66 FR 50608, October 4, 2001 A-570-863 Investigation Public Document Enforcement III/8: alm, FB MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary AD/CVD Enforcement Group III SUBJECT: Issues and Decision Memorandum for the Antidumping Investigation of Honey from the People's Republic of China (PRC); Notice of Final Determination of Sales at Less Than Fair Value (A-570-863) Summary We have analyzed the comments and rebuttal comments of interested parties in the antidumping duty investigation of honey from the PRC (A-570-863). As a result of our analysis, we have made changes in the margin calculations. We recommend that you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in this investigation for which we received comments and rebuttal comments by parties: General Issues 1. Cooperation of PRC Producers/Exporters and Compliance Under the Suspension Agreement 2. Critical Circumstances 3. Factory Overhead, SG&A, and Profit 4. Surrogate Value for Raw Honey 5. Surrogate Value for Beeswax 6. Surrogate Value for Scrap Honey 7. Surrogate Value for Drums 8. Surrogate Value for Energy 9. Labor Hours Company-Specific Issues Zhejiang 10. Zhejiang Willing 11. Raw Honey 12. Water 13. Electricity Inner Mongolia 14. Movement Expenses Kunshan 15. Inland Insurance 16. Electricity Background We published the preliminary determination in this investigation in the Federal Register on May 11, 2001. See Notice of Preliminary Determination of Sales at Less Than Fair Value: Honey from the People's Republic of China, 66 FR 24101 (May 11, 2001) (Preliminary Determination). On June 6, 2001, we published a notice of postponement of the final determination and extension of provisional measures in this investigation. See Notice of Postponement of Final Determinations of Sales at Less Than Fair Value: Honey from Argentina and the People's Republic of China and Postponement of Final Countervailing Duty Determination: Honey from Argentina, 66 FR 30413-02 (June 6, 2001). On May 18, 2001, the American Honey Producers Association and the Sioux Honey Association (collectively, petitioners) submitted comments alleging certain errors in the Preliminary Determination. On May 21, 2001, respondents submitted comments alleging certain errors in petitioners' proposed corrections of the ministerial errors alleged on May 18, 2001. Petitioners commented on respondents' submission on May 23, 2001. On August 2, 2001, we published an amended preliminary determination in this investigation. See Notice of Amended Preliminary determination of Sales at Less Than Fair Value: Honey from the People's Republic of China, 66 FR 40191-01 (August 2, 2001) (Amended Preliminary Determination). The U.S. Department of Commerce (the Department) conducted verification at the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and the China Chamber of Commerce of Importers and Exporters of Foodstuffs, Native Produce and Animal By-Products (the Chamber) from May 28, 2001 through May 29, 2001 in Beijing, PRC. See "Verification Meeting at MOFTEC and the Chamber in the Antidumping Duty Investigation of Honey from the PRC," dated July 27, 2001 (MOFTEC and the Chamber Verification Report). The Department also conducted verification of information submitted by Inner Mongolia Autonomous Region Native Produce and Animal By-Products Import and Export Corporation (Inner Mongolia), Kunshan Foreign Trading Company (Kunshan), and Zhejiang Native Produce and Animal By-Products Import and Export Corporation (Zhejiang) from May 30, 2001 through June 9, 2001, at each respondent's respective administrative headquarters and suppliers' facilities in the PRC. See Memorandum For the File; "Verification of U.S. Sales and Factors of Production - Inner Mongolia and its affiliated processing factory Inner Mongolia Sheng Li Food Company (Sheng Li);" "Verification of U.S. Sales and Factors of Production - Zhejiang and Hangzhou Green Forever Apiculture (Group) Co. (Hangzhou);" and, "Verification of U.S. Sales and Factors of Production - Kunshan and Kunshan Xinlong Food Co. Ltd. (Xinlong)," dated July 27, 2001 (collectively, Sales Verification Reports). The period of investigation (POI) is January 1, 2000 through June 30, 2000. The investigation covers sales of honey made by three producers/exporters: Inner Mongolia, Kunshan, and Zhejiang. We invited parties to comment on our Preliminary Determination. On June 7, 2001, the American Honey Producers Association and the Sioux Honey Association (collectively, petitioners) requested a public hearing. Respondents requested a public hearing on June 11, 2001. On July 3, 2001, petitioners and respondents submitted additional publicly available information to value the factors of production for honey exported from the PRC. On July 3, 2001, petitioners requested that the Department solicit updated, exporter-specific information for purposes of determining critical circumstances for Inner Mongolia, Kunshan, Shanghai Eswell Enterprise Company Ltd. (Shanghai Eswell), Anhui Native Produce Import and Export Corporation (Anhui), and Henan Native Produce Import and Export Corporation (Henan). Respondents commented on petitioners' submission on July 12, 2001. Petitioners filed additional comments on July 13, 2001 and August 1, 2001. Respondents filed additional comments on July 17, 2001. On August 9, 2001, we requested additional shipment information from respondents and from cooperative exporters with respect to exports of honey from the PRC to the United States. Respondents submitted the requested information on August 24, 2001. On August 8, 2001, petitioners and respondents (Inner Mongolia, Kunshan, and Zhejiang) filed case briefs. We received rebuttal briefs from all parties on August 14, 2001. A public hearing in this investigation was held on August 27, 2001. Scope of Investigation For purposes of this investigation, the products covered are natural honey, artificial honey containing more than 50 percent natural honey by weight, preparations of natural honey containing more than 50 percent natural honey by weight, and flavored honey. The subject merchandise includes all grades and colors of honey whether in liquid, creamed, comb, cut comb, or chunk form, and whether packaged for retail or in bulk form. The merchandise subject to this investigation is currently classifiable under subheadings 0409.00.00, 1702.90.90, and 2106.90.99 of the harmonized tariff schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and U.S. Customs Service (Customs) purposes, the Department's written description of the merchandise under investigation is dispositive. Discussion of the Issues General Issues Comment 1: Cooperation of PRC Producers/Exporters and Compliance Under the Suspension Agreement Respondents assert that the PRC producers/exporters have cooperated fully in this proceeding, and all prior honey proceedings, and that their responses have verified completely. Respondents further assert that PRC producers/exporters could not be dumping because during the POI, the prices at which they sold subject merchandise to the United States were determined by the U.S. government. See Notice of Suspension of Investigation; Honey from the PRC, 60 FR 42521 (August 16, 1995). Respondents assert that the suspension agreement was entered into between the governments of the United States and the PRC on the understanding that compliance with the terms of the agreement would eliminate any "dumping" as calculated by the Department. Respondents claim that under the agreement the U.S. government told the PRC producers/exporters that if they sold above a specified price their imports would, by definition, be fairly traded and, consequently, not subject to dumping duties. Respondents assert that the PRC producers/exporters did in fact sell above the designated price, and therefore, there is nothing else the PRC producers/exporters could have done to prevent or eliminate dumping of subject merchandise in the United States. Respondents further argue that the purpose of the dumping laws is remedial and that penalizing PRC producers/exporters for selling at prices established by the Department would be punitive (see NTN