[Federal Register Volume 64, Number 39 (Monday, March 1, 1999)]
[Notices]
[Pages 9972-9979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5014]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-846]
Brake Rotors From the People's Republic of China: Final Results
of Antidumping Duty New Shipper Administrative Review
AGENCY: Import Administration, International Trade Administration, U.S.
Department of Commerce.
SUMMARY: On September 29, 1998, the U.S. Department of Commerce
published the preliminary results of the new shipper administrative
review of the antidumping duty order on brake rotors from the People's
Republic of China (``PRC'') (``preliminary results'') (63 FR 51895).
This review covers six exporters 1 of the subject
merchandise to the United States. The period of review is April 1,
1997, through September 30, 1997. We gave interested parties an
opportunity to comment on our preliminary results.
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\1\ The six exporters are China National Machinery Import &
Export Company (CNIM), Laizhou Auto Brake Equipments Factory
(LABEF), Longkou Haimeng Machinery Co., Ltd. (Haimeng), Qingdao Gren
Co. (GREN), Yantai Winhere Auto-Part Manufacturing Co., Ltd.
(Winhere), and Zibo Luzhou Automobile Parts Co., Ltd. (ZLAP).
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We have determined that U.S. sales of brake rotors have not been
made below the normal value, and we will instruct the U.S. Customs
Service not to assess antidumping duties for the six PRC exporters
subject to this review.
EFFECTIVE DATE: March 1, 1999.
FOR FURTHER INFORMATION CONTACT: Brian C. Smith or Barbara Wojcik-
Betancourt, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-1766 or (202) 482-0629,
respectively.
SUPPLEMENTARY INFORMATION: Unless otherwise indicated, all citations to
the Tariff Act of 1930, as amended (``the Act''), are references to the
provisions effective January 1, 1995, the effective date of the
amendments made to the Act by the Uruguay Round Agreements Act
(``URAA''). In addition, unless otherwise indicated, all citations to
the U.S. Department of Commerce (``the Department'') regulations are to
the regulations at 19 CFR part 351 (1998).
Background
On September 29, 1998, the Department published in the Federal
Register the preliminary results of its new shipper administrative
review of the antidumping duty order on brake rotors from the PRC (see
preliminary results). In October and November 1998, the Department
conducted verification of the questionnaire responses of the six
respondents. On November 10, 1998, the Department published in the
Federal Register a notice of postponement of the final results until no
later than February 23, 1999 (63 FR 63025). On December 1, 1998, the
petitioner 2 withdrew its request for a hearing in this
proceeding. Since the six respondents never requested a hearing and the
petitioner withdrew its original request for one, no hearing was held
in this case. From December 4, 1998, through January 7, 1999, the
Department issued its verification reports. On January 21, 1999, the
petitioner submitted its case brief. CNIM, LABEF, Haimeng, GREN,
Winhere, and ZLAP (hereafter referred to as the six respondents) did
not submit case briefs. On January 28, 1999, the six respondents
submitted rebuttal briefs.
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\2\ The petitioner is the Coalition for the Preservation of
American Brake Drum and Rotor Aftermarket Manufacturers.
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Scope of Order
The products covered by this review are brake rotors made of gray
cast iron, whether finished, semifinished, or unfinished, ranging in
diameter from 8 to 16 inches (20.32 to 40.64 centimeters) and in weight
from 8 to 45 pounds (3.63 to 20.41 kilograms). The size parameters
(weight and dimension) of the brake rotors limit their use to the
following types of motor vehicles: automobiles, all-terrain vehicles,
vans and recreational vehicles under ``one ton and a half,'' and light
trucks designated as ``one ton and a half.''
Finished brake rotors are those that are ready for sale and
installation without any further operations. Semi-finished rotors are
those on which the surface is not entirely smooth, and have undergone
some drilling. Unfinished rotors are those which have undergone some
grinding or turning.
These brake rotors are for motor vehicles, and do not contain in
the casting a logo of an original equipment manufacturer (``OEM'')
which produces vehicles sold in the United States (e.g., General
Motors, Ford, Chrysler, Honda, Toyota, Volvo). Brake rotors covered in
this investigation are not certified by OEM producers of vehicles sold
in the United States. The scope also includes composite brake rotors
that are made of gray cast iron, which contain a steel plate, but
otherwise meet the above criteria. Excluded from the scope of the
review are brake rotors made of gray cast iron, whether finished,
semifinished, or unfinished, with a diameter less than 8 inches or
greater than 16 inches (less than 20.32 centimeters or greater than
40.64 centimeters) and a weight less than 8 pounds or greater than 45
pounds (less than 3.63 kilograms or greater than 20.41 kilograms).
Brake rotors are classifiable under subheading 8708.39.5010 of the
HTSUS. Although the HTSUS subheading is provided for convenience and
customs purposes, our written description of the scope of this review
is dispositive.
Period of Review
The period of review (``POR'') covers the period April 1, 1997,
through September 30, 1997.
