the identical component at a lower
price. However, for these domestic purchases, the Department, by
assigning such prices, i.e., the public versions of presumably higher
market-economy prices, as used in the preliminary determination,
ascribes to that component a higher price than the companies may
actually incur. Respondents maintain that using petitioners suggestion
to value Chinese-sourced components would only increase this penalty.
In addition, respondents state that the Department has developed a
preference for using PI to derive factor prices. Respondents maintain
that they have submitted publicly ranged versions of their proprietary
factors of production databases in accordance with the Department's
instructions and 19 CFR 353.32(b)(1). Finally, respondents argue that
neither the Department nor petitioners claimed that the publicly-ranged
prices did not conform to the regulations.
DOC Position: We agree with petitioners that the use of
respondents publicly-ranged prices allows the possibility of
distortions caused by the manner in which respondents ranged these
prices. Respondents were aware of our intention to use the public
versions of these prices in our factor valuations prior to the
preliminary determination. We discussed this issue with them when
explaining the requirements of our additional request for information
related to the special coding instructions for parts and components. We
agree with petitioners that it is appropriate to use actual average
prices for the margin calculations. However, before determining whether
the average of the actual prices could be released publicly, we
analyzed the data sources to satisfy ourselves that no proprietary
information would be released.
For each input price under analysis, we considered the number of
companies reporting a price for that input and whether one or two
companies' relative volume of market-economy purchases were
significant. These factors allowed us to determine to our satisfaction
whether any one company could derive the actual prices reported by
other respondents (i.e., proprietary data). In performing this
analysis, we considered, among other things, the approach to this issue
employed by the International Trade Commission (ITC).\1\ However, we
modified this approach to fit the unique circumstances of this
investigation. We took this approach because there are instances in
which proprietary data would be divulged and it would be too burdensome
to make public versions of all documents which incorporate the
proprietary prices. Accordingly, we classified all the average market-
economy price data as proprietary and will release it to the
appropriate parties under APO.
---------------------------------------------------------------------------
\1\ According to the ITC approach, generally, it would not be
feasible for any one company to determine the actual price as long
as three or more respondents purchase the same component from
market-economy suppliers. However, in situations where one
respondent accounts for 75 percent of the quantity of a given
component, the data is considered proprietary. In addition, in
situations where two respondents account for 90 percent of the
quantity of a given component, that data is considered proprietary.
See, memo from analyst to file regarding this practice dated April
8, 1996.
---------------------------------------------------------------------------
Comment 4: Transfer Prices
At verification we discovered that three respondents, Hua Chin,
Universal and Overlord, had reported the transfer prices of their
affiliates (which included a markup for freight, expenses, and profit)
instead of the price paid to the unrelated supplier. Respondents
contend that because the transfer prices were always higher then the
prices paid to the unrelated supplier, it follows that these prices
must be considered by the
[[Page 19033]]
Department to have been made at arm's length and should not be
adjusted.
Although three respondents reported transfer prices, petitioners
only addressed Overlord. Petitioners argue that the component prices
reported by Overlord do not include those general and administrative
expenses incurred by Overlord Taiwan and NaiYu, its other affiliate, in
purchasing the same components. As such, petitioners maintain that
Overlord understated the actual costs of components from these
suppliers by not accounting for these expenses. Therefore, petitioners
argue that the Department should not adjust these prices downward to
account for the mark-up.
DOC Position: We agree with both petitioners and respondents. Hua
Chin, Universal, and Overlord each reported the price paid to an
affiliate which had purchased certain parts from unaffiliated
suppliers. Regarding Hua Chin, it pays its Taiwan affiliate a service
fee for certain component purchases to cover freight, expenses, and
profit. However, company officials were unable to provide separate
freight invoices showing how much of the service fee was attributable
to freight, other expenses, or profit. Regarding Universal and
Overlord, we found at verification that the prices reported by both
companies were conservative, in that they cover the price from the
unaffiliated supplier plus the affiliated supplier's freight costs and
profit, if applicable. However, we do not know the exact amount of the
price that is applicable to freight costs, expenses, and profit.
Therefore, we made no adjustment to the transfer prices reported by Hua
Chin, Universal, and Overlord, and have used them in our margin
calculations.
Comment 5: Third Country Selling, General, and Administrative Expenses
(SG&A)
Regarding the SG&A expenses incurred by the Hong Kong and Taiwan
affiliates of respondents, petitioners argue that such expenses cannot
be used to build NV because their use would result in an understatement
of these expenses. Petitioners argue that the respondents also incur
significant expenses selling at the factory in the PRC. Because such
expenses are incurred in RMB, they cannot be combined with market-
economy currency expenses incurred by the affiliates. If the Department
used the affiliates' SG&A, it could not also use the PRC-incurred
selling expenses. Therefore, petitioners argue that the Department must
use the SG&A expenses of the Indian surrogate producers. However,
petitioners argue that COS adjustments must be made for particular line
items in affiliates' financial statements, such as commissions, which
they argue should be considered as direct selling expenses.
Chitech argues that the Department cannot lawfully use the SG&A
expenses of the offshore affiliates because these do not fit into the
statutory scheme. Chitech argues that the statute requires the
Department to value SG&A in a surrogate country.
DOC Position: We agree that the SG&A expenses of the offshore
affiliates should not be used for calculating NV. In non-market-economy
cases our practice is to value factors of production using the prices
actually paid by a respondent for inputs purchased from a market-
economy producer and paid for in a market-economy currency. This
practice has been used primarily to value material inputs. However, at
the outset of this investigation, we considered using the ``actual''
market-economy expenses of the Hong Kong and Taiwan affiliates to
calculate NV. We also considered using the selling portion of the
affiliates' SG&A to make COS adjustments to NV in both CEP and EP
situations. On September 28, 1995, prior to the preliminary
determination, we issued supplemental SG&A questionnaires to the
respondents and subsequently verified the information contained in the
responses. After analyzing and verifying this SG&A information, we have
identified several problems, discussed below, which cause us to
conclude that use of such data would not enhance the accuracy or
fairness of our calculations.
The first problem involves double counting SG&A. Each of the nine
respondents incur SG&A expenses at their factories in the PRC.
Therefore, in addition to using the affiliates' market-economy SG&A
expenses to construct NV, we would also have to use surrogate data to
value the portion of SG&A incurred in the PRC. To do so, we would have
to determine the appropriate portion of the surrogate SG&A ratio to use
(i.e., that portion concerning the PRC factory incurred selling
expenses) to avoid over-valuing the SG&A element in NV. Although we can
identify both the SG&A ``activities'' performed at the respondents'
factories and the SG&A ``activities'' performed by the respondents'
affiliates, we are not able to use this information to identify the
portion of total surrogate SG&A expenses that should be used to value
SG&A expenses incurred at the factories.
The second problem is in finding the appropriate cost of sales over
which to allocate SG&A. The Department's practice is to express the
SG&A element in NV as a percentage of the cost of sales. In order to
derive this percentage from the affiliates, we used the affiliates'
cost of goods sold. However, we encountered several problems with this
methodology. We were not able to compute an SG&A ratio for one of the
affiliates because it did not report any product costs (cost of sales)
in its financial statement. In addition, the product costs of the other
affiliates include both costs incurred to purchase the product from the
factory in China (costs generally denominated in RMB) and costs
incurred in market economies. Thus, the SG&A ratios derived from the
affiliates are not ratios solely of market-economy expenses and,
therefore, it may not be appropriate to use these ratios.
The Department uses actual market-economy inputs wherever possible
in NME cases because we believe this enhances the accuracy of our
calculations. Given the numerous difficulties described above, we do
not believe the use of these expenses would enhance the accuracy of our
calculations in this case. Therefore, we did not use the affiliates'
SG&A information to construct NV, and instead, used the Indian
producers' surrogate data. In addition, we find that the affiliates'
data is also not usable for making COS adjustments as suggested by
petitioners, for the same reasons discussed above (See, Comment 1
above. See, also, Concurrence Memorandum, dated April 22, 1996, for
further discussion.)
Comment 6: Price Averaging
Respondents state that the Department's preliminary determination
limited averaging to an inappropriately narrow range of products.
Respondents claim that the illustration cited in the SAA regarding
averaging NVs for ``each size of television...'' demonstrates that the
Department's use of control numbers for averaging NV was too narrow of
a basis. The Department should calculate average prices over
``comparable merchandise'' as defined by bicycles of identical type,
wheel size, and number of gear speeds. Respondents claim that these
factors were identified by the ITC as the most important determinants
of price differences among bicycles. Respondents further state that
petitioners used the above factors to segregate different classes of
bicycles for purposes of alleging dumping margins.
Furthermore, respondents argue that control numbers are not an
acceptable method for determining ``comparable merchandise'' for
purposes of averaging
[[Page 19034]]
because of the many working components contained on a bicycle.
Respondents state that using control numbers to define ``comparable
merchandise'' nullifies the intent of the averaging provision because
it limits its application to instances in which prices would not vary
in the first place.
Petitioners contend that the SAA language cited by respondents
actually expresses concern that televisions of different physical
characteristics not be subject to a single average, but rather, be
averaged separately. Petitioners state that the proposed regulations
identify averaging groups as consisting of ``subject merchandise that
is identical or virtually identical in all physical
characteristics....'' Petitioners state that, for the preliminary
determination, the Department followed the approach described by the
proposed regulations, the statute, and the SAA in averaging products by
control numbers.
Further, petitioners suggest that the Department narrow the
averaging categories even further for the final determination.