Bearing Corp. v. United States, 74 F.3d. 1204 (Fed. Cir. 1995)). They contend that, in the present case, the PRC producers/exporters were given a specific target - the reference price established by the Department - and the PRC producers/exporters met that target, as confirmed by the Department during numerous verifications of the agreement. According to respondents, the Department's preliminary antidumping duty margin calculations showed estimated margins of approximately 20 to 50 percent for the three investigated producers/exporters. Respondents argue that such a finding, where the PRC producers/exporters' U.S. prices were determined by the Department, supports the conclusion that the Department's preliminary analysis is at best counterintuitive and at worst unfair and punitive. Petitioners argue that respondents' statements concerning the relevance of the agreement in this investigation should be rejected. Petitioners note that the particular agreement entered into between the Department and the PRC was authorized under section 734(1) of the Act, which pertains to suspension agreements involving investigations of non-market economy (NME) countries. Petitioners further note that there is nothing in this statutory provision, or in the Department's implementing regulations, that requires that sales of subject merchandise covered by such a suspension agreement be made at non-dumped prices (i.e., equal to or greater than normal value). Petitioners further argue that section 734(1) requires only that the Department determine that a suspension agreement entered into under this provision "will prevent the suppression or undercutting of price levels of domestic products by imports of the merchandise under investigation" (see section 734(l)(1)(B) of the Act (19 U.S.C. 1673c(l)(1)(B)). Petitioners note that section 734(b), in fact, contemplates suspension agreements under which the producers/exporters of substantially all of the relevant imports agree to "eliminate completely sales at less than fair value." However, petitioners argue that the agreement was not entered into under subsection (b) of section 734. They maintain, therefore, that subsection (b) has no relevance to the issue of whether export sales subject to a section 734(1) suspension agreement can be made at dumped prices. Petitioners argue that respondents incorrectly imply that, beyond the language of section 734, the language of the agreement itself prohibits PRC producers/exporters from selling in the United States at dumped prices. Petitioners assert that the relevant agreement, however, says nothing about less than fair value sales, and in no manner requires PRC producers/exporters to sell to the United States at non-dumped or "fairly traded" prices. Petitioners further assert that it is absurd for respondents to claim that PRC sales of subject merchandise to the United States during the POI were at non-dumped prices, given that prevailing market prices during the first half of the year 2000 were below such prices during the POI for the original dumping investigation, when the Department preliminarily determined dumping margins ranging from 131.86 percent to 157.16 percent. Petitioners contend that PRC prices for U.S. sales that would have constituted dumping during the POI of the original investigation would also constitute dumping during the POI of the current investigation in 2000. Petitioners assert that the agreement in no manner prohibited the PRC producers/exporters from selling at prices higher than the agreement's reference prices. They further assert that had the PRC producers/exporters sold at prices sufficiently above the reference prices, the Department's current investigation would result in a finding of no dumping. Petitioners conclude that the existence of the now- terminated agreement during the current POI should have no impact on the Department's less than fair value analysis. With respect to respondents' argument that they have cooperated in this investigation and that their responses have been fully verified by the Department, petitioners raise several issues relating to verification. Petitioners assert that respondents' reported honey consumption is inconsistent with the moisture content of the raw honey consumed. Petitioners state that in their pre-verification comments to the Department dated May 23, 2001, they noted that, based on moisture content levels reported by the respondents, the reported honey consumption figures appeared suspiciously low. Petitioners state that they requested that the Department verify the honey consumption figures reported by the respondents. They indicate that while the Department's verification reports confirm the honey consumption figures reported for each of the respondents, the reports do not provide any indication as to how the reductions in moisture content resulting from processing affect the honey consumption figures. Petitioners reiterate their serious reservations concerning the accuracy of the honey consumption figures reported by the respondents and request that the Department aggressively pursue this issue in a future verification should an antidumping order ultimately issue covering honey from the PRC. Petitioners also assert that the beeswax reclamation figures reported by Zhejiang are highly anomalous, and are inconsistent with honey producers' incentives to capture beeswax. Petitioners note that in their pre- verification comments to the Department dated May 23, 2001, they requested that the Department verify information placed on the record by respondents concerning beeswax recovered during processing and the sales of that beeswax. Petitioners note that while the Department's verification report for Zhejiang confirmed the reported information, the verification report does not provide any indication that the Department questioned Zhejiang concerning its beeswax recovery rate. Petitioners reiterate their reservations concerning the accuracy of the information relating to beeswax recovery and sales reported by Zhejiang and request that the Department aggressively pursue this issue in a future verification should an antidumping duty order ultimately issue covering honey from the PRC. Department's Position: We agree with petitioners in part. The reference prices issued by the Department under the suspension agreement were established to provide minimum selling prices for exports of honey to the United States. See Notice of Suspension of Investigation; Honey from the PRC, 60 FR 42521 (August 16, 1995) (Suspension Agreement). These reference prices were not formulated to eliminate completely all sales at less than fair value but rather were designed to meet the statutory criteria for section 734 (l) agreements: the elimination of price suppression or undercutting. The agreement did not prohibit the PRC producers/exporters from selling subject merchandise at prices higher than the reference prices in order to eliminate completely any sales at less than fair value. Indeed, the language of the agreement itself did not address the issue of sales at less than fair value, nor did it require PRC producers/exporters to sell honey to the United States at non-dumped prices. As stated above, the agreement was designed to meet the specific statutory criteria for agreements concluded under section 734(l), which references the elimination of price suppression or undercutting. Therefore, we are unpersuaded by respondents' argument that there was nothing else they could have done under the agreement to prevent alleged dumping. We disagree with respondents' assertions that the Department's preliminary calculated antidumping rates are counterintuitive, unfair and punitive. The Department, in the Preliminary Determination and in this final determination, appropriately calculated respondents' estimated dumping margins in accordance with the Department's statute and regulations, using our usual non-market economy methodology, based on factual information submitted by the parties, and conducted in a transparent manner which allowed respondents to review and comment on the data used in the investigation. Thus, we cannot agree that