(65 FR 11550, March 3, 2000) A-570-601 Sunset Review Public Document MEMORANDUM TO: Robert S. LaRussa Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Review of Tapered Roller Bearings from the People's Republic of China; Final Results Summary: We have analyzed the comments and rebuttals of interested parties in the full sunset review of the antidumping duty order covering tapered roller bearings ("TRBs") from the People's Republic of China ("PRC"). 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 sunset review for which we received comments and rebuttals by parties: 1. Likelihood of continuation or recurrence of dumping Weighted-average dumping margin Volume of imports 2. Magnitude of the margin likely to prevail Margins from the investigation Use of a more recent margin Background: On October 22, 1999, the Department of Commerce (“the Department”) published in the Federal Register a notice of preliminary results of the full sunset review of the antidumping duty order on TRBs(1) pursuant to section 751(c) of the Tariff Act of 1930, as amended (“the Act”). In our preliminary results, we found that revocation of the order would likely result in continuation or recurrence of dumping. In addition, we preliminarily determined the following net margins likely to prevail if the order were revoked: Producer/Exporter Margin (percent) China National Machinery Import & Export Corp. ("CMC") 0.03 Zheijiang Wanxiang Group 0.03 Zheijiang Machinery Import & Export Corp. 0.11 Luoyang 3.20 Premier 5.43 Liaoning 9.72 Guizhou Machinery 21.79 Wafangdian 29.40 Jilin 29.40 China National Machinery Import & Export Corp. ("CMEC") 29.40 Guizhou Automotive 29.40 Tianshui Hailin 29.40 Xiangyiang 29.40 Xibei 29.40 Zheijiang Changshan Changhe Bearing Co. ("ZCCBC") 29.40 All Others 29.40 Subsequent to the issuance of our preliminary results, the Department issued the final results of the administrative review covering the period 1 June 1997 - 31 May 1998 (see 64 FR 61837 (November 15, 1999)). On November 15, 1999, the Department issued the final results of new shipper reviews with respect to ZCCBC and Weihai.(2) On December 7, 1999, within the deadline specified in 19 CFR 351.209(c)(1)(i), we received a case brief on behalf of domestic interested parties, The Timken Company ("Timken") and The Torrington Company ("Torrington") (collectively "domestic interested parties"). We also received a case brief on behalf of Zheijiang Machinery Import & Export Corporation ("Zheijiang Machinery"); Liaoning Mec Group, Ltd. ("Liaoning"); Luoyang Bearing Corporation (Group) ("Luoyang"); Zheijiang Changshan Changhe Bearing Co., Ltd. ("ZCCBC"); Zheijiang Wanxiang Group ("Wanxiang"); China National Machinery Import & Export Corporation ("CMC");(3) Xibei Bearing Group Import & Export Co., Ltd. ("Xibei"); Xiangyiang Bearing Factory ("Xiangyiang"); and the China TRB Sunset Coalition ("China Coalition") (collectively "respondent interested parties"). On December 13, 1999, within the deadline specified in 19 CFR 351.309(d), the Department received rebuttal comments from domestic and respondent interested parties. On December 15, 1999, the Department held a public hearing. We have addressed the comments received below. Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this sunset review to determine whether termination of the antidumping duty order would likely lead to continuation or recurrence of dumping. Section 752(c) of the Act provides that, in making this determination, the Department shall consider the weighted-average dumping margins determined in the investigation and subsequent reviews and the volume of imports of the subject merchandise for the period before and the period after the issuance of the antidumping duty order or suspension agreement. In addition, section 752(c)(3) of the Act provides that the Department shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the order or suspension agreement is revoked. Likelihood of Continuation or Recurrence of Dumping Interested Party Comments Comment 1: Respondent interested parties assert in their case brief of December 7, 1999, that none of the three criteria set forth in section II.3(a) of the Sunset Policy Bulletin and section C.9.C(3) of the Statement of Administrative Action ("SAA") as likely to lead to a continuation or recurrence of dumping exist in this review (see December 7, 1999, Case Brief of respondent interested parties at 4). Respondent interested parties contend that, although certain individual respondents continue to be subject to antidumping duties above de minimis, the overwhelming portion of TRBs from China under the order have been subject to zero or de minimis levels of antidumping duties in recent years. Id. As such, the weighted average dumping margins determined in subsequent reviews has been de minimis in the most recent reviews. Id. In support of this assertion, respondent interested parties refer to the U.S. Customs Service Annual Reports to Congress on Administration of the Antidumping and Countervailing Duty Laws, "Compliance Initiatives and Enforcement Actions," and divide the total reported final assessed duty by the total reported value of liquidated entries to arrive at zero or de minimis margins. In addition, respondent interested parties also contend that there is no basis for a likelihood of continued or recurring dumping because imports of TRBs from China have neither ceased nor declined since the issuance of the order, but have increased dramatically. Id. at 5. They contend that comparison of total imports of TRB sets from China in three years