Petitioners state that the mass merchandisers should be segregated from
the independent bicycle dealers (IBDs) in the averaging groups, based
on the customer codes set forth in the computer program, in order to
ensure that the sales with the same physical characteristics and same
class of customer are averaged together. However, petitioners also
state that, by averaging U.S. prices based on a number of discrete,
physical characteristics, the Department has to a large extent ensured
that it is also comparing bicycles in the same customer class because
bicycles sold to mass merchandisers often will be of lower
specifications than bicycles sold to IBDs.
DOC Position: We agree with petitioners. It has been long-standing
Department practice to average NV using as specific a basis as
available (i.e., control numbers). See, Final Determination of Sales at
Less Than Fair Value: Polyvinyl Alcohol from Taiwan, 61 FR 14065 (March
29, 1996) and Pasta. Respondents' argument is that we should ignore
differences in material composition and/or quality level of components.
Respondents would have us average the prices of a 21-inch bicycle with
a chrome-molybdenum frame with the same size bicycle with a carbon
steel frame. Similarly, respondents would have us average the price of
a bike with an expensive, sophisticated Shimano derailleur with a bike
with an inexpensive derailleur. Clearly, the different costs associated
with frame material composition and componentry are important to
consider in price averaging. Furthermore, we are unable to confirm
petitioners' assertion that there is more than one LOT or class of
customer due to lack of evidence on the record. Therefore, we averaged
NV by control number, as in the preliminary determination.
Comment 7: Initiation of This Investigation
In previous submissions to the Department, respondents' claim that
petitioners had access to Indian data and information on export prices
of bicycles which was more accurate than the Indonesian data and U.S.
retail pricing data provided in the petition. As such, they claim that,
pursuant to instructions of the U.S. Court of International Trade, the
Department was told to ``continue to explore'' whether the initiation
of this investigation was proper and to develop ``a final reviewable
record'' on this issue.
Respondents state that the Department failed to develop a complete
administrative record of the circumstances surrounding the initiation
of this antidumping investigation as directed by the U.S. Court of
International Trade instructions in China Bicycle Co. (Holdings) Ltd.,
et. al. v. United States, et. al. (Ct. No. 95-11-01426). Specifically,
respondents state that the Department should have reexamined the retail
price calculations alleged in the petition as well as the export price
information in the possession of petitioners at the time the petition
was filed.
DOC Position: We disagree with respondents. Respondents' requests
for termination of this investigation is based on a fundamental
misunderstanding of the initiation process in the context of the
overall antidumping statutory scheme. The evidentiary standard for
initiation is ``information reasonably available to the petitioner
supporting those allegations.'' 19 U.S.C. 1673a(b)(1)(1995). Inherent
in this standard is the understanding that petitioners generally will
have very limited access to foreign firms' pricing practices. As a
result, petitioners will not usually be in a position to determine if
foreign firms, on an overall weight-averaged basis, are dumping.
Pursuant to the statute and regulations, petitioners merely have to
support their dumping allegations with evidence that any sale is dumped
in order for the Department to initiate an investigation. The statute
assigns the task of performing the overall weight-averaged dumping
calculations to the Department. The Department has the authority,
pursuant to the statute, to request and analyze respondent's actual
data to determine if the respondents are dumping. Respondents, in turn,
have the opportunity to provide their information to demonstrate that
on a weight-averaged basis they are not dumping.
This does not mean, however, that petitioners need merely allege
dumping in order for the Department to initiate an antidumping duty
investigation. The Department's regulations state that the petition
shall contain ``[a]ll factual information (particularly documentary
evidence) relevant to the calculation of the United States price of the
merchandise and for the foreign market value of such or similar
merchandise.'' 19 C.F.R. 353.12(b)(7). We interpret this regulation
consistent with the evidentiary standards in the statute, i.e., the
petition must contain evidence reasonably available in support of the
allegation. Thus, all information ``relevant to the calculation of USP
and NV'' is interpreted to mean evidence supporting each element of the
calculation in the petition. This regulation is not interpreted as
imposing a stricter evidentiary standard than is provided for in the
statute. As discussed below, the petition met that statutory standard.
In this case, the Department determined that the information in the
petition constituted a reasonable basis upon which to initiate.
Moreover, the Department carefully examined respondents' subsequent
challenges to the petition data and, as a result, has made some
adjustments to the petition calculations. However, none of the
respondents' allegations justified termination of the investigation on
the basis that the petition was inadequate.
In calculating the export prices contained in the petition,
petitioners obtained U.S. retail prices and made adjustments for
retailer's gross margin, importer selling expense, and movement
charges, to estimate an ex-factory price. Respondents have not
provided, and the Department has not encountered, any evidence to
indicate that any of the retail prices and subsequent adjustments were
in anyway flawed or inaccurate.
Instead, respondents' challenge rests on the fact that petitioners
did not include in the petition the actual export price for one of the
petitioner's few purchases of Chinese bikes. However, as discussed
above, the fact that some sales may not have been sold at LTFV does not
invalidate the petition evidence that other sales were. In addition,
these purchases were not of the same types of bikes upon which the
petition calculations were based and, therefore,
[[Page 19035]]
do not challenge the data upon which the dumping allegation was based.
Respondents' further argument that certain FOB Hong Kong prices
contained in the petition should have been used instead of the retail
price information is not persuasive. As petitioners point out in their
submissions, there are significant problems with these figures, not the
least of which is that the record does not indicate the models with
which those prices are associated.
On the NV side of the margin allegation, the Department examined
respondents' allegations that the factors of production were improperly
valued. Respondents argued that petitioners should and could have
reasonably provided data from India instead of Indonesia because the
Indian data was reasonably available, and in respondent's view, India
was a more appropriate surrogate. Once again, respondents' argument is
unpersuasive. The statute does not require petitioners to investigate
and supply in the petition all possible surrogate data from all
potential surrogate countries. Petitioners are required to base their
factors of production analysis on values in an appropriate surrogate
country as defined by the statute. Petitioners selected Indonesia as
the primary surrogate based on their analysis that Indonesia was
economically comparable and a significant producer of bikes. The
Department reviewed their analysis and determined that Indonesia was an
appropriate surrogate country for the basis of a petition. In fact,
when the Department conducted its own surrogate country analysis, it
determined that both Indonesia and India were appropriate surrogate
countries. Although the Department did ultimately select India as the
primary surrogate (see, Factors Valuation Memo dated November 1, 1995),
that does not invalidate Indonesia as an appropriate surrogate. Indeed,
in this final determination, as in the preliminary determination, the
Department resorted to Indonesian values when Indian values were not
available.
Respondents also challenged the validity of certain factor values,
including the Indonesian depreciation, interest, and profit (value
added) figures. During the course of the investigation, updated
information demonstrated that the Indonesian depreciation, interest and
profit percentage used in the petition was aberrant and, as a result,
the Department adjusted these Indonesian figures. The original
depreciation, interest, and profit figures in the petition was
substantiated by a 1992 Indonesian Survey of the Indonesian bike
industry. The updated figures for 1993, which demonstrated that the
1992 figure was aberrational, were not available at the time of filing.
Thus, the 1992 figure was relevant information reasonably available to
the petitioner at the time of filing and provided a valid basis upon
which to initiate. We further note that the adjustment to the
depreciation, interest and profit figures did not eliminate the
petition margins. The Department was able to corroborate the other
petition data challenged by the respondents and, thus, made no
adjustment to them. See, Facts Available section above.
Finally, contrary to respondents' argument, the Department's
actions have been consistent with its statutory obligations as noted by
the Court during the hearing for respondents' interlocutory appeal of
the initiation issue. In reaching its final determination, the
Department has examined all of the submissions of both respondents and
petitioners on this subject and determined that none of the information
or arguments submitted by respondents provide a basis upon which the
Department should initiate a further investigation of the petition or
terminate the investigation.
Comment 8: China-Wide Rate--Adverse Facts Available
Respondents argue that the Department resorted to sampling in this
investigation and, therefore, the Department should apply the
provisions of Section 735(c)(5) of Act to calculate an antidumping duty
rate for all uninvestigated firms. Section 735(c)(5) of the Act,
``Method for determining all other rate,'' provides that this rate
should be the weighted average of margins established for exporters and
producers investigated individually, excluding margins that are de
minimis and margins that are based on ``facts available.'' Respondents
assert that the law precludes the Department from applying punitive
rates to uninvestigated firms, except in certain limited circumstances
that are not applicable in this investigation. According to
respondents, the Department's preliminary determination violated
Section 735(c) of the Act because it based the ``all others'' rate for
uninvestigated firms on adverse information from the petition.
Furthermore, respondents contend that the fact that this
investigation involves a non-market economy does not change the
prohibition against the use of punitive rates for uninvestigated firms.
Respondents argue that the Department has never informed the Chinese
government, industry representatives or any uninvestigated exporters
that they have failed to cooperate. According to respondents,
uninvestigated firms in non-market-economy cases are entitled to the
same fair treatment as uninvestigated firms in market-economy cases.
Respondents state that neither the sampling provision of the Act nor
Section 735(c) provides an exception for non-market economies.
Moreover, respondents argue that the Court of International Trade has
directed in UCF America, Inc. v. United States (No. 92-01-00049, Feb.
27, 1996) (UCF) that the ``all others'' calculation be applied without
distinction to market or non-market-economy investigations.
Petitioners argue that, contrary to respondents' claim, the
Department did not apply an ``all others'' rate. Rather, petitioners
note that the Department applied a ``China-wide'' rate, in accordance
with its well-established methodology in NME cases, including basing
the rate on adverse facts available.