these results are unfair, punitive, or counterintuitive. With respect to petitioners' concerns regarding raw honey consumption rates and beeswax recovery rates, the Department is satisfied that the information provided by respondents in this investigation with respect to these issues is accurate and complete. If petitioners continue to have concerns with respect to these issues in a future segment of this proceeding, should one occur, they may raise the issues in the context of such segment and the Department will take appropriate action. Comment 2: Critical Circumstances Respondents argue that the Department should make a negative final critical circumstances determination with respect to PRC honey producers/exporters because any increase in imports of PRC honey in the fourth quarter of 2000 and the first quarter of 2001 were due to factors other than the filing of the petition which resulted in this investigation. Respondents assert that, when determining if critical circumstances exist with respect to exports of PRC honey to the United States, the Department must consider two factors that significantly influenced such exports during the period under consideration: 1) that there was substantial market uncertainty affecting exports of honey from the PRC to the United States during the summer of 2000; and 2) seasonality. According to respondents, in the Spring of 2000, the Department significantly delayed completion of its administrative review of the Suspension Agreement. Respondents cite to correspondence from MOFTEC to the Department, in which MOFTEC explained to the Department the market confusion caused by the delay in the results of that administrative review. Respondents state that this market confusion was further increased by uncertainty with respect to the reference prices and quotas that could potentially apply to PRC honey exports on and after August 1, 2000, the expected date of termination of the agreement. Respondents indicate that although the Department had announced potential reference prices and quotas to be effective after August 1, 2001, should termination of the agreement be delayed, these figures were contingent upon finalization of an amendment to the Suspension Agreement under consideration by MOFTEC and the Department. According to respondents, this market uncertainty resulted in many PRC honey producers/exporters either ceasing or significantly decreasing their exports to the United States during the summer of 2000. Respondents claim that any subsequent increase in PRC exports was due to this abnormal period of suppressed exports, and that it would be unfair for the Department to now attribute an increase in exports after this abnormal period to any other cause. With respect to seasonality, respondents maintain that many PRC honey producers/exporters export less honey during July, August, and September because they are busy during these months purchasing and processing honey for export later in the year. According to respondents, the volume of PRC exports of honey to countries other than the United States increased by 19 percent between July - September 1999 and October-December 1999, and by 28 percent between July-September 2000 and October-December 2000. Respondents contend that the Department erroneously discounted these factors in its preliminary analysis of the export statistics for Zhejiang and High Hope. They argue that the Department erroneously determined that exports for Zhejiang and High Hope for July 2000 to September 2000 did not appear to be "suppressed." They note that six of the seven producers/exporters (including Zhejiang and High Hope) had no exports of honey in August 2000 and only one producer/exporter had export sales in August 2000. Respondents assert that the fact that all of the PRC producers/exporters had little or no exports at exactly the same time supports the conclusion that there was a great deal of market confusion at that time. Therefore, respondents conclude that the Department should not attribute any increases in import volumes after the summer of 2000 to the filing of the petition and should make a final negative critical circumstances determination for all PRC producers/exporters of subject merchandise. Petitioners argue that the Department should make an affirmative final critical circumstances finding for all PRC producers/exporters of subject merchandise. Petitioners contend that U.S. monthly import statistics for 1999 rebut respondents' claim that "seasonal" patterns affect honey exports from the PRC to the United States. Petitioners contend that U.S. import statistics show that of all 12 months of 1999, July and August were the first and third largest import months by volume, respectively. They assert that the volume of imports for each of these three months was larger than or approximately equal to the 1999 monthly average volume of 4.89 million pounds. Petitioners indicate that PRC honey exports to the United States for the third quarter of 1999 accounted for more than 33 percent of all 1999 shipments. Petitioners maintain that, in contrast, PRC honey exports to the United States during the fourth quarter 1999 accounted for only 25 percent of all 1999 shipments. Petitioners claim that contrary to respondents' assertion, an evaluation of PRC honey exports to the United States in a representative year shows that those exports are not "seasonally" lower in the third calendar quarter than in the other three quarters. Petitioners argue that the Department should reject respondents' suggestion that uncertainties over the status of the agreement in August 2000 prevent a meaningful comparison of the reference periods before and after the filing of the petition for purposes of critical circumstances. Petitioners note that U.S. import statistics show a significant decline in the volume of honey imports from the PRC entering the United States in August and September 2000. They contend that even if the import volumes for August and September 2000 are replaced with the volumes from August and September 1999 to account for the alleged uncertainty surrounding the status of the agreement, there still remains a huge surge of honey imports from the PRC in the five or seven month period following the filing of the petition. Petitioners also argue that the Department should make an affirmative critical circumstances finding for Zhejiang, in the event that the company's final dumping margin exceeds 25 percent. Petitioners state that the Department's Amended Preliminary Determination makes clear that the only reason for the recision of Zhejiang's critical circumstances finding was that its calculated dumping rate fell below 25 percent as the result of the Department's correction of certain clerical errors. Petitioners contend, however, that because the Department has found that the volume of imports from Zhejiang did surge following the filing of the petition, the Department should make an affirmative finding of critical circumstances with respect to Zhejiang in the event that the company's final calculated dumping margin exceeds 25 percent. With respect to the existence of critical circumstances for the PRC-wide entity, petitioners assert that an analysis which includes the huge volume of imports in March and April 2001 is even more supportive of an affirmative critical circumstances finding. Therefore, petitioners maintain that the Department should continue to find that critical circumstances exist with respect to the PRC-wide entity in its final determination. Department's Position: We agree with petitioners. The Department makes its critical circumstances findings in accordance with section 735(a)(3) of the Act and 19 CFR 351.206. The statute provides for a determination of critical circumstances to be based on three elements. First, there is evidence of the knowledge of dumping. This is demonstrated by the fact that Zhejiang, Kunshan, High Hope, and the PRC-wide entity all have dumping margins of over 25 percent. Second, there is evidence of knowledge of material injury (here indicated by the preliminary finding of material injury by the International Trade Commission (ITC)). Finally, there is evidence of massive imports of subject merchandise by Zhejiang, Kunshan, High Hope, and the PRC-wide entity within a relatively short period. See Memo to Richard Weible regarding Final Affirmative and Negative Determinations of Critical Circumstances, September 26, 2001 at Attachment 1. Section 19 CFR 351.206(h) provides for the Department to consider certain "seasonal trends" in determining whether imports were massive during the "relatively short period under consideration." The Department did so in this case. See Memo to Richard Weible regarding Preliminary Affirmative and Negative Determinations of Critical Circumstances, May 4, 2001. Indeed, in our preliminary determination of critical circumstances, we declined to find critical circumstances for Inner Mongolia due to evidence showing that the surge in imports from that exporter during the comparison period appeared to be due to factors other than the filing of the petition, including seasonality. See Preliminary Determination and Memo to Richard Weible regarding Preliminary Affirmative and Negative Determinations of Critical Circumstances, May 4, 2001. However, we found no evidence that surges in exports of subject merchandise by Zhejiang and High Hope were related to seasonal trends. Respondents argue that the PRC producers/exporters export less honey of during the months of July through September because they are processing honey for the next year. Again, the Department did consider such seasonal trends in its analysis of the exporter-specific shipment data. See Memo to Richard Weible regarding Final Affirmative and Negative Determinations of Critical Circumstances, September 26, 2001. There is also no record evidence to suggest that exports of PRC honey to the United States were severely disrupted or suppressed during the summer of 2000 as a result of any market uncertainty surrounding the then-pending administrative review of the Suspension Agreement. Respondents argue that the fact that six of the seven PRC producers/exporters had no exports in August 2000 supports the conclusion that there was a great deal of market confusion at that time. We do not agree that such conclusion can be drawn because August represents only one month of the seven-month period we analyzed to determine trends in export volumes. Even if such uncertainty existed with respect to exports entering into the United States after August 1, 2000, it is unclear how or why the uncertainty would have affected exports entering the United States prior to that date. In addition, the agreement was effectively terminated on August 16, 2001. As a result, any alleged uncertainty would have been resolved as of that date, because termination of the agreement removed all price and quantity restrictions on imports of honey from the PRC. Furthermore, after analyzing exporter-specific shipment data (provided by the PRC producers/exporters) the Department found that: 1) some of the PRC producers/exporters increased exports of subject merchandise to the U.S. during summer 2000 when compared with export levels during summer 1999; and 2) those PRC producers/exporters that did experience decreases in exports of subject merchandise during summer 2000 experienced similar decreases in honey exports during summer 1999. Therefore, the Department is unpersuaded by respondents' argument that any increases in exports during the comparison period were caused by the alleged market uncertainty in the summer of 2000. Comment 3: Factory Overhead, SG&A, and Profit Respondents argue that the Department should use the 1998-1999 annual report of the Mahabaleshwar Honey Producers Cooperative Society, Ltd. (MHPC) as the source for determining the ratios for factory overhead, selling, general and administrative expenses (SG&A), and profit, with some adjustments. Respondents contend that, in the Preliminary Determination, the Department made several methodological errors in its calculation of the ratios which should be corrected for purposes of the final determination. Respondents note that the Department should reject the ratios proposed by petitioners based on the 1999-2000 MHPC financial statements, because the results they produce are aberrational. Respondents argue that the Department should, at the very least, average the corrected ratios for the two years, if it intends to consider information from the 1999-2000 financial statement. With respect to the aberrational nature of the 1999-2000 financial statements, respondents note that the reported profit ratio from these statements is unbelievably high for any industry, especially an industry as small and fragmented as the Indian honey industry. Respondents contend that the ratios derived from the 1999-2000 financial statements are highly suspect because they are directly inconsistent with the figures for the same cooperative for the prior year in the 1998-1999 financial statements. Respondents cite to the public version of the ITC Preliminary Injury Determination (1), which includes public financial ratios for independent honey processors in the United States. Respondents note that those processors are not injured by imports, as demonstrated by the fact that the independent honey processors in the United States oppose this antidumping investigation. Respondents state that the profit ratio in 1999- 2000 for U.S. independent commercial packers and honey packing operations is 2.9 percent of cost of sales, and their SG&A expenses are 13.6 percent of cost of sales. These ratios, argue respondents, support the contention that the ratios in the 1999-2000 financial statement of the Indian cooperative are aberrational. Respondents further note that the 1999-2000 cooperative ratios are also contradicted by the ratios used by the Department in the original 1995 investigation of PRC imports of honey. In that investigation, the Department used the ratios of 8 percent for profit and 10 percent for SG&A, which were, at that time, the minimum rates mandated by the statute. Respondents cite to Refined Antimony Trioxide from the PRC; Final Determination of Sales at Less Than Fair Value, 57 FR 6801, 6803 (February 28, 1992), in which the Department stated that it will reject SG&A ratios as aberrationally high if there is record evidence showing that they are aberrational by industry standards. Respondents further cite numerous cases in which the Department has stated that it will examine surrogate values for reasonableness, including Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, from Romania; Final Results of Antidumping Administrative Review, 62 FR 37194, 37199 (July 11, 1997); Steel Concrete Reinforcing Bars from Belarus; Final Determination of Sales at Less Than Fair Value, 66 FR 33528 (June 22, 2001) and accompanying Decision Memo at Comment 2 (rejecting SG&A ratio as aberrationally high); and Certain Cased Pencils from the PRC; Final Determination of Sales at Less Than Fair Value, 59 FR 55625, 55633 (November 8, 1994) (stating "although we have selected India as the appropriate surrogate country in this investigation, this does not mean that we are required to use those Indian factor values that we find to be aberrational . . . "). Respondents urge the Department to base the financial ratios on the 1998- 1999 financial statements for MHPC. However, they also argue that, in the Preliminary Determination, the Department made a number of errors which should be corrected for the final determination. These include the following: 1) the Department included total interest expense without offsetting it by short-term interest income in calculating the SG&A ratio; and 2) the Department relied on an absolute profit amount that did not reflect the honey processing division's actual profit. Respondents note that, in the Preliminary Determination, the Department, in calculating financial ratios, included total interest expense but failed to reduce that expense for short-term interest income shown on the statements. Respondents state that petitioners have not provided the balance sheets or other information which would conclusively demonstrate what portion of total interest income is