preceding the issuance of the order with the exports of respondent interested parties during the 1996-98 period reflects an increase of total imports. Id. Respondent interested parties argue that the record in this review, which demonstrates that existing margins are declining and imports are steady or increasing, falls within Department standards to determine "no likelihood" of continuation or recurrence of dumping. Id. at 6. Further, they assert that, within this context, the mere existence of margins for individual exporters and of an "all others" rate above de minimis is not determinative that recurrence or continuation of dumping is likely if the order is revoked. Id. at 6-7. Given the existence of de minimis weighted-average margins in the most recent reviews of TRBs from China and the dramatic increase in the volume of imports of TRBs from China in relation to the period before the order was issued, the respondent interested parties urge the Department to find no likelihood of continuation or recurrence of dumping. Id. at 7. In their rebuttal brief, domestic interested parties assert that the methodology of respondent interested parties for calculating the weighted- average margins determined from data in the U.S. Customs Annual Reports is flawed and, consequently, respondent interested parties' calculation that the weighted-average dumping margin is de minimis is erroneous (see Rebuttal Brief of domestic interested parties at 2). Domestic interested parties contend that there is no way of knowing, from the Customs Annual Report, which entries during which time periods were the source of the liquidated duty reported in respondent interested parties' case brief. Id. at 3. Further, given the existence of the antidumping duty order and suspension of liquidation pending administrative review, the domestic interested parties assert that it is highly probable that none or little of the liquidated duty collected during the fiscal year concerns covered TRBs entered during the same fiscal year. Id. Domestic interested parties note that the respondent interested parties' case brief shows that the "liquidation" rates for a majority of the Chinese producers are above de minimis, and they assert that the Department correctly determined, in accord with its normal policy, that dumping is likely to continue if the order were revoked. Id. at 4. Department's Response We disagree with respondent interested parties that we should base our determination on a weighted-average margin calculated using data from Customs Annual Reports. Putting aside the flaws identified by domestic interested parties, we note that, use of such data may mask significant individual dumping margins. To suggest that we should rely on a weighted-average dumping margin calculated on all imports because our determinations of likelihood are made on an order-wide basis ignores that dumping is a company-specific behavior. Therefore, we will continue to base our determination of likelihood on the behavior of individual companies. As we noted in our preliminary results, although margins for some companies have decreased below de minimis, dumping by other producers nonetheless continued since the issuance of the order. Therefore, we determine that dumping is likely to continue if the order were revoked. Magnitude of the Margin Likely to Prevail Interested Party Comments Comment 1: Respondent interested parties assert that, if the Department determines that revocation is likely to result in the continuation or recurrence of dumping, the Department should revise the magnitude of the margins set forth in the preliminary results for Wafangdian, Jilin, Liaoning, Guizhou Machinery, and Premier (see December 7, 1999, Case Brief of respondent interested parties at 7). Respondent interested parties submit that the Department's methodology of determining the rate likely to prevail by selecting the assessed rate from the annual review period during which these companies had their highest volume of exports is flawed. Respondent interested parties argue that this methodology does not reflect real commercial considerations of the Chinese respondents since the only information available to exporters at the time of their exports and sales is the cash deposit rate in effect, and changes of assessment are not known until years after the periods of review. Therefore, they contend, the subsequent declines in import volumes (which were accompanied by reduced margins) are not in any way connected to the higher duty rates assessed. Id. at 7-9. With respect to each of these five companies, respondent interested parties argue that, given the companies' lack of knowledge of the applicability of a higher rate for the period during which exports peaked, the Department should select, as the magnitude of the margin likely to prevail, the cash deposit rate in effect when imports for each of these companies peaked. The respondent interested parties do not dispute that the exports of Wafangdian, Liaoning, and Jilin peaked during the 1994-95 review period, or that the exports of Premier and Guizhou peaked during the 1994-95 period. In their rebuttal brief of December 13, 1999, domestic interested parties assert that the Department's methodology for determining company-specific margins is reasonable and should be maintained for the final results. Domestic interested parties first argue that the Department should not consider arguments related to companies which waived participation in this proceeding (see December 13, 1999, Rebuttal Brief of domestic interested parties at 5). Domestic