65 FR 43290, July 13, 2000 A-570-803 AR: 02/01/98- 01/31/99 Public Document OIV: LGA MEMORANDUM TO: Troy H. Cribb Acting Assistant Secretary for Import Administration FROM: Holly A. Kuga Acting Deputy Assistant Secretary For Import Administration SUBJECT: Issues and Decision Memo for the Administrative Reviews of Heavy Forged Hand Tools from the People's Republic of China -- February 1, 1998 through January 31, 1999 Summary We have analyzed the comments and rebuttal comments of interested parties in the 1998-1999 administrative reviews of the antidumping duty orders covering heavy forged hand tools ("HFHTs") from the People's Republic of China. As a result of our analysis, we have made changes in the margin calculations, including corrections resulting from verification. We recommend that you approve the positions we have developed in the Discussion of Issues section of this memorandum. Below is a complete list of the issues in these administrative reviews for which we received case and rebuttal briefs by parties: Whether Shandong Machinery Import & Export Company ("SMC") Failed Verification for Hammers/Sledges Whether the Application of Adverse Facts Available is Warranted for SMC's Sales of Hammers/Sledges Whether the Application of Adverse Facts Available is Warranted for SMC's Axes/Adzes, Picks/Mattocks, and Bars/Wedges Factory A's Unreported Factors of Production: Resin and Tape Calculation of Hammer Weight Loss for SMC Surrogate Value for Steel Bar Surrogate Value for Steel Billet Surrogate Value for Steel Scrap Surrogate Value for Pallets Truck Freight The "Sigma" Rule/Inland Freight Ocean Freight Rate Tianjin Machinery Import & Export Corporation ("TMC") Verification and Adjustment Issues Preliminary Adjustments Noted in the Calculation Memorandums Background On March 8, 2000, the Department of Commerce ("the Department") published the preliminary results of the administrative reviews of the antidumping duty orders on HFHTs from the People's Republic of China. See Notice of Preliminary Results of Sales at Less Than Fair Value: Heavy Forged Hand Tools from the People's Republic of China 65 FR 12202 (March 8, 2000) ("HFHTs Preliminary Results"). Imports covered by the antidumping orders on HFHTs include four classes or kinds of subject merchandise: axes/adzes, bars/wedges, hammers/sledges, and picks/mattocks. See Antidumping Orders: Heavy Forged Hand Tools, Finished or Unfinished, With or Without Handles from the People's Republic of China, 56 FR 6622 (February 19, 1991)("Orders"). The reviews cover five manufacturer/exporters, Fujian Machinery & Equipment Import & Export Corporation ("FMEC"), Liaoning Machinery Import & Export Corporation ("LMC"), SMC, Shandong Huarong General Group Corporation ("Shandong Huarong") and TMC. The period of review ("POR") is February 1, 1998 through January 31, 1999. FMEC ceased participating in these reviews prior to the preliminary results. See Letter from Hume & Associates Regarding FMEC Withdrawal From1998-1999 Review (December 15, 1999). As described in the preliminary results, the Department found that FMEC was part of the "PRC-wide" entity and utilized adverse facts available to determine the preliminary rates for FMEC. No parties have commented on this issue, nor has any additional information been placed on the record; therefore, we have continued to treat FMEC as part of the PRC-wide entity and assigned FMEC a margin based on adverse facts available for these final results. We invited parties to comment on our preliminary results of the reviews. Comments were submitted by respondents, LMC, SMC, Shandong Huarong, and TMC, on April 10, 2000, and rebuttal comments by petitioner, Woodings- Verona, on April 14, 2000. A public hearing was held on Wednesday April 19, 2000 at the request of respondents. See Letter from Hume & Associates Requesting a Public Hearing (March 28, 2000). The Department has conducted this administrative review in accordance with section 751 of the Tariff Act of 1930, as amended ("the Act"). Verification As provided in section 782(i) of the Act, we conducted verifications of the information provided by TMC and SMC. We used standard verification procedures including: on-site inspection of the manufacturers' facilities, examination of relevant sales and financial records, and selection of relevant source documentation as exhibits. Our verification findings are detailed in the memoranda dated February 28, 2000, the public versions of which are on file in the Central Records Unit, Room B099 of the Main Commerce building (CRU-Public File). See SMC's Sales Verification Report (February 28, 2000); see also TMC's Sales Verification Report (February 28, 2000); see also SMC's Cost Verification Report (February 28, 2000); see also TMC's Cost Verification Report (February 28, 2000). Facts Available At the preliminary results of these reviews we determined that the use of facts available is appropriate for purposes of establishing the country- wide rate, pursuant to section 776(a)(2)(B) of the Act. For the final results, of each segment of these proceedings, we have used as adverse facts available for the PRC-wide rates the highest rates from the current or previous segments of the respective proceedings. The PRC-wide rate from the most recently completed reviews is the highest rate from any segment of these proceedings for picks/mattocks (98.77 percent). The calculated rates from these current reviews are the highest rates from any segment of these proceedings for axes/adzes (41.12 percent), hammers/sledges (32.51 percent), and bars/wedges (91.45 percent). We have received no comments from interested parties regarding this issue, nor has additional information been placed on the record in these reviews. Therefore, we are continuing to apply adverse facts available in determining the country- wide rates. Changes from the Preliminary Results of the Reviews The Department, at verification of TMC, found certain errors in reported consumption of paint, electricity, packing materials, and coal. See TMC's Cost Verification Report at 2. In addition, the Department made clerical errors in calculating the surrogate value for steel scrap, pallets, ocean and inland freight for TMC, LMC, and Shandong Huarong. The Department adjusted for these errors in these final results of these administrative reviews. See TMC's Final Calculation Memorandum (July 06, 2000); see also LMC's Final Calculation Memorandum (July 06, 2000); see also Shandong Huarong's Final Calculation Memorandum (July 06, 2000). No other changes were made to our margin calculation program. Discussion of Issues Comment 1: Whether SMC Failed Verification for Hammers/Sledges SMC claims that it did not fail verification with respect to hammers/sledges for four general reasons: 1) SMC successfully reconciled the quantity and value of every sale of subject merchandise hammers/sledges reported to the Department; 2) SMC regularly records sales in its financial records at times that are different from those in its invoices-- a practice SMC claims is consistent with the Generally Accepted Accounting Principles ("GAAP") of China; 3) SMC reported sales based on entry date, which was a practice established and accepted by the Department in prior reviews; and 4) SMC argues that it is unreasonable for the Department to expect it to maintain an accounting system that is flexible and easily translatable for antidumping purposes. As such, SMC states that it acted to the best of its ability by providing extensive information, and that the Department should rely on the data that was provided during verification as sufficient for margin calculation purposes. SMC argues that it confirmed that it reported every sale of subject merchandise hammers/sledges for 1998 and supplied the verifiers with all the documents to support the quantity and value reconciliation. Specifically, SMC claims that it successfully tied its reported sales of hammers/sledges to the U.S. during the POR to SMC's financial statements using a reconciliation chart based on the sales journal of the "Hardware and Tools