short-term. According to respondents, the description on the statement of a separate amount for "bank interest" (as compared to other interest income) indicates that this income is derived from deposits held in bank deposits and typically such deposits are short-term in nature. Respondents conclude that the Department should therefore deduct the bank deposit interest income from the interest expense. Respondents further claim that, when calculating the profit ratio for purposes of the Preliminary Determination, the Department erroneously relied on petitioners' statement in the petition that the 1998-1999 profit ratio for MHPC was 17.63 percent. Respondents note that the 17.63 percent profit figure used in the Preliminary Determination was clarified in petitioners' July 3, 2001, submission discussing the corresponding entry for 2000, which stated that profit on the 1998-1999 MHPC statement does not reflect the honey processing division's actual profit. According to respondents, this profit erroneously excludes significant costs relating to the honey processing division which were included in the Department's factory overhead and SG&A ratio calculations. Thus, respondents argue, in utilizing the absolute profit reflected in the 1998-99 financial statement, the Department significantly overstated the profit ratio. Respondents point out that, as shown in the MHPC's 1998-1999 trading account statement, the honey processing division profit is calculated as sales of all products plus closing stock, less opening stock and purchases of various inputs (including honey, wax and medicine, packing inputs, other inputs and selling and distribution expenses). Respondents state that the resulting amount represents the gross or operating profit; this amount is also shown in the income and expenditure account. Respondents maintain that net profit is calculated on the statement as the gross or operating profit plus profit from another division and other income, less manpower, factory overhead, SG&A expenses, and financial expenses, all of which were included in the Department's factory overhead and SG&A ratios. Respondents state that the net profit correctly calculated is shown on the face of the 1998-1999 financial statement. (2) Respondents state that petitioners made several errors when they calculated the ratios from the MHPC's 1998-1999 and 1999-2000 annual report and that, should the Department use petitioner's calculations, these errors must be corrected. The alleged errors include: 1) petitioners' use of purchases of honey instead of the cost of the raw honey processed in calculating the cost of manufacturing (COM); (2) petitioners' inclusion of transportation and "octroi" costs; (3) petitioners' inclusion of commissions; (4) petitioners' inclusion of water and electricity expenses; (5) petitioners' inclusion of sales tax; and, (6) petitioners' exclusion of processing expenses and professional tax. Respondents assert that petitioners should have used the cost of raw honey processed rather than raw honey purchases in calculating COM, as the former is a more rational and reasonable measure of the costs incurred by the honey processing division to produce the honey that it sold during the same time period covered by the financial statement. Respondents note that the value of honey actually processed reflects changes in raw materials inventory (i.e., the raw material costs of honey processed corresponds to the value of opening stock plus purchases less ending stock). Respondents also contend that petitioners' calculation incorrectly includes transportation costs in the SG&A calculation. Respondents note that this is incorrect because the Department calculates an ex-factory cost, which does not include any transportation costs because any transportation and movement charges are already deducted from the U.S. price. Thus, respondents state that petitioners are double-counting by deducting transportation expenses from the U.S. price and including them in the SG&A calculation. Respondents note that the Department, in the Preliminary Determination, correctly did not include transportation expenses in its SG&A calculation and should not include these expenses in SG&A in the final determination. Respondents claim that petitioners also inappropriately included in the SG&A expense "octroi" costs. Respondents described "octroi" as essentially inbound freight and stated that the Department already included inbound freight as an element of raw material costs in the factors of production valuation methodology. Respondents state that to include "octroi" costs again in SG&A would result in double- counting. Respondents also claim that petitioners' calculation of SG&A inappropriately includes commissions because commission expenses are not incurred by the PRC respondents in this proceeding. Additionally, respondents assert that petitioners erroneously included water and electricity charges as part of their SG&A ratio. Respondents contend that these costs are properly accounted for in the Department's calculation of direct manufacturing costs and factory overhead. Further, respondents contend that petitioners also incorrectly included sales tax in their SG&A calculation. Respondents state that the Department never includes sales tax, whether for NME or market economy cases, in its cost analysis. Finally, respondents claim that petitioners have also improperly excluded two significant expenses, processing expenses and professional tax, from their SG&A calculation. According to respondents, both of these expenses were clearly treated as expenses of the honey processing division in petitioners' clarification of the profit earned by the cooperative provided at Exhibit A to their July 3, 2001 submission. Respondents argue that because these processing expenses were incurred in the production of honey by the honey division they should be included in the calculation of direct manufacturing costs and factory overhead, as appropriate. Respondents contend that petitioners' cost of manufacturing is vastly understated and, hence, the SG&A and profit ratios are vastly overstated. Similarly, respondents believe that petitioners also incorrectly omitted professional tax expenses in their calculation of the ratios. Respondents note that the professional tax expenses should be included in the Department's analysis because these expenses are an element of labor costs. Respondents claim that the Department routinely includes professional tax expenses as a fee incurred by the company on behalf of its personnel. MHPC, clearly included this professional tax fee in its categorization of "manpower expense." Respondents argue that because these expenses were not included in the petitioners calculation of COM, COM is vastly understated, and hence, the SG&A and profit ratios calculated by petitioners are vastly overstated. Petitioners assert that, for purposes of the final determination, the Department should value factory overhead, SG&A, and profit based on the figures reported in the MHPC's 1999-2000 Annual Report. Petitioners state that the results from the 1999-2000 financial statements are contemporaneous with the POI, and that there is no evidence that they are aberrational as suggested by respondents. Petitioners argue that the respondents find the 1999-2000 financial statements to be "aberrational" when compared to the "more realistic results" of the 1998-1999 financial statements, solely because the latter statements result in lower dumping margins for the PRC respondents. Petitioners state that respondents have failed to provide any rational basis for the Department to conclude that the MHPC's 1999-2000 financial statements are aberrational. Petitioners specifically note that respondents fail to provide any analysis or factual information to support their allegation that the 1999-2000 financial statements do not produce "realistic results." Petitioners maintain that the expenses and revenues reported in the MHPC's financial statements represent actual production experience during the period April 1, 1999 through March 31, 2000. Petitioners contend that, to the extent that there are