65 FR 31143, May 16, 2000
                                                          A-570-822
                                        Fifth Administrative Review
                                               POR: 10/1/97-9/30/98
                                                    Public Document


MEMORANDUM

DATE: May 8, 2000

TO:   Troy H. Cribb
      Acting Assistant Secretary
      for Import Administration

FROM: Richard W. Moreland
      Deputy Assistant Secretary, Group I
      Import Administration


SUBJECT: Issues and Decision Memorandum for the Final Results of the
         Antidumping Duty Administrative Review of Certain Helical
         Spring Lock Washers from the People's Republic of China


___________________________________________________________________


SUMMARY

We have analyzed the comments in the case and rebuttal briefs
submitted by interested parties in the antidumping duty
administrative review of certain helical spring lock washers
("HSLWs") from the People's Republic of China ("PRC"). As a result of
our analysis, we have made changes, including corrections of certain
inadvertent programming and clerical errors, in the margin
calculations. We recommend that you approve the positions we have
developed in the Discussion of the Issues section of this memorandum.
Below is the complete list of the issues in this review for which we
received comments from the parties:


Comment 1: Use of Import Prices to Value All Steel Wire Rod Inputs
Comment 2: Use of Import Prices to Value Domestically-sourced Steel
           Wire Rod
Comment 3: Factory Overhead, SG&A Expenses and Profit in Plating
           Operations
Comment 4: Inland Freight Charges for Steel Wire Rod
Comment 5: Valuation of Truck Freight
Comment 6: Calculation of Factory Overhead and Profit Rates
Comment 7: Valuation of Hydrochloric Acid
Comment 8: Assessment Rate Calculation for Importer


BACKGROUND

On July 13, 1999, the Department of Commerce ("the Department")
published the preliminary results of this administrative review.(1)

We published a notice of extension of time for the final results in
this review on November 8, 1999.(2) The products covered by this
review are HSLWs of carbon steel, of carbon alloy steel, or of
stainless steel, heat-treated or non-heat-treated, plated or non-
plated, with ends that are off-line. HSLWs are designed to: (1)
function as a spring to compensate for developed looseness between
the component parts of a fastened assembly; (2) distribute the load
over a larger area for screws or bolts; and, (3) provide a hardened
bearing surface. The scope does not include internal or external
tooth washers, nor does it include spring lock washers made of other
metals, such as copper.

The period of review ("POR") is October 1, 1997, through September
30, 1998. We invited parties to comment on our preliminary results.


DISCUSSION OF ISSUES

Comment 1: Use of Import Prices to Value All Steel Wire Rod Inputs

In the preliminary results, the Department used the price of steel
wire rod imported by the respondent, Zhejiang Wanxin Group, Co., Ltd.
("ZWG"), from the United Kingdom to value all rod used by ZWG,
including rod domestically sourced in the PRC.

The petitioner, Shakeproof Assembly Components, Inc., disagrees with
the valuation methodology used by the Department in the preliminary
results. According to the petitioner, both the statute at §773(c)(1)
of the Tariff Act of 1930, as amended ("the Act"), and the Court of
International Trade ("CIT"), in Shakeproof Assembly Components
Division of Illinois Toolworks, Inc. v. United States, Slip Op. 99-70
(July 29, 1999) ("Shakeproof") require the Department to use "best
available information" to value factors and the Department did not do
so.

First, according to the petitioner, the prices paid by ZWG for steel
wire rod were aberrationally low. The petitioner points to the unit
value of steel wire rod imported into the PRC from the United Kingdom
(as reported in Chinese import statistics) and to the price of rod
imported into the United States from the United Kingdom during 1998
to support this claim.

Second, the petitioner argues, the Department failed to follow its
practice of disregarding small quantity import data when the per unit
value of the small quantity transaction differs from the per unit
value of larger quantities. According to the petitioner, Chinese
trade data indicate that imports of the type of wire rod imported by
ZWG from the United Kingdom were one percent or less of Chinese
imports of steel wire rod during the POR.

Third, the petitioner contends that the prices paid by ZWG cannot
constitute best available information regarding the value of steel
wire rod for the following reasons: (i) ZWG estimated its usage of
steel wire rod based on inventory records, with the result that rod
purchased during the POR was not necessarily used in production
during the POR; (ii) despite the fact that it used rod from its
inventory, the price reported by ZWG reflects the price paid during
the POR, not the cost of wire rod in its inventory; (iii) certain
sizes of steel wire rod were purchased exclusively in the domestic
market; (iv) given the specifications of the rod, ZWG should have
been able to trace imported and domestically-sourced rod into its
various products; and (v) ZWG did not provide a public summary of the
prices it paid for imported steel wire rod.

