66 FR 27063, May 16, 2001 A-570-846 AR/NSR 04/99-03/00 Public Document IA/I/2/BS MEMORANDUM TO: Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary for Import Administration SUBJECT: Issues and Decision Memorandum for the Final Results of the Antidumping Duty Administrative Review and New Shipper Review on Brake Rotors from the People's Republic of China - April 1, 1999, through March 31, 2000 Summary We have analyzed the comments of the interested parties in the 1999-2000 administrative review and the new shipper review of the antidumping duty order covering brake rotors from the People's Republic of China ("PRC"). As a result of our analysis of these comments, we have made changes in the margin calculations as discussed in the "Margin Calculations" section of this memorandum. 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 these reviews for which we received comments from parties: Issue 1: Rescission of Third Administrative Review Based on the Results of the Department's Customs Data Query Issue 2: Alleged Violation of Exporter/Producer Combinations Excluded from the Order Based on Examination of Selected U.S. Brake Rotor Entries during the Period of Review Issue 3: Surrogate Value Selection for Wood Pallets Background On January 8, 2001, the Department of Commerce ("the Department") published the preliminary results and partial rescission of the fourth new shipper review and the rescission of the third administrative review of the antidumping duty order on brake rotors from the PRC. See Brake Rotors from the People's Republic of China: Preliminary Results and Partial Rescission of the Fourth New Shipper Review and Rescission of the Third Antidumping Duty Administrative Review, 66 FR 1303 (January 8, 2001) ("Preliminary Results"). The products covered by this order are brake rotors made of gray cast iron, whether finished, semifinished, or unfinished, ranging in diameter from 8 to 16 inches (20.32 to 40.64 centimeters) and in weight from 8 to 45 pounds (3.63 to 20.41 kilograms). The period of review ("POR") is April 1, 1999, through March 31, 2000. We invited parties to comment on our preliminary results of reviews. The petitioner submitted its case brief on March 15, 2001, and the respondents submitted their rebuttal brief on March 22, 2001. On April 9, 2001, we placed on the record additional publicly available information for pallet wood for consideration in the final results. Both parties submitted comments on this additional information on April 16, 2001. There was no request for a hearing in this proceeding. Margin Calculations We calculated export price and normal value using the same methodology stated in the preliminary results, except as follows: 1. To value pallet wood, we used an updated import value from the Indonesian government publication Indonesian Foreign Trade Statistics rather than a value from Monthly Statistics of the Foreign Trade of India or from International Business Information Services ("IBIS"). See Comment 3, below, and surrogate value calculation memorandum for further discussion. 2. In the Preliminary Results, we inadvertently did not calculate source- to-factory surrogate freight for those material inputs that we valued based on CIF import values in the surrogate country in accordance with the decision of the Court of Appeals for the Federal Circuit in Sigma Corp. v. United States, 117 F. 3d 1401 (1997) ("Sigma"). Therefore, for the final results and in accordance with the Sigma decision, we have corrected this error and have added to the CIF surrogate values from India a surrogate freight cost using the shorter of the reported distances from either the closest PRC port of importation to the factory or from the domestic supplier to the factory on an input-specific basis. Discussion of the Issues Comment 1: Rescission of Third Administrative Review Based on the Results of the Department's Customs Data Query Pursuant to 19 CFR 351.213(d)(3), the Department preliminarily rescinded the third administrative review with respect to three exporter/producer combinations (1) because it determined, based on the results of its examination of shipment data maintained by the Customs Service, that during the period of review ("POR"), the companies in the exporter/producer combinations which received zero rates in the less-than- fair-value ("LTFV") investigation and were the only companies subject to the third administrative review, did not make shipments of subject merchandise to the United States during the POR. (See Preliminary Results at 1306.) The petitioner objects to the Department's preliminary rescission decision, alleging that the Department violated due process when it did not explain or disclose the data query which resulted in its selection of certain U.S. entries of brake rotors for confirmation by the Customs Service of the manufacturer and exporter. Citing Nippon Steel Corp. v. United States,118 F. Supp. 2d 1366, 1371-1373 (Ct. Int'l Trade 2000) ("Nippon Steel") and Wieland-Werke AG, Langenberg Kupfer v. United