differences between the 1998-1999 and 1999-2000 financial statements, these differences are attributable to the MHPC's standard production experience in two different time periods. Petitioners maintain that respondents fail to reference any record evidence to suggest that these differences are anything other than temporal in nature. As a result, petitioners assert that the Department should calculate the surrogate ratios for overhead, SG&A, and profit based on the MHPC's 1999-2000 financial statements. Petitioners argue that the Department should not use the MHPC's 1998-1999 financial statements, nor should the Department average the 1998-1999 and 1999-2000 financial statements. With respect to respondents' contention that the Department should deduct bank deposit income from the SG&A ratio, petitioners argue that it is the Department's practice to offset interest expense by short-term interest income only where it is clear from the financial statements that the interest income was indeed short-term in nature. Petitioners note that the MHPC's line item "Bank Interest" is not clear whether the interest income was short-term in nature. Petitioners suggest that the line item "Bank Interest" represents interest income that was not short-term in nature as the large value reported as interest income (i.e., Rs. 18,947), is greater than the interest expense (i.e., Rs. 18,092). Petitioners contend that respondents' attempt to attribute the absence of record evidence regarding the nature of the "Bank Interest" line-item to petitioners is without merit. Petitioners argue, contrary to respondents' argument that they "should not be penalized for not providing information which was not in their control, but which is in the control of petitioner which has declined to provide this information, that petitioners do not control the dissemination of information by the MHPC. Petitioners assert that respondents could have contacted the MHPC themselves if they had chose to do so. Petitioners contend that indeed on several occasions they requested and received additional information from MHPC, especially when the Department requested clarification on certain line-items in the MHPC's financial statements. Thus, contrary to respondents' contention, petitioners assert that they have not declined to provide information. Rather, petitioners argue, that respondents' have failed to obtain the information necessary to confirm whether the interest income reported in the MHPC finacial statements was short-term in nature. Accordingly, petitioners argue that consistent with its standard practice, the Department should not offset interest expense by the line-item "Bank Interest". With respect to respondents' arguments regarding commissions, petitioners assert that the Department's surrogate value analysis is concerned with valuing the costs incurred by PRC honey processors, not PRC honey trading companies (i.e., respondents). Petitioners further assert that, with respect to PRC honey processors, there is no information on the record regarding their selling practices and, therefore, no basis for making adjustments to the MHPC SG&A and profit ratios. Moreover, petitioners argue that the Department has rejected any approach that would adjust the surrogate ratios of an Indian company based on a PRC producer's experience. Petitioners cite to Pure Magnesium and Alloy Magnesium from the Russian Federation; Final Determination of Sales at Less Than Fair Value, 60 FR 16440, 16447 (March 30, 1995) (stating that "[i]n NME proceedings, the FMV is normally based on factors valued in a surrogate country (without regard to, for example, actual selling expenses) on the premise that the actual experience cannot be meaningfully considered"). Department's Position: We agree with petitioners that, although the ratios derived from MHPC's 1999-2000 financial statements are higher than those for 1998-1999, they are a more appropriate representation of surrogate country profit and SG&A levels than the 1998-1999 statements because the 1999-2000 period is more contemporaneous with the POI. We disagree with respondents that the 1999-2000 data must be rejected because they exceed the profit experience of U.S. processors/packers for a similar time period. The Department generally selects a country as a surrogate for the PRC that is at a comparable level of economic development. Normally, the Department would not rely on the U.S. surrogate data when there is surrogate value information available for a country that is at a more comparable level of economic development, such as India. In this case, respondents have not demonstrated that these data, profit levels of U.S. processors/packers, are more representative of the PRC experience than the data from the MHPC. Therefore, the Department has determined that profit levels shown by the MHPC are more representative than the U.S. profit levels respondents propose as a benchmark. Because the only profit data on the record from a honey producer in a comparable economy is the MHPC data, the question then becomes whether to use the 1998-1999 data, the 1999-2000 data, or some combination of both. We disagree with respondents' argument that averaging the overall 1998- 1999 and 1999-2000 ratios would eliminate aberrational results because we have no basis upon which to distinguish which of the divergent financial statements might reflect any aberration. Respondents' comparison of the SG&A and profit ratios used in the original 1995 investigation of honey from the PRC to those from MHPC's 1999-2000 financial statements is inconclusive because these ratios were simply minima used in accordance with U.S. law prior to the URAA. The Department is now using actual surrogate industry data, which respondents urge us to use for these ratios - with only the year being different. Respondents have not proposed a source other than MHPC for these data, nor have they argued that the MHPC is not representative of the Indian honey processing/producing experience. Therefore, for this final determination, we have used MHPC's 1999-2000 financial statements to derive the ratios for factory overhead, SG&A, and profit, as adjusted, in calculating normal value. We agree with respondents that our calculation of the ratios in the Preliminary Determination were flawed in several respects, and we have adopted respondents' suggestions with respect to methodological changes necessary to correct these flaws in deriving the ratios based on the 1999- 2000 financial statements. For example, we are using the value of raw honey consumed, Rs. 2,725,305 (petitioners used this same figure in their clarification of the manufacturing expenses incurred by the honey processing division) rather than the value of raw honey purchased in calculating COM because it is a more rational and reasonable measure of the costs incurred by the honey processing division to produce the honey that it sold. See petitioners' July 3, 2001 submission at Exhibit A. The raw honey purchases figure is less accurate because it does not account for changes in value of raw material inventory. We are also calculating a profit ratio without reference to the absolute profit figure listed in the financial statement, because that value does not appear to include all relevant expenses. We agree that octroi and transportation expenses should not be included in the calculation of SG&A because these expenses are already accounted for in the normal value calculation and in adjustments made to the U.S. price. To also include these expenses in SG&A would result in double-counting. We have continued to treat water expenses as a direct manufacturing expense in accordance with the reporting methodology adopted by respondents and verified by the Department, and thus have not included water in the SG&A calculation. Similarly, we have continued to include all electricity expenses relating to production as a direct manufacturing cost and have allocated a portion of electricity expenses to factory overhead. We have included professional tax and processing expenses in our calculation of COM, because these expenses were incurred in the production of honey