Department No.2" ("HTD2"). While some sales listed in the accounting record had to be adjusted in the sales journal to account for SMC's recording methodology, SMC claims that the chart provided at verification successfully reconciled to the financial statements and accounted for each sale reported to the Department. See SMC's Sales Verification Report at Verification Exhibit 33. According to SMC, its reporting methodology is commonly used; it regularly records sales in its financial records at dates different from the dates on the invoices. This does not mean that they are "misreported." In fact, contrary to the inference made in the SMC verification report, SMC states that the majority of sales reported outside the month in which they were made, were reported the following month. While this system is not constructed to facilitate antidumping verifications, it is set up to comply with Chinese accounting standards. SMC argues that reporting sales based on entry date is consistent with the Department's regulations and is the same method used since the 1992- 1993 review. See SMC's Sale Verification Report for the 1992-1993 Administrative Review (September 30, 1994). Citing the Department's Verification Report for the 1992-1993 review, SMC argues that there are three options to reporting date of sale, one of which is reporting date of sale based on entry date. SMC states that if it were to change its method of reporting sales, some sales might be excluded from the database. Finally, SMC argues that its accounting system is not constructed to facilitate the Department's antidumping verification. SMC claims that it does not have a computerized system which can sort sales by subject and non-subject merchandise. The sorting must be done manually. Given more time, SMC argues that it could have provided other methods to confirm the accuracy of its reported sales of hammers to the United States, and that in the time allowed, it provided all information to the best of its ability. Therefore, SMC recommends that the Department reverse its findings from the preliminary results finding that SMC failed verification. Petitioner claims the Department's determination that SMC failed verification is appropriate because SMC did not reconcile the total reported quantity and value of its U.S. sales to its financial records, nor did SMC demonstrate the completeness of its reported U.S. sales. First, petitioner claims that the work of the verifiers was seriously impaired because the charts provided by SMC failed to reconcile the total reported quantity and value of SMC's U.S. sales to its records. In particular, SMC's adjustments to its sales records rendered the verifiers' attempts to reconcile quantity and value unworkable. Furthermore, petitioner states that because some of these adjustments related to extended periods of time, it was not possible to isolate them to the POR, nor could the verifiers tie adjusted sales figures to SMC's questionnaire response. Petitioner disagrees with SMC that there was not ample time to provide a reconciliation of the total quantity and value of their reported U.S. sales to their financial statements. Petitioner argues that verifiers attempted additional procedures to test the completeness and accuracy of SMC's reported U.S. sales, using the books and records available and were unable to complete an accurate reconciliation. See SMC's Sales Verification Report for the 1998-1999 Administrative Review (February 28, 2000) ("SMC's Sales Verification Report") at 9. This included reviewing a chart based on SMC's inventory journal. Indeed, petitioner argues that verifiers delayed their departure several days to provide SMC an extended opportunity to provide the chart and that SMC failed to provide the chart. Furthermore, petitioner states that attempts to reconcile the total reported quantity and value were complicated by the fact that SMC inaccurately reported its date-of-sale methodology. Petitioner claims that when combined, these problems prevented the Department from ascertaining the reliability of SMC's reported sales, made it impossible to tie SMC's sales from its HTD2 to its company-wide financial record, and undermined the Department's ability to verify whether the U.S. sales were bona fide transactions. As a result, petitioner argues that SMC failed verification and that the Department is justified in calculating SMC's dumping margin based on total AFA. Department's Position: We disagree with SMC's claim that it passed verification. The Department specifically requested SMC to demonstrate that it reported all U.S. sales of hammers. See SMC's Sale Verification Report at 10. The verification report establishes that the company failed to demonstrate adequately that it had reported all sales. Specifically, SMC was unable to confirm the total sales for its HTD2. See SMC's Sale Verification Report at 10. In addition, SMC misreported its date of sale to the Department. In its questionnaire response, SMC reported that it used invoice date as date of sale. However, at verification, we discovered that SMC used a combination of the invoice date and customs date of entry into the U.S., as date of sale for subject merchandise. See SMC's Sale Verification Report at 9. As a consequence of these problems, the Department was not able to perform the "completeness test." See Comment 2 of this notice for a more detailed discussion of the importance of the completeness test. Moreover, SMC's assertions that it reconciled the total quantity and value of U.S. sales reported to the Department to the quantity and value recorded in SMC's accounting books and records is contradicted by the verification report. See SMC's Sales Verification Report at 7-10. See SMC's Sale Verification Report at 7. The Department identified numerous sales invoices, accounting for a substantial quantity of hammers/sledges, that were entered randomly in SMC's accounting records. For the majority of these invoices, the period from when these sales were actually made to the date when they were entered in SMC's accounting records varied considerably-- as long as two years in some instances and usually more than one month. See SMC's Sales Verification Report at 8-9. SMC provided the Department with an "adjustment chart" which attempted to explain the misreporting of sales and how sales had to be adjusted to account for SMC's recording methodology. See SMC's Sales Verification Report at Verification Exhibit 33. Even after accounting for the adjustments described in the adjustment chart, the revised quantity and value chart did not reconcile to the reported sales data. See SMC's Sales Verification Report at 9; see also SMC's Sales Verification Report at Verification Exhibit 33. Consequently, the total quantity and value of SMC's U.S. sales reported to the Department could not be reconciled to SMC's accounting books and records. In addition, we disagree with SMC that its accounting system is consistent with the principles of Chinese GAAP. First, after reviewing SMC's financial statements provided in SMC's May 28, 1999 submission, there is no record evidence that these statements are audited by an outside examiner or that these statements are consistent with the principles of Chinese GAAP. Further, SMC failed to demonstrate that its accounting system, in which sales appeared to be entered in the accounting records (i.e., sales journal) at random, is consistent with Chinese GAAP. SMC failed to establish, and we are not otherwise aware of, any aspect of Chinese GAAP which provides for or permits such a potentially distortive accounting practice. See SMC's Sales Verification Report at 7-10. Moreover, whether or not SMC's accounting practices are consistent with Chinese GAAP, SMC was requested to prove that all U.S. sales were accurately reported, which it failed to do. While attempting to reconcile quantity and value, we requested information from company officials on how date of sale was determined. See SMC's Sales Verification Report at 9. In SMC's submission, dated May 28, 1999, the company reported the