States, 4 F. Supp. 2d 1207 (Ct. Int'l Trade 1998) ("Wieland-Werke"), the petitioner argues that the Court of International Trade ("CIT") has overturned the Department's decisions in antidumping proceedings for violation of due process based on lack of opportunity for parties to comment on information. The petitioner contends that the Department violated procedural due process and its statutory obligation under section 782(g) of the Act (19 USC 1677m(g)) to give parties an opportunity to comment on information when: (1) it failed to make available to the petitioner its data query; (2) it failed to explain the source of the data query; (3) it failed to explain the methodology for selection of the specific entries to be further investigated by the Customs Service; and (4) it failed to give an opportunity for parties to comment on the data query results and on the selection of the entries to be further investigated before requesting the Customs Service's assistance. For these reasons, the petitioner asserts that the Department should allow the parties to comment on the data query, and if necessary, should extend the final results of the third administrative review to permit all entries from the exporters subject to the exporter/producer combinations to be reviewed and verified. The respondents assert that the Department's preliminary determination to rescind the third administrative review is consistent with precedent and is not in violation of any due process requirements as alleged by the petitioner. The respondents emphasize that the very fact that the petitioner was able to submit its case brief demonstrates that the petitioner was afforded an opportunity to comment on the Department's decision to rescind the third administrative review. Therefore, according to the respondents, the petitioner's due process allegations are without merit. The respondents maintain further that the facts in the instant case are not analogous to those in the cases cited by the petitioner because the Department placed on the record of this case all of the relevant decision memoranda on the rescission issue and made them available to all parties more than two months prior to the Department's preliminary determination. Department's Position: We disagree with the petitioner that we have violated any due process requirements in preliminarily rescinding the third administrative review with respect to the three exporter/producer combinations subject to this review. In order to substantiate the claims of the three exporter/producer combinations that they made no shipments of subject merchandise during the POR through a non-excluded exporter/producer combination, the Department conducted a data query on September 27, 2000, of brake rotor entries made during the POR from all exporters named in the excluded exporter/producer combinations. The results of the data query provided a voluminous number of entries associated with the excluded exporter/producer combinations. For many of those entries, the manufacturer name listed was not the actual manufacturer since the term "manufacturer" could indicate one of several manufacturers covering a portion of the merchandise included in the entry. Under these circumstances, the Department realized that it would be extremely burdensome for the Customs Service to check at each of its ports every 7501 form filed on behalf of all the entries in the query. Therefore, consistent with its normal practice, the Department deemed it appropriate in this instance to select a random sample of the entries from the query to determine whether any of them involved non-excluded exporter/importer combinations. The Department's discretion for using sampling techniques in situations where the information to be checked is voluminous has been upheld in previous cases by the CIT (see Federal-Mogul Corp. v. United States, 20 CIT 234, 918 F. Supp. 386, 403-404 (CIT 1996)). Accordingly, on September 28, 2000, the Department requested that the Customs Service confirm the actual manufacturer for specific entries associated with the excluded exporter/producer combinations. As a representative sample of the entries provided by the query, the Department selected at least four entries associated with each exporter/producer combination. In addition, the Department selected entries for each exporter/producer combination which were made at different Customs Service ports in order to widen the coverage of the sample (see September 28, 2000, memorandum from Brian Ledgerwood, Case Analyst, to Tom Ede, U.S. Customs Service, titled, "Request for Assistance: Shipments of Brake Rotors from the People's Republic of China Manufactured and/or Exported By Five PRC Companies During the Period April 1, 1999, Through March 31, 2000") ("September 28, 2000, memorandum"). Both parties to this proceeding were provided a copy of the September 28, 2000, memorandum to the Customs Service at the time of issuance. The results of our Customs Service inquiry were placed on the record on October 25, 