Separate Rates
In proceedings involving non-market-economy (``NME'') countries,
the Department begins with a rebuttable presumption that all companies
within the country are subject to government control and thus should be
assessed a single antidumping duty deposit rate. One of the
respondents, Winhere, is located in the PRC and is wholly-owned by
private individuals. Two respondents (i.e., Haimeng, ZLAP) are joint
ventures between PRC and foreign companies. The three other respondents
are either wholly owned by all the people (i.e., CNIM) or collectively
owned (i.e., GREN, LABEF). Thus, for all six respondents, a separate
rates analysis is
[[Page 9973]]
necessary to determine whether the exporters are independent from
government control (see Notice of Final Determination of Sales at Less
Than Fair Value: Bicycles From the People's Republic of China
(``Bicycles''), 61 FR 56570 (April 30, 1996)).
To establish whether a firm is sufficiently independent from
government control to be entitled to a separate rate, the Department
analyzes each exporting entity under a test arising out of the Final
Determination of Sales at Less Than Fair Value: Sparklers from the
People's Republic of China (56 FR 20588, May 6, 1991) and amplified in
Final Determination of Sales at Less Than Fair Value: Silicon Carbide
from the People's Republic of China (59 FR 22585, May 2, 1994)
(``Silicon Carbide''). Under the separate rates criteria, the
Department assigns separate rates in nonmarket economy cases only if
the respondent can demonstrate the absence of both de jure and de facto
governmental control over export activities.
1. De Jure Control
Each respondent has placed on the administrative record documents
to demonstrate absence of de jure control, including the ``Law of the
People's Republic of China on Industrial Enterprises Owned by the Whole
People,'' adopted on April 13, 1988, (``the Industrial Enterprises
Law''); ``the Enterprise Legal Person Registration Administrative
Regulations,'' promulgated on June 13, 1988 (``the Enterprise
Registration Regulations;'' the 1990 ``Regulation Governing Rural
Collectively-Owned Enterprises of PRC''; the 1992 ``Regulations for
Transformation of Operational Mechanisms of State-Owned Industrial
Enterprises'' (``Business Operation Provisions''); and the 1994
``Foreign Trade Law of the People's Republic of China.''
In prior cases, we have analyzed these laws and have found them to
sufficiently establish an absence of de jure control of companies
``owned by the whole people,'' joint ventures, privately owned
enterprises or collectively owned enterprises. See, e.g., Final
Determination of Sales at Less than Fair Value: Furfuryl Alcohol from
the People's Republic of China (``Furfuryl Alcohol''), 60 FR 22544 (May
8, 1995), and Preliminary Determination of Sales at Less Than Fair
Value: Certain Partial-Extension Steel Drawer Slides with Rollers from
the People's Republic of China (``Drawer Slides''), 60 FR 29571-29576
(June 5, 1995). We have no new information in this proceeding which
would cause us to reconsider this determination with regard to the six
respondents mentioned above. See Comment 1 in the ``Interested Party
Comments'' section of this notice for further discussion.
2. De Facto Control
As stated in previous cases, there is some evidence that certain
enactments of the PRC central government have not been implemented
uniformly among different sectors and/or jurisdictions in the PRC. See
Silicon Carbide and Furfuryl Alcohol. Therefore, the Department has
determined that an analysis of de facto control is critical in
determining whether the respondents are, in fact, subject to a degree
of governmental control which would preclude the Department from
assigning separate rates.
The Department typically considers four factors in evaluating
whether each respondent is subject to de facto governmental control of
its export functions: (1) Whether the export prices (``EPs'') are set
by or subject to the approval of a governmental authority; (2) whether
the respondent has authority to negotiate and sign contracts and other
agreements; (3) whether the respondent has autonomy from the government
in making decisions regarding the selection of management; and (4)
whether the respondent retains the proceeds of its export sales and
makes independent decisions regarding disposition of profits or
financing of losses (see Silicon Carbide and Furfuryl Alcohol).
Each respondent asserted the following: (1) It establishes its own
EPs; (2) it negotiates contracts without guidance from any governmental
entities or organizations; (3) it makes its own personnel decisions;
and (4) it retains the proceeds of its export sales, uses profits
according to its business needs, and has the authority to sell its
assets and to obtain loans.
As explained below, at verification, the Department found no
evidence of government involvement in each respondent's business
operations. See Comment 2 in the ``Interested Party Comments'' section
of this notice for further discussion.
Specifically, at verification, Department officials examined sales
documents that showed that each respondent negotiated its contracts and
set its own sales prices with its customers. In addition, the
Department reviewed sales payments, bank statements and accounting
documentation that demonstrated that each respondent received payment
from its U.S. customers via bank wire transfer, which was deposited
into its own bank account without government intervention. Finally, the
Department examined internal company memoranda such as appointment
notices and notes on company meetings which demonstrated that each
respondent selected its own management. See Department verification
reports for CNIM at pages 5-7 and exhibits 1-6 and 16; for LABEF at
pages 6-7 and exhibits 2-5; for Haimeng at pages 5-6 and exhibits 1-5,
7 and 17; for GREN at pages 5-6 and exhibits 3-4, 6, 9 and 19; for
Winhere at pages 4-6 and exhibits 1-6 and 16; and for ZLAP at pages 5-7
and exhibits 18, 19 and 24. This information, taken in its entirety,
supports a finding that there is a de facto absence of governmental
control of export functions. Consequently, we have determined that the
six respondents have each met the criteria for the application of
separate rates. See Notice of Final Determination at Less Than Fair
Value: Persulfates from the Peoples Republic of China, 62 FR 27222 (May
19, 1997).