interested parties argue further, that because the dumping margins for these producers increased as their imports increased, it was appropriate to assign likely dumping margin rates for the five producers based on the margin calculated during the review period in which their U.S. imports peaked. Id. Moreover, domestic interested parties argue that a producer is assumed to know the consequences of its pricing behavior, and, given that administrative reviews occurred over a ten-year period, the five producers were on notice that they could and should adjust their pricing in order to avoid any potential dumping duties. Id. at 6-7. Department's Position While we agree with respondent interested parties that the final results of administrative review are not complete until well after the review period ends, we do not agree that we should rely on the cash deposit rates in effect during the period of increasing imports. Rather, the Sunset Policy Bulletin and SAA refer to the use of a more recently calculated rate in cases where dumping has increased or decreased and import volumes have remained steady or decreased. While a de minimis cash deposit rate may enable exporters to increase the volume of their exports, it does not necessarily provide an indication of the actual level of dumping associated with such increased imports. As we stated in our preliminary results, we may provide to the Commission a more recently calculated margin for a particular company if a company chooses to increase dumping in order to increase or maintain market share. Therefore, we continue to determine that it is appropriate to select, as the magnitude of the margin likely to prevail, the margin corresponding to the increase in sales. Comment 2: Domestic interested parties, in their case brief of December 7, 1999, agree with the Department's determination to provide the Commission with a margin calculated more recently than the original investigation where a company has chosen to increase dumping in order to increase market share. However, they point out that the Department recently issued the final results of the administrative review for the 1997-98 period and argue that, as appropriate, the Department should rely on the margins determined during the most recent review. Specifically, domestic interested parties argue that, for companies whose highest level of imports occurred during the 1997-98 review period, the Department should rely on the margin calculated for such sales or, where no review was conducted of that company, the Department should rely on the duty deposit rate in effect at the time of entry. In their rebuttal brief of December 13, 1999, respondent interested parties agree with the methodology identified by domestic interested parties. However, they assert that the correct application of such a methodology has markedly different results than those sought by domestic interested parties. Referring to the company's share of the U.S. market for imported Chinese TRBs, respondent interested parties assert that the margin likely to prevail with respect to Luoyang should be zero (see December 13, 1999, Rebuttal Brief of respondent interested parties at 2-3). In addition, in their rebuttal brief, respondent interested parties note that they do not disagree with domestic interested parties' methodology with respect to the rates for CMC and Zheijiang Machinery. However, they assert that the change in rates proposed by domestic interested parties is a meaningless and irrelevant change to the record of this review because the rates are nonetheless de minimis and, therefore, should be reported as zero. Department's Response: We agree with domestic and respondent interested parties that we should select, as the magnitude of the margin likely to prevail, the margin of dumping corresponding to the period in which a company increased or decreased dumping while that company was increasing or maintaining market share. As we noted in the Sunset Policy Bulletin, in analyzing whether company import volumes increased, the Department normally will consider a company's relative market- share, with such information to be provided by the parties (see section II.B.2). However, we have relied on value information in cases where market share information was not provided or volume information was determined inappropriate (see, e.g. Final Results of Expedited Sunset Review: Internal- Combustion, Industrial Forklift Trucks From Japan, 64 FR 42662 (August 5, 1999), and Final Results of Expedited Sunset Review: Natural Bristle Paintbrushes and Brush Heads From the People's Republic of China, 64 FR 25011 (May 10, 1999)). We note that, given the difficulties associated with both the volume (number of units of TRBs is not necessarily indicative of the volume of imports given the differences in TRBs) and value (actual value of imports subject to the order), in our determination and re-determination of respondent interested party adequacy and our preliminary results, we relied on company- specific export values as reported by domestic and respondent interested parties. Despite respondent interested parties' efforts to have us refer to Luoyang's share of Chinese TRB exports for the purposes of determining the magnitude of the margin likely to prevail, because we determine that reliance on a value of total subject imports is inappropriate, we continue to believe that it is appropriate, in this case, to rely on the company-specific value of exports. Further, we note that, although there would be a correlation between a company's share of total subject