invoice date as the date of sale. At verification, we found that SMC actually used a combination of the invoice date and customs entry date into the United States as date of sale for subject merchandise. According to company officials, if the sale was a December 1997 sale (outside the POR) with an entry date in the POR, it was reported with a date of sale based on the entry date. See SMC's Sales Verification Report at 9. This previously unreported methodology further undermined the reliability of reported sales information. SMC further claims that a complete tracing of sales was difficult, since its system was not computerized and such an activity must be done manually. However, as explained in Comment 2 of this memorandum, a respondent in an antidumping proceeding is not relieved of its responsibility to substantiate its submissions simply because it has a rudimentary bookkeeping system. The verification team did not demand records that did not exist; rather they attempted to work with the existing record-keeping system of the company. For example, when the verifiers requested sales reconciliations, SMC informed them that complying with the request would be difficult due to its bookkeeping system. See SMC's Sales Verification Report at 7-10. Therefore, the verifiers then requested less complicated versions of the reconciliations by limiting their requests, for example, to certain products or months. See SMC's Sales Verification Report at 7-10. When SMC was unable to provide a reconciliation package based on the sales journal, the verifiers attempted additional procedures to test the completeness and accuracy of SMC's reported U.S. sales, using SMC's inventory journal. See SMC's Sales Verification Report at 7-10. The verifiers delayed their departure in order to give SMC additional opportunity to demonstrate the completeness and accuracy of its reported U.S. sales. See SMC's Sales Verification Report at 9. Nevertheless, SMC failed to provide the reconciliation chart requested by the Department. See SMC's Sales Verification Report at 9. Thus, SMC failed to provide key documentation during verification that was necessary to test the completeness of SMC's response. Because the inability to demonstrate that all U.S. sales of hammers were properly reported to the Department calls into question the reliability of SMC's response as a whole, we find that SMC failed verification, and continue to use total adverse facts available as the margin in these final results. Comment 2: Whether the Application of Adverse Facts Available is Warranted for SMC's Hammers/Sledges SMC claims that because of the level of its cooperation and the substantial evidence on the record that it acted to the best of its ability during verification, application of adverse facts available is unwarranted. SMC argues that the Department applies a five-part test, as detailed in the Notice of Final Determination of Sales at Less Than Fair Value: Certain Preserved Mushrooms from Chile, 63 FR 56613, 56616 (October 22, 1998) ("Mushrooms from Chile") and D & L Supply Co. v. United States, 113 F.3d 1220, 1223 (CAFC 1997), when determining whether information should be accepted in the face of verification failures. The five factors considered are whether: 1) submissions of information were timely; 2) respondents substantially cooperated with the Department's information requests; 3) some successful verification of the questionnaire response was made; 4) for unverifiable information, there was alternative information available to allow "appropriate adjustments to the submitted data;" and 5) the Department was able to make adjustments for the identified deficiencies and could use the submitted information without undue difficulties. Respondents note that when applying these factors in Mushrooms from Chile, the Department chose not to apply adverse facts available, despite certain deficiencies found at verification. Likewise, in this case the Department should not use adverse fact available because "the information provided by SMC could be used without undue difficulties." See SMC's Case Brief to the Department (April 10, 2000) at 20. SMC states that the Department failed to take into account SMC's accounting records. According to SMC, its accounting records kept in the normal course of business are not arranged to respond to the Department's verification request. In this instance, SMC states that the verifiers were not interested in gaining an understanding of SMC's accounting system and quickly resolved to label the system "unorthodox." SMC insists that the Department cannot expect it to prepare and maintain records solely for purposes of the antidumping statute. SMC claims that while the Department in its verification report repeatedly points to the failure of SMC to provide financial statements to tie in to their sales records, this expectation is unreasonable unless such a financial statement is kept in the ordinary course of business. In this case, SMC argues that it does not prepare internal financial statements, and that verification should have been limited instead to an examination of "whether the allocation methods are used in the normal accounting records and whether they have been historically used by the company." See Porcelain-on-Steel Cooking Ware From the People's Republic of China: Final Results Antidumping Duty Administrative Review, 62 FR at 32,757 (June 17, 1997). Applying that standard, respondent claims the records provided to the Department at the verification are the normal accounting records and methods used historically by SMC. Further, SMC argues that since it provided these records it can not be deemed an uncooperative respondent and, thus, use of adverse facts available cannot be supported or sustained. Petitioner asserts that the Department correctly assigned adverse facts available to SMC for its lack of cooperation during verification. Petitioner points out that SMC failed to report sales and factors of production information regarding its sales of axes/adzes, bars/wedges and picks/mattocks, and the information provided regarding the sales of hammers/sledges could not be verified. Petitioner contends that SMC met none of the criteria in the five-part test as detailed in Mushrooms from Chile: 1) information was not submitted by SMC within established deadlines; 2) information could not be verified; 3) information was so incomplete that it could not serve as a basis for reaching a determination; 4) SMC did not act to the best of its ability in providing the requested information; and 5) information provided by SMC could not be used without undue difficulties. Petitioner argues that the Department's decision to use adverse facts available is "an essential investigative tool" because the Department has no subpoena power, the potential use of facts available is "the only incentive to foreign exporters and producers to respond to Commerce questionnaires." See Uruguay Round Statement of Administrative Action, reprinted in H.R. Doc. 103-316, 103d Cong.2d Sess., Vol. I, at 868 (1994) ("SAA"). Petitioner argues that if non-cooperative companies elect not to participate or respond to the questionnaire this lack of cooperation should result in a higher dumping margin. Petitioner argues that for the Department to take any other course would invite respondents who believe that they would have higher-than-average dumping margins to manipulate the system by not cooperating, knowing that the Department would reward their lack of cooperation with the lower margin applicable to a cooperating company. This would destroy the integrity of the entire system by eliminating the incentive respondents now have to cooperate in antidumping proceedings. Department's Position: We disagree with SMC that adverse inferences are not warranted in this case. We find that SMC did not cooperate to the best of its ability. As discussed above in Comment 1, the accuracy of SMC's questionnaire response could not be substantiated at verification. The verification failures were the direct result of SMC's inability to reconcile