[Federal Register Volume 61, Number 47 (Friday, March 8, 1996)]
[Notices]
[Pages 9434-9436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5424]
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DEPARTMENT OF COMMERCE
Notice: Change in Policy Regarding Currency Conversions
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (``the Department'') has revised
its policy regarding currency conversions to conform to changes
resulting from the Uruguay Round Agreements Act (``the URAA''). We are
now announcing this change in methodology and the accompanying computer
code and
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requesting comments on this new methodology. At the end of a one-year
test period, the Department will reexamine the methodology, make any
needed changes, and prepare regulations.
DATES: Effective Date: The proposed policy is effective March 8, 1996
with respect to all investigations and reviews requested since January
1, 1995. The Department will consider all written comments concerning
this methodology and the accompanying computer code received before
December 31, 1996.
ADDRESSES: Comments: Address all written comments to Susan G. Esserman,
Assistant Secretary for Import Administration, Central Records Unit,
Room B-099, U.S. Department of Commerce, Pennsylvania Avenue and 14th
Street, NW., Washington DC 20230.
Computer Code: The computer code is available to the public as of
March 8, 1996 on Internet at the following address: HTTP://
WWW.ITA.DOC.GOV/IMPORT____ADMIN/RECORDS/. In addition, the computer
code is available on 3.5'' diskettes in SAS 6.11 format and paper
copies are available for reading and photocopying at Room B-099 of the
Central Records Unit, Room B-099, U.S. Department of Commerce,
Pennsylvania Avenue and 14th Street, NW., Washington, DC 20230.
FOR FURTHER INFORMATION CONTACT: Penelope Naas, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington D.C. 20230; telephone:
(202) 482-3534.
SUPPLEMENTARY INFORMATION: The URAA amended the Tariff Act of 1930
(``the Act'') to provide explicit guidance regarding the exchange rate
to be used when converting currencies in antidumping proceedings
(section 773A). In the Statement of Administrative Action accompanying
the URAA, the Administration set out its intention that the Department
would ``* * * promulgate regulations implementing the requirements of
section 773A.'' In the ``Notice of Proposed Rulemaking and Request for
Public Comments'' dealing with proposed antidumping and countervailing
duty regulations, the Department announced its intention to implement
the requirements of section 773A ``through an exchange rate model
announced in a policy bulletin * * *'' (61 FR 7308; February 27, 1996.)
Policy Bulletin 96-1, which follows, is a description of the exchange
rate model.
As stated in the proposed regulations, we plan to use this model
for one year and then evaluate its performance based on public comment.
We will then alter the model as necessary and expand the regulations to
provide more extensive guidance. The public is invited to comment on
the model at any time prior to December 31, 1996. The computer code,
through which the exchange rates will be selected is available on
Internet and on disks from the Department. The Department also will
make available on Internet lists of exchange rates for all currencies
required in antidumping proceedings under the Act, as amended by the
URAA.
Policy Bulletin 96-1: Import Administration Exchange Rate
Methodology
Introduction
For the first time, the Uruguay Round Agreements Act (the ``URAA'')
provides explicit guidelines for the selection of exchange rates that
Import Administration (``IA'') will use in converting foreign
currencies to U.S. dollars. Our past practice, specified in 19 CFR
353.60, has been to use the same exchange rates as the Customs Service.
Section 773A of the Tariff Act of 1930, as amended, (the ``Act'')
provides that IA will convert foreign currencies at the exchange rates
on the date of the U.S. sale, subject to certain exceptions. Those
exceptions require IA to ignore ``fluctuations'' in the exchange rate
and to provide respondents in an investigation at least 60 days to
adjust prices after a ``sustained movement'' in the exchange
rate.1 Neither the Act nor the Antidumping Agreement (Agreement on
Implementation of Article VI, GATT 1994) provide guidance on defining
fluctuations or sustained movements.