Fair Value Comparisons
To determine whether sales of the subject merchandise by each
respondent to the United States were made at less than fair value
(``LTFV''), we compared the EP to the normal value (``NV''), as
described in the ``Export Price'' and ``Normal Value'' sections of this
notice, below.
Export Price
We calculated EP in accordance with section 772(a) of the Act,
because the subject merchandise was sold directly by the PRC exporter
to unaffiliated parties in the United States prior to importation into
the United States and constructed export price methodology was not
warranted based on the facts of record. We calculated EP based on the
same methodology used in the preliminary results with the following
exceptions: (1) we revised our surrogate value calculations for marine
insurance and foreign brokerage and handling fees to reflect correction
of mathematical errors (see Comment 4 in the ``Interested Party
Comments'' section of this notice for further discussion); and (2) we
used the verified foreign inland freight distances to value freight
expenses incurred for transporting the subject merchandise to the port
of exportation (see Comment 5 in the ``Interested Party Comments''
section of this notice for further discussion).
[[Page 9974]]
Normal Value
A. Non-Market Economy Status
In every case conducted by the Department involving the PRC, the
PRC has been treated as a NME country. None of the parties to this
proceeding has contested such treatment. Accordingly, we calculated NV
in accordance with section 773(c) of the Act, which applies to NME
countries.
B. Surrogate Country
Section 773(c)(4) of the Act requires the Department to value the
NME producer's factors of production, to the extent possible, in one or
more market economy countries that (1) are at a level of economic
development comparable to that of the NME country, and (2) are
significant producers of comparable merchandise. We determined that
India is a country comparable to the PRC in terms of overall economic
development (see Memorandum from Office of Policy to Louis Apple, dated
January 22, 1998). In addition, based on publicly available information
placed on the record, we determined that India is a significant
producer of the subject merchandise. Accordingly, we considered India
the primary surrogate country for purposes of valuing the factors of
production as the basis for NV because it meets the Department's
criteria for surrogate country selection.
C. Factors of Production
In accordance with section 773(c) of the Act, we calculated NV
based on the factors of production reported by the companies in the PRC
which produced the subject merchandise for the exporters which sold the
subject merchandise to the United States during the POR. To calculate
NV, the reported unit factor quantities were multiplied by publicly
available Indian or Indonesian values.
The selection of the surrogate values applied in this determination
was based on the quality, specificity, and contemporaneity of the data.
As appropriate, we adjusted input prices to make them delivered prices.
For those values not contemporaneous with the POR and quoted in a
foreign currency, we adjusted for inflation using wholesale price
indices published in the International Monetary Fund's International
Financial Statistics. For a complete analysis of surrogate values, see
the Final Results Valuation Memorandum from the Team to the File, dated
February 23, 1999 (``Final Results Valuation Memorandum'').
We calculated surrogate values based on the same methodology used
in the preliminary results with the following exceptions: (1) we
revised our calculation for factory overhead, selling, general and
administration expenses (``SG&A''), and profit to correct for
mathematical errors (see Comment 4 in the ``Interested Party Comments''
section of this notice for further discussion); (2) we corrected, where
appropriate, clerical errors found at verification; (3) we assigned an
additional freight amount to ZLAP for using an unaffiliated
transportation company to move the unfinished castings from the casting
workshop to the processing workshop which had not been accounted for in
our preliminary results; and (4) we used the verified supplier
distances to value freight expenses incurred for the transportation of
materials to the factory (see Comment 5 in the ``Interested Party
Comments'' section of this notice for further discussion).
Currency Conversion
We made currency conversions pursuant to section 773A(a) of the Act
and section 351.415 of the Department's regulations based on the rates
certified by the Federal Reserve Bank.
Interested Party Comments
We gave interested parties an opportunity to comment on the
preliminary results. We received comments only from the petitioner. We
received rebuttal comments only from the six respondents.
General Issues
Comment 1: Procedure for Renewing Business Licenses As Evidence of PRC
Government Control
The petitioner contends that the six respondents have not met the
de jure and de facto absence of government control criteria because the
procedure by which PRC companies renew their business licenses with
provincial administrations for industry and commerce in the PRC
(``administration bureaus'') is evidence of de jure control.