by the honey processing division. See Memoranda from the Team to the File regarding Final Margin Analysis for Kunshan and Xinlong, Inner Mongolia and Sheng Li, and Zhejiang, Hubei and Hangzhou, dated September 26, 2001 (Final Margin Analysis Memoranda). We disagree with respondents, however, that MHPC's commission expense line item should be excluded in our calculation of SG&A expenses. Consistent with its practice for valuing costs incurred in a NME, the Department does not adjust financial ratios based on the experiences of the surrogate producer in an attempt to match precisely the experience of the PRC producer. Rather, we are concerned that all relevant types of expenses are accounted for in the ratios. Commissions are included on MHPC's financial statement as a selling expense. Therefore, they are properly included in our calculation of SG&A. Whether the PRC entity incurs commissions or some other type of selling expense is irrelevant. As stated above, we are calculating a ratio for SG&A in general, not specific types of such expenses. In prior cases, the Department has specifically rejected any approach in which the Department would adjust surrogate ratios based on the specific experiences of the NME producer because such adjustments would distort the surrogate ratios. See Pure Magnesium and Alloy Magnesium from the Russian Federation; Notice of Final Determination of Sales at Less Than Fair Value, 60 FR 16440, 16447 (March 30, 1995). Therefore, we are not excluding MHPC's commission expenses from our SG&A ratio for the final determination. With regard to interest income, we also agree with petitioners. Although it is the Department's practice to offset interest expense by the interest income that is short-term in nature, we find that the MHPC's financial statements do not clearly indicate that bank interest represents interest from short-term investments. Therefore, we are not offsetting interest expense by the amount identified as "bank interest" on the financial statement. Comment 4: Surrogate Value for Raw Honey Respondents assert that the Department should use the price for raw honey reported in the feasibility study of the Indian honey industry by the Agriculture and Processed Food Products Export Development Authority (APEDA). This study, according to respondents, is valuable because it represents an overview of the entire Indian honey industry and is the result of an in-depth study by an Indian expert in the field. Respondents note that the study summarizes the strengths and weaknesses of the Indian honey industry, examines the opportunities and threats to the industry, and sets out a feasibility study for developing the Indian honey industry. Respondents claim that the veracity and reliability of this study is very high because it is an independent assessment by an Indian government authority on the Indian honey industry. According to respondents, there is no similar support for the source or the reliability of the raw honey prices upon which the Department relied in the Preliminary Determination. Respondents contend that the raw honey prices used by the Department (from The Tribune of India) give no indication of where the author of the article obtained these prices or any other basis to believe that these prices are more accurate than the price reported in the APEDA study. Respondents claim that it would be unreasonable to conclude that information provided in a general interest news article is more accurate than information contained in a specific report on the subject merchandise that was prepared by an expert in the field. Additionally, respondents note that the price from the APEDA feasibility study is exactly the same type of price from the feasibility study used by the Department in the previous investigation of honey from the PRC. (3) Respondents maintain that because both the prices used in the 1995 investigation and the APEDA study prices are country-wide, derived from feasibility studies, and from expert sources, that the APEDA price more accurately reflects the overall price of raw honey in India than does the price the Department used in the Preliminary Determination. Respondents note that, in the prior antidumping investigation of honey from the PRC, the Department rejected other raw honey prices under consideration because the feasibility study price was based on a greater quantity of transactions. Petitioners argue that the Department should value raw honey using the average raw honey price calculated from the 1999-2000 financial statement of MHPC, stating that the honey used by the MHPC is the most comparable surrogate for the raw honey used by the PRC producers. Petitioners base this argument on the statutory provision mandating that the Department value the factors of production on the basis of "the best available information regarding the values of such factors in a market economy country." Section 773(c)(1)(B) of the Act (19 U.S.C. 1677b(c)(1)(B)) (emphasis added in the original). The Department's practice, petitioners argue, is to select the best available surrogate values based on quality, specificity, and contemporaneity. This method has been applied in numerous cases in which slight physical differences in a particular input impact the price or use of the input. See, e.g., Manganese Metal from the PRC; Final Results of Antidumping Duty Administrative Review, 65 FR 30067 (May 10, 2000) and accompanying Decision Memorandum at Comment 7 (Manganese Metal from the PRC); Fresh Water Crawfish from the People's Republic of China; Final Determination of Sales at Less Than Fair Value, 62 FR 41347 (August 1, 1997) (Crawfish from the PRC). Petitioners claim that this approach has recently been upheld by the Court of International Trade. See Union Camp Corporation v. United States, 8 F. Supp. 2d 842 (CIT 1998) (Union Camp). With regard to quality, petitioners cite a study by the Central Bee Research and Training Institute (CBRTI), which claims that raw honey was sold in the Indian market at prices between Rs. 50 and Rs. 60 per kilogram, as substantiation for the MHPC raw honey price of Rs. 56.75 because the prices corroborate one another. With regard to specificity, petitioners argue that only the MHPC surrogate provides a price for raw honey comparable to the raw honey consumed by respondents with respect to moisture content. Petitioners point out that respondents have themselves argued that moisture content is a factor that the Department should consider in choosing a surrogate, but that the APEDA study, which respondents urge the Department to use, does not describe any of the physical characteristics of the raw honey addressed in the study, much less its moisture content. With regard to contemporaneity, petitioners argue that the MHPC surrogate is roughly contemporaneous with the POI because it reflects purchases made during the period April 1, 1999 through March 31, 2000, and the POI covers the period January through June 2000. Moreover, petitioners argue, the CBRTI study substantiates the MHPC data. That study, they claim, is based on data gathered during the period April and May 2000, and is thus also contemporaneous. In contrast, petitioners state, the APEDA study was completed in 1999, and therefore the prices provided in that study were obtained well before the POI. Respondents contend, in rebuttal, that the MHPC raw honey surrogate price proposed by petitioners is unrepresentative and unreliable because it is based on the experience of a single Indian honey producer. The Department's rejection of this data in the Preliminary Determination was proper, respondents argue, because the value of raw honey can vary among Indian honey producers due to differences in producers' locations and the types and grades of honey they purchase. Respondents further note that data from a single honey producer is more likely to give aberrational results due to the producer's own unique conditions and circumstances that might not apply to the industry as a whole. Furthermore, the Department has, in numerous cases, expressed a preference for using industry-wide prices when valuing surrogate factors, rather than