the quantity and value of U.S. sales reported to the Department to the quantity and value recorded in SMC's accounting records. In other words, SMC was unable to demonstrate, despite Commerce's repeated request, that the complete universe of U.S. sales had been accurately reported to the Department. We also disagree with SMC's claim that the same facts that caused the Department not to apply adverse facts available in Mushrooms from Chile exist in these reviews. In Mushrooms from Chile, the Department applied the criteria established in section 782(e) of the Act, which directs the Department to consider information, if: 1) the information is submitted within the established deadlines; 2) the interested party acted to the best of its ability in providing the requested information; 3) the information can be verified; 4) the information is not so incomplete that it cannot serve as a reliable basis for reaching a determination; and 5) the information can be used without undue difficulties. After reviewing the record of the investigation in Mushrooms from Chile, the Department decided that it was not appropriate to reject the respondent's data in its entirety, but to apply partial facts available. Contrary to the facts involved in the Mushrooms from Chile investigation, the inaccuracies and unverified information in SMC's responses in these HFHTs proceedings, when taken in total, are so substantial that they prevent the Department from using any part of SMC's responses to determine whether dumping margins exist. In accordance with section 776(a)(2) and 776(b) of the Act, the Department has determined that the use of adverse facts available is appropriate for purposes of determining the final dumping margins for hammers/sledges sold by SMC. Section 776(a)(2) of the Act provides: if an interested party or any other person (A) withholds information that has been requested by the administering authority or the Commission under this title; (B) fails to provide such information by the deadlines for the submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of section 782; (C) significantly impedes a proceeding under this title; or (D) provides such information but the information cannot be verified as provided in section 782(i), the administering authority and the Commission shall, subject to section 782(d), use the facts otherwise available in reaching the applicable determination under this title. Moreover, section 776(b) of the Act provides that; if the administering authority or the Commission (as the case may be) finds that an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information from the administering authority or the Commission, the administering authority or the Commission (as the case may be), in reaching the applicable determination under this title, may use an inference that is adverse to the interests of that party in selecting from among the facts otherwise available. In the instant review, the information SMC provided regarding its sales of hammers/sledges could not be verified. We are therefore applying facts available pursuant to section 776(a)(2)(D). At the verification, the Department's verifiers required SMC to reconcile the total reported quantity and value of its U.S. sales to its financial records and to demonstrate the completeness of its reported U.S. sales. The Department notified SMC of these requirements in its verification agenda dated January 7, 2000. In that agenda, the Department requested that SMC prepare specific worksheets and have available certain records which the verifiers intended to use in order to ensure that SMC properly reported all of its U.S. sales of subject merchandise. See Department's Letter to TMC and SMC, dated January 7, 2000, transmitting the verification outline. However, prior to the start of the verification, SMC failed to prepare any of the material requested by the Department. Moreover, other than providing source documents, such as invoices, prior to the commencement of the verification, company officials had not prepared any other supporting documentation to demonstrate how the total reported quantity and value of sales reconciled to the company's records. Nevertheless, during the verification, the verifiers afforded SMC officials an opportunity to prepare worksheets reconciling the total reported quantity and value of the company's U.S. sales of hammers/sledges to its financial records (1). However, the verifiers' efforts to work with company officials were seriously impaired for the following reasons: 1) they discovered that company accountants made unorthodox accounting entries that made it difficult to tie sales invoices to the monthly sales journal (for a detailed discussion of this topic, see the proprietary version of the SMC Sales Verification Report); 2) they found that for some U.S. sales, SMC had misreported the date of sale; and 3) at the verification, SMC failed to provide certain relevant supporting documentation requested by the verifiers. The verifiers' efforts to work with company officials and the difficulties that they encountered are detailed below. In this context, the verifiers provided ample opportunity for SMC to explain its deficiencies and provide further information pursuant to section 782(d) of the Act. After discussions with company officials, the verifiers requested that the officials create three charts in order to reconcile total quantity and value: 1) a chart reconciling the sales revenue shown on the financial statements to the cumulative sales revenue listed in SMC's supporting internal accounting records; 2) a chart listing the total sales revenue, by product, for the HTD2; and 3) a chart listing sales of both subject and non-subject hammers made by HTD2 (the third chart was based on information from SMC's sales journal). However, the charts that company officials provided in response to this request failed to reconcile the total reported quantity and value of SMC's U.S. sales to its records. Company officials explained that the accountants routinely made certain monthly adjustments (the nature of which is proprietary) to the sales records of HTD2 which rendered the verifiers' attempts to reconcile total reported quantity and value unworkable (for a detailed discussion of this topic, see the proprietary version of the SMC's Sales Verification Report). Furthermore, because some of these adjustments pertained to extended periods, it was not possible to isolate the portion of the adjustments that pertained solely to the POR; nor could the verifiers tie adjusted sales figures to SMC's questionnaire response. After it became apparent that SMC could not use the prepared charts to reconcile the total reported quantity and value to its financial statements, the verifiers attempted additional procedures to test the completeness and accuracy of SMC's reported U.S. sales using the books and records that were available. Specifically, the verifiers requested that company officials prepare a chart, similar to the third chart described above, except that it was to be based on SMC's inventory journal for HTD2. After affording company officials with ample time to respond to this request, officials provided a different quantity and value chart and attempted unsuccessfully to demonstrate how it could be tied to SMC's reported sales by making certain adjustments. Officials offered no explanation as to why they did not provide the specific chart that the verifiers requested, and the attempt to reconcile total reported quantity and value using the new chart was unsuccessful. See SMC's Sales Verification Report at 9-10. Additionally, the attempts to reconcile total reported quantity and value were complicated by the fact that SMC inaccurately reported its date of sale methodology. In its questionnaire responses, SMC reported that it used the invoice date as the date of sale. However, at the verification, the verifiers found that SMC had, in fact, used both the invoice and, in some cases, a projected U.S. customs entry date, as the date of sale for reporting purposes. As a result of the difficulties