Specifically, the petitioner argues that the record shows that the
renewal of each respondent's business license is conditioned on
providing the administration bureau in each respondent's respective
province relevant documentation such as balance sheets, profit and loss
statement, articles of association and feasibility reports. For
example, the petitioner alleges that both Haimeng and Winhere are
controlled by the PRC government because each respondent provided the
administration bureau a copy of its feasibility report and/or articles
of association. Specifically, the petitioner contends that Winhere's
articles of association state that in order for the articles to take
effect, they must be approved by the Administrative Committee of Yantai
Economic and Technical Development Zone (``YETDZ''). The petitioner
contends that because YETDZ is a PRC government agency, the need for it
to approve Winhere's articles of association or review Winhere's
feasibility report is evidence of government control over the operation
and management of Winhere. With regard to Haimeng, the petitioner
contends that because Haimeng filed a feasibility report with the
Longkou Foreign Economics and Trade Committee (``LFETC'') (i.e., a PRC
government entity), this act is further evidence of government control
over the operations and management of Haimeng. The petitioner maintains
that although the respondents did not specify in their submissions or
questionnaire responses all of the documentation they provided to
provincial administration bureaus, the Department should consider the
existence of this PRC government requirement for business license
issuance or renewal to indicate PRC government de jure control.
The six respondents maintain that the submission of financial data
to PRC administration bureaus is not proof of PRC government control.
Citing the Department's verification reports, the respondents maintain
that the Department reviewed the documents submitted by all respondents
at verification and that these documents establish an absence of de
jure control. The respondents further state that under the Enterprise
Registration Regulations, PRC companies are required to submit annual
financial data and to report the list of names of the company board of
directors to PRC administration bureaus in order to maintain their
business licenses. According to the respondents, providing such
information is a regulatory requirement and by no means indicates
government control of a PRC company's export activities. The
respondents also state that the petitioner has provided no rational
explanation for why the Department should suspect that there is hidden
PRC government control behind each respondent's basic regulatory filing
requirement. Finally, the respondents state that the Court of
International Trade (``CIT'') has approved of the Department's separate
rate analysis, particularly the Department's review of PRC exporters'
business licenses, articles of association, and other corporate
documentation as
[[Page 9975]]
evidence of de jure independence from government control. Therefore,
the respondents contend that in light of the substantial evidence on
the record of this proceeding demonstrating each respondent's de jure
independence from government control, the Department should reject the
petitioner's argument. In support of their arguments, the respondents
cite to Writing Instrument Mfrs Ass'n. v. United States Department of
Commerce, 984 F. Supp. 629, 642-43 (CIT 1997); Sigma Corp. v. United
States, 841 F. Supp. 1255, 1266 (CIT 1993); and Tianjin Machinery
Import & Export Corp. v. United States, 806 F. Supp.1088, 1014 (CIT
1992). DOC Position.
We agree with the six respondents based on the Department's past
practice in analyzing the existence or absence of de jure government
control over PRC exporters' business activities. We find that the
petitioner has misapplied the separate rates test as articulated in
Silicon Carbide. With regard to the issue of business licenses, in
prior cases, we have analyzed the Enterprise Registration Regulations,
which outlines the requirements PRC companies must follow in order to
receive or renew a business license. Specifically, articles 5 and 15 of
this PRC law state that a PRC company applying for a business license
with a state or provincial industrial and commercial bureau must
provide a copy of its organizational rules and regulations, capital
credits certificate, capital verification certificate and capital
guarantee, and other related documents and proofs. Since Silicon
Carbide, we have interpreted this article to mean that PRC companies,
upon applying or renewing their business license, must demonstrate to
the business license issuing authority that they are incorporated and
have the capital to conduct business within the scope of their
operation. See, e.g., Silicon Carbide, 61 FR 22588, 22589. For some
companies, the documents they have been required to provide to
administration bureaus to show that they qualify for a business license
have included a copy of the financial statement (which shows the
company's capital) and articles of association or feasibility report
(i.e., business plan) (especially if the company is a start-up
company). See, e.g., article 15 of the Enterprise Registration
Regulations.
With regard to Winhere, verification exhibits (i.e., exhibits 1, 3
and 4) show that the feasibility report and articles of association are
documents which note the company's investment capital situation,
business plan, organizational structure, and general profit
projections. This type of documentation, which Winhere provided YETDZ
for receiving its business license, is consistent with article 15 of
the Enterprise Registration Regulations and, as such, is a routine
regulatory requirement and not evidence of de jure government control
over export activities. With regard to Haimeng, verification exhibits
(i.e., exhibits 1 through 3) show that Haimeng's feasibility report
notes the investment capital, scope of production, foreign and domestic
investment equipment, joint-venture agreement, general sales and market
plan, organizational structure, and general profit projections. This
feasibility report along with the articles of incorporation, provided
by Haimeng to the LFETC for receiving its business license, is
consistent with article 15 of the Enterprise Registration Regulations
and, as such, is a routine regulatory requirement and not evidence of
de jure government control over export activities. We have also found
that this business license requirement applies not only to PRC
companies that are ``owned by the whole people,'' but also to other
types of ownership such as joint ventures or collectively owned
enterprises. See, e.g., article 2 of the Enterprise Registration
Regulations.
Based on the foregoing discussion, we find the petitioner's claim
that the procedure by which PRC companies must renew their business
licenses is evidence of de jure control over export activities to be
without merit and inconsistent with our analysis of this issue in
previous PRC cases. As stated in the ``Separate Rates'' section above,
we have found the PRC law referred to above, along with other PRC laws
such as the Industrial Enterprises Law, the 1990 Regulation Governing
Rural Collectively-Owned Enterprises of PRC, the 1992 Business
Operation Provisions, and the 1994 Foreign Trade Law of the People's
Republic of China, to sufficiently establish an absence of de jure
control of companies ``owned by the whole people,'' joint ventures,
privately owned enterprises or collectively owned enterprises.