2000 (see October 25, 2000, Memorandum from Brian C. Smith, Team Leader, to the File, entitled, "Results of Request for Assistance from the U.S. Customs Service to Further Examine U.S. Entries Made by Exporter/Producer Combinations.") ("October 25, 2000, memorandum"). Based on these results, we preliminarily rescinded the administrative review because we found no evidence that the exporters in the exporter/producer combinations subject to this review made U.S. shipments of the subject merchandise during the POR through a non-excluded exporter/producer combination. At no point prior to the filing of its case brief did the petitioner raise an objection to the Department's use of a sampling method in this administrative review or question the results of the data. Nonetheless, in order to address comprehensively the petitioner's above- mentioned allegation, the Department re-examined specific entries which the petitioner maintains represent instances in which the named exporter/producer combination violated the terms of its exclusion status (see Comment 2 below for further discussion). Notwithstanding the Department's attempt to address the petitioner's allegation at such a late stage in this administrative review, the Department further points out that the cases cited by the petitioner to support its due process arguments are without merit. In Nippon Steel, the CIT ruled that the Department violated the statute and due process when the Department failed to place memoranda discussing ex parte meetings between the Department and the petitioner on the record until "on or about the day of the final determination" and thereby denied the respondents an opportunity to examine and comment on the factual data contained in the memoranda before the final decision-making was complete. Similarly, in Wieland-Werke, the Department obtained factual information after the record had closed and used such information in its decision-making for the final determination without allowing the parties to comment on it. In this case, the Department placed on the record all memoranda supporting its preliminary rescission decision two months prior to preliminary results and all parties to the proceeding had an opportunity to comment on these preliminary results, as is evidenced by the petitioner's submission of its case brief on March 15, 2001, and the respondents' submission of their rebuttal brief on March 22, 2001. In fact, in this case, the petitioner had an opportunity to file comments on our data query results prior to the Department's preliminary determination, but failed to avail itself of that opportunity until the briefing stage. Therefore, the Department has fulfilled its statutory obligation and has not violated any due process requirements. Accordingly, there is no reason to allow the parties additional time to comment on the data query, or to extend the final results of the third administrative review to permit all entries from the exporters subject to the exporter/producer combinations to be reviewed and verified, as requested by the petitioner. Based on the record evidence, we have no compelling reason to reverse our preliminary decision to rescind the third administrative review. Comment 2: Alleged Violation of Exporter/Producer Combinations Excluded from the Order Based on Examination of Selected U.S. Brake Rotor Entries during the POR The petitioner maintains that the Department's memoranda regarding its data query demonstrate that there are inconsistencies between the original information obtained by the Department and that subsequently obtained from the Customs Service with respect to certain entries selected for further review. The petitioner asserts that there is a very high level of discrepancy in the names of the exporters and manufacturers identified as associated with these entries, as almost half of the entries selected for review (i.e., 12 out of a total of 23 entries) contain contradictory information, and in some instances appear to violate the exporter/producer combinations currently excluded from the order. (See Petitioner's March 15, 2001, case brief at 4-9.) While the petitioner concedes that the discrepancies found do not always result in a violation of the exporter/producer combinations, the petitioner asserts that they clearly cast doubt on the reliability and credibility of the respondents' non- shipment claims in this administrative review and the reliability of the information itself. Consequently, the petitioner strongly objects to the Department's preliminary determination to rescind the third administrative review of the brake rotors antidumping duty order. Furthermore, it requests that the Department investigate further the discrepancies it enumerates in its case brief. Finally, the petitioner contends that exporters that have violated the terms of the excluded exporter/producer combinations should be denied the benefit of exporting under these combinations and should instead be subject to the China-wide rate. If the Department does not have