outlined above, SMC was unable to demonstrate that it properly reported all of its U.S. sales of hammers/sledges. Accordingly, we disregarded SMC's responses for hammers/sledges pursuant to section 782(d) of the Act. The Department's antidumping analysis is based fundamentally on an evaluation of a respondent's U.S. selling practices. Thus, a complete and accurate reporting of U.S. sales is central to determining accurate dumping margins. Because SMC could not establish the completeness of its reported U.S. sales, we consider SMC to have failed verification. Pursuant to section 776(b) of the Act, we are relying on adverse facts available to determine the margin for SMC because SMC: 1) failed to timely provide requested information at the outset of verification; 2) could not tie sales invoices to sales journals; 3) did not reconcile its reported U.S. sales value and quantity with its company records; 4) and did not accurately report the data of some U.S. sales. SMC did not accomplish any of these goals despite ample notice and opportunity to do so. This demonstrates to us that SMC failed to cooperate to the best of its ability. The application of adverse facts available in this case is consistent with the Department's practice in cases where a firm fails verification. See Natural Bristle Paintbrushes and Brush Heads from the People's Republic of China; Final Review Results of Antidumping Duty Administrative Review, 64 FR 27506 (May 20,1999) see also Sparklers From the People's Republic of China; Preliminary Results of Antidumping Duty Administrative Review 65 FR 18059 (April 6, 2000 ). For hammers/sledges, we have used as adverse facts available for SMC the PRC-wide rate, which represent the highest rate from any segment of the respective proceedings. The PRC-wide rate from these current reviews are the highest rate from any segment of these proceedings for hammers/sledges (32.51 percent). Comment 3: Whether the Application of Adverse Facts Available is Warranted for SMC's Axes/Adzes, Picks/Mattocks, and Bars/Wedges SMC states that the Department's reliance on adverse facts available for SMC's unreported sales of picks/mattocks, bars/wedges, and axes/adzes is unwarranted. First, SMC states that it reported the U.S. sales and factors of production information for its axes/adzes and bars/wedges in its June 28, 1999, Section C and D responses. Second, SMC argues that it did not sell picks/mattocks during the POR, and therefore it did not report any sales or factors of production for these items. SMC further states that it decided to continue to participate in the 1998-1999 review only for hammers/sledges, but waited to amend its sales database and chart until responding to the Department's November 19, 1999, supplemental questionnaire response. The fact that SMC was aware of its sales of picks/mattocks, axes/adzes, and bars/wedges, and that the Department readily obtained general information for such sales at the verification, in no way supports a determination that SMC did not act to the "best of its ability" to report sales and factors of production information for such transactions. Further, SMC states that it informed the Department that it was withdrawing its participation in this review with respect to bars/wedges, axes/adzes, and picks/mattocks. Petitioner claims that the Department's reliance on adverse facts available for unreported sales of axes/adzes, bars/wedges, and picks/mattocks is warranted because SMC did not act to the best of its ability to report sales and factors of production information for such transactions when SMC was aware of these sales and the Department obtained general information regarding the existence of such sales at verification. Department Position: We disagree with SMC that the Department's reliance on adverse facts available for SMC's unreported sales of picks/mattocks, bars/wedges, and axes/adzes is unwarranted. In the instant review, SMC failed to provide certain information that was requested by the Department. In accordance with section 776(a)(2) and 776(b) of the Act, the Department has determined that the use of adverse facts available is appropriate for purposes of determining the final antidumping duty margins for picks/mattocks, bars/wedges, and axes/adzes sold by SMC. The following sequence of events shows SMC's participation in this review with respect to axes/adzes, picks/mattocks, and bars/wedges: On March 19, 1999, the Department initiated administrative reviews of SMC's exports of all four classes or kinds of subject merchandise (i.e., axes/adzes, bars/wedges, picks/mattocks, and hammers/sledges). See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 64 FR 14860 (March 29, 1999). On April 15, 1999 we issued a questionnaire to SMC asking it to report all of its U.S. sales and factors of production for the four classes or kinds of subject merchandise. SMC responded to the questionnaire completely on May 28, 1999 and June 28, 1999 with respect to hammer/sledges, but provided only limited and fragmentary information for axes/adzes and bars/wedges. In addition, SMC claimed it did not have sales of pick/mattocks to the U.S. during the POR. See SMC's Response to Department's April 15, 1999 Questionnaire Section A, C, & D (May 28, 1999 and June 28, 1999). On November 19, 1999, in our supplemental questionnaire we notified SMC of its deficient response and provided opportunity for SMC to provide complete information on its sales of picks/mattocks, bars/wedges, and axes/adzes, pursuant to section 782(d) of the act. On December 13, 1999, SMC responded to the Department's supplemental questionnaire stating that it was not supplying financial statements for one of its suppliers because that supplier produced bars, and SMC was "only participating in the review on hammers." See SMC's Response to Department's November 19, 1999 Supplemental Questionnaire (December 13, 1999) at 5. SMC provided no other information. At verification (January 26-29, 2000), the Department found evidence of U.S. sales of picks/mattocks, bars/wedges, and axes/adzes which SMC failed to report to the Department. See SMC's Sales Verification Report at Verification Exhibit 32, 36, and 37. Thus, SMC had U.S. sales of axes/adzes, bars/wedges, and picks/mattocks. The Department determines, based on these facts (i.e., SMC's failure to report these U.S. sales and relevant factors of production data), that the use of facts otherwise available pursuant to section 776(a)(2)(B) is warranted. The Department further finds that an adverse inference is warranted pursuant to section 776(b) of the Act. As detailed above, SMC failed to report U.S. sales and factors of production data which could be used to calculate a margin for axes/adzes, bars/wedges, and picks/mattocks despite the Department's requests and despite the fact that SMC actually held records of such sales. Record evidence shows that SMC was aware of its sales of HFHTs within the axes/adzes, bars/wedges, and picks/mattocks classes or kinds of subject merchandise and that the Department readily obtained general information regarding the existence of such sales at the verification. These facts support our determination that SMC failed to cooperate to the best of its ability. Therefore, pursuant to section 776(b) of the Act, we have used an adverse inference in selecting facts available margins for SMC. Specifically, we have based SMC's margin on the highest margin from any segment of this proceeding. See Natural Bristle Paintbrushes and Brush Heads from the People's Republic of China; Final Review Results of Antidumping Duty Administrative Review, 64 FR 27506 (May 20,1999) see also Sparklers From the People's Republic of China; Preliminary Results of Antidumping Duty Administrative Review 65 FR 18059 (April 6, 2000 ). Comment 4: Factory A's Unreported Factors of Production: Resin and Tape SMC argues that it reported the relevant factor information for resin glue (the glue used to attach the wood to the handle) in it's December 28, 1999 submission. SMC states that this amount was verified and accepted by the