\1\ Section 773A of the Act also specifies that, if it is
established that a forward currency transaction (``hedging'') is
linked to an export sale, IA may use the exchange rate specified in
the forward contract to convert currency for that sale. The model
described in this bulletin does not encompass this exception. When
it is appropriate to employ the forward rate provision, it is a
simple matter to substitute the forward rate for the results of the
model.
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The Statement of Administrative Action accompanying the URAA (the
``SAA'') provides that IA is to promulgate regulations implementing the
currency conversion provisions of section 773A of the Act. (SAA at
841.) The proposed regulations do not provide the kind of detail
necessary to define fluctuations and sustained movement. Instead, we
intend to implement and test the model described in this bulletin for
one year. We will then make any necessary revisions to the model based
on our experience and public comment. Once that process is complete, we
will promulgate regulations fully defining our practice.
We have designed the exchange rate model described below to define
fluctuations and sustained movements with three goals in mind:
1. To implement the statutory requirements as simply as possible.
2. To ensure that all exporters, when they set their U.S. prices
and whether under order or not, can know with certainty the daily
exchange rate the Department will use in a dumping analysis.
3. To capture the model in simple computer code to reduce the
administrative burdens on IA and other parties that wish to monitor
exchange rates.
In brief, the model has been designed to convert a file of actual
daily exchange rates to a file of ``official'' daily exchange rates. In
this process, each actual daily exchange rate is classified as
``normal'' or ``fluctuating.'' An extended pattern of appreciating
rates defines a ``sustained movement.'' Based on these classifications,
the model assigns the appropriate official exchange rate for each
day.2
\2\ We are continuing to examine the application of the model in
situations where the foreign currency depreciates substantially
against the dollar over the period of investigation or the period of
review. In those situations, it may be appropriate to rely on daily
rates.
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Summary of the Model.
Step 1: Exchange Rate Used
The model classifies each daily rate as ``normal'' or
``fluctuating'' based on a ``benchmark'' rate. The benchmark is a
moving average of the actual daily exchange rates for the eight weeks
immediately prior to the date of the actual daily exchange rate to be
classified.3 Whenever the actual daily rate varies from the
benchmark rate by more than two-and-a-quarter percent, the actual daily
rate is classified as fluctuating. If within two-and-a-quarter percent,
the actual daily rate is classified as normal.
\3\ The New York Federal Reserve Bank publishes exchange rates
for Monday through Friday only, excluding holidays. We refer to
these as the actual daily rate or reported days.
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Actual daily rates classified as normal are the official exchange rate
for that day. However, when an actual daily rate is classified as
fluctuating, the benchmark rate is the official rate for that day.
Step 2: Recognition Period
Whenever the weekly average of actual daily rates exceeds the
weekly average of benchmark rates by more than five percent for eight
consecutive
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weeks (the recognition period), the model classifies the exchange rate
change as a sustained movement. During the eight week recognition
period, the model continues to classify each daily rate as normal or
fluctuating and to substitute the benchmark rate for the actual daily
rate when the daily rate is fluctuating.
Step 3: Adjustment for Sustained Movement
When there has been a sustained movement increasing the value of a
foreign currency in relation to the dollar, respondents under
investigation, but not review, are given 60 calendar days to correct
their prices. The 60-calendar-day grace period begins on the first day
after the recognition period. During that period, the official rate in
effect on the last day of the recognition period will be the official
rate in investigations. For reviews, the model continues to apply the
eight-week average to determine whether daily rates are normal or
fluctuating.
When a foreign currency has decreased in value in relation to the
dollar, there is no adjustment required for a sustained movement, and
the official rate generated by the model will normally apply to
currencies depreciating against the dollar. However, in both
investigations and reviews, whenever the decline in the value of a
foreign currency is so precipitous and large as to reasonably preclude
the possibility that it is only fluctuating, the lower actual daily
rates will be employed from the time of the large decline.