ZWG supports the valuation methodology used by the Department in the
preliminary results. ZWG contends that the CIT's ruling in Shakeproof
effectively (and incorrectly) overturned the Department's regulation
regarding factor valuation in situations where the nonmarket economy
("NME") producer imports an input from a market economy supplier and
pays for the input with a market economy currency. In ZWG's view, the
CIT's failure to address the regulation constitutes clear legal error
and, moreover, the Shakeproof decision is inconsistent with Court of
Appeals for the Federal Circuit ("CAFC") precedent and Department
practice.

First, ZWG points to §351.408(c)(1) of the Department's regulations,
which states that the Department will normally use the market economy
price paid by a NME producer (in a market economy currency) to value
an input, even if only a portion of the input used is imported. ZWG
notes that in comments on the implementation of this regulation, the
Department explicitly rejected a suggestion that the domestically-
sourced portion should be valued using prices in a surrogate country.
ZWG then cites the CAFC's ruling in Lasko Metal Prod. v. United
States, 43 F.3d 1442 (Fed. Cir. 1994) ("Lasko"):

Where we can determine that an NME producer's input prices are
market determined, accuracy, fairness and predictability are enhanced
by using those prices. Therefore, using surrogate values when market-
based values are available would, in fact, be contrary to the law.

Lasko, 43 F.3d at 1446. ZWG points to Melamine Institutional
Dinnerware from the PRC, 62 FR 1708, 1710 (January 13, 1997)
("Melamine"); Collated Roofing Nails from the PRC, 62 FR 51410 51416
(October 1, 1997); Bicycles from the People's Republic of China, 61
FR 19026, 19032 (April 30, 1996), and Saccharin from the People's
Republic of China, 59 FR 58818, 58828 (November 15, 1994) as examples
of cases where the Department used import prices to value the input,
despite the fact that a portion of the input was sourced domestically
in the PRC.

Second, ZWG disputes the petitioner's claim that the prices it paid
for imported steel wire rod were aberrationally low. In ZWG's view,
the petitioner's citation to Chinese import statistics is incomplete,
is not on the record in this review, and would be inappropriate to
measure the validity of ZWG's prices. ZWG further claims that the
petitioner's reference to U.S. import data is irrelevant as the
United States' level of economic development is not comparable to
that of the PRC. ZWG also dismisses the petitioner's concern that not
all sizes of wire rod were imported during the POR. ZWG points to the
Department's verification report from the 4th administrative review
of this order which states that ZWG uses little of the large diameter
rod (which is sourced in the PRC). In that review, ZWG maintains, the
Department found that larger diameter wire rod is usually less
expensive than the smaller diameter (imported) rod. Therefore, ZWG
concludes that the use of import prices for domestically-sourced,
large diameter rod actually overvalues this input.

Department's Position:

The CIT decision relied upon by the petitioner for several of its
arguments, Shakeproof, is not a final and conclusive decision.
Rather, it was a remand which requested the Department to provide
further explanation on, among other things, the Department's factor
valuation methodology when a NME producer imports an input from a
market economy supplier. We filed a remand determination with the
Shakeproof court on September 27, 1999, and it is currently pending
with the court. Because Shakeproof is not a final and conclusive
decision, we have continued to follow §351.408(c)(1) of our
regulations.

Although we are not following the Shakeproof decision, we agree with
the petitioner that §773(c)(1) of the Act requires the Department to
use "best available information" to value a NME producer's factors of
production. Consistent with the CAFC's ruling in Lasko, we believe we
achieve this by using information which promotes accuracy, fairness
and predictability in our results (see Preamble to the Department's
Proposed Rule, 61 FR 7308, 7344 (February 27, 1996)). Section
351.408(c)(1) of our regulations describes our method for valuing
factors of production including our preference for using the price
paid by a NME producer that actually imports the input, when the
input is purchased from a market economy supplier and paid for in a
market economy currency. ZWG correctly points to our comments on the
implementation of our regulations, where we explained that our
decision to use the import price, even to value the portion of the
input sourced domestically, leads to increased accuracy (see,
Preamble to the Department's Final Rule, 62 FR 27296, 27366 (May 19,
1997)). In that same discussion, we also indicated that we would not
use the price paid for the imported input if the price were
"distorted (i.e., non-arm's length)" or if the amount purchased was
"insignificant." In this review, ZWG purchased its imported wire rod
at arm's length and, as discussed in response to Comment 2, the
amount it purchased is not insignificant. Therefore, we have
continued to use the price actually paid by ZWG for imported steel
wire rod to value this factor of production.