Department. SMC states that it did not report factor of production information for the tape used for packing. Citing the Department's regulations, SMC argues that it is evident that a material like tape, which is used for containers and covers, is a factor but not a factor of production. Petitioner did not comment on this issue. Department's Position: As a result of the Department's decision to apply total adverse facts available in calculating a margin for SMC, it is not necessary to address this comment from SMC. See Comments 1 and 2 above. Comment 5: Calculation of Hammer Weight Loss for SMC SMC argues that the Department's calculation of the amount of steel lost from making a hammer head during the production process (i.e., grinding and polishing) is incorrect. According to SMC, the Department's own calculations show that the company officials' estimates were not only right, they were even higher than the actual results examined by the verifiers. Petitioner did not comment on this issue. Department's Position: As a result of the Department's decision to apply total adverse facts available in calculating a margin for SMC, it is not necessary to address this comment from SMC. See Comments 1 and 2 above. Comment 6: Surrogate Value for Steel Bar TMC, Shandong Huarong, and LMC (collectively "respondents") argue that the Department erred in selecting its steel surrogate value for HFHTs that are made from steel bar. In the previous administrative reviews of this case, the Department valued steel inputs for these tools based upon HTS category 7214.50, the classification for forged bars and rods. However, this HTS category no longer exists as a tariff classification for steel bars and rods. In this review, based on the descriptions of the production process in the record and information gathered at verification, the Department used HTS category 7214.10, the classification for forged steel, to value the steel bar input. See SMC's Cost Verification Report at 5. Respondents claim that HTS category 7214.10 is not appropriate because it covers forged steel and there is no evidence that HFHT factories would use already forged steel when the steel is forged in the production process. In addition, respondents claim that Indian import prices are unreliable because they are derived from basket import categories which contain a wide range of steel. Finally, respondents argue that Indian import steel prices under HTS category 7214.10 are higher than the world market price. According to respondents, the world market price for steel has fallen as a result of the Asian financial crisis. During this time, economies throughout Asia (including those of Japan and Singapore) experienced a severe downturn and were forced to sell their excess steel production at very low prices. Respondents argue that an influx of low-priced Indian imports from Japan and Singapore should have driven the price of steel under HTS category 7214.10 down. Instead, respondents argue that Indian Import Statistics used to calculate the Department's HTS category 7214.10 are much higher than the standard steel prices provided by the American Metal Market. As such, the respondents recommend using Indian domestic steel prices or Indian export prices from the Indian Export Statistics for steel bars under HTS category 7214.91 because they are more similar to the world market prices for steel bar and wire rod. Petitioner supports the Department's use of the HTS category 7214.10 to value the steel input, claiming that it constitutes the most appropriate information regarding the materials being used by the HFHT manufacturers to produce subject merchandise. Petitioner argues that this surrogate value selection appears to be a reasonable and conservative selection when compared to the steel bar category used in many prior reviews, specifically HTS category 7214.99. (2) Petitioner disagrees with respondents that Indian export prices are reliable. Petitioner argues that export values are problematic on many levels: the values selected by respondents are for a limited period of the POR and apparently have not been adjusted for freight, taxes, and other expenses. In addition, petitioner argues that additional domestic Indian steel prices placed on the record should be rejected because they were submitted after the deadline for submission of additional surrogate values. Therefore, petitioner recommends that the Department use as the surrogate value for steel bars the Indian import data as calculated in the preliminary results of these reviews for purposes of the final results of these reviews. Department's Position: We disagree with respondents that HTS category 7214.10 is not an accurate category by which to value steel bars. Respondents claim there is no record evidence to indicate the use of HTS category 7214.10 as an input to produce subject merchandise. On the contrary, the Department's decision to use this HTS category to value steel bars was based on import documentation from one of the respondents in this review, which indicated the importation of steel under HTS category 7214.10 as an input to produce subject merchandise. See SMC's Cost Verification Report at 5; see also SMC's Cost Verification Report at Verification Exhibits 6 and 7. Furthermore, we disagree with the suggestion to use Indian export prices submitted by the respondent. It is the Department's practice, where possible, to use publicly available factor prices that are broad market averages of non-export values, contemporaneous with the POR, specific to the input in question, and exclusive of taxes. See Manganese Metal from the People's Republic of China, Final Results and Partial Recission of Antidumping Duty Administrative Review, 63 FR 12442 (March 13, 1998); see also Cut-to-Length Carbon Steel Plate from the People's Republic of China, Final Determination of Sales at Less than Fair Value, 62 FR 61964, (November 20, 1997) at 61966. There is nothing to indicate that the values submitted by the respondents include taxes, freight and other expenses. We also disagree that the Department should use Indian domestic prices to value steel bar. It is the Department's practice, when the data are equal in terms of specificity, contemporaneity, and representativeness, to use an import price over a domestic price because the former is reported on a duty-exclusive, tax-exclusive basis, while the latter almost always is not. See Sulfanilic Acid from the People's Republic of China, Final Results of Antidumping Duty Administrative Review, 63 FR 63838 (November 17, 1998); see also Cut-to-Length Carbon Steel Plate from the People's Republic of China, Final Determination of Sales at Less than Fair Value, 62 FR 61986 (November 20, 1997) ("CTL Plate from China"). Therefore, for these final results the Department used HTS category 7214.10 to value steel bars. Although we disregarded these domestic prices, we disagree with petitioner that the domestic Indian steel prices placed on the record were submitted after the deadline for submission of additional surrogate values. Respondents' Indian steel prices were based upon information timely filed by the petitioner. See Petitioner's Submission to the Department of Publicly Available Information (February 14, 2000). Comment 7: Surrogate Value for Steel Billet Respondents argue that for HFHTs made from steel billets, the record evidence supports using HTS category 7207.20 to value respondents' steel billet input. However, respondents argue that the Department should use their Indian import data from the POR which excludes shipments from NME countries. Petitioner agrees with respondents that the Department should use HTS category 7207.20 to value billets for purposes of the final results, however, petitioner argues that the Department should reject the respondents' calculation for steel billets which bears no resemblance to the actual import data from which it is derived. Department Position: We agree with respondents and petitioners that HTS category 7207.20 is a proper category to value steel billets. In addition, we agree with