DOC Position: We disagree with respondents. Respondents' statement
with respect to the Department's method of respondent selection is
incorrect. As noted in the respondent selection memorandum (see the
June 30, 1995, Memorandum to Barbara R. Stafford), the Department did
not resort to sampling when choosing mandatory respondents for this
investigation. Accordingly, the sampling provision of the Act regarding
uninvestigated firms does not apply here.
The Department acknowledges a recent decision of the Court of
International Trade, UCF America Inc. v. United States, Slip Op. 96-42
(CIT February 27, 1996), in which the Court affirmed the Department's
remand results for reinstatement of the relevant cash deposit rate, but
expressed disagreement with use of the ``PRC-wide'' rate as the
underlying basis for reinstatement.
The Court suggested that the Department lacks authority for
applying a ``PRC-wide'' rate in lieu of an ``all others'' rate. We
note, however, that section 777(A)(c) requires the Department to
determine individual dumping margins for each known exporter or
producer. Pursuant to this authority, the Department implements a
policy in NME cases whereby all exporters or producers are rebuttably
presumed to comprise a single exporter under common government control,
the ``NME entity.'' The Court has upheld our NME policy in previous
cases. See e.g., UCF America, Inc. v. United States, 870 F. Supp. 1120,
1126 (CIT 1994); Sigma Corp. V. United States, 841 F.
[[Page 19036]]
Supp. 1255, 1266-67 (CIT 1993); Tianjin Machinery Import & Export Corp.
V. United States, 806 F. Supp. 1008, 1013-15 (CIT 1992).
The ``NME-wide'' rate is consistent with section
735(c)(1)(B)(i)(I). This provision directs the agency to assign a
dumping margin for each exporter or producer individually investigated.
As discussed above, in NME cases, all producers and exporters comprise
a single exporter. Thus, we assign a single NME rate to the NME entity
just as we assign a single rate to exporters or producer in a market
economy that are deemed to comprise a single enterprise. Also, as in
all cases in which multiple exporters are treated as a single entity,
the response normally must include data for all companies that comprise
the collapsed entity. If any company fails to respond, the entire
entity receives a rate based on facts available.
To qualify for a separate rate, an NME exporter or producer must
provide a complete questionnaire response, including evidence showing
both de jure and de facto absence of government control. See Silicon
Carbide. Until such evidence is presented, a company is presumed to be
part of the NME entity and receives the ``NME-wide'' rate.
Consequently, whenever the NME enterprise has been investigated or
reviewed, calculation of an ``all others'' rate under section
735(c)(1)(B)(i)(II) is unnecessary because all exporters or producers
either qualify for a separate company-specific rate, or are part of the
NME enterprise, and receive the ``NME-wide'' rate. Thus, normally in an
NME case, there can be no exporters or producers who have not been
investigated or reviewed. Only when the respondents in an investigation
account for all exports and all respondents qualify for a separate rate
is an ``all others'' rate required. See PVA. Under those circumstances,
the NME entity has not been investigated and, pursuant to the statute,
would be entitled to an ``all others rate.''
Application of our NME policy to the instant investigation is
consistent with the Department's standard practice in NME cases. The
official copy of the questionnaire was sent to MOFTEC, an agency of the
PRC government. The cover letter of the questionnaire stated our long-
standing policy that the Department presumes that a single antidumping
margin is appropriate for all exporters in an NME country. However,
because of the large number of companies potentially comprising the NME
entity, we requested that the response include only the nine largest
companies. We issued the questionnaire to those nine largest exporters.
We also notified the government that we might be able to investigate a
limited number of voluntary respondents wishing to claim separate rates
treatment, but only if they submitted complete questionnaire responses.
We provided courtesy copies of the questionnaire to law firms and
companies who contacted us. In addition, the cover letter also laid out
our policy on voluntary respondents (see below), and we enclosed with
the questionnaire a copy of our respondent-selection memorandum.
Regarding our position on voluntary respondents, the Department
informed respondents at the onset of this investigation that due to a
lack of resources, we would only be able to investigate nine individual
producers/exporters. We addressed the issue of voluntary responses in
our respondent-selection memorandum, stating we would investigate and
verify voluntary responses on a ``space available'' basis, up to the
number of any non-responding firms from the list of the nine mandatory
respondents. We further indicated that if the number of voluntary
respondents was larger than the Department could investigate, we would
select randomly from the pool of voluntary respondents the additional
exporters to be investigated.
On August 7, we received responses from only three of the nine
exporters named as mandatory respondents. We also received only six
full voluntary questionnaire responses. All of the participating
companies established that they qualified for separate rates and have
received their own dumping margins for purposes of the final
determination. Because the six non-responding mandatory respondents are
presumed to be part of the single NME enterprise, that entire NME
enterprise is deemed to be uncooperative and it received a rate based
on adverse facts available. Any company that did not submit a full
questionnaire response, including information establishing entitlement
to a separate rate, is also deemed to be part of the NME enterprise
and, therefore, is subject to that rate.
Comment 9: China-Wide Rate--Submission of Section A by Exporters
Respondents contend that, even if the Department finds that the
amendment of Section 735(c) of the Act does not change the Department's
practice in NME cases, the presumption of control has been rebutted
successfully by a group of 12 uninvestigated Chinese exporters. They
argue that these 12 exporters have cooperated with the Department, and
have expressed their intention to provide any information the
Department requires in order to determine a separate rate for them.
Respondents believe that it would be unfair and contrary to law for the
Department to apply punitive margins against the 12 uninvestigated
companies.
In addition, respondents argue that the Department should accept as
timely submissions made by the 12 exporters showing their entitlement
to a separate rate. According to respondents, these submissions were
timely because the Department did not establish any specific deadline
for the submissions and, therefore, the general deadlines of 19
C.F.R.353.31 should apply.
Even assuming the 12 exporters' voluntary submissions were
untimely, respondents argue that the Department has no grounds to use
adverse information against these companies. Respondents assert that
Section 735(c)(5) of the Act does not require a company to request to
be a voluntary respondent in order to avoid the application of an
adverse rate. Furthermore, respondents argue that Section 735(c) of the
Act and the Court's ruling in UCF require that these exporters receive
a rate based on the weighted-average margin of investigated companies.
Finally, respondents argue that the lack of guidance in this
investigation stands in contrast to the instructions issued in the
antidumping duty investigation on honey from the PRC (see, Preliminary
Determination of Sales at Less Than Fair Value: Honey from the PRC, 60
FR 14725, March 20, 1995, (Honey)) where the Department requested
MOFTEC to transmit the questionnaire to ``all companies that process
honey for export to the United States and to all companies that were
engaged in exporting honey to the United States during the period of
investigation. . . .'' Respondents claim that the Department did not
issue these instructions in the instant investigation.
Petitioners assert that, contrary to respondents' claim, the 12
exporters have not cooperated in this investigation because they
ignored the Department's clear directive and submitted only partial and
untimely questionnaire responses. In addition, petitioners assert that
respondents have mischaracterized the Court's decision in UCF, stating
that the Court in that case did not rule on the issue of whether the
Department is allowed to use an adverse ``PRC-wide'' rate in an
investigation, but rather whether, in the course of an administrative
review, the Department was required to apply to unreviewed PRC
exporters the ``all others'' rate established in the original
investigation. In addition, petitioners note that UCF
[[Page 19037]]
concerned pre-URAA law. Petitioners assert that under the URAA, the
Department may apply a China-wide rate to companies that have not
established their entitlement to separate rates in an investigation.
DOC Position: We disagree with respondents. The information
submitted by the 12 exporters at issue was not a sufficient basis upon
which the Department could determine that these companies should
receive rates separate from the China-wide rate. The companies merely
provided volume and value data through a China Chamber of Commerce.
This submission did not include a request for separate rates treatment
from any of these exporters, nor did it provide information sufficient
to demonstrate that they were entitled to separate rates. Moreover,
although these exporters subsequently filed full Section A
questionnaire responses which included explicit claims for separate
rates treatment, these Section A responses were submitted two months
late. The cover letter to the questionnaire clearly identified the
deadline for submission of section A responses from any party wishing
to participate in the investigation as August 7, 1995. Because no
request for extension of this deadline was made by these parties, their
Section A responses were untimely under 19 C.F.R. 353.31.
Furthermore, in order to perform a separate rates analysis, the
Department needs to have not only the Section A separate rates
questionnaire response but also complete pricing data from each
exporter. The separate rates analysis focuses on the relationships
between exporters and the government, export prices and who sets them,
and control over export revenue. While the Section A response may
contain information on the ownership and control structures of the
entities being examined, the Department must also have complete pricing
data in order to analyze whether export pricing and business decisions
of a NME exporter are being made at the direction of the NME
government. As we stated above, the Department has never granted a
separate rate to any exporter without first receiving a full
questionnaire response. See e.g., Honey.
Therefore, by not submitting complete questionnaire responses in a
timely manner, these exporters failed to provide the Department with
the information necessary to perform a separate rates analysis. In
addition, by not placing the necessary pricing information on the
record, petitioners were denied the opportunity to examine the
responses and comment on whether it was appropriate for these exporters
to obtain separate rates. As a result, the 12 companies at issue do not
qualify for separate rates and therefore are considered to be part of
the single NME enterprise.