The petitioner has raised additional concerns about this price.
First, the petitioner claims the price is aberrationally low.
Assuming for the sake of argument that the price paid by ZWG is low,
we do not agree that this is a basis for rejecting the price. It is
the price paid by ZWG to an unrelated market economy supplier, i.e.,
an arm's length price, and the petitioner has provided no information
except the allegedly low price that would lead us to question the
reliability of the data. While the Department will examine surrogate
values to determine whether they are aberrational (see, e.g., Final
Determination of Sales at Less Than Fair Value: Creatine Monohydrate
from the People's Republic of China, 64 FR 71104, 71106 (December 20,
1999)), we are not aware of, nor has the petitioner pointed to, any
case where we have tested the actual price paid by the NME producer
to a market economy supplier for the input. We do not believe that
substituting a surrogate value for the price a NME producer actually
paid to a market economy supplier for an input actually used to
produce the merchandise being sold to the United States could meet
the best available information standard imposed by the statute.

The petitioner also has raised the Department's practice of
disregarding small quantity import data when the per unit value of
the small quantity transaction differs from the per unit value of
larger quantities. However, the petitioner fails to mention that this
practice again applies only to surrogate data. Specifically, when the
Department uses a surrogate country's import statistics to value an
input, we omit imports from NMEs and small quantity shipments in
calculating the average import price. A review of the cases cited by
the petitioner shows that the Department was examining the per unit
values and quantities of imports into the surrogate country and not
imports by the NME producer (see, Heavy Forged Hand Tools, Finished
or Unfinished, With or Without Handles, from the People's Republic of
China, Final Results of Administrative Reviews, 62 FR 11813, 11815
(March 13, 1997), and Tapered Roller Bearings and Parts Thereof,
Finished or Unfinished, from Romania, 62 FR 37194, 37195 (July 11,
1997)). Moreover, as discussed below, we have examined ZWG's imports
relative to its total amount of steel wire rod used, and found that
the imports are not insignificant.

Finally, the petitioner has raised several concerns about the import
value reported by ZWG. We are satisfied that this amount accurately
reflects the price for steel wire rod during the POR. We did not ask
ZWG to trace imported versus domestically sourced inputs through to
the final product. We do not believe that this is relevant to our
determination because our regulations direct us to use the import
price for all of the input. Inventory records are an acceptable means
of measuring the relative usage of imported and domestic wire rod.
Similarly, we accept the price paid for wire rod during the POR
(rather than the price paid for rod in inventory). This is consistent
with our methodology when we use surrogate values, i.e., we seek a
value that is contemporaneous with the POR. Regarding the fact that
ZWG did not import all sizes of wire rod, as stated in ZWG's rebuttal
brief, the verification in the 4th administrative review demonstrated
that ZWG did not import the larger-sized diameter because of certain
minimum order requirements set by the supplier. Also as stated by
ZWG, we verified that the larger-sized diameter wire rod is usually
less expensive than the smaller-sized wire rod, and that ZWG does not
use very much of the larger-sized rod. Last, while the petitioner is
correct that ZWG did not provide a public summary of the prices it
paid for its imported steel wire rod, ZWG acknowledged this at the
timed it filed its response and we did not ask ZWG to amend its
response in this respect.


Comment 2: Use of Import Prices to Value Domestically-sourced Steel
           Wire Rod

The petitioner contends that even if the Department does not find
the prices of ZWG's imported steel wire rod to be aberrationally low
(and, consequently, uses those prices to value the imported steel),
the Department is precluded by Shakeproof from using those import
prices to value ZWG's domestically-sourced wire rod. First, according
to the petitioner, Shakeproof requires the Department to verify the
import prices for steel wire rod and the Department has not done so.
The petitioner charges that using the import prices in these
circumstances would constitute a clear abuse of the Department's
discretion.

Second, Shakeproof imposes other "preconditions," according to the
petitioner. Specifically, the petitioner contends that the Department
must explain why it has found the amount of wire rod imported by ZWG
to be significant or meaningful. Without this, the petitioner
believes that the Department has not shown why use of the import
price is more accurate than other available alternatives, as required
by Shakeproof.

Finally, the petitioner argues that the Department set out the
criteria it would use to evaluate import prices in its Final Results
of Redetermination Pursuant to Court Remand (August 31, 1998),
Olympia Indus., Inc. v. United States, 7 F. Supp. 2d 997 (CIT 1998)
and 36 F. Supp. 2d 414 (CIT 1999). Under these criteria, the
petitioner claims that the Department must examine: (i) the value and
volume of imports; (ii) the type and quality of the imported input;
and (iii) consumption of the imported input by the NME producers. In
the petitioner's view, the Department's failure to apply these
criteria to ZWG's imports is an abuse of the Department's discretion.

The American Fastener Importers Association ("AAFI"), an interested
party, disputes the petitioner's interpretation of Shakeproof.
According to AAFI, Shakeproof does not say that unless the Department
can prove that ZWG's import prices are the most accurate method of
valuing steel wire rod that the Department must use Indian surrogate
values. The Department has determined that ZWG imported a significant
amount, according to AAFI, and the use of actual import prices will
promote more accurate results than the use of surrogate values.

