02-13845. Brake Rotors From the People's Republic of China: Preliminary Results of the Sixth Antidumping Duty New Shipper Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of preliminary results of sixth antidumping duty new shipper review.

SUMMARY:

In response to a request from one exporter, Longkou TLC Machinery Co., Ltd., the Department of Commerce is conducting a new shipper administrative review of the antidumping duty order on brake rotors from the People's Republic of China. The review covers the period April 1, 2001, through September 30, 2001.

We have preliminarily determined that U.S. sales have not been made below normal value. If these preliminary results are adopted in our final results, we will instruct the U.S. Customs Service to assess no antidumping duties on the exports subject to this review.

Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE:

June 3, 2002.

FOR FURTHER INFORMATION CONTACT:

Brian Smith or Terre Keaton, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: [phone] or [phone], respectively.

The Applicable Statute

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. In addition, unless otherwise indicated, all citations to the Department's regulations are to 19 CFR Part 351 (2001).

SUPPLEMENTARY INFORMATION:

Background

On October 30, 2001, the Department received a request from Longkou TLC Machinery Co., Ltd. (“Longkou TLC”), for a new shipper review pursuant to section 751(a)(2)(B) of the Act and 19 CFR 351.214(b).

Section 751(a)(2) of the Act and 19 CFR 351.214(b)(2)(i) govern determinations of antidumping duties for new shippers. These provisions state that, in requesting a review, an exporter or producer of the subject merchandise must meet the following conditions: (1) It did not export the merchandise to the United States during the period covered by the original less-than-fair-value (“LTFV”) investigation; and (2) it is not affiliated with any exporter or producer who exported the subject merchandise during that period. If these provisions are met, the Department will conduct a new shipper review to establish an individual weighted-average dumping margin for such exporter or producer, if the Department has not previously established such a margin for the exporter or producer. The regulations require that the exporter or producer include in its request, with appropriate certifications, the following information: (i) The date on which the merchandise was first entered, or withdrawn from warehouse, for consumption, or, if it cannot certify as to the date of first entry, the date on which it first shipped the merchandise for export to the United States, or, if the merchandise has not yet been shipped or entered, the date of sale; (ii) a list of the firms with which it is affiliated; (iii) a statement from the exporter or producer, and from each affiliated firm, that it did not, under its current or a former name, export the merchandise during the period of investigation (“POI”); and (iv) in an antidumping proceeding involving inputs from a non-market-economy (“NME”) country, a certification that the export activities of such exporter or producer are not controlled by the central government. See 19 CFR 351.214(b)(ii) and (iii).

Longkou TLC's request was accompanied by information and certifications establishing the effective date on which it first shipped and entered brake rotors. The respondent also claims that it is not affiliated with companies which exported brake rotors from the People's Republic of China (“PRC”) during the POI and has certified that its export activities are not controlled by the central government. Based on the above information, the Department initiated a new shipper review covering Longkou TLC (see Brake Rotors from the People's Republic of China: Initiation of Sixth New Shipper Antidumping Duty Review (66 FR 63362, December 6, 2001)). The Department is now conducting this review in accordance with section 751 of the Act and 19 CFR 351.214.

On December 5, 2001, we issued the antidumping duty questionnaire to Longkou TLC. On December 17, 2001, the Department provided the parties an opportunity to submit publicly available information for consideration in these preliminary results.

On January 15, 2002, Longkou TLC submitted its questionnaire response.

On February 20 and 27, 2002, the petitioner and Longkou TLC submitted publicly available information and rebuttal comments, respectively.

On March 6, 2002, the Department issued a supplemental questionnaire to Longkou TLC, to which it received a response on April 5, 2002.

On March 12, 2002, the petitioner submitted a letter requesting that the Department conduct a verification of the response submitted by Longkou TLC.

Scope of Order

The products covered by this order 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 the order 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 order 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 currently classifiable under subheading 8708.39.5010 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Although the HTSUS subheading is provided for convenience and customs purposes, the written description of the scope of this order is dispositive.

Period of Review

The period of review (“POR”) is from April 1, 2001, through September 30, 2001.

Verification

As provided in section 782(i)(2) of the Act and 19 CFR 351.307, we intend to verify Longkou TLC's information.

Separate Rates

In proceedings involving 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 (i.e., a PRC-wide rate).

The respondent in this review, Longkou TLC, is a joint venture. Thus, a separate-rates analysis is necessary to determine whether this exporter is 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 in its export activities from government control to be entitled to a separate rate, the Department utilizes a test arising from 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 NME 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

Longkou TLC has placed on the administrative record documents to demonstrate absence of de jure control, including the “The Enterprise Legal Person Registration Administrative Regulations,” promulgated on June 3, 1988, the 1990 “Regulation Governing Rural Collectively-Owned Enterprises of PRC,” and the 1994 “Foreign Trade Law of the People's Republic of China.”