Similarly, the exporters' argument that the Department should base
their margin on a weighted-average of the margins calculated for the
responding companies is without merit. See Comment 8. The only
situation where the Department would apply a weighted-average margin to
an NME exporter not specifically investigated is one in which the
exporter provides a complete questionnaire response and makes a claim,
and establishes eligibility, for separate rates. (See e.g., Honey.) In
Honey, unlike in this case, the Department received 28 complete
questionnaire responses. The Department only had the resources to fully
analyze and verify four of those companies selected from the pool of
exporters which submitted complete responses. Thus, petitioners had the
opportunity to comment on all 28 responses. The Department applied the
weighted-average rate calculated for the four selected respondents to
the other 24 exporters which the Department did not have the resources
to fully investigate. The Department explained that:
This change in methodology was necessitated by the particular
circumstances of this case. The parties who responded but were not
analyzed have applied for separate rates, and provided materials for
the Department to consider in this request. Although the Department
is unable, due to administrative constraints, to consider the
request for separate rates status, and to calculate a separate rate
for each of these named parties, there has been no failure on the
part of these firms to provide requested information. Because it
would not be appropriate for the Department to refuse to consider an
affirmative documented request for an examination of whether these
companies were independent of any non-respondent firms and then
assign to the cooperative firms the rate for the noncooperative
firms, which in this case is an adverse margin based on best
information available, the Department has assigned a special single
rate for these firms.'' See, Honey at 14729.
In this case, as discussed above, the 12 companies at issue did not
provide complete questionnaire responses and therefore do not qualify
for separate rates.
Regarding the exporters' arguments that the Department did not
provide sufficient guidance on this issue, we find that this argument
is contrary to the evidence in the record. In the cover letter to the
questionnaire and respondent selection memorandum, we stated explicitly
the Department's long-standing practice of treating all NME exporters
or producers as part of the NME government unless otherwise
demonstrated. In addition, all communications from the Department to
the PRC government and counsel for respondents clearly states all
deadlines and instructs respondents to contact the Department if they
have any questions regarding deadlines or any data requested. Courtesy
copies of the questionnaire, the cover letter, and the respondent
selection memorandum were provided to counsel for the 12 exporters. The
Department, with the Honey case in mind, further indicated in the
respondent selection memorandum that, even though we did not have the
resources to investigate more than nine companies, if mandatory
respondents did not respond we would be able to examine additional
exporters randomly selected from the voluntary responses received. In
the respondent selection memorandum we clearly stated that if we
received more responses than we could reasonably investigate and verify
we would have to address the issue of what rate to apply to the
responses we were unable to investigate. However, in this case, we were
able to investigate and verify all of the responses received and,
accordingly, did not have to address this issue.
By not providing complete questionnaire responses, the 12 exporters
did not make themselves available for analysis in the event that a
mandatory respondent did not respond. It was not reasonable for those
exporters at issue to assume that they should receive special treatment
separate from other companies presumed to be part of the NME entity
when the record demonstrates that they were informed of the
consequences of not requesting a separate rate in a timely manner.
Finally, the exporters' assertion that they provided all the
information requested by the Department and thus qualify for a rate
other than the country-wide rate misinterprets the Department's non-
market economy single entity presumption. As explained above, the
Department assumes that all companies are part of the NME entity unless
the companies satisfy the Department that they qualify for a separate
rate. The burden is on the exporters to come forward and demonstrate
that they are entitled to separate rates. It is not incumbent upon the
Department to ask for separate rates responses, as these exporters'
arguments seem to suggest. It is up to each company to decide whether
it wishes to seek a separate rate. In this case, these
[[Page 19038]]
companies did not submit a separate rates claim until well after the
deadline for doing so had passed. Based on the above analysis, we are
treating these exporters as part of the government controlled entity.
Comment 10: Calculation of Antidumping Rate for Uninvestigated
Exporters on Facts Available in the Petition
If the Department bases the antidumping rate for uninvestigated
exporters on facts available in the petition, respondents assert it
should use only Indian surrogate values for overhead, SG&A, and profit.
Respondents argue that the Department should not use any of the
Indonesian surrogate values used in the petition because the Department
has rejected Indonesian in favor of Indian surrogate values.
Respondents argue that the Department had no justification for using
the rejected Indonesian information for these cooperating exporters,
and that for purposes of the final determination the Department should
apply the most recent Indian data in any calculations based on facts
available for other uninvestigated shippers.
Petitioners agree with respondents that in the event the Department
does apply facts available to these exporters, it should use only
Indian surrogate values for overhead, SG&A, and profit.
DOC Position: As discussed above in the Facts Available section,
Indonesia is an appropriate surrogate and, with the exception of
depreciation, interest and profit, the Indonesian factor values in the
petition have been corroborated. Therefore, the petition rate, as
adjusted, is appropriate for use as adverse facts available.
Comment 11: Business Taxes Paid on Exports
At verification, we found that Tandem Hong Kong (Tandem HK),
Chitech's Hong Kong affiliate, pays a fee to the Shunde government for
operating within the Shunde township. This fee is based on a percentage
of the value of all sales.
According to petitioners, this fee should be considered an export
tax and deducted from USP, in accordance with 772(a)(2)(B) of the Act.
Chitech maintains that the Department should make no adjustment for
this fee because the statute requires the Department to disregard the
costs of goods and services provided by NME suppliers. In addition,
Chitech points out that the Department has never treated payments to
the PRC government as selling expenses.
DOC Position: We disagree with petitioners that this fee should be
considered an export tax or that it should be deducted. In fact, our
analysis of Chitech's questionnaire response and review of this expense
at verification suggests that this fee is more analogous to a business
license fee or an income tax, rather than a tax levied solely on
exports. We do not adjust for intra-NME transfers.
Factor Valuations
Comment 12: Indian Producer Financial Statements
Petitioners argue that the Department should not use the financial
reports of Hero or Atlas because, according to the publication Cycle
Press, Hero and Atlas produce primarily roadster-type bicycles rather
than the MTB and ATB bicycles which PRC producers ship overwhelmingly
to the United States. In addition, Hero and Atlas only export 10 and 13
percent of their production, respectively. Petitioners point out that
under the Statute and Department's proposed antidumping regulations,
the Department is required to use surrogate value data from only those
market-economy firms that are significant producers of merchandise that
is identical or the most similar to that produced by the respondents
under investigation. Therefore, petitioners maintain that the
Department should use only the financial reports of Gujarat, TI Cycles
(TI) and Roadmaster because these companies are largely export-oriented
companies and predominately manufacture MTB and ATB bicycles.
Respondents maintain that the Department should use the combined
financial reports of Hero, Atlas and Gujurat. Respondents point out
that the Department cannot use the financial data of Gujurat without
using the data of Hero and Atlas because Gujurat (1) is considered a
``sick industrial'' company by the Indian government; (2) receives
subsidies from the Indian government; and (3) is not representative of
the Indian industry as a whole.
Respondents contend that the Department should reject TI's
financial report because TI only receives 50 percent of its income from
the sale of bicycles and because it produces a wide range of other
products, notably steel tubes. Respondents also maintain that the
Department should not rely on Roadmaster's financial report because the
report is not contemporaneous with the POI and because the Department
has financial reports it can use which are contemporaneous with the
POI. Respondents also argue that the Department should ignore the
submitted statement of a Hero company official because (1) it is not
public information; (2) it lacks credibility; and (3) it is self-
serving.
DOC Position: We disagree with respondents and petitioners and have
used the financial statements of the four Indian producers which are
contemporaneous with the POI--Atlas, Hero, Gujurat, and TI. This case
is unique in that there is a wealth of high-quality surrogate data,
particularly with respect to factory overhead, SG&A and profit. The
parties have argued, for a variety of reasons, that we should reject
certain companies' from consideration. However, we find that on
balance, the financial statements of four of the India surrogate
producers are usable for our factor valuations. We rejected the fifth
company's report, Roadmaster, because it was not contemporaneous with
the POI and because we already have four good sources which contain
data within the POI.
Regarding similarity of the merchandise produced by the Indian
producers to that of the PRC respondents, we find insufficient evidence
that any producer clearly produces the most comparable merchandise. It
is possible that the Hero, Atlas and Gujurat models shown in Bicycle
Guide may not be of as high a quality as those models produced by TI
(as alleged by petitioners). However, these models do contain basic
components, designs and features associated with BMX and ATB models
which resemble, or are exactly the same, as those in the PRC models
produced by respondents. Therefore, based on data in Cycle Press and
Bicycle Guide, we conclude that all five companies to some extent
manufacture the type and quality of bicycles produced by the
respondents during the POI.
With regard to the issue of who exports the highest percentage of
its merchandise, we disagree with petitioners that the amount of
exported production of each Indian producer is a clear indication of
which company is a significant producer of the merchandise under
investigation. The information in Cycle Press does not allow the
identification of the specific quantity of bicycle types exported by
each Indian producer for overseas sale. However, we can establish from
this publication that each of the five companies exports its full line
of products to foreign markets. Although we do not know for certain
whether these companies export all of the BMX, ATB, and/or MTB bicycles
that they produce, it is reasonable to conclude that these models
produced in India are designed primarily and/or exclusively for export
markets and that the number of these bicycles sold in
[[Page 19039]]
India's domestic market is minimal. Therefore, there is no basis in the
record to conclude that one company produces more comparable
merchandise. As such, this data is not relevant to our choice of
surrogate values.
With regard to the financial condition of the companies, Gujurat
was not profitable during the POI based on its financial report. We
know that the other Indian producers were profitable based on their
financial reports. Whether or not a company is profitable, however, is
not necessarily a reason for rejecting that company's data for purposes
of surrogate valuations for factory overhead and SG&A expenses. See,
also Comment 16.