Comment 2: Lack of Detail Contained in the Verification Reports
The petitioner claims that the Department's verification reports
are not sufficiently detailed in order for the petitioner to evaluate
the comprehensiveness and accuracy of the verification process, and
whether the respondents have demonstrated de jure and de facto absence
of government control over their export activities. The petitioner
states, among other things, that the verification reports in general
contain vague, broad statements and conclusions. Specifically, the
petitioner points to the sections of each respondent's verification
report where the Department discusses its examination of (1) the
business licenses and articles of incorporation; (2) the restrictions
on how export revenue is used; and (3) the sales terms, prices and
contractual correspondence for pre-selected sales, in particular, as
sections lacking detail. The petitioner states that the lack of detail
in the verification reports indicates that the Department did not
sufficiently examine the separate rates issue at verification. Finally,
the petitioner contends that the lack of content in the verification
reports has injured petitioner's right to a fair administrative
procedure and sets a poor precedent for future cases.
The six respondents contend that the Department's verification
procedures were consistent with the verification procedures conducted
in other PRC antidumping cases. Furthermore, the respondents suggest
that the petitioner's complaints about the vagueness of and lack of
detail in the Department's verification reports result from the
petitioner's unfamiliarity with the respondents' submissions and the
procedures described in the Department's verification outlines.
Finally, the six respondents contend that the petitioner has offered no
record evidence and only speculative theories to contradict the
substantial evidence supporting a finding of de jure and de facto
absence of government control. Therefore, the six respondents maintain
that the Department should reject all of the petitioner's arguments
challenging the Department's verification procedures.
DOC Position
We agree with the six respondents. In conducting our verification
of each respondent's response, we examined substantial documentation
the respondent maintained in the ordinary course of business such as
financial statements, sales records, sales negotiation documentation,
payment and bank deposit documentation, and bank account activity
records to determine if the respondent met the criteria for de jure and
de facto absence of government control based on the separate rates
criteria specified in the verification outline. The petitioner claims
that because the Department did not provide a detailed description in
the verification reports of all information contained in the documents
examined at verification that the Department did not sufficiently
examine the separate rates issue at verification. The petitioner's
claim is without merit. We
[[Page 9976]]
examined each respondent's available documentation and specifically
requested copies of all examined documentation as verification exhibits
on the separate rates issue. See verification reports for the six
respondents at sections entitled ``De Jure Absence of Government
Control,'' and ``De Facto Absence of Government Control.'' Based on our
corroboration of the statements each respondent made regarding an
absence of de jure and de facto government control in its questionnaire
response with information contained in the relevant verification
exhibits for each respondent, and based on the Department's review of
the applicable PRC laws regarding separate rates in previous NME cases,
we find that there is substantial evidence supporting a finding of de
jure and de facto absence of government control for each respondent in
this proceeding.
Comment 3: Visit to PRC Ministry of Machinery Industry (``MMI'') and
Ministry of Foreign Trade and Economic Cooperation (``MOFTEC'')
The petitioner contends that the Department should have visited the
PRC government offices of MMI and MOFTEC as requested in its December
23, 1998, letter for purposes of examining the separate rates issue.
The petitioner contends that the Department's failure to visit MMI and
MOFTEC has made it impossible to verify completely the extent of PRC
government control over the export activities of each respondent. The
petitioner asserts that when Department officials visited these two PRC
government entities in the LTFV investigation, the Department was
denied access to important information and, as a result, the Department
used facts available in the final determination for certain companies.
The petitioner alleges that in this review, all six respondents have
withheld information demonstrating that the PRC government, through MMI
and MOFTEC, exercise control over their operations. Therefore, the
petitioner contends that none of the six respondents should be entitled
to a separate rate. As evidence that at least one respondent is
controlled by PRC government entities, the petitioner points to a
Department official's handwritten note on CNIM's articles of
association, claiming that this notation indicates that CNIM is
required by MOFTEC to furnish its sales volumes to MOFTEC and thus is
controlled by MOFTEC. In addition, the petitioner suggests that
evidence gathered during the LTFV proceeding indicates that dealings
with trading companies were handled by MOFTEC and that this connection
is evidence of PRC government control. The petitioner states that
because the Department did not and does not plan to conduct a visit of
MMI and MOFTEC in the context of this review, the Department should
resort to the use of facts available in the final results.
The six respondents argue that the petitioner's allegations
concerning the relationship of the respondents with MOFTEC and the MMI
are based on unsubstantiated speculation. The six respondents also
contend that the petitioner's allegation that the respondents withheld
relevant and material information about their relationship with MMI and
MOFTEC is unfounded. The six respondents assert they have had no
communications or relationship with MMI and MOFTEC officials. With
regard to the petitioner's specific allegation that CNIM furnished
MOFTEC with its sales volumes, CNIM states that the handwritten note in
CNIM's articles of association is the reply of CNIM officials to the
Department official's question concerning the reference to MOFTEC in
CNIM's articles of association. Specifically, CNIM's reply reflects
that CNIM furnished MOFTEC with this information for statistical
purposes (see exhibit 20A of the verification report). The respondent
also states that the Department examined relevant documents and asked
probative questions of CNIM personnel regarding all aspects of the
issue of government control and found no evidence of such control.