As discussed above, ZWG argues that Shakeproof is in error. With
respect to the amount imported, the Department's regulations hold
that import prices are per se to be preferred to a surrogate value,
unless the amount imported is not meaningful, according to ZWG. ZWG
points to Ferrovanadium and Nitrided Vanadium from the Russian
Federation, 62 FR 65656, 65661 (December 15, 1997), where the
Department found that the respondent had purchased a "relatively
small amount" of an input from a market economy supplier. The
Department did not use the amount paid to the market economy supplier
to value the input, but not because the amount was small, ZWG
contends. Instead, it was because the purchased input was different
from the NME-sourced input.

ZWG argues that the Department should have the discretion to look at
the facts on a case-by-case basis and determine whether the amount of
input purchased from a market economy supplier is "not
insignificant." In this case, ZWG claims, the steel wire rod it
purchased from its market economy source accounted for more than half
of its steel wire rod purchases. When a majority of the input is
purchased from a market economy supplier, those purchases must be
deemed "not insignificant," in ZWG's view.

Regarding Olympia, ZWG contends that the petitioner's reliance on
that decision is misplaced. In ZWG's view, Olympia addresses the
situation where an input is imported by a Chinese trading company,
and the criteria developed by the Department are used to determine
whether the price paid by the trading company can be used as a
surrogate value. Olympia does not apply, according to ZWG, where the
input is directly imported by the NME producer. However, even if the
Department were to apply the Olympia criteria to ZWG's purchases of
steel wire rod, ZWG claims that its import prices would be found
reliable.

Finally, ZWG dismisses the petitioner's argument that the Department
must verify ZWG's import prices before they can be used to value
steel wire rod. In ZWG's view, the CIT's decision in Shakeproof is in
clear legal error because the Court misread the law, regulations, and
precedent, and improperly substituted its own judgment for the
Department's.

Department's Position:

The Department's view of the relevance of the Shakeproof decision is
explained in response to Comment 1.

We do not agree with the petitioner that we are required to verify
the information provided by ZWG in this review. The regulation
dealing with factor valuation, §351.408(c)(1), does not state that
the import price paid by the NME producer must be verified. We also
are not required to verify under §351.307, our regulation that
addresses verification. Specifically, §351.307(b)(1)(v) requires
verification of information used in final review results if, inter
alia, there has been no verification in the two immediately preceding
reviews. (See, also, §782(i)(3) of the Act.) In this case, we
verified the information used for ZWG in the most recent (4th)
review, including information regarding ZWG's imported steel wire rod
during that POR. Hence, verification is not required for ZWG in this,
the 5th review.

Section 351.307(b)(1)(iv) also directs that information used in
final review results will be verified if good cause for verification
exists. Because Shakeproof was only a remand decision, i.e., not
final and conclusive, by the Court requesting further clarification,
among other things, of the Department's verification practice, we
disagree that the remand decision requires the Department to conduct
a verification for good cause or otherwise. Moreover, the petitioner
made no written request for verification under the "good cause"
provision. In fact, the petitioner did not raise the issue of
verification until it filed its briefs. Given the similarity of the
facts presented by ZWG's situation in this and the immediately
preceding review, we do not see good cause to verify.

Second, we have determined that the amount of steel wire rod
imported by ZWG was not "insignificant." As noted in ZWG's comment,
the company imported a majority of the input needed to produce the
subject merchandise. Given this, ZWG's imports clearly were
meaningful. Moreover, in the Melamine case cited by ZWG, the
Department used the price paid by the NME producer for the imported
input, although the imports accounted for less than 40 percent of the
total input used. Similarly, in the Collated Roofing Nails case, the
respondent imported slightly more than half of its input. Therefore,
use of ZWG's import price is entirely consistent with the
Department's past practice in this regard.

Finally, we agree with ZWG that the petitioner's reliance on Olympia
is misplaced. Olympia dealt with the situation where the imported
input was purchased by the NME producer from a NME trading company.
Thus, the Department tested the reliability of the price paid by the
trading company as a surrogate value. In this proceeding, ZWG
purchased the input directly from the market economy supplier. Thus,
the criteria developed in Olympia do not apply here.


Comment 3: Factory Overhead, SG&A Expenses and Profit in Plating
           Operations

The petitioner contends that the Department has incorrectly treated
the plating of ZWG's HSLWs as an integrated operation, though ZWG
purchases plating from independent contractors. The petitioner argues
that the preliminary results calculation methodology understates the
surrogate value for HSLWs. According to the petitioner, the
Department should use either a surrogate value for plating or include
the plater's overheard, SG&A and profit in its calculations as an
input to ZWG prior to calculating ZWG's overhead, SG&A and profit.
The petitioner argues that the subcontractor's constructed value
(including overhead, SG&A, and profit) is a ZWG input cost and must
be included in its costs before calculating ZWG's overhead, SG&A, and
profit.