exports and its share of the U.S. market, we do not agree that a company's share of exports is the same as its relative market share. We agree with respondent interested parties that we instruct Customs to liquidate without regard to duties where the assessment is de minimis. However, we disagree that we should report any de minimis margins as zero. Rather, consistent with our approach in investigations and administrative reviews, we intend to identify any de minimis weighted-average margin as calculated. Comment 3: Respondent interested parties assert that, consistent with the methodologies discussed above for the determination of the magnitude of dumping likely to prevail, the Department should provide rates for six of the 21 identified companies-Xiangfan, Chin Jun/Peer, ZX, Shandong, China National Automotive, East Sea Bearing, and Henan-which have participated in some segment of this proceeding (see December 7, 1999, Case Brief of respondent interested parties at 13). In their rebuttal, domestic interested parties assert that the Department should strike the arguments of respondent interested parties on behalf of the above companies because the information they have chosen not to supply is necessary for the Department to make an informed decision (see December 13, 1999, Rebuttal Brief of domestic interested parties at 9). Further, even if the Department were to consider the argument, the domestic interested parties argue that it should continue to not assign a company-specific rate to them as facts available. Id. Department's Response While we recognize that, subsequent to the issuance of the order, several companies have participated in administrative reviews and been determined in such administrative reviews to operate independent of government control, the Department's position is that companies that do not participate in a sunset review should not benefit from their lack of participation. The Department agrees with domestic interested parties. The Department specified in its Sunset Policy Bulletin, that, for companies not specifically investigated or for companies that did not begin shipping until after the order was issued, the Department normally will provide a margin based on the all others rate from the original investigation. Therefore, for companies that waived participation in this administrative review, the Department will not report a company-specific margin unless such company was investigated in the original investigation. Comment 4: Respondent interested parties assert that, given the availability of the final results in the new shipper reviews for ZCCBC and Weihai, the Department should select, as the margins likely prevail for these companies, the zero margins in the respective new shipper reviews (see December 7, 1999, Case Brief of respondent interested parties at 11). In their rebuttal, domestic interested parties assert that ZCCBC and Weihan, by not providing information in this review, waived their participation and the Department should strike and disregard this argument (see September 13, 1999, Rebuttal Brief of domestic interested parties at 7). In addition, domestic interested parties contend that reliance on the results of the new shipper reviews is not appropriate, given that the Department initiated the new shipper review on February, 19, 1999, more than two months before substantive responses were submitted in the sunset review and, therefore, ZCCBC and Weihai had an opportunity to fully participate in the sunset review. Because these companies chose not to participate, the domestic interested parties argue, they should not be allowed to claim the benefit of the new shipper reviews in the context of this sunset review. Id. However, domestic interested parties subsequently acknowledged ZCCBC's participation in this review.(4) Furthermore, in response to a question during the hearing addressing sunset reviews of orders on non-market-economy countries and the appropriateness of the use of a new shipper rate as reflective of the magnitude of the margin likely to prevail in the event of revocation, domestic interested parties agreed that it is not inappropriate to rely on margins determined in new shipper reviews, given that, in such reviews, companies have demonstrated independence from government control. See Transcript at 58. Department's Response At the time of our preliminary results, we had not yet issued the final results of new shipper reviews with respect to ZCCBC and Weihai. As noted by respondent interested parties, we have since concluded those reviews. In our Sunset Policy Bulletin we stated that, for companies not specifically investigated or for companies that did not begin shipping until after the order was issued, we normally will provide a margin based on the all others rate from the investigation. However, we agree with interested parties(5) that because this order covers a non-market economy country and the "all others" rate is the rate applicable to "China, Inc.," companies that demonstrate their independence from government control should not be assigned the China-wide rate. Therefore, although we acknowledge that rates from new shipper reviews reflect the behavior of exporters with the discipline of the order in place, we determine that it is appropriate, in this review, to rely on the margins calculated in the new shipper review of ZCCBC as probative of its behavior absent the discipline of the order. With respect to Weihai, we will not report a company-specific margin for the reasons mentioned above, in Comment 3. Comment 5: Respondent interested