Therefore, the respondents maintain that based on a thorough
examination by Department officials of documentation and statements
furnished by the respondents at verification, the Department should
find an absence of de jure and de facto government control for all six
respondents.
DOC Position
We agree with the six respondents. There is nothing on the record
of this proceeding that suggests that a Department visit to MMI or
MOFTEC is warranted. In the LTFV investigation, the petitioner provided
us with documentary evidence in support of its claim that two
respondents were still controlled by the PRC government, which prompted
the Department to visit MMI. Thus, in the LTFV investigation,
documentation submitted by the petitioner justified the Department's
visit to MMI in order to examine in greater depth the relationship
between MMI and two respondents in the LTFV proceeding. However, on the
record of this administrative review, we have no evidence of a similar
relationship between any of the six respondents and MMI or MOFTEC.
Therefore, we determined that there was no basis on which to visit MMI
or MOFTEC.
Furthermore, the petitioner incorrectly claims that the same
situation with regard to the two respondents in the LTFV investigation
applies to all six respondents in this review by placing on the record
from the LTFV proceeding the Department's verification report at MMI.
We find that the information in that report has no bearing on our
findings in this segment of the proceeding. Specifically, the
information in the MMI verification report from the LTFV investigation
contained information on government control specific to two PRC
companies which are not part of this review. In contrast, in this
review, there is substantial evidence on the record which indicates
that none of the six respondents are subject to government control.
There is no evidence on this record to the contrary, and we find that
the petitioner's claim that the six respondents have withheld
information on the separate rates issue to be without merit. With
regard to the petitioner's specific allegation that CNIM furnished
MOFTEC with its sales volumes and that this event constitutes
government control, we find that CNIM's explanation contained in the
verification exhibit in response to our question on this matter is
acceptable and does not indicate government control over export
activities. Moreover, it is not unusual for CNIM or any other PRC
company to provide MOFTEC with sales statistics. For example, in
numerous antidumping cases involving products from the PRC, the
Department has sent initial antidumping questionnaire surveys (i.e.,
mini-section A questionnaires) to MOFTEC to gather information from
which we could select mandatory respondents, and these questionnaires
have requested total sales quantity and value data from each PRC
exporter of the subject merchandise. See, e.g., Notice of Preliminary
Determinations of Sales at Less Than Fair Value and Postponement of
Final Determinations: Brake Drums and Brake Rotors from the People's
Republic of China, 61 FR 53190, 53192 (October 10, 1996).
Comment 4: Calculation of Foreign Brokerage and Handling and Marine
Insurance Values, and Factory Overhead, SG&A and Profit Percentages
The petitioner contends that in the preliminary results, the
Department made mathematical errors in calculating
[[Page 9977]]
the foreign brokerage and handling and marine insurance values.
Specifically, the petitioner contends that since the Department used
the financial data of five Indian producers of the subject merchandise
to calculate the surrogate value percentages for factory overhead, SG&A
and profit, the Department erred in calculating the surrogate
percentages because it calculated average percentages using a
denominator of seven instead of a denominator of five. The petitioner
requests that the Department correct these errors for the final
results.
The six respondents agree that the arithmetic errors made in the
Department's calculation of the surrogate values mentioned above should
be corrected for the final results.
Doc Position
We agree with both the petitioner and the respondents and have made
the appropriate corrections in our final results. See Final Results
Valuation Memorandum for further details.
Comment 5: Application of Facts Available to Respondents' Reported
Distances For Foreign Inland Freight and Suppliers
The petitioner maintains that at verification the Department did
not examine all of the transportation distances (i.e., foreign inland
freight and supplier distances) reported by the respondents because the
Department's verification reports did not note that all reported
distances were examined. Therefore, the petitioner contends that
because the Department's verification reports noted errors in the
transportation distances that five respondents (i.e., CNIM, LABEF,
GREN, Winhere, and ZLAP) reported in their responses, the Department
should find the distances reported by the companies to be unreliable
and thus resort to facts available.
The six respondents state that there is no basis for the
application of either facts available or adverse inferences to the
reported transportation distances. Specifically, the six respondents
maintain that the petitioner has failed to demonstrate that application
of facts available is warranted under the statute, because (1) all
necessary information for transportation distances is on the record;
(2) no respondent withheld or failed to provide information requested
in a timely manner and in the form required; (3) no respondent impeded
the review proceeding; and (4) the Department was able to verify all of
the respondent's submitted transportation distances. With regard to the
petitioner's allegation that because the Department's verification
reports did not state that all distances reported by each respondent
were examined even though some errors in reported transportation
distances were noted in the reports, the six respondents assert that
the Department clearly noted in the verification reports for all
respondents that it checked all of the distances reported by the
respondents. Moreover, the six respondents state that if the petitioner
had compared the distances reported in the Department's verification
reports with the distances reported in each respondent's Section D
submission, the petitioner would discover that the Department did in
fact verify all of the reported distance information. Additionally, the
six respondents assert that even if the Department had elected not to
examine all of the reported distances, the Department has the
discretion not to verify all reported information. Furthermore, the six
respondents note, contrary to the petitioner's assertions, that the
errors in the reported transportation distances noted in the
verification reports were either minor in nature or were to the
detriment of the affected respondent. Finally, the six respondents
point out that the Department verified the correct distances and thus
should use them in the final results.