The petitioner claims that, in a market economy case, if plating is
undertaken by an independent contractor, the full cost of the
plating, including the plater's overhead, SG&A, and profit, would be
included in the constructed value calculations (the petitioner cites
Notice of Final Determination of Sales at Not Less Than Fair Value:
Collated Roofing Nails from Korea, 62 FR 51420, 51423 (October 1,
1997) ("Collated Roofing Nails from Korea"). The petitioner asserts
that the same methodology should apply to NME cases. The petitioner
further contends that the Department has, in fact, applied this
methodology in a NME case and cites Natural Paint Brushes and Brush
Heads from the People's Republic Of China, (Paint Brushes), 62 FR,
60228, 60230 (November 7, 1997). According to the petitioner, in
Paint Brushes, the Department used surrogate values for inputs such
as handles and added the factory's overhead, SG&A, and profit on top
of the full value of the finished handles. The petitioner claims that
the purchase of handles in Paint Brushes is comparable to ZWG's
purchase of plating.

The petitioner claims that its proposed methodology is supported by
§§ 773(c) and (e) of the Act, which define the calculation of normal
value for NME cases and constructed value in market economy cases,
respectively. With respect to these sections of the Act, the
petitioner asserts that the Department is instructed "to add amounts
for SG&A and profits to reflect the value of the subject merchandise
as sold."

The petitioner disputes ZWG's argument in the 4th administrative
review that adding overhead, SG&A and profit to the plating factors
of production would constitute double counting. The petitioner
asserts that the Department is determining the normal value of the
subject merchandise, not the cost of producing it, and claims that
the normal value must contain all of the inputs, plus the SG&A
component. According to the petitioner, treating plating as an input
does not require the Department to treat plating as a price between
NME companies, but rather as an input, like the steel wire rod input.
Unlike the steel price, however, the petitioner contends that the
plating constructed value does not include SG&A and profit for the
plating activity.

Finally, concerning the plating factors of production reported by
ZWG, the petitioner contends that the record does not establish that
the information reported is representative. The petitioner argues the
Department has not verified the plating factors of any subcontractor
since the 1993/94 review and that a full verification is necessary to
confirm the reported plating inputs. ZWG has reported the plating
factors of production for its two principal plating contractors
without reference to the sizes of HSLWs each plates. According to the
petitioner, if particular sizes of washers are plated by a particular
subcontractor, that subcontractor's plating factors should be used,
but this information is not on the record. The petitioner claims that
consumption amounts can vary significantly and questions whether the
reported subcontractors' data is representative and complete. If the
Department continues to construct the plating factors of production,
the petitioner contends that it should collect the information for
all subcontractors. Alternatively, if the Department does not include
the amounts for all subcontractors, the petitioner alleges that it
must use a statistically valid sampling approach, which would require
collecting all the subcontractors' data and determining the correct
methodology. The petitioner contends that plating is a significant
part of the value of plated HSLWs and, therefore, ZWG must account
for all of its costs - not just representative costs. The petitioner
claims that this methodology is consistent with the Department's
calculation of constructed value for normal value in a market economy
case.

ZWG contends that the Department accurately accounted for all costs,
including all subcontracted costs for plating, in the preliminary
results. ZWG argues that the Department's methodology is consistent
with previous HSLWs administrative reviews and fully captures the
costs at ZWG and the plating factory, including all factory overhead,
SG&A and profit related to the plating operations. According to ZWG,
the methodology proposed by the petitioner would result in double-
counting overhead, SG&A and profit for the plating portion of
production. ZWG further asserts that the petitioner's methodology is
contrary to the Department's regulations and practice with regard to
the treatment of subcontractors in market and nonmarket economy
cases. While ZWG agrees with the petitioner's reference to §773(c) of
the Act for the calculation of normal value in NME cases, ZWG
contends that the petitioner has failed to recognize that the
Department's regulations provide that subcontractors may not be
treated as the producer of the subject merchandise (see §351.401(h)).
According to ZWG, the evidence on the record indicates that ZWG's
platers are subcontractors as defined by the Department's regulations
and, therefore, cannot be treated as producers of the subject
merchandise. ZWG argues that the Department's calculation methodology
fully accounts for the plating factors and to adopt the petitioner's
methodology instead would result in treating the plating companies as
producers together with ZWG rather than as ZWG's subcontractors.