In addition, we disagree with respondents that TI's data is
unusable because it produces some non-subject merchandise. The other
Indian producers also produce non-subject merchandise, albeit to a
lesser extent. Most Indian producers, like TI, produce steel tubes (a
bicycle input). Given these facts, we cannot conclude that the use of
TI's data is inappropriate.
Based on the above analysis, we have used the 1994-1995 financial
data of Hero, Atlas, TI, and Gujurat. We have excluded from our
analysis Roadmaster's data because it is not contemporaneous with the
POI and other contemporaneous data is available.
Comment 13: Average Method for Calculating Surrogate Percentages
Respondents claim that the Department should calculate a weighted-
average factory overhead, SG&A and profit of each Indian producer.
Respondents contend that, unlike in PVA, there is a clear correlation
between the costs and production quantities for all of the Indian
bicycle producers.
Petitioners maintain that using a weighted- average method would
imply that the production experience of larger producers like Hero and
Atlas would be more relevant than that of smaller producers like
Gujurat or Roadmaster. Instead, petitioners claim that it is the
experience of the smaller producers that is more representative of, and
better reflects, the factors of production for the products made by the
PRC respondents. Petitioners also point out that in PVA, the Department
found no indication that one factor (i.e., sales volume or production)
was so important that it would require the use of weighted-average
methodology.
DOC Position: We agree in part with petitioners. The use of
production quantities from the financial data to derive weighted-
average percentages will take into account the differences between the
production capacity and sales associated with the largest Indian
producers (Hero, Atlas and TI) and the capacity and sales of
significantly smaller operations such as Gujurat. The respondents show
data suggesting the factory overhead percentages for the largest
producers, Hero and Atlas, are measurably lower than the percentages
for the significantly smaller producer (Gujurat) and that there may be
inverse relationship between the factory overhead, SG&A and profit
ratios and production. However, a myriad of other factors could also be
affecting these ratios. For example, the age of the factory, the
quality of the merchandise being produced, and the relative capital
intensivity of the manufacturing process could all affect the ratios
under consideration. Moreover, not all of the PRC respondents are
large-scale producers like the Indian producers Hero and Atlas. In
fact, we find that the total production of the largest PRC producer is
significantly less than the total production amount of either Hero or
Atlas.
Finally, we do not know the relative amount of MTB or ATB
production included in each Indian producer's total bicycle production,
as compared with the production of utilitarian roadsters. This is
important because the PRC respondents produce predominantly MTB or ATB
bicycles for export to the United States.
Given these facts, there is no basis to conclude that a weighted-
average calculation would be a more accurate measure of the costs of
Indian surrogate producers of comparable merchandise. Therefore, we
used a simple average of these financial statements consistent with our
normal practice because, barring evidence to the contrary, we assume
that all of these surrogate values are equally representative of the
surrogate experience.
Comment 14: Calculating Surrogate Percentages from TI's Financial Data
Respondents maintain that the Department should exclude from TI's
financial report the expense data separately reported for two TI
subsidiaries which do not produce bicycles and which are consolidated
into TI's report. Alternatively, respondents argue that the Department
should use a ratio based on the amount of bicycle sales in terms of
total sales to determine the allocable factory overhead, SG&A, and
profit associated with bicycles exclusively. Finally, respondents urge
the Department to remove the excise duty amounts from TI's SG&A expense
calculation because the tax is a neutral item, bicycles are exempt from
the tax, and Indian law allows any Indian producer to recover this duty
amount.
Petitioners maintain that TI's financial data reasonably reflects
the performance of its bicycle division and is corroborated by the
similar financial experience of other Indian producers such as Gujurat
and Roadmaster. Moreover, petitioners maintain that the Department
should not make an adjustment to the expense data in TI's financial
report because TI's report is unconsolidated and therefore does not
include expense data from its two subsidiaries. Finally, petitioners
maintain that the Department should not exclude the excise duty from
the factory overhead or SG&A calculation because TI records this
expense in its financial report as an expense and that other Indian
producers such as Hero, Roadmaster and Gujurat account for the excise
duty liability in their financial reports by treating the duty as an
expense.
DOC Position: Respondents' claim that we should deduct the
``separately reported'' expenses of TI's subsidiaries is unsupported.
We examined the financial statements for TI's two subsidiaries and
found that expenses of TI's subsidiaries are not provided separately.
In addition, there is no evidence establishing that TI's report is a
consolidated statement that includes the subsidiaries. Indian Generally
Accepted Accounting Principles (GAAP) do not require Indian companies
to consolidate financial reports. Moreover, it appears from PI we
obtained that, in general, Indian companies do not prepare consolidated
financial statements (See World Accounting (1995) (page 44) and
International Accounting Summaries (1993) (page 5)). Therefore, we are
using the data in TI's financial report without any adjustment for the
subsidiaries' expenses.
Regarding the excise tax amount, we are removing the duty and/or
tax amount listed in TI's financial report when calculating its
surrogate percentages because it is the Department's practice to use,
if possible, tax exclusive values as surrogates in NME cases (See,
Final Determination of Sales At Less Than Fair Value: Disposable Pocket
Lighters from the PRC, 60 FR 22359 (May 5,1995) and Final Determination
of Sales At Less Than Fair Value: Sebacic Acid from the PRC, 59 FR
280053 (May 31, 1994)). Moreover, we have found in previous cases
involving products from India that excise duties and/or taxes paid by
Indian producers were refundable to the
[[Page 19040]]
producer by the Indian government (See, Final Determination of Sales at
Less Than Fair Value: Stainless Steel Bar from India, 59 FR 66915
(December 28, 1994)). Therefore, we have not only removed the amount of
excise duty and/or tax from TI's financial data, but also from the
financial data of the other Indian producers, where possible, which we
have used to calculate surrogate percentages.
Comment 15: Gujurat's Profit Percentage
Petitioners maintain that the Department should not use the profit
percentage derived from Gujurat's financial data in the overall profit
percentage calculation because Gujurat's profit percentage is negative.
Respondents assert that the Department should calculate a weighted
average profit percentage using Gujurat's actual financial data.
DOC Position: Consistent with how constructed value (CV) is
calculated in market-economy cases, we conclude that in selecting a
surrogate value for profit under section 773(c)(1), it is inappropriate
to use data from sales made below the cost of production. Gujurat's
negative profit indicates that the company may be selling its product
below the cost of production. Therefore, we have treated Gujurat's
negative profit ratio as zero, but have included the zero amount when
calculating the overall surrogate profit average.
Comment 16: Treatment of Pre-Painting Chemicals
In the preliminary determination, we valued all chemicals used to
produce the subject merchandise because we considered such materials to
be direct inputs and not part of factory overhead. Respondents argue
that the chemicals it uses to pre-treat parts prior to painting are not
material inputs, but rather factory overhead costs (i.e., consumables).
Respondents point out that it is Department practice to treat such
chemicals, which act as a cleaning detergent, as part of factory
overhead because these chemicals are not physically incorporated into
the subject merchandise (see Final Results of Administrative Review:
Heavy Forged Handtools, Finished or Unfinished, With or Without
Handles, from the People's Republic of China, 60 FR 49251 (September
22, 1995)(Hand Tools). Alternatively, respondents state that an amount
for ``consumables'' is noted in the financial reports of the Indian
producers used to calculate percentages for factory overhead, SG&A and
profit and that if the Department includes the ``consumables'' amount
in its factory overhead calculation, then the Department should not
value the chemical inputs reported in the Section D database because it
would be double-counting.
Petitioners maintain that the chemicals the respondents use are not
detergents applied to the parts to remove oxidation or dirt but
chemicals used to pre-treat parts prior to painting which are
incorporated into the subject merchandise. Therefore, petitioners
maintain that these chemicals are direct materials and should be valued
accordingly. Petitioners are silent on whether valuing the chemicals
would be double-counting if the Department included in its factory
overhead calculation an amount for ``consumables.''
DOC Position: We agree with petitioners. We examined all of the
respondents' production processes at verification and found that the
chemicals in question are essential for producing the finished product
and are incorporated into the product (i.e., in pre-treating the
components, the chemicals permeate the components and are not
completely washed off). These chemicals appear to be significant inputs
into the manufacturing process rather than miscellaneous or
occasionally used materials, i.e., cleaning supplies which might
normally be included in consumables. Moreover, the chemicals which we
would be valuing are chemicals such as hydrochloric acid, sulfuric
acid, and caustic soda (to name a few) which we have routinely valued
in prior NME cases involving the production of non-chemical finished
products (e.g., lock-washers). Therefore, we treated these chemicals as
direct material inputs. We considered that such significant material
inputs would not normally be considered consumables and, therefore, no
double counting would occur.
Comment 17: Fasteners and Chainguard Screws
In the preliminary determination, we valued fasteners and
chainguard screws using an average import value from the HTS
subcategory ``other screws and bolts with nuts or washers threaded''
from Monthly Statistics (April 1993-March 1994).
Respondents claim that the average value we used from Monthly
Statistics was aberrational as it is based on a basket category of
import statistics which includes other products. Therefore, respondents
urge the Department to use Indonesian surrogate values for nuts and
bolts. The respondents cite Final Determination of Sales at Less Than
Fair Value: Certain Partial-Extension Steel Drawer Slides with Rollers
From the People's Republic of China, 60 FR 54472, 54477 (October 24,
1995) (Drawer Slides) and the Final Determination of Sales at Less Than
Fair Value: Sulfur Dyes, Including Sulfur Vat Dyes, from the PRC, 58 FR
7537, 7540 (1993) in support of their argument.