Doc Position
We agree with the six respondents. At verification, we examined all
of the distances reported by each respondent using maps to check each
respondent's reported distances (see ``Distances'' section of
verification reports for the six respondents). As noted in the
verification reports, we found several minor errors. In addition, the
respondents informed the Department of some minor clerical errors they
found in preparation for verification at the commencement of
verification. However, these errors did not affect the overall
integrity of each respondent's data. Hence, we find the application of
facts available is unwarranted in this case and have used the corrected
transportation distance information noted in the verification reports
for each respondent in the final results.
Company-Specific Issues
Comment 6: Duties and Responsibilities of GREN's General Manager
The petitioner argues that verification exhibit documentation does
not support a finding that GREN's general manager has autonomy from the
government in making decisions regarding the selection of management.
Therefore, because the respondent did not demonstrate de facto absence
of government control, the petitioner argues that the Department should
use facts available and deny GREN a separate rate.
GREN states that the petitioner's argument is without merit. First,
the respondent points out that a specific verification exhibit (i.e.,
exhibit four referred to in the GREN verification report) explains the
selection process for GREN's factory general manager. In addition, the
respondent maintains that all responses to the Department's questions
and all documents reviewed at verification concerning personnel and
management selection were consistent with information provided in
GREN's questionnaire responses and fully support a determination that
GREN's personnel and management selection decisions are free from
government involvement. The respondent contends that the petitioner is
merely asserting that the absence of additional documentation renders
the findings of the Department's verification report and exhibits
insufficient to prove the absence of government control over management
regarding the hiring or firing of employees. Because, in its opinion,
the petitioner's conclusory allegation is illogical and contradicted by
the substantial evidence in the GREN verification reports and exhibits,
the respondent maintains that the Department should reject petitioner's
argument and conclude that substantial record evidence supports a
finding of GREN's independence from government control.
DOC Position
We agree with the respondent. In conducting our verification of
this issue at GREN, we examined all documentation such as management
appointment notices issued and approved by GREN's board of directors
and meeting minutes for the election of the general manager (see
verification exhibit 4 and exhibit 2 of GREN's April 7, 1998,
submission). We discussed with GREN the selection process for the
general manager. Based on our examination of statements in GREN's
response and documentation provided by GREN at verification, we found
no evidence that refuted or contradicted GREN's statements in its
response regarding whether its management selected its personnel
without government interference. Therefore, we find that the
petitioner's claim of de facto government control in the case of GREN
is unsubstantiated by any evidence on the record.
[[Page 9978]]
Comment 7: Relationship Between CNIM and its Supplier of the Subject
Merchandise and the PRC Government
The petitioner argues that the Department's verification report did
not provide sufficient information on whether CNIM met the separate
rates criteria. First, the petitioner claims that the separate rate
test should apply to CNIM's supplier of the subject merchandise,
Hanting, because Hanting did not provide sufficient evidence that it is
unaffiliated with CNIM. The petitioner further adds that there is a
reason to suspect that CNIM and Hanting are affiliated parties because
CNIM supplied control numbers in its sales response which are identical
to the control numbers Hanting provided in its factors of production
(``FOP'') response. Second, the petitioner argues that there is no
documentary evidence in the verification report that supports a finding
that CNIM does not coordinate its selling and pricing activities with
other PRC exporters of the subject merchandise or with the China
Chamber of Commerce (``CCC''). Moreover, the petitioner adds that the
items the Department routinely examines to determine whether a
respondent meets the separate rates criteria (i.e., sales records, bank
records and accounting ledgers) are not likely to reveal activities of
price or selling coordination among PRC entities and the government or
the PRC government's role in setting prices. Furthermore, the
petitioner argues that the Department did not fully examine this issue
at verification because there is no mention in the verification report
that documentation such as letters, facsimiles, emails, phone logs,
memoranda of phone conversations, and travel and expense records were
examined, or that the Department officials visited the CCC. Finally,
the petitioner argues that there is no documentary evidence in the
verification report that supports a finding that no PRC government
entity had a role in setting prices for CNIM. To determine whether CNIM
was subject to PRC government control, the petitioner argues that the
Department should have examined letters, facsimiles, emails, phone
logs, memoranda of phone conversations, and travel and expense records
of CNIM.
The respondent states that the fact that CNIM and Hanting reported
the same control numbers simply reflects good communication between the
two companies in preparing their antidumping response, which is
consistent with the Department's questionnaire requirements, and has
nothing to do with the affiliation issue or the separate rates issue.