the time or resources to further investigate this issue, the petitioner urges the Department to resort to adverse facts available and assign the China-wide rate to the violators. The respondents maintain that the Customs Service data reviewed by the Department support the Department's decision to rescind the third administrative review and support the Department's conclusion that there were no violations of the exporter/producer combinations. The respondents claim that certain discrepancies in the Customs Service data noted by the petitioner appear to be clerical errors. Furthermore, the respondents point out that the Department has broad discretion for determining whether entries during the POR have complied with the Department's order, and that there is no evidence that the Department has abused its discretion in this case. Department's Position: We disagree with the petitioner. As a result of the petitioner's comments, we have re-examined the data acquired from the Customs Service on the 12 entries the petitioner is questioning. Based on our re- examination of the data and request for additional clarification from the Customs Service, as explained in detail in a May 8, 2001, Department memorandum cited below, we continue to find no evidence that any of the 12 entries in question represent instances in which the exporter/producer combinations made entries of subject merchandise not covered by the exclusion. Specifically, 11 of the 12 entries in question involved situations in which (1) a different excluded exporter/producer combination was associated with the entry in the Customs Service database than what was reflected in entry documentation examined by the Customs Service; (2) entries had been inadvertently designated in the Customs database as entries attributable to certain exporter/producer combinations when in fact those entries were made by other PRC exporting companies which had their own separate antidumping duty rate; (3) the Customs Service database listed the manufacturer rather than the exporter of the merchandise included in the entry; (4) Customs Service documentation did not indicate who the manufacturer was for entries made by the exporter named in the exporter/producer combination, but subsequent communication with the Customs Service clarified the matter; and (5) the Customs Service provided the Department with the actual sales invoice for the entry instead of a memorandum which summarized its findings based on its examination of the entry documentation. With respect to these 11 entries, the Customs Service confirmed that these entries were made by an excluded exporter/producer combination or it had no reason to believe that the merchandise included in these entries was subject to antidumping duties (i.e., merchandise entered through a non-excluded exporter/producer combination). (For details of the Department's findings with respect to the entries at issue, see Memorandum dated May 8, 2001, from Brian C. Smith, Team Leader, to the File, titled, "Clarification of 12 U.S. Entries Made By Exporter/Producer Combinations Included in the Department's September 28, 2000, Request for Further Information from the U.S. Customs Service on Selected Brake Rotor Entries During the Period of Review," and two other memoranda dated May 8, 2001, from Brian C. Smith, Team Leader, to the File, titled, "Telephone Conversation with U.S. Customs Service Personnel Seeking Clarification on an Entry Included in the Department's September 28, 2000, Request for Further Information on Selected Brake Rotor Entries During the Period of Review.") With respect to the twelfth entry at issue, the Customs Service indicated that it had not conclusively determined whether the exporter included in one of the exporter/producer combinations was indeed the actual exporter of the brake rotors included in this entry, and that it was still examining this entry. In addition, the Customs Service indicated that while it could not at this point render a decision on whether the exporter whose name appears on the entry documentation actually entered merchandise based on a non-excluded exporter/producer combination, it would promptly inform the Department if it found that to be the case (see Memorandum dated May 8, 2001, from Brian C. Smith, Team Leader, to the File, titled, "Telephone Conversation with U.S. Customs Service Personnel Concerning the Status of an Entry Included in the Department's September 28, 2000, Request for Further Information on Selected Brake Rotor Entries During the Period of Review" for further information). In the case of the twelfth entry, we have no evidence to conclude that this entry was not made by an excluded exporter/producer combination. However, should we receive notification from the Customs Service in the future that the exporter involved made this entry through a non-excluded exporter/producer combination, we will consider an appropriate corrective action at that time. We also will continue to review this matter, if concerns are raised in a