respondents that shipments from NME countries should be excluded from the data. Although respondents provided the Department with calculations for the import data under HTS category 7207.20, we have continued to use our statistical analysis, which excludes NME data, because our data is more complete. The Department agrees with the petitioner, that the data provided by the respondent, which randomly omits data from both market and non-market-economy countries, resembles nothing from the actual import data it is derived form. Comment 8: Surrogate Value for Steel Scrap Respondents claim that record evidence supports using HTS category 7204.49 to value respondents' steel scrap input for HFHTs made from scrap railroad wheels and rails. However, respondents also claim that the import data the Department used from the Indian Import Statistics for steel scrap appears to be incomplete for March 1998 and provides alternative data. Petitioner agrees with respondents that the Department should use HTS category 7204.49 to value steel scrap for purposes of the final results, however, petitioner argues that the Department should reject the respondents' calculation for steel scrap, which removes data they disagree with and follow the consistent approach the Department has used in prior reviews. Department Position: We agree with respondents and petitioners that HTS category 7204.49 is a proper category by which to value scrap steel. In addition, we agree with respondents that we inadvertently omitted data from the Indian Import Statistics for our preliminary margin calculations. Therefore, for these final results the Department maintained its use of HTS category 7204.49 and corrected it for clerical errors. Comment 9: Surrogate Value for Pallets Respondents argue that the Department erred in using data from the POR for HTS category 4415.20. While respondents acknowledge that this is the correct HTS category, they claim that this data is flawed because it contains aberrational data, includes partial year figures, and is based on the number of pallets, not the weight of the pallets. Further, respondents argue that the Department erred when it assumed that each pallet weighed nine kilograms. Instead, respondents argue that the Department should use the rate for the 1995/1996 review and adjust it for inflation. Petitioner argues that the Department should reject the data submitted by respondents for pallets because there is no reason to go back as far as five years ago for information on pallets when the Department was able to obtain Indian import data on pallets for this current review. Therefore, petitioner argues that the Department should use the current Indian import data on HTS Category 4415.20 for pallets, as was used in the preliminary results, for purposes of these final results. Department's Position: We agree with respondents that the POR data used by the Department to value pallets for the preliminary results was flawed. As discussed in the HFHTs Preliminary Results, we valued wooden pallets using the Indian imports from April through August 1998 as published in Indian Import Statistics and adjusted this number to match the kilograms reported by the respondents. After adjusting this number to match the kilograms reported by the respondents, we find the value of pallets to be unreasonable when compared to the value of pallets reported in the same publication in prior years. See TMC's Final Calculation Memorandum (July 06, 2000); see also LMC's Final Calculation Memorandum (July 06, 2000); see also Shandong Huarong's Final Calculation Memorandum (July 06, 2000). Therefore, we used the most recent Indian Import Statistics of HTS category 4415.20 reported in kilograms from a prior review. Thus, for these final results, we used data from the 1996/1997 review and adjusted it for inflation. Comment 10: Truck Freight Respondents argue that the Department should use the Times of India truck rate for all domestic truck transportation, rather than using this rate only in those instances when transportation was provided by company- operated trucks. While respondents acknowledge that the Times of India truck rate covers company-operated trucks, not non-company operated trucks, they nonetheless cite the Preliminary Determination of Sales at Less Than Fair Value: Helical Spring Lock Washers,63 FR 60299 (November 9, 1998) ("Helical Spring Lock Washers") noting that in that case, the Department used the Times of India rate for all domestic truck transportation. Using the higher rate from the Final Determination of Sales at Less Than Fair Value: Certain Helical Spring Lock Washers from the People's Republic of China (58 FR 48833) (September 20, 1993) cable for non-company operated trucks, only serves to penalize respondents in this proceeding as compared with other exporters from China involved in other antidumping proceedings. Petitioner contends that it is reasonable for the Department to use two truck rates because it reflects the reality of when respondent's report using their own trucks and when the respondent's report using the services of another truck company. Therefore, petitioner argues that this in no way "penalizes" respondents. Department's Position: We disagree with respondents. In prior reviews of HFHTs, the Department has consistently treated the cost of operating the company's own vehicles as a separate, distinguishable expense from the costs related to use of non-company operated trucks. See Heavy Forged Hand Tools from the People's Republic of China, Final Results of Antidumping Duty Administrative Review, 64 Fed. Reg. 43659 (August 11, 1999). We used the Times of India rate to value the cost of a company-operated truck because this is the most appropriate surrogate value. For non-company operated trucks, i.e., the purchase of freight delivery services in the PRC, we used information contained in an August 1993 U.S. embassy cable, which we have placed on the record of these reviews, describing the cost of truck transportation for an Indian company located in Bombay used in the Final Determination of Sales at Less Than Fair Value: Certain Helical Spring Lock Washers from the People's Republic of China (58 FR 48833) (September 20, 1993). We also disagree that Helical Spring Lock Washers supports using company-operated truck rates for valuing all truck transportation. In that review, the Department used the company-operated truck rates to value truck transportation because the respondent used only company-operated trucks during the POR. Comment 11: The "Sigma" Rule/Inland Freight Respondents argue that the Department did not apply the Sigma rule. See Sigma Corporation v. United States, 117 F.3d 1401 (Fed. Cir. 1997) ("Sigma") which requires the Department to use the distance to the nearest port or to the supplier, whichever is shorter, for valuing inland freight. For example, respondents claim that in calculating TMC's normal value for axes/adzes and bars/wedges, the Department used an average factory/supplier distance even though all distances were longer than the distance to the nearest port. Respondents' argue that the Department should use the distance from the factory to the nearest port which is already on the record. Petitioner did not comment on this issue. Department Position: We agree with the respondents. After receiving a supplemental response from the respondents on March 22, 2000 regarding inland freight and port destinations, we can now apply the Sigma rule in calculating freight in the instant review. See LMC's Response to the Department's March 9, 2000 Supplemental Questionnaire (March 17, 2000); see also Shandong Huarong's Response to the Department's March 9, 2000 Supplemental Questionnaire (March 17, 2000); see also TMC's Response to the Department's March 9, 2000 Supplemental Questionnaire (March 17, 2000). Therefore, the Department used the shorter of the distance to the port or the supplier for valuing inland freight in these final results. Comment 12: Ocean Freight Rate Respondents claim that the Department should have used the market-economy ocean freight