With regard to the sales documentation which the Department examined at
verification, the respondent states that the Department's thorough
examination of such documentation demonstrated that CNIM personnel
were, in fact, solely involved in the sales and pricing activities, and
that the sales records did not identify any other PRC exporter or the
CCC as a party to CNIM's sales transactions. Finally, the respondent
maintains that all documentation reviewed by the Department at
verification represents substantial evidence which supports a finding
that there is no coordination of selling or pricing activities between
CNIM and other PRC exporters or the CCC.
DOC Position
We agree with the respondent. The petitioner's claim that CNIM and
Hanting are affiliated parties is without merit. At verification, we
examined CNIM's long-term and short-term investments in its affiliates
by examining investment entries in CNIM's short-term and long-term
investment subledgers (see verification exhibit 19 of the Department's
verification report for CNIM). We also tied these subledgers to CNIM's
financial statements. We also examined at verification Hanting's short-
term and long-term investments. As a result of our examination, we
found no evidence that CNIM made investments in Hanting (or vice versa)
or that CNIM is otherwise affiliated with Hanting. The petitioner
erroneously concludes that, because CNIM supplied the same control
numbers as Hanting supplied in its FOP response, CNIM and Hanting must
be affiliated parties. In issuing the antidumping questionnaire, the
Department instructed CNIM to furnish, by control number, for each of
its sales to the U.S. market, the factors used by its supplier to
produce the merchandise sold by CNIM. This reporting requirement
applies to both affiliated and unaffiliated suppliers of the subject
merchandise and is separate from the affiliation issue.
We also disagree with the petitioner's claim that CNIM coordinated
its selling and pricing activities with other PRC exporters of the
subject merchandise or with the CCC, and that a PRC government entity
had a role in setting prices for CNIM. At verification, we extensively
examined CNIM's accounting records and sales documentation and found no
evidence to support these claims. Although we did not examine the
additional types of documentation suggested by the petitioner for the
first time in its case brief (i.e., letters, facsimiles, emails, phone
logs, memoranda of phone conversations, and travel and expense
records), we did examine the type of documentary evidence (including
sales documentation and records, bank records and accounting ledgers)
that we normally rely on in NME cases. The Department considers such
evidence to be sufficient to establish whether there is a de facto
absence of government control in selling and pricing activities of the
respondent or whether the respondent is coordinating with other PRC
exporters in selling the subject merchandise. In this case, we find
that the substantial evidence on this record supports a finding that
CNIM did not coordinate its selling and pricing activities with other
PRC exporters of the subject merchandise or with the CCC, and that no
PRC government entity had a role in setting prices for CNIM.
Final Results of the Review
As a result of our comparison of EP and NV, we determine that the
following weighted-average margins exist for the period April 1, 1997,
through September 30, 1997:
------------------------------------------------------------------------
Margin
Manufacturer/producer/exporter (percent)
------------------------------------------------------------------------
China National Machinery Import & Export Company (CNIM).... 0.00
Laizhou Auto Brake Equipments Factory (LABEF).............. 0.00
Longkou Haimeng Machinery Co., Ltd. (Haimeng).............. 0.00
Qingdao Gren Co. (GREN).................................... 0.00
Yantai Winhere Auto-Part Manufacturing Co., Ltd. (Winhere). 0.00
Zibo Luzhou Automobile Parts Co., Ltd. (ZLAP).............. 0.00
------------------------------------------------------------------------
[[Page 9979]]
We will instruct the U.S. Customs Service not to assess antidumping
duties on entries of the subject merchandise from the above-referenced
PRC exporters made during the POR.
Furthermore, the following deposit rates shall be required for
merchandise entered, or withdrawn from warehouse, for consumption on or
after the publication date of these final results of administrative
review, as provided for by section 751(a)(1) of the Act: (1) The cash
deposit rates for CNIM, LABEF, Haimeng, GREN, Winhere, and ZLAP will be
the rates indicated above; (2) the cash deposit rate for PRC exporters
who received a separate rate in the LTFV investigation will continue to
be the rate assigned in that investigation; (3) the cash deposit rate
for all other PRC exporters will continue to be 43.32 percent, the PRC-
wide rate established in the LTFV investigation; and (4) the cash
deposit rate for non-PRC exporters of subject merchandise from the PRC
will be the rate applicable to the PRC supplier of that exporter. These
deposit requirements shall remain in effect until publication of the
final results of the next administrative review.
This notice serves as the final reminder to importers of their
responsibility under 19 CFR 351.402(f) to file a certificate regarding
the reimbursement of antidumping duties prior to liquidation of the
relevant entries during the review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (``APO'') of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification or
conversion to judicial protective order is hereby requested. Failure to
comply with the regulations and terms of the APO is a sanctionable
violation.
This new shipper administrative review and notice are in accordance
with section 751(a)(2)(B) of the Act (19 U.S.C. 1675(a)(2)(B)) and 19
CFR 351.214(d).
Dated: February 23, 1999.
Holly A. Kuga,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-5014 Filed 2-26-99; 8:45 am]
BILLING CODE 3510-DS-P