The Starting Point
In order to provide certainty for all parties, we will start the
model for all currencies as of January 1, 1992. We have chosen this
date because the new law is effective for all reviews requested in
January 1995 and thereafter. Generally, the earliest possible U.S. sale
is 18 to 22 months prior to the anniversary month (18-month review
period (first review) with U.S. sales generally made not earlier than 4
months before entry). By starting the model more than a full year prior
to the earliest probable U.S. sale date, any distortion caused by the
pattern of rates included in the initial benchmark will be eliminated
before it can influence the exchange rate on the date of an actual U.S.
sale.
Currently, a list of official rates starting with January 1, 1992,
for the 30 exchange rates collected by the New York Federal Reserve
Bank 4 is available on Internet and through the Central Records
Unit. Shortly, all currencies for which there is a product under a
dumping order will be posted and distributed. We will maintain these
rates and update them quarterly using the Federal Reserve and other
reliable sources.
\4\ The 30 exchange rates are collected by the New York Federal
Reserve Bank from a sample of market participants. They are the noon
buying rates in New York for cable transfers payable in foreign
currencies. These rates are certified by the New York Federal
Reserve Bank for customs purposes, as required by section 522 of the
Act. The daily rates are published weekly by the Federal Reserve
Bank Board of Governors in form H-10. In addition, the Chicago
Federal Reserve Bank maintains an electronic file on a bulletin
board (which any party can access by modem) of 30 of the currencies.
When the need for a currency other than one of the 32 arises, we
will identify another reliable source.
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Decision Rules in Greater Detail
The decision rules which follow have been programmed in SAS to
convert a list of actual daily exchange rates to a list of official
exchange rates for use in dumping investigations and reviews. We will
use the file of official daily rates to select the exchange rate for
each U.S. sale in our calculations. The following rules will apply:
1. Use the actual daily exchange rate 5 unless the actual
daily rate varies by more than two and a quarter percent from the
benchmark rate (``fluctuates''). The benchmark rate is defined as the
moving average exchange rate of the 40 reported days immediately
preceding the date of the exchange rate being tested and
classified.6
\5\ The exchange rate on Saturday, Sunday, or holidays is the
rate used for the previous reported day.
\6\ The model is based on reported days. For example, the
benchmark rate used is 40 reported days or approximately eight
calendar weeks. Likewise, the exchange rate recognition period is 40
reported days or approximately eight weeks.
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2. When the actual daily rate fluctuates from the benchmark rate,
use the benchmark rate until the daily rate fluctuates by more than
five percent in the same direction from the benchmark rate for a period
of 40 reported days, or approximately eight weeks.7 In other
words, the weekly average of the actual daily rates will be compared to
the average benchmark rate for the same week. If the actual exchange
rate average exceeds the benchmark average by five percent or more for
eight consecutive weeks, a sustained movement in the value of the
currency is deemed to have occurred.
\7\ To eliminate ``noise'' in the daily rates, when testing
whether there has been a sustained movement, the model compares the
eight average weekly rates for the recognition period to the
benchmark rate. Daily rates are too volatile. (By using an average
weekly rate, a single day's dip back into the normal range will not
mask a sustained movement.) A sustained movement is deemed to have
occurred when the average rate for each of the eight weeks of the
recognition period deviates from the benchmark by more than five
percent.
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3. In investigations, if a sustained movement has occurred, and the
foreign currency has increased in value in relation to the U.S. dollar,
continue to use the official rate from the last day of the recognition
period for 60 days following the end of the recognition period. On the
61st day, we would return to comparing the actual daily rate to the
benchmark rate.
Whenever the decline in the value of a foreign currency is so
precipitous and large as to reasonably preclude the possibility that it
is only fluctuating, use actual daily rates from the start of the
recognition period.
Dated: March 4, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-5424 Filed 3-7-96; 8:45 am]
BILLING CODE 3510-DS-P