rates (paid for in market-economy currencies) for all shipments because they represent the most accurate information. Instead, the Department used surrogate value ocean freight rates for all shipments on non-market economy carriers. Citing Shakeproof Assembly Components Division of Illinois Tool Works, Inc. v. United States, Slip Op. 99-70 (CIT 1999) at 5, respondents argue that given the percentage of tools shipped on market-economy carriers and paid for in U.S. dollars, we should use this information to value all ocean freight. Petitioner did not comment on this issue. Department's Position: We agree with the respondents in part. Pursuant to section 773(c)(4) of the Act and our regulations at 19 CFR 351.408, we normally use the price paid by an NME-producer to a market- economy supplier if the quantity of the input purchased is significant. For TMC, the record evidence indicates that a substantial number of shipments were made using market-economy carriers for merchandise shipped by TMC. See TMC's Section C &D Response to the Department's April 15, 1999 Questionnaire (June 28, 1999). Since many of TMC's sales were shipped by a market-economy vendor and paid for in market-economy currency, we applied the weighted average market-economy price paid by TMC to value ocean freight for all of its shipments. See TMC's Final Calculation Memorandum (July 06, 2000). This is consistent with Department's practice of using actual market-economy based prices as the best information available when those market-economy based prices represent a significant amount of the input involved in the production process. See Shakeproof Assembly Components Division of Illinois Tool Works, Inc. v. United States, Slip Op. 00-67 (CIT 2000). We disagree with the respondents that a surrogate value should not be used for all shipments on non-market economy carriers made by Shandong Huarong and LMC. Record evidence indicates that the majority of these shipments were made using NME carriers. See LMC's Section C &D Response to the Department's April 15, 1999 Questionnaire (June 17, 2000); see also Shandong Huarong's Section C &D Response to the Department's April 15, 1999 Questionnaire (June 17, 1999). The majority of Shandong Huarong's and LMC's sales were not shipped by a market-economy vendor or paid for in a market-economy currency. Moreover, in this instance the market-economy freight rates only applied to certain destinations. Because the shipments made by NME suppliers were to different destinations, the market-economy rates were not appropriate. See LMC's Final Calculation Memorandum (July 06, 2000); see also Shandong Huarong's Final Calculation Memorandum (July 06, 2000). Therefore, we appropriately used surrogate values for all but a small number of shipments which were paid for in a market-economy currency to market-economy vendors. Comment 13: TMC Verification and Adjustment Issues TMC claims that there should be no adjustments to its reported production factors for energy, labor, paint and packing factors based on findings at verification because while some small differences exist, the differences taken together do not affect the margins. At verification, the Department tested the reasonableness of the allocation of electricity, coal, and paint consumed by TMC by multiplying the total consumption of electricity, coal, and paint consumed in the production of all merchandise by 60 percent. The 60 percent was used because company officials stated at the beginning of verification that 60 percent of their company's total production was in hammers/sledges. However, TMC argues that applying the 60 percent assumption for production on any one day is unsupportable. The more accurate figure, TMC states, would be to divide by the length of time to produce each type of product as witnessed by the verifiers. TMC claims that because the 60 percent statements include subject and non-subject hammers, use of the 60 percent figure would be inaccurate. As for packing materials, TMC argues that the difference between the consumption amounts reported for packing materials based on "caps" (predetermined consumption amounts) and the Department's test were too small to warrant an adjustment for margin calculation purposes. Further, the Department's sampling of one size does not reflect a pattern of under- reporting. Petitioner argues that the adjustments the Department made to the reported production factors for energy, labor, paint, and packing factors are based on information in TMC's records that the Department reviewed at verification. The petitioner recommends that the Department maintain theses adjustments, regardless if they are small, for these final results. Department's Position: We disagree with TMC. Company officials stated that 60 percent of the merchandise they produce is hammers/sledges. See TMC's Cost Verification Report at 1. While we requested documentation for this percentage, company officials claimed they had none. However, we did compare this number to the "Finished Inventory Journal," which detailed the quantity of products produced each month. We found this percentage to be reasonable and continue to use it in calculating the allocation of electricity, coal, and paint consumed for each product produced by TMC. See TMC's Cost Verification Report at Exhibits 6A and 6B. In addition, we note that it would be impossible to determine the consumption of these inputs based on the production witnessed at verification. While we witnessed a limited number of hammers/sledges being produced, we never witnessed the production of non-subject merchandise, nor does any of our production time information include energy shared by both subject and non-subject merchandise. As for packing materials, we find the difference between the reported caps and the measured packing materials large enough to warrant an adjustment in the margin calculation. See TMC's Cost Verification Report at 11. Although we measured only a small number of pieces of packing materials, we found that many of the items shipped by TMC shared these same materials. Regardless of the size of the hammers/sledges, all subject merchandise used the same amount of packing materials and a percentage could be applied equally. Therefore, for these final results the Department has continued to adjust TMC's reported production factors of electricity, coal, paint, and packing materials based on findings at verification. Comment 14: Preliminary Adjustments Noted in the Calculation Memorandums Respondents argue that we should continue to maintain some of the minor adjustments used in the margin calculations for the preliminary results. In particular, respondents state that the Department should continue to use the adjustments made to product codes, finished weight, port codes, and steel inputs provided by the respondents. Petitioner agrees with this comment. Department's Position: We agree with respondents and petitioners. In the preliminary results we made a number of small adjustments for each exporter concerning product codes, finished weight, port codes, and steel inputs based on information provided by the respondent companies. See TMC's Preliminary Calculation Memorandum (February 28, 2000); see also LMC's Preliminary Calculation Memorandum (February 28, 2000); see also Shandong Huarong's Preliminary Calculation Memorandum (February 28, 2000). The Department has continued to use these adjustments for these final results. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendation are accepted, we will publish the final results of these reviews and the final ad valorem antidumping duty margins in the Federal Register. Agree Disagree Let's Discuss _____________________ Troy H. Cribb Acting Assistant Secretary for Import Administration Date ____________________________________________________________________ footnotes: 1. SMC reported only U.S. sales of HFHTs within the hammers/sledges class or kind of merchandise. 2. Bars and rods currently classified under HTS 7214.99 (other bars and rods: rounds: other) were classified previously under HTS 7214.50.