Petitioners claim that the respondents have not demonstrated that
the average value the Department used from Monthly Statistics is
aberrational, or why the statistical category for ``other screws and
bolts with nuts or washers threaded'' is not the best information
available. Moreover, petitioners assert that the per kilogram average
price of the material to value the chainguard screws and fasteners
should not be used without accounting for the labor, overhead, and
other costs necessary to produce the finished part, e.g., a screw.
Therefore, petitioners contend that the Department should continue to
use the value from Monthly Statistics to value chainguard screws and
fasteners.
DOC Position: We agree with respondents that the value used in the
preliminary determination was a basket category. We have recently found
two sources of Indonesian PI which are more specific to these two
different inputs, fasteners and screws. These sources are
contemporaneous with the POI and are more specific to the factor inputs
we are trying to value. Accordingly, we used these sources to value
fasteners and screws for purposes of the final determination. See,
Factor Valuation Memo dated April 22, 1996.
Comment 18: Labor
In the preliminary determination, we used a 1990 labor rate
applicable for laborers working in the Indian transport equipment
sector noted in Yearbook of Labor Statistics (YLS) to value skilled,
unskilled and indirect labor. Respondents claim that the Department
should use instead the labor rate applicable for Indian laborers
working in the sector called ``manufacture of fabricated metal
products, except machinery and equipment.''
DOC Position: We disagree with respondents. We have no reason to
believe that the Indian transport equipment sector does not include
bicycle production and, therefore, that the rate we used in the
preliminary determination does not capture the wages paid to the
laborers in the Indian bicycle industry.
Fabricated metal products could include a host of products other
than bicycles. Moreover, since the respondents have not provided
concrete evidence that bicycle production is included in the fabricated
metal
[[Page 19041]]
products sector or not included in the transport equipment sector,
there is no basis to change our calculation.
Common Company-Specific Comments
Unreported Sales
Comment 19: Unreported EP Sales--CBC
At verification, we discovered that CBC failed to report a small
number of EP sales to the United States. Petitioners argue that the
Department should base the final margin for these sales on facts
available. They state that CBC had sufficient time to amend the U.S.
sales listing, but did not do so. As facts available, they advocate
using the highest reported amounts for charges and expenses contained
in CBC's EP sales listing. (The price information is contained in a
verification exhibit.)
CBC agrees that the Department should apply facts available to
these sales. However, CBC maintains that the Department should use the
average, rather than the highest, amount for charges and expenses that
CBC reported for its other EP sales. CBC states that the sales in
question were omitted from the sales listing because the company had to
file its response prior to their shipment. Therefore, CBC characterizes
this omission as attributable more to the company's attempt to comply
with the response deadline rather than as a deliberate failure to
respond to a Departmental request.
DOC Position: We disagree with both parties. In an investigation,
the Department is not required to examine every sale made during the
POI. In this case, the sales at issue represent an insignificant
portion of CBC's total sales by volume and value. Consequently, we have
excluded them for purposes of our final determination.
Comment 20: Unreported EP Sales--Chitech
The petitioners argue that the Department should assign the highest
margins to EP sales not included in the sales database because of
Chitech's date of sale methodology. The petitioners argue that these
unreported sales are subject to this investigation because even though
the invoice date is outside the POI, the sales were actually confirmed
and booked during the POI.
The respondent points out that it consistently applied its date of
sale methodology to report its POI sales of subject merchandise. In
addition, the respondent points to its submissions showing where the
terms of sale changed from the order up to the invoice. Respondents
note that the alternative date of sale proposed by the petitioners is
merely the date that the respondent receives payment from its bank.
DOC Position: We disagree with petitioners that there were any
unreported EP sales. Chitech consistently applied our date of sale
methodology for reporting its U.S. sales of subject merchandise during
the POI. Chitech used the invoice date to report its POI sales because
the terms of sale can and do change up to the invoice date. We examined
Chitech's date of sale methodology at verification and found no
discrepancies.
Comment 21: Unreported CEP Sales--Dynacraft
The petitioners argue that Dynacraft should not be rewarded for its
failure to report these sales and suggest that these sales should be
based on adverse facts available.
The respondent points out that the Department's practice is to
generally disregard an inadvertent omission of a minor amount of sales.
Alternatively, if the Department elects to calculate margins on these
sales, the Department has all of the required information (except for
credit expenses) to calculate margins using actual and verified expense
data for these sales.
DOC Position: Dynacraft inadvertently omitted these sales from its
U.S. sales database because it had incorrectly considered this group of
sales as being non-subject merchandise produced in Taiwan. We did not
collect the sales invoices for these unreported sales at verification.
The sales were all for one specific model sold at the same price. This
model also happens to be one of the higher priced models reported by
Chitech. We determined that including these sales in our calculations
would have no effect, or a negligible effect, on the margin calculated
for Chitech. Moreover, this situation does not appear to warrant the
use of adverse facts available. Therefore, we have not included these
sales in our analysis.
Warranty and Bad Debt Expenses
Comment 22: Accrued vs. Actual Warranty and Bad Debt Expenses
Giant USA (GUSA) sets aside a budgeted amount for warranty and bad
debt expenses each fiscal year and reported the actual amount in its
section C database. The petitioners argue that the Department should
use these accrued amounts as the basis for calculating these expenses
rather than the actual expenses GUSA incurred in warranty and bad debt
expenses during the POI because the accrued amounts are based on the
historical experience of the company and are not influenced by
distortions such as fluctuations in volumes of sales.
Giant argues it is Department practice to deduct actual, rather
than accrued, expenses from USP. The respondent cites to Final Results
of Administrative Review: AFBs (Other Than TRBs) and Parts Thereof From
France, 60 FR 10900, 10917 (February 28, 1995) and Final Results of
Administrative Reviews: Roller Chain, Other Than Bicycle, From Japan,
57 FR 46535 (October 9, 1992) in support of its argument. In addition,
respondent contends that the Department should treat GUSA's bad debt
expenses as indirect selling expenses, in accordance with its normal
practice. In support, respondent cites Certain Cut-to-Length Carbon
Steel Plate From Germany; Final Results of Antidumping Administrative
Review, 61 FR 13834 (Mar. 28, 1996).
DOC Position: With respect to warranty expenses, we disagree with
respondents that we always use actual expenses. Our practice is
normally to use historical expenses unless our analysis of the actual
expenses suggests that historical expenses are inappropriate. (See,
Final Determination of Sales at Less Than Fair Value: Color Picture
Tubes from Japan, 52 FR 44171 (November 18, 1987)). Giant's accrued
amounts are reflective of historical experience. As such, we used the
accrued amounts. The actual POI amounts only reflected a short period
of GUSA's warranty experience, whereas the accrued expenses were
reflective of Giant's actual historical experience. Regarding the issue
of whether bad debt should be classified as a direct or indirect
expense, we agree with respondent. Accordingly, we have classified bad
debt as an indirect selling expense and have treated it as such for
purposes of the final determination.
Comment 23: Warranty Expenses
Petitioners argue that the Department should use the historical
average warranty costs incurred by Motiv, CATIC's affiliated reseller
in the United States, rather than the reported POI costs as the basis
for its warranty expense adjustment. Petitioners assert that Motiv's
POI warranty costs may be aberrational and historical warranty costs
take into account fluctuations in sales volume.
Respondent argues that because petitioners use a historical average
warranty amount reported as a dollar amount per bicycle, and the
reported POI warranty costs are reported as a percentage of each gross
sales dollar, they are making an apples to oranges comparison.
Respondent states that,
[[Page 19042]]
although Motiv's total warranty costs change from year to year, there
is nothing on the record to suggest that there is any fluctuation in
Motiv's historical warranty costs as a percentage of gross sales
dollars. Moreover, respondent argues that to impute to each bicycle the
same per-unit cost would create distortions because Motiv's other
expenses are allocated by value, not by volume.
DOC Position: We agree with petitioners. Our examination of Motiv's
historical warranty costs indicate that the reported POI warranty costs
may not be reflective of what Motiv's true warranty expenses will be on
its POI sales. Accordingly, we used the historical warranty expenses.
Findings at Verification
Comment 24: Discrepancies in Weights and Distances
At verification, we found a number of discrepancies in the weights
and distances reported by Overlord and used in the calculation of
surrogate freight on components. Petitioners assert that the Department
should correct the reported data, based on the findings at
verification. In addition, petitioners argue that the Department should
impute these findings to all of Overlord's components not examined at
verification by adjusting the reported weights and distances by the
average percentage difference observed at verification.
Overlord maintains that the Department should only correct for the
errors found at verification.
DOC Position: We agree with respondent. At verification, we found
no consistent pattern of under- reporting. For example, we found that
the weight differences ranged from an over-reporting of 200 percent to
an under-reporting of 23 percent. Given the wide range of observed
differences, adjusting the weights and distances of unexamined
components would only affect the margin several points to the right of
the decimal. Consequently, we corrected Overlord's database to account
only for errors found at verification.
Comment 25: Unreported Market-Economy Movement Expenses
Petitioners maintain that Universal was not forthcoming in
providing to the Department prior to verification a clear picture of
how it incurred its movement expenses in Hong Kong. Because these
expenses were not reported, the petitioners insist that the Department
should now assign adverse amounts to each of the Hong Kong incurred
movement expenses rather than rely on the actual expense data noted in
the verification report. Petitioners recommend that the Department use
the highest rates found for any respondent for each movement expense or
use the highest rates from the data examined at verification and apply
them on a container basis, using the lowest quantity figure per
container provided by Universal.