timely manner, in a future administrative review (see Polyvinyl Alcohol from Taiwan: Final Results of Second Antidumping Duty Administrative Review, 64 FR 32024, 32026 (June 15, 1999) at Comment 4). Therefore, based on the record of this administrative review, we cannot conclude that any of the exporters in the exporter/producer combinations subject to this review made entries through non-excluded exporter/producer combinations. Accordingly, consistent with our position in Comment 1 above, we are rescinding this administrative review with respect to all three exporter/producer combinations subject to it. Comment 3: Surrogate Value Selection for Wood Pallets To value wood pallets in the preliminary results, the Department selected an April 1995-March 1996 per-kilogram import value from the Monthly Statistics of the Foreign Trade of India (Monthly Statistics), rather than per-kilogram import values for pallet wood after 1996 from Monthly Statistics or the November 1999 to March 2000 per-piece value from IBIS proposed by the petitioner. The Department stated that it did not select the latter, more contemporaneous values because the post-March 1996 values from Monthly Statistics appeared aberrational relative to the overall value of the subject merchandise, and the IBIS value did not indicate the size or weight of a piece of wood in a manner which would have allowed the Department to value the factor reported by the respondent Hongfa Machinery (Dalian) Co., Ltd. ("Hongfa") (2) (see Preliminary Results at 1309.) The petitioner objects to the Department's selection of the less contemporaneous value for pallet wood valuation in this case, stating that it is contrary to the Department's longstanding practice when selecting surrogate values which focuses on the quality, specificity, and contemporaneity of the data. The petitioner argues that the IBIS value is more contemporaneous with the POR, is specific to pallet wood, and is from a reliable source, and therefore, should be used by the Department to value pallet wood in the final results. The petitioner contends further that based on the Hongfa's supplemental questionnaire response, it is mathematically possible to value pallet wood consumption using the IBIS value. Finally, the petitioner points out that because the IBIS value and the pallet wood import values after 1996 from Monthly Statistics are comparable values, it may be that the 1995-1996 Monthly Statistics value is the one that is aberrational and unreasonably low. The respondents argue that the Department properly determined the valuation for pallet wood in accordance with its broad discretion under section 773(c)(1) of the Act to value factors of production based on the best information available. The respondents argue that the 1995-1996 Monthly Statistics value used by the Department is more reliable than the IBIS price data suggested by the petitioner for several reasons: (1) the IBIS data uses inconsistent units for quantities of inputs; (2) the IBIS data provides information for a limited number of pieces while the Monthly Statistics data pertains to many kilograms of pallet wood; (3) the IBIS data do not indicate the size or weight of the quantity unit and therefore cannot be applied to the respondent's factor of production for pallet wood as reported; (4) the explanation of the search used to compile the IBIS data for pallet wood appears to suggest that the petitioner may have selectively provided only the six highest value imports for pallet wood and not all entries during the period, while the Monthly Statistics are more comprehensive in coverage; and (5) the product description in the IBIS data on pallet wood suggests that the data provided is for assembled pallets and not pallet wood which is used by the respondents to build their own pallets. Therefore, the respondents conclude that the surrogate value for pallet wood used by the Department in the preliminary results was the most appropriate value on the record in the new shipper review. Department's Position: We disagree with the petitioner. As we stated in the Preliminary Results, we did not use the pallet wood value from IBIS because that value does not indicate the size or weight of a piece of wood in a manner which allows the Department to value the factor reported by the respondent. In addition, the value furnished from IBIS appears to be unreasonable in comparison to pallet wood values obtained from Indonesian import statistics. However, we do agree with the petitioner that the 1995-1996 Indian pallet wood value we used from Monthly Statistics in the Preliminary Results is dated. We also agree with the respondent that the1996 the pallet wood values obtained from the same Indian government publication are aberrational and unreliable when compared to the 1995-1996 pallet wood value from the same publication. Because of the unreliability of the pallet wood values obtained from Monthly Statistics, we placed on the record of this proceeding on April 9, 2001, a 1998 pallet wood value from