Citing Collated Roofing Nails from the PRC, 62 FR at 51416, ZWG
asserts that the Department recognized this principle of not treating
subcontractors as producers in NME cases and rejected essentially the
same calculation methodology argument raised by the petitioner in
this case. ZWG further alleges that the petitioner inaccurately cites
Paint Brushes for the proposition that the Department used surrogate
values for inputs from handles allegedly supplied by subcontractors.
ZWG contends that the handles in Paint Brushes were not processed by
a subcontractor at the direction of the respondent, but rather the
brush factory purchased the finished handles from unaffiliated
suppliers in normal arm's length transactions. According to ZWG,
Paint Brushes has nothing to do with the issue of the proper
valuation of a factor supplied by a subcontractor.

ZWG further contends that none of the petitioner's allegations that
ZWG's reported plating factor value information is inaccurate or
unrepresentative are relevant or merit changing the preliminary
results. ZWG asserts that the evidence on the record demonstrates
that the Department acted reasonably in using the plating
subcontractors' data provided by ZWG.

Finally, concerning the petitioner's claim that the Department must
verify the plating subcontractors' data, ZWG responds that the
petitioner failed to demonstrate that "good cause" to conduct
verification existed. Furthermore, ZWG contends that there is no
evidence on the record to indicate that the Department should have
determined that "good cause" existed for verification. ZWG notes that
it believes the Shakeproof decision is legally in error in its
failure to grant the Department proper deference regarding its
decision not to conduct verification.

The AAFI agrees with ZWG that the Department should reject the
petitioner's argument that SG&A, factory overhead, and profit should
have been included separately as part of plating costs. The AAFI
asserts that the Department rejected similar arguments from the
petitioner in the 4th review, and nothing has changed since the last
review that should alter the Department's previous decision.


Department's Position:

We agree with ZWG that the Department accurately accounted for all
costs, including costs for plating, in the preliminary results. We
have added to the calculation of the plating factory's material costs
amounts for overhead, SG&A, and profit and, therefore, have captured
all costs related to the plating operations. The Department's
calculation methodology is consistent with previous HSLW reviews.

Concerning the petitioner's argument that the reported plating
factors are unrepresentative and unverified, the factors of the
largest plating operation have been deemed representative and used
for the plating factors of production in the investigation and in
prior reviews, and there is no evidence on the record compelling us
to change our practice in the instant case. The petitioner has
provided no evidence to indicate that ZWG's responses are flawed or
unreliable that would preclude us from using the information as
reported. With respect to verification, the petitioner made no formal
request for verification under the "good cause" for verification
provision in §782(i)(3) of the Act and the Department was not
required by the regulations to conduct verification (see
§351.307(b)). Contrary to the petitioner's interpretation of
Shakeproof, the Department used the discretion accorded to it by the
Act and regulations in electing not to conduct verification in this
proceeding.

Comment 4: Inland Freight Charges for Steel Wire Rod

The petitioner argues that the Department should have included a
domestic freight charge for the steel wire rod that ZWG sourced
domestically during the POR. Citing the 4th administrative review of
HSLWs, the petitioner states that the Department is of the view that
Sigma Corporation v. United States, 117 F.3d 1401 (Fed. Cir. 1997),
does not apply. However, the petitioner claims that by valuing all
the steel wire rod used during POR at the imported market economy
value, the Department disregards the existence of any domestic steel
purchases.

ZWG asserts that the Department correctly excluded domestic inland
freight charges for the steel wire rod that ZWG sourced domestically.
ZWG asserts that, because the Department used the market economy
price actually paid by ZWG, it used the actual freight rate that ZWG
incurred in these purchases to value freight for all steel wire rod
purchases.

Contrary to the petitioner's claim, ZWG contends that, if the
Department decides to include domestic inland freight charges for the
domestically-sourced steel wire rod, the Sigma cap would apply. ZWG
argues that the Department's methodology reflects the reasoning of
the CAFC in Sigma as it recognizes that market economy producers
would tend to purchase inputs from the closer of an import source or
domestic source and treats the actual CIF price of steel wire rod as
a "surrogate value" for steel wire rod in determining the freight
costs. According to ZWG, because surrogate values are merely the best
approximation of what a PRC producer would pay if the producer were
operating in a market economy, the Sigma cap should apply to all
distances to ZWG's material input suppliers in the PRC.


Department's Position:

We disagree with the petitioner that we should assign a freight
value based on the distance to the NME supplier for that portion of
the steel wire rod that is domestically sourced. Because we are using
an actual market economy price to value all steel wire rod and we
know the actual distance that the imported steel wire rod was
shipped, we are using that freight distance to value inland freight
for all steel wire rod. We agree with the petitioner that Sigma does
not apply in this instance, since we valued the input using the
market economy price actually paid by the NME producer.