Respondent claims that the Department's practice is to not use the
movement expenses incurred by a PRC respondent if it sourced its
transportation services from a company that was located in the PRC and
affiliated with a Hong Kong company. The respondent cites to Drawer
Slides and Final Determination of Sales at Less Than Fair Value:
Ferrovanadium and Nitrided Vanadium from the Russian Federation, 60 FR
27957, 27962 (May 26, 1995) (Ferrovanadium) in support of its argument.
In addition, the respondent states that if the Department intends to
use expenses incurred in Hong Kong, then the Department should not
apply adverse facts available in this situation because it has the
actual expenses.
DOC Position: At verification, we found that Universal pays its
customs broker in Hong Kong, in Hong Kong dollars, for five services:
(1) terminal handling charges; (2) handling fees; (3) document fees;
(4) courier fees; and (5) import and export fees. Universal did not
report these expenses because the Hong Kong broker is a subsidiary of a
PRC company. Universal assumed that this data could not be used by
Department. The NME questionnaire requests a respondent to report all
movement expenses paid to a market-economy supplier.
We used the average rates established at verification for each
expense noted above and the quantity amounts per container for each
U.S. model provided in the October 2, 1995, submission to calculate the
Hong Kong incurred model-specific expenses for those expenses that are
incurred on a container basis. For Hong Kong import & export fees, we
used the rate found among the other respondents. The fact that
Universal failed to report these expenses is not a basis for adverse
inference because Universal's interpretation of the questionnaire
instructions, although in error, was not unreasonable.
Other Company-Specific Comments
Petitioners made several arguments that certain expenses incurred
by the Hong Kong and Taiwan affiliates of the PRC bike producers should
be treated as direct selling expenses and be subject to COS
adjustments. Because we are not making COS adjustments in this case,
these issues are moot. See Comment 1 in General Comments section above.
Bo An
Comment 26: Market-Economy Based Movement Charges
Petitioners have stated that the Department should assign adverse
facts available to Bo An's movement charges because Bo An has been less
than forthcoming concerning movement charges purchased from market-
economy suppliers and paid for in market-economy currency. Moreover,
according to petitioners, the verification exhibits contradict Bo An's
statement in its Section C response that ``Bo An did not use any
market-economy suppliers for shipment of the goods.'' Petitioners agree
that this information should clearly have been reported earlier in the
investigation and that the Department should now assume that Bo An made
full use of all potential market-economy based movement and handling
services between the PRC factory and the loading of the ocean-going
vessel in Hong Kong. Accordingly, the Department should apply the
highest calculated freight rates found for any respondent in this
investigation to all Bo An's movement and handling expenses.
Bo An contends that the Department should not assign market-economy
values to goods and services obtained through a non-market-economy
transaction. Bo An points out that it has already certified for the
record that it arranges for transportation through the PRC affiliates
of Hong Kong transportation companies and that the Department found no
evidence at verification to contradict this information. Finally,
respondent cites Drawer Slides and Ferrovanadium as evidence that the
Department's practice has been to determine whether a good or service
obtained through a market-economy transaction is sourced from a market
economy rather than merely purchased in it.
DOC Position: We agree with respondent. Because these movement and
handling services were provided by a company located in the PRC, we
conclude that these charges do not reflect a market-economy based
price. Therefore, in our final determination we have continued to apply
a surrogate country cost to value these charges.
CBC
Comment 27: Brokerage and Handling Expenses
Petitioners argue that the Department should base brokerage and
handling
[[Page 19043]]
expenses for CBC's CEP sales on facts available because CBC failed to
provide any support for its claimed amount at verification. As facts
available, petitioners assert that the Department should use the amount
that it calculated during verification based on an examination of CBC's
sales information.
DOC Position: We agree. Accordingly, we have based brokerage and
handling for CEP sales on the information reviewed at verification.
Comment 28: Interest Expense and Interest Revenue
At verification, we found that CBC received interest revenue on EP
sales although it did not report this revenue in its sales listing. In
addition, we also noted that CBC incurred sales-specific interest
expenses, which likewise had not been reported. CBC requests that the
Department add interest revenue to its USPs. Moreover, CBC argues that
the Department should ignore the interest expenses observed at
verification because they represent affiliated party transactions, as
evidenced by intra-company invoices between CBC and its Hong Kong
affiliate.
Contrary to CBC's assertions, petitioners maintain that the
interest expenses in question are similar to movement expenses because
they were actually paid by CBC on every sale. They state that CBC
failed to provide any credible evidence supporting its claim that these
payments are intra-company transfers. Moreover, they state that failure
to report these expenses should lead to the application of adverse
inferences against CBC. Specifically, they argue that the Department
should subtract from CBC's reported EP sales prices interest expenses
equal to the highest expenses (as a percentage of invoice price)
observed during verification. Regarding interest revenue, petitioners
state that the Department should ignore the amounts collected at
verification because CBC failed to provide complete information in a
timely fashion.
DOC Position: Regarding interest expenses, we disagree with CBC
that these expenses represent affiliated party transactions. At
verification, we reviewed actual payment advices issued by the
unaffiliated bank. These payment advices showed that interest expenses
were actually charged by the bank on each transaction, independent of
any affiliated party transfers that may have occurred. However, we have
not made an adjustment for these expenses, because we are not making
COS adjustments on EP sales. See, Comment 1 in General Comments section
above.
Regarding interest revenue, we found at verification that CBC
charged this revenue in order to cover the actual interest expenses
that it incurred on each sale. Therefore, adjusting for interest
revenue without making the corresponding adjustment for interest
expenses would result in an EP that is overstated. Accordingly, we also
have made no adjustment for interest revenue for purposes of the final
determination.
Comment 29: Freight Rebates
At verification, we found that Western States Importers (WSI),
CBC's U.S. affiliate, did not use the eligibility criteria specified in
its freight rebate program when calculating the freight rebates
reported in its CEP sales listing. According to petitioners, the
Department should recalculate these rebates by applying the eligibility
criteria set forth in WSI's program brochures.
According to CBC, no adjustment is warranted. CBC states that these
rebates operate as a customer-specific price allowance and as a general
expense to WSI, as evidenced by the fact that WSI's accounting system
does not track freight rebates on a transaction-specific basis. CBC
asserts that, indeed, given the limitations of WSI's accounting system,
reporting freight rebates on a customer-specific basis was the only
feasible way to capture these costs. Moreover, CBC argues that there is
no evidence on the record to support the contention that allocating
these rebates on a customer-specific basis is distortive.
DOC Position: We do not have sufficient information on the record
to reallocate WSI's freight rebates according to the eligibility
criteria specified in the rebate program brochures, as requested by
petitioners. Moreover, we agree with CBC that it would not be
distortive to allow these rebates on a customer-specific basis, based
on our finding at verification that they operate as a customer-specific
price allowance, rather than as a transaction-specific expense.
Therefore, we have accepted the expenses as reported for purposes of
the final determination.
Comment 30: Different Control Numbers for Identical Products
At verification, we found CBC had assigned different control
numbers to a small number of products which appeared to have identical
physical characteristics; however, CBC reported different factors of
production for these products. In addition, we found that CBC assigned
the same control number (and same factors of production) to a small
number of products which appeared to be physically different.
Petitioners assert that the Department should resort to facts
available to calculate the factors of production for each of the
products in question. As facts available for the physically identical
products, petitioners maintain that we should use the highest COM
calculated for any of the products which are within the identical
grouping. As facts available for the non-identical products,
petitioners assert that the Department should calculate separate
production costs using ratios derived from the different prices
reported for the different models.
According to CBC, the Department should not make adverse inferences
as to the COM of the bicycles in question. CBC states that it explained
all of the discrepancies at verification and that it documented most of
these explanations.
DOC Position: Regarding the different control numbers reported for
physically identical products, we agree with petitioners. Contrary to
its assertion, at verification CBC could not explain why the factors of
production for these models differed. Moreover, it is difficult to
imagine how models sharing the same control number could have different
production costs. Because CBC failed to report its data in a consistent
fashion, we find that applying an adverse inference to facts available
is reasonable and appropriate in this case. Therefore, we have used the
highest COM calculated for any of the products which are within the
identical grouping to the products in question.
Regarding the same control numbers reported for potentially non-
identical products, we agree with CBC. The documents reviewed at
verification support CBC's assertion that the control numbers in
question were assigned correctly to identical products. Accordingly, we
find no basis to adjust the costs reported for these products, as
suggested by petitioners.
Comment 31: Component Sourcing
At verification, we found that CBC sourced certain components in
both a market and non-market economy. Petitioners argue that the
Department should rely exclusively on the prices paid to the market-
economy suppliers.
DOC Position: We agree and we have made the appropriate corrections
for purposes of the final determination.
CATIC
Comment 32: Treatment of handling charges incurred by Motiv and
classification of Motiv's selling expenses
Petitioners argue that the Department should treat handling charges
incurred
[[Page 19044]]
by Motiv for returns of bicycles during the POI as a direct selling
expense. At verification we found that Motiv did not report handling
charges incurred for bicycles that were returned by a certain customer.
Petitioners argue that this expense is a direct selling expenses
because it was incurred to return subject merchandise during the POI,
and that the Department should treat it as such for purposes of the
final determination.
Respondent claims that this expense is properly categorized as
indirect because there were no sales associated with the returns.
Petitioners also argue that certain advertising, after-market
telephone support, and bad debt expenses reported by Motiv as indirect
selling expenses should be classified as direct selling expenses.