the Indonesian publication Indonesia Foreign Trade Statistics which the Department has used to value pallet wood in two recent antidumping duty proceedings (see Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China: Final Results of 1998- 1999 Administrative Review, Partial Rescission of Review, and Determination Not To Revoke Order in Part, 66 FR 1953, 1955 (January 10, 2001) ("TRBs") and accompanying decision memorandum at Comment 10, and Persulfates from the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review, 66 FR 18439, 18443 (April 9, 2001) ("Persulfates").) We also gave both parties the opportunity to comment on the merits of using this Indonesian surrogate value (which was based on import data from four countries (3)) in the final results. Although the respondent stated that using the Indonesian pallet wood value was appropriate in this case, the petitioner suggested that the Department use only the value and quantity of pallet wood imported from Asian countries (i.e., Singapore and Japan) into Indonesia as the basis for calculating a pallet wood value using Indonesian Foreign Trade Statistics, because the Indonesian pallet wood import data from the United States and Germany yielded average import values which are aberrational in comparison to the import data from Singapore and Japan for the same period. In support of its argument, the petitioner cites to the Final Determination of Sales at Less Than Fair Value: Steel Wire Rope from India and the PRC, 66 FR 12759, 12761 (February 28, 2001) (which cites to the Decision Memorandum accompanying this notice at Comment 1) ("Steel Wire Rope"); and the Final Results of Administrative Review: Chrome-Plated Lug Nuts from the PRC, 63 FR 53872, 53873 (October 7, 1998) ("Chrome-Plated Lug Nuts"). After careful consideration of the petitioner's comments on the Indonesian pallet wood surrogate value, we find that it is appropriate in this case to use all of the available import data from Indonesian Foreign Trade Statistics to calculate the Indonesian import value for pallet wood. Specifically, we do not find any evidence on this record that clearly demonstrates that the Indonesian import data for pallet wood from Germany and the United States is aberrational or that it should not be used in this calculation. Unlike the situation which existed in Chrome-Plated Lug Nuts, we do not have on our record Indonesian pallet wood import data from Germany and the United States from different periods which would allow us to examine whether the import data for this input from those two countries during the period January-December 1998 is aberrational. Unlike the situation in Steel Wire Rope, we do not have numerous other Indonesian import data for pallet wood which would enable us to determine whether the Indonesian import data from Germany and the United States is aberrational. All we have on this record is Indonesian import data for pallet wood from four countries which relate to the same time period. Therefore, consistent with the Department's assignment of a pallet wood value in TRBs and Persulfates, we are using a 1998 import price based on imports from all countries listed in Indonesian Foreign Trade Statistics to value pallet wood in the final results of this new shipper review. In accordance with Department practice, because the dollar-denominated January-December 1998 Indonesian import value is contemporaneous with the POR (i.e., April 1999 to March 2000), we have not inflated the value. (See Final Determination of Less Than Fair Value: Creatine from the People's Republic of China, 64 FR 71104 (December 20, 1999). (See also factor valuation memorandum for further discussion of the pallet wood surrogate value calculation.) 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 reviews and the final weighted-average dumping margin for the reviewed new shipper in the Federal Register. Agree____ Disagree____ _____________________________________ Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration ______________________ (Date) ______________________________________________________________________ footnotes: 1. These three exporter/producer combinations, which received a zero rate in the less-than-fair-value ("LTFV") investigation and thus were excluded from the antidumping order only with respect to brake rotors sold through the exporter/producer combinations, are: (1) China National Automobile Industry Import & Export Corporation) or Shandong Laizhou CAPCO Industry/Laizhou CAPCO; (2) Shenyang Honbase Machinery Co., Ltd. or Laizhou Luyuan Automobile Fittings Co., Ltd./Shenyang Honbase or Laizhou Luyuan; and (3) China National Machinery and Equipment Import & Export (Xinjiang) Co., Ltd./Zibo Botai Manufacturing Co., Ltd. 2. Hongfa was the only new shipper exporter for which we calculated a separate rate in the preliminary results. 3. The Indonesian import value for pallet wood is based on imports from Japan, Singapore, the United States, and Germany during the period January through December 1998.