As in prior cases, we have analyzed these laws and have found that they establish a sufficient absence of de jure control of 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, 60 FR 29571 (June 5, 1995). We have no new information in this proceeding which would cause us to reconsider this determination with regard to Longkou TLC.

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 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 the disposition of profits or financing of losses (see Silicon Carbide and Furfuryl Alcohol).

Longkou TLC has asserted 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. Additionally, Longkou TLC's questionnaire responses indicate that its pricing during the POR does not suggest coordination among exporters. This information supports a preliminary finding that there is absence of de facto governmental control of export functions performed by Longkou TLC. See Pure Magnesium from the People's Republic of China: Preliminary Results of Antidumping Duty New Shipper Administrative Review, 62 FR 55215 (October 23, 1997). Consequently, we have preliminarily determined that Longkou TLC has met the criteria for the application of separate rates.

Normal Value Comparisons

To determine whether sales of the subject merchandise by Longkou TLC to the United States were made at prices below normal value (“NV”), we compared its export prices to NV, as described in the “Export Price” and “Normal Value” sections of this notice, below.

Export Price

We used export price methodology in accordance with section 772(a) of the Act because the subject merchandise was sold by the exporter directly to an unaffiliated customer in the United States prior to importation and constructed export price was not otherwise indicated.

For Longkou TLC, we calculated export price based on an FOB foreign port price to the first unaffiliated purchaser in the United States. Where appropriate, we made deductions from the starting price (gross unit price) for foreign inland freight and foreign brokerage and handling charges in the PRC in accordance with section 772(c) of the Act. Because foreign inland freight and brokerage and handling fees were provided by PRC service providers or paid for in an NME currency (i.e., renminbi), we based those charges on surrogate rates from India (see “Surrogate Country” section below for further discussion of our surrogate-country selection). To value foreign inland trucking charges, we used a November 1999 average truck freight value based on price quotes from Indian trucking companies. To value foreign brokerage and handling expenses, we relied on public information reported in the 1997-1998 new shipper review of the antidumping duty order on stainless steel wire rod from India.

Normal Value

A. Non-Market-Economy Status

In every case conducted by the Department involving the PRC, the PRC has been treated as an NME country. Pursuant to section 771(18)(C)(i) of the Act, any determination that a foreign country is an NME country shall remain in effect until revoked by the administering authority (see Notice of Preliminary Results of Antidumping Duty Administrative Review and Preliminary Partial Rescission of Antidumping Duty Administrative Review: Freshwater Crawfish Tail Meat From the People's Republic of China, 66 FR 52100, 52103 (October 12, 2001)). 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 an 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. India and Indonesia are among the countries comparable to the PRC in terms of overall economic development (see Memorandum from the Office of Policy to Irene Darzenta Tzafolias, Program Manager, dated December 6, 2001). In addition, based on publicly available information placed on the record, 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 because it meets the Department's criteria for surrogate-country selection. Where we could not find surrogate values from India, we used values into Indonesia.

C. Factors of Production

In accordance with section 773(c) of the Act, we calculated NV based on the factors of production which included, but were not limited to the following elements: (A) Hours of labor required; (B) quantities of raw materials employed; (C) amounts of energy and other utilities consumed; and (D) representative capital costs, including depreciation. We used the factors reported by Longkou TLC which produced the brake rotors it exported to the United States during the POR. To calculate NV, we multiplied the reported unit factor quantities by publicly available Indian or Indonesian values.

The Department's 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.

To value pig iron, steel scrap, ferrosilicon, ferromanganese, limestone, lubrication oil, firewood, and coking coal, we used April 2001-July 2001 average import values from Monthly Statistics of the Foreign Trade of India. We relied on the factor specification data submitted by the respondent for the above-mentioned inputs in its April 5, 2002, submission for purposes of selecting surrogate values from Monthly Statistics. We also added an amount for loading and additional transportation charges associated with delivering coal to the factory based on June 1999 Indian price data contained in the periodical Business Line.

We based our surrogate value for electricity on data obtained from Conference of Indian Industries: Handbook of Statistics (“CII Handbook”) and from the Centre for Monitoring Indian Economy (“CMIE data”).

We valued labor based on a regression-based wage rate, in accordance with 19 CFR 351.408(c)(3).