Respondent contends that each of those expenses were properly
classified as indirect selling expenses.
DOC Position: These expenses has been deducted from U.S. price as
part of the CEP deductions. Because we are not making a corresponding
CEP offset (See, Comment 1), the classification of these expenses as
direct or indirect is moot.
Comment 33: Commission Expenses
Petitioners urge the Department to ensure that the commission
expense adjustment includes all payments by Motiv to outside sales
representatives during the POI. Motiv's questionnaire responses state
that its independent sales representatives perform various functions in
facilitating customer orders for Motiv. Petitioners state that the
record is unclear as to whether Motiv's reported commission amounts
cover its payments for all the services provided by its outside sales
representatives. Respondent did not comment on this issue.
DOC Position: We verified that the payments to Motiv's outside
sales representatives covered all services performed by these sales
representatives.
Comment 34: Finance Expense
Petitioners use information from Motiv's and CATIC's financial
statements to demonstrate that CATIC may have incurred a certain
finance expense on behalf of Motiv. Petitioners contend that the
Department should either include this finance expense in Motiv's U.S.
selling expenses or should add the expense to the NV for bicycles
produced by CATIC.
Respondent claims that imputing this finance expense is at odds
with the Department's established practice and would result in double-
counting. Respondent states that since CATIC and Motiv are affiliated
companies, any interest expense would be an intra-company charge.
Respondent cites to Frozen Concentrated Orange Juice from Brazil: Final
Determination of Sales at Less Than Fair Value, 52 Fed. Reg. 8324
(March 17, 1987) and Certain Tapered Journal Roller Bearings and Parts
Thereof from Japan: Final Determination of Sales at Less Than Fair
Value, 49 Fed. Reg. 2285 (January 19, 1984) as cases in which the
Department excluded intra-company interest expenses from the margin
calculations. Respondent also states that the Department already will
have accounted for the costs of financing inventory and receivables in
its imputed calculations of inventory carrying costs and credit costs.
DOC Position: We agree with respondent. The expense identified by
petitioners is an intra-company expense and should not be included in
our calculations.
Giant
Comment 35: Interest Charge Giant USA Pays its Taiwan Affiliate
The respondent maintains that the fees GUSA pays its Taiwan parent
GMC to cover interest charges on letters of credit opened by GMC to
finance GUSA's purchases from GMC should not be deducted from USP if
the Department also deducts inventory carrying expenses and imputed
credit costs. The respondent states that deducting both the actual fees
and the imputed expenses would double-count the expenses associated
with financing shipment, inventory and receivables on U.S. sales.
The petitioners argue that the Department's verification report
makes no mention that the letter of credit fees are actual interest
expenses or the nature of the fees. Therefore, the petitioners maintain
that there in insufficient evidence to support Giant's claim that its
interest expenses will be double-counted if both letter of credit fees
and imputed credit expenses are deducted from the USP. Moreover, the
petitioners state that the letter of credit fees appear to be indirect
rather than direct selling expenses, since these fees were first paid
by GMC in opening bank accounts from which GUSA could draw funds to
finance inventory and accounts receivables. As such, the petitioners
argue that the Department should revise GUSA's reported indirect
selling expenses by including the amount of letter of credit fees.
DOC Position: We did not separately deduct the interest expense
from the USP because deducting both the actual fees and the imputed
costs (which include these fees) would be double-counting. In addition,
we did not treat the letter of credit fees as indirect selling expenses
since they have been accounted for in the calculation of inventory
carrying expenses.
Comment 36: Errors in Giant's Data
Petitioners argue that the Department should apply facts available
to Giant in its final margin analysis. Petitioners assert that the
Department found numerous errors in Giant's data during verification
which company officials were unable to explain. Petitioners cite
examples related to the price and usage data reported for Giant's
factors of production, as well as discounts reported for CEP sales.
Giant asserts that the Department should use its data for purposes
of the final determination, after correcting it for errors discovered
at verification. Respondent argues that petitioners misunderstood both
the verification reports and Giant's responses, leading to a number of
incorrect assumptions regarding the significance of the errors found.
DOC Position: We agree with Giant. The majority of the errors
discovered at verification resulted from data input problems or
calculation errors. Because these errors were minor in nature, we find
that the use of facts available is not warranted. Therefore, we have
corrected the errors found at verification and used the data reported
by Giant for purposes of the final determination.
Comment 37: Interest Revenue
Petitioners argue that the Department should deny Giant's claim for
interest revenue for purposes of the final determination. According to
petitioners, Giant did not collect all of the interest revenue that it
actually invoiced. In addition, petitioners assert that Giant
misapplied these revenues in its sales listing because it reported
revenue for sales for which the customer paid on a timely basis and for
which no revenue was due.
Respondent asserts that the Department should allow the revenue
amounts reported in its sales listing. Respondent notes that
petitioners do not dispute the fact that the company received interest
revenue, but rather disagree with the methodology used to allocate this
revenue to specific sales. Respondent maintains that, not only is its
allocation methodology consistent with the methodology used to allocate
other adjustments (e.g., credit expenses), but also petitioners failed
to object to this methodology prior to the submission of their case
brief. Moreover,
[[Page 19045]]
respondent asserts that its allocation methodology is not distortive or
inaccurate. Finally, respondent notes that the Department reviewed
Giant's interest revenue calculation at verification and found no
discrepancies.
DOC Position: We found that Giant's record keeping system does not
readily allow Giant's to report transaction-specific interest revenue.
Therefore, we are allocating interest revenue only to those sales with
no early payment discounts. Regarding bad debt expense, we agree with
respondents that it was correctly reported as an indirect selling
expense. We recommend making no adjustment to bad debt.
Overlord
Comment 38: Declaration Fees
At verification, we found that Overlord under-reported declaration
fees paid to the Hong Kong government on U.S. shipments of bicycles
through Hong Kong. Petitioners contend that the Department should
increase the reported expenses by the average percentage by which the
fees were under-reported.
DOC Position: We agree and have made the appropriate calculations
for purposes of the final determination.
Universal
Comment 39: Methodology for Reporting Prices of Market-Economy Inputs
According to the petitioners, Universal's price reporting
methodology is unacceptable. Based on Universal's unwillingness to
provide information prior to the verification regarding the methodology
it used to derive market-economy prices, and the inaccuracies
discovered during the Department's price variation tests and component
traces, the petitioners propose that, as facts available, the
Department increase prices for all market-sourced components by the
greatest disparity between reported and verified prices in the price
variation tests.
Universal argues that the Department should not increase the prices
reported for market-economy inputs because the majority of the input
prices examined by the Department were accurately reported and the few
discrepancies noted by the Department were only minor errors.
Additionally, Universal contends that its reported prices are already
overstated because these prices are charged by Universal's affiliated
supplier. Universal maintains the Department verified that reported
component prices, which are charged by Universal's affiliated supplier,
are more than the prices the affiliated supplier pays to purchase those
components from unrelated suppliers.
DOC Position: Universal failed to report the weight-average price
of market-economy inputs purchased during the POI. Rather, Universal
reported market-economy prices based on selected invoices which company
officials considered to be representative of the prices paid during the
POI. According to Universal officials, the company employed this
reporting methodology because during the POI prices for most components
remained stable. We tested ten components and found that four were
under-reported by a small percentage. We disagree with petitioners that
we should increase all of Universal's prices by the largest observed
variation. This situation does not warrant the use of adverse acts
available. Rather, as facts available, we applied the average variance
to all purchases. See, Concurrence Memo for Final Determination.
Continuation of Suspension of Liquidation
For Bo An, Giant, Hua Chin, and Overlord, we calculated a zero or
de minimis margin. Consistent the with Pencils, merchandise that is
sold by these producers but manufactured by other producers will not
receive the zero margin. Instead, such entries will be subject to the
``PRC-wide'' margin.
In accordance with section 733(d)(1) of the Act and 735(c)(1), we
are directing the Customs Service to continue to suspend liquidation of
all entries of bicycles from the PRC, that are entered, or withdrawn
from warehouse for consumption, on or after the date of publication of
this notice in the Federal Register. The Customs Service shall require
a cash deposit or posting of a bond equal to the estimated amount by
which the NV exceeds the export price as shown below. These suspension
of liquidation instructions will remain in effect until May 7, 1996.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Margin
Manufacturer/producer/exporter percentage
------------------------------------------------------------------------
Bo An...................................................... 0.00
CBC........................................................ 3.25
CATIC...................................................... 13.67
Giant...................................................... 0.97
Hua Chin................................................... 0.00
Merida..................................................... 7.44
Overlord................................................... 0.00
Chitech.................................................... 2.05
Universal.................................................. 11.06
PRC-wide rate.............................................. 61.67
------------------------------------------------------------------------
PRC-Wide Rate
The PRC-Wide rate applies to all entries of subject merchandise
except for entries from exporters that are identified individually
above.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our final determination is affirmative,
the ITC will, within 45 days, determine whether these imports are
materially injuring, or threaten material injury to, the U.S. industry.
If the ITC determines that material injury, or threat of material
injury does not exist, the proceeding will be terminated and all
securities posted will be refunded or canceled. If the ITC determines
that such injury does exist, the Department will issue an antidumping
duty order directing Customs officials to assess antidumping duties on
all imports of the subject merchandise entered for consumption on or
after the effective date of the suspension of liquidation. This
determination is published pursuant to section 735(d) of the Act.
Dated: April 22, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-10555 Filed 4-29-96; 8:45 am]
BILLING CODE 3510-DS-P