Comment 5: Valuation of Truck Rate

The petitioner argues that the Department should not use the April
20, 1994 Times of India article as the basis for valuing freight
rates because the Times of India rate applies only to company-owned
trucks and the trucks in the instant case are not company owned.
Instead, the petitioner contends that the Department should use the
freight rate reported in an August 1993 Embassy cable ("cable rate").
The petitioner cites the use of the cable rate in Heavy Forged Hand
Tools from China, Finished or Unfinished, With or Without Handles,
From the People's Republic of China; Final Results and Partial
Recession of Antidumping Duty Administrative Reviews (Hand Tools), 64
FR 43659 (August 11, 1999), to value trucking where shipments were
made on "non-company" owned trucks. The petitioner states that, in
Hand Tools, the Department concluded that the Times of India article
reflects a rate for company-owned and operated trucks, but not for
non-company operated trucks. In addition, the petitioner states that
Hand Tools does not describe the cable rate as being a composite rate
nor does it say that the cable rate is not applicable to truck rates.
The petitioner further contends that there is nothing in the cable to
indicate what modes of transportation are included in the rates
(i.e., that it is a composite rate).

The petitioner argues that, to be consistent with Hand Tools, the
Department must use the cable rate whenever non-company owned trucks
are used. In cases where the record is unclear, the petitioner
asserts that the Department should make an adverse assumption and
assume only non-company owned trucks were used. The petitioner
alleges that ZWG "simply noted the mode of transportation" and did
not indicate whether the trucks were company-owned, except for a
single statement that company-owned trucks were used to transport
imported steel wire rod to its factory. Finally, the petitioner
argues that there is no evidence that truck expenses are included in
factory overhead and, therefore, ZWG cannot argue there is double
counting.

ZWG argues that the Department should continue to use the Times of
India rate for the final results. ZWG disagrees with the petitioner
that the Times of India rate is a rate for company-operated trucks.
The article's reference to "costs of operations of trucks in three
companies" does not, in ZWG's view, mean that these trucks are
"company-owned trucks." ZWG asserts that the petitioner's attempt to
distinguish surrogate freight rates based on company owned and non-
company owned trucks is irrelevant. Additionally, ZWG claims that the
cable rate is an inappropriate surrogate trucking rate for this
review because it is an aggregate of various rates. Noting that the
Department rejected the use of the cable rate in the 4th
administrative review of HSLW, ZWG asserts that the Department should
follow its practice in this review.
Department's Position:

In these final results, the Department is valuing inland truck
freight using the more contemporaneous freight rate from an Indian
Financial Express article of November 15, 1998. This truck freight
rate was used by the Department in the recent Final Determination in
the Antidumping Duty Investigation of Certain Non-frozen Apple Juice
from the People's Republic of China, 65 FR 19873 (April 13, 2000)
("Apple Juice). (See, Memorandum to the File dated April 18, 2000.)
Because we are using information from the Financial Express article,
the petitioner's argument with respect to Hand Tools is moot.

Comment 6: Calculation of Factory Overhead and Profit Rates

The petitioner argues that the factory overhead percentage should be
computed by dividing overhead expenses by direct materials, labor and
energy ("ML&E") as was done in Hand Tools. In this proceeding,
according to the petitioner, the Department instead calculated the
overhead rate by dividing overhead expenses by the sum of ML&E
expenses plus overhead expenses (i.e., by the cost of manufacture
("COM")). The petitioner contends that the Department should correct
its calculation of overhead to conform to Hand Tools.

In addition, the petitioner points out that while the preliminary
results calculation memorandum stated that the Department was
calculating the profit ratio by using the before-tax profit figure,
the preliminary results calculations in fact used the after-tax
profit figure. The petitioner asserts that this should be corrected.

ZWG states that the preliminary results calculation memorandum
states that the Department calculated the surrogate profit rate by
dividing the Reserve Bank of India ("RBI") profit amount by the RBI
cost of production ("COP") (i.e., COM plus selling general and
administrative expenses). However, the respondent alleges, the
Department actually calculated the surrogate profit rate by dividing
the RBI profit by the RBI cost of manufacture ("COM"). The respondent
argues that the Department should correct this error for the final
results.

Concerning overhead, ZWG asserts that the Department should not
recalculate the overhead rate for the final determination. ZWG argues
that the methodology used in Hand Tools was expressly rejected in
Sebacic Acid from the PRC ("Sebacic Acid"), 62 FR 10530 (March 7,
1997), wherein the Department stated that we disagree with the
petitioner's argument that overhead should be valued as a percentage
of ML&E, and instead calculated the overhead rate as a percentage of
COM.

Department's Position:

We disagree with the petitioner that it is necessary to recalculate
the overhead rate as a percentage of ML&E rather than as a percentage
of COM because the ratio calculated for the preliminary results was
applied in the normal value calculations to COM rather than to ML&E.
However, in order to provide greater clarity in the margin
calculations, we have both recalculated the overhead rate as a
percentage of ML&E (instead of as a percentage of COM), and applied
this ratio in the normal value calculations to ML&E (rather than to
COM). (Because these changes affect both the calculation of the
overhead rate and the base to which it is applied, the amount
calculated for overhead does not change from the preliminary results
as a result of this modification.)