parties argue that the "all others" rate of 29.4 percent from the 1995-96 review is inappropriate in the context of this review because the rate is based on adverse facts available and, thus, is not predictive of the rate likely to prevail for shippers not previously assigned individual rates through individual orders and annual reviews. Id. at 11-12. Respondent interested parties assert that the 1995-96 review, from which the Department selected its PRC-wide rate, corresponds to the entry of significant new shippers into the U.S. market and that the decline in imports subject to the 1997-98 "all others" rates corresponds to the announcement in 1997 of the assessed rates for each of these new shippers. Id. at 12. Further, respondent interested parties assert that the results of these new shipper reviews correspond to the seventh, eighth, and ninth reviews and indicate that the initial actual margins for these new entrants were substantially below the PRC- wide rate. Id. Therefore, they contend, the actual margins for these new shippers demonstrate that the real margin applicable to the volume of imports subject to the "all others" rates between 1994-96 was de minimis, and these margins support a finding that dumping is not likely to continue or recur if the order is revoked. Id. at 13. As such, respondent interested parties assert that the Department should report for "all others" 2.96 percent, the PRC-wide rate determined in the original investigation. In their rebuttal, domestic interested parties contend that the rate from the preliminary results is a good predictor of likely behavior regardless of whether it is based on facts available or not (see December 13, 1999, Rebuttal Brief of domestic interested parties at 8). Further, domestic interested parties argue that all but one of the "new shippers" identified by respondents obtained company-specific rates before or as part of the 1995-1996 administrative review. Therefore, they contend, their imports were not included in or covered by the PRC rate calculated for that period, and the rates determined for these companies provide no indication of the likely margin for the bearings produced by the state enterprise. Id. Department's Response We do not agree that the PRC-wide rate of 29.40 percent is inappropriate because it is based on facts otherwise available. As domestic interested parties pointed out, we specified in our Sunset Policy Bulletin, that we may, in response to argument from an interested party, provide a more recently calculated margin where dumping margins have increased after the issuance of the order, even if the increase was a result of the application of best information available or facts otherwise available (see section II.B.2). In this case, we continue to find that overall imports, by value, increased from fiscal year 1994 (October 1993 - September 1994) through FY 1995 and then decreased in FY 1996 and FY 1997 before rebounding in FY 1998. In addition, for the same time period, based on the company-specific information available, we continue to find that total imports less imports of those companies receiving separate rates during that time, increased. Therefore, in accordance with section II.B.2 of the Sunset Policy Bulletin, we continue to determine that a rate of 29.40 percent is probative of the behavior of "all others." Comment 6: Respondent interested parties assert that the Department should not assign the PRC-wide rate to Xibei and Xiangyiang as the margin likely to prevail for these two companies should the order be revoked (see December 7, 1999, Case Brief of respondent interested parties at 14). Although Xibei and Xiangyiang are interested parties, neither company has exported subject merchandise to the United States or been previously investigated or reviewed by the Department, and there are no facts in the record upon which to base a determination for a finding of individual prevailing margins for these companies if the order is revoked. Id. In their rebuttal, domestic interested parties assert that, because neither Xibei nor Xiangyiang has demonstrated that they are independent of the government-controlled enterprise producing bearings, they should not be assigned individual rates and are properly covered by the PRC "all others" rate of 29.40 percent (see December 13, 1999, Rebuttal Brief of domestic interested parties at 9). Department's Position: Although Xibei and Xiangyiang are participating in this review as part of the China Coalition, neither company has exported subject merchandise to the United States or has been determined by the Department to operate independent of government control and therefore entitled to a company-specific rate. Therefore, we will not report individual rates for these companies. Recommendation: Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review in the Federal Register. AGREE____ DISAGREE____ ________________________ Robert S. LaRussa Assistant Secretary for Import Administration _____________________ (Date) 1. See Preliminary Results of Full Sunset Review: Tapered Roller Bearings from the People's Republic of China, 64 FR 57034 (October 22, 1999). 2. See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China; Final Results of 1997-1998 Antidumping Duty Administrative Review and Final Results of New Shipper Review, 64 FR 61837 (November 15, 1999). 3. CMC is a different and distinct company from CMEC. 4. See January 24, 2000, submission in response to the clerical error correction filed by respondent interested parties on January 14, 2000. 5. See Transcript at 48 - 58.