To value selling, general, and administrative (“SG&A”) expenses, factory overhead and profit, we used the 1998 financial data of Jayaswals Neco Limited (“Jayaswals”), the 1998-1999 financial data of Rico Auto Industries Limited (“Rico”), and the 2000-2001 financial data of Kalyani Brakes Limited (“Kalyani”). We have relied on fiscal data for three companies rather than just one company's fiscal data for purposes of calculating the surrogate-value percentages. In this case, Jayaswals' 1998 fiscal data and Rico's 1998-1999 fiscal data are reasonably contemporaneous with the POR and otherwise as suitable as Kalyani's data. Accordingly, we find it more reliable to use data of three companies than to use data of a single company. We have not used the 1999-2000 fiscal data suggested by the respondent from Rico's internet website because the data provided by its website is incomplete for purposes of calculating ratios for SG&A, factory overhead, and profit. Specifically, the website data provided only expense data based on general categories of expenses and not on the basis of specific expenses. Specific expense data (i.e., line-item expense categories such as advertising, repair and maintenance, etc.) is necessary for determining whether a particular expense should be considered an overhead or selling expense and for calculating accurate surrogate-value percentages.

Where appropriate, we removed from the surrogate overhead and SG&A calculations the excise duty amount listed in the financial reports. We made certain adjustments to the ratios calculated as a result of reclassifying certain expenses contained in the financial reports. For further discussion of the adjustments made, see the Preliminary Results Valuation Memorandum, dated May 29, 2002.

All inputs were shipped by truck. Therefore, to value PRC inland freight, we used a November 1999 average truck freight value based on price quotes from Indian trucking companies.

In accordance with the decision of the Court of Appeals for the Federal Circuit in Sigma Corp. v. United States, 117 F. 3d 1401 (1997), we revised our methodology for calculating source-to-factory surrogate freight for those material inputs that are valued based on CIF import values in the surrogate country. We have added to CIF surrogate values from India a surrogate freight cost using the shorter of the reported distances from either the closest PRC port of importation to the factory or from the domestic supplier to the factory on an input-specific basis.

To value corrugated cartons, nails, paper cartons, paper cover, plastic bags, steel strip, tape, and clamps, we used April-July 2001 average import values from Monthly Statistics. To value pallet wood, we used a 2000 pallet-wood value from the Indonesian publication Indonesia Foreign Trade Statistics which the Department has used to value pallet wood in two recent antidumping duty proceedings (see Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the PRC: Final Results of 1998-1999 Administrative Review, Partial Rescission of Review, and Determination Not To Revoke Order in Part, 66 FR 1953, 1955 (January 10, 2001) (“TRBs”), and accompanying decision memorandum at Comment 10, and Persulfates from the PRC: Final Results of Antidumping Duty Administrative Review and Partial Rescission of Administrative Review, 65 FR 46691 (July 31, 2000)).

Preliminary Results of the Review

We preliminarily determine that the following margin exists for Longkou TLC during the period April 1, 2001, through September 30, 2001:

Manufacturer/producer/exporter	Margin percent
Longkou TLC Machinery Co., Ltd.	0.00

We will disclose the calculations used in our analysis to the parties to this proceeding within five days of the date of publication of this notice. Any interested party may request a hearing within 30 days of publication of this notice. Any hearing, if requested, will be held on July 30, 2002.

Interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, Room B-099, within 30 days of the date of publication of this notice. Requests should contain (1) the party's name, address, and telephone number, (2) the number of participants, and (3) a list of issues to be discussed. See 19 CFR 351.310(c).

Issues raised in the hearing will be limited to those raised in case briefs and rebuttal briefs. Case briefs from interested parties may be submitted not later than July 19, 2002. Rebuttal briefs, limited to issues raised in the case briefs, will be due not later than July 26, 2002. Parties who submit case briefs or rebuttal briefs are requested to submit with each argument (1) a statement of the issue and (2) a brief summary of the argument. Parties are also encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited.

The Department will issue the final results of this new shipper review, including the results of its analysis of issues raised in any such written briefs or at the hearing, if held, not later than 90 days after the date of issuance of this notice.

Assessment Rates

In accordance with 19 CFR 351.106(c)(2), we will instruct the Customs Service to liquidate without regard to antidumping duties all entries of subject merchandise during the POR for which the importer-specific assessment rate is zero. The Department will issue appropriate appraisement instructions directly to the Customs Service upon completion of this review.

Cash Deposit Requirements

Upon completion of this review, for entries from Longkou TLC, we will require cash deposits at the rate established in the final results pursuant to 19 CFR 351.214(e) and as further described below.

The following deposit requirements will be effective upon publication of the final results of this new shipper review for all shipments of brake rotors from the PRC entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(1) of the Act: (1) The cash deposit rate for Longkou TLC will be the rate determined in the final results of review (except that, if the rate is de minimis, i.e., less than 0.50 percent, a cash deposit rate of zero will be required); (2) the cash deposit rate for PRC exporters who received a separate rate in a prior segment of the proceeding will continue to be the rate assigned in that segment of the proceeding; (3) the cash deposit rate for the PRC NME entity will continue to be 43.32 percent; 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 requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Importers

This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

This new shipper review and notice are in accordance with section 751(a)(2)(B) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 351.213.

Dated: May 28, 2002.

Bernard T. Carreau,

Acting Assistant Secretary for Import Administration.