With regard to profit, we agree with the petitioner that we
incorrectly used post-tax, rather than pre-tax, profits in
calculating the profit rate, and have revised our final calculations
accordingly. The preliminary results calculation memorandum correctly
stated our intention to use pre-tax profits, however the post-tax
amount was used instead. The use of pre-tax operating profits is
consistent with recent cases (See, e.g., Apple Juice and Manganese
Metal) and, in general, it is the Department's preference to use tax-
exclusive surrogate value information. Furthermore, we also agree
with ZWG that the amount for profit included in normal value should
be calculated by multiplying the COP, rather than the COM, by the
surrogate profit rate. Given that the surrogate profit rate is
calculated as a percentage of COP from the RBI data, it is
appropriate to apply this rate on the same basis. We have modified
the calculations accordingly.


Comment 7: Valuation of Hydrochloric Acid

The petitioner argues that the Department should not base its
surrogate value for hydrochloric acid on Indian export prices because
it is the Department's policy to avoid the use of Indian export
prices. In support of this argument, the petitioner quotes a
Department memorandum in this review from the Office of Policy (dated
March 15, 1999) which states that we "should in general refrain from
using Indian or Pakistani export prices because these countries
maintain non-specific export subsidies."

ZWG contends that the Department correctly valued hydrochloric acid
based on Indian export price data quoted in Chemical Weekly. ZWG
asserts that the Chemical Weekly data is both contemporaneous with
the POR and consistent with Department practice for selecting
surrogate values in the 3rd and 4th administrative reviews of HSLWs.
Concerning the Office of Policy's warning against using Indian export
prices, ZWG contends that this general warning does not prohibit
using the data, particularly in the absence of any other more
accurate data on the record. The respondent points out that, in this
instance, the petitioner has not provided alternative data to the
Department.

ZWG argues that the Department should not use Indian import prices
to value hydrochloric acid. In support of this argument, ZWG cites
the 2nd administrative review of HSLWs where the Department stated
that Indian import prices for hydrochloric acid also encompass
hydrogen chloride in gaseous form. ZWG claims that the Department has
recognized in other NME cases that Indian import data for
hydrochloric acid is an inappropriate surrogate value source. ZWG
also stated that the Department was correct by not adding any
additional freight value to the Chemical Weekly export price.


Department's Position:

We agree with the respondent that the Chemical Weekly Indian export
price data is the more appropriate surrogate value for hydrochloric
acid. The Chemical Weekly data is contemporaneous with the POR and
its use is consistent with Department practice in prior reviews of
HSLWs and in other NME cases. (See, e.g., Notice of Final Results of
Antidumping Duty Administrative Review: Certain Helical Spring Lock
Washers from the PRC, 64 FR 13401 (March 18, 1999); Notice of Final
Results of Antidumping Duty Administrative Review: Certain Helical
Spring Lock Washers from the PRC, 62 FR 61794 (November 19, 1997);
and, Notice of Final Results of Antidumping Duty Administrative
Review: Certain Helical Spring Lock Washers from the PRC, 61 FR 41994
(August 13, 1996).) Furthermore, as ZWG points out, the Department
has found in past reviews of HSLWs that the Indian import prices for
hydrochloric acid also include hydrogen chloride in gaseous form,
which ZWG does not use. Finally, the Office of Policy statement is a
cautionary warning that does not preclude us from using Indian export
prices where we have determined Indian export prices to be the most
appropriate surrogate value.


Comment 8: Assessment Rate Calculation for Importer

ZWG alleges that the Department incorrectly calculated an assessment
rate for an importer of its HSLWs. ZWG contends that the correct
methodology for calculating an importer's assessment rate is to
divide the total dumping duties on all POR sales to the importer by
the total entered value of all POR sales to the importer.


Department's Position:

We agree with ZWG that the assessment rate was incorrectly
calculated in the preliminary results and have revised the
calculation for the final results.


RECOMMENDATION


Based on our analysis of the comments received, we recommend
adopting all of the above positions and adjusting all related margin
calculations accordingly. If these recommendations are accepted, we
will publish the final results in the Federal Register.


AGREE ____ DISAGREE ____



______________________

Troy H. Cribb
Acting Assistant Secretary
  for Import Administration

______________________
(Date)

__________________________________________________________________
footnotes:

1. Notice of Preliminary Results of Antidumping Duty Administrative
Review: Certain Helical Spring Lock Washers from the People's
Republic of China, 64 FR 37743 (July 13, 1999) ("Preliminary Results -
5th AR").

2. Notice of Extension of Time Limit for Administrative Review:
Certain Helical Spring Lock Washers from the People's Republic of
China, 64 FR 60771 (November 8, 1999).