the experience of a single producer. See Steel Concrete Reinforcing Bars from the People's Republic of China, Notice of Final Determination of Sales at Less-Than- Fair-Value, 66 FR 335522 (June 22, 2001), Issues and Decision Memorandum at Comment 5; Steel Concrete Reinforcing Bars from Belarus; Notice of Final Determination of Sales at Less-Than-Fair-Value, 66 FR 33528 (June 22, 2001), Issues and Final Decision Memorandum at Comment 1; and Certain 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, 61981 (November 20, 1997); Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27366 (May 19, 1997). Petitioners contend that the Department should disregard respondents' argument that the MHPC's financial statement reflects data from a single producer. Petitioners argue that the MHPC is a co-operative with broad membership, and that the raw honey purchases reported in the financial statements reflect the raw honey prices charged by both numerous members of the cooperative and various other producers. Respondents further state that the surrogate values for raw honey which petitioners submitted on July 3, 2001, which purportedly support the MHPC price, do not provide meaningful data with which to value PRC raw honey. They state that the report prepared by the CBRTI, for instance, is not meaningful or reliable because there is no indication of the time period for the raw honey prices reported in that study. Respondents state that, although petitioners claim these data are for May 2001, there is no indication in the CBRTI study itself that it was conducted in May 2001, and that, furthermore, this period is after the January - June 2000 POI. Respondents note that the affidavit provided by petitioners identifying the time period to which the prices correspond in the CBRTI study should not be relied upon because it is hearsay and is not publicly available information. In addition, respondents argue that the study is inconsistent and contradictory. Respondents note, for example, that the page submitted by petitioners in their July 3, 2001 filing labeled "revised cost chart for sale of khadi honey" (prepared by the CBRTI) shows the same price for both raw honey and processed honey. Respondents contend that this error indicates that the authors of the study confused the prices for raw honey and for processed honey, and erroneously listed the price of the processed honey in the place of the raw honey price. Respondents assert that this confusion is also evident on page 74 of the CBRTI study, where, despite the earlier citation of identical prices for raw and processed honey, it is reported that the price for processed honey can be at least 20 rupees more than the price for raw honey. Respondents further assert that the CBRTI study actually supports the APEDA study in that the average raw honey price on page 66 of the CBRTI study, following computation into a per unit amount, is comparable to the price referenced in the APEDA study. In rebuttal, petitioners argue that there is an indication in the CBRTI study that this average price is based on price information from 1991- 1992, which suggests that the APEDA study is unreliable and dated. Respondents argue that the other reports submitted by petitioners on July 31, 2001 suffer from similar flaws. The National Bank for Agricultural and Rural Development (NABARD) report, respondents argue, contains no indication of the source of any price information in that report, and there is no indication of the time period to which those purported prices apply. The Punjab report, respondents argue, is irrelevant because it is several years old, and is further discredited because its data is from only one area of India. The article from the Indian Bee Journal is also from before the POI, and its prices are for honey from feral rock bees, and not for domesticated bees, which are used in the PRC. Respondents also argue that the Department should reject petitioners' moisture content argument. Respondents note that the moisture level of the raw honey processed by the MHPC is not indicated in the financial statement itself. They contend that it is contained, instead, in a statement from a purported official of MHPC. Respondents claim that such information has no independent reliability because it is based on a statement by a single company representative. Respondents maintain that there is no independent way, such as publication in a financial statement or other public document, to test the veracity and reliability of that moisture content information. Petitioners rebut that the Department should disregard respondents' characterization as "hearsay" of the petitioners' affidavit concerning this study. Petitioners argue that the affidavit constituted a clarification of a public document to provide the most accurate surrogate value. Petitioners state that, if the respondents had doubted the authenticity of the information in the affidavit, they could have contacted the expert interviewed and have submitted their own affidavit. According to respondents, in Manganese Metal from the PRC and Crawfish from the PRC, the Department looked at a variety of factors when judging comparability, as opposed to just one. Respondents also argue that Union Camp involved a product with highly technical, specified characteristics, unlike raw honey which has great variety (i.e., different floral sources, taste profiles, and wide range of other characteristics). Respondents maintain that petitioners have not attempted to demonstrate that the moisture levels of the raw honey used in the APEDA study are in any way less comparable to the PRC raw honey than is the raw honey purchased by MHPC. Therefore, respondents contend that cases such as Union Camp are not relevant here because, in those cases, there was detailed information in the record concerning the differences between and among the different surrogate values as compared with the product produced in the country under investigation. Department's Position: In this final determination, we have continued to value raw honey using the prices reflected in the article published in The Tribune of India, an Indian newspaper. The raw honey price data from The Tribune of India is the best available surrogate value for the following reasons: 1) it is the most contemporaneous, dated May 1, 2000; 2) the broad-based data is specific to Indian raw honey prices (i.e., generally Indian honey, like PRC raw honey, has a high moisture content); and 3) it is quality agricultural data. We do not find that the prices offered by petitioners and respondents offer more accurate or representative alternatives. Moreover, the values in both the APEDA study submitted by respondents and the MHPC financial statements submitted by petitioners suffer from inherent weaknesses not present in the prices reflected in The Tribune of India. We agree with respondents that, even though the MHPC is a cooperative, and hence likely buys raw honey from various sources, the value for raw honey reported on its financial statement represents the value as experienced by a single processor of honey in a particular region of India. As respondents have argued, the Department's preference is to use industry-wide values, rather than the values of a single producer, wherever possible, because industry-wide values are more representative of prices/costs of all producers in the surrogate country. Furthermore, we are not persuaded based on the moisture content information on the record that MHPC's honey is necessarily more comparable to PRC raw honey than the raw honey valued in The Tribune of India. As noted in the APEDA study, Indian honey generally has a high moisture content. See respondents' April 4, 2001 submission at Exhibit 1 page 2. The record indicates that there is a wide range of moisture contents in the raw honey processed by the MHPC. While the average of that range is comparable to the moisture content of the raw honey used by the PRC producers, in the absence of additional information, we cannot know how often, if ever, the MHPC uses raw honey within the much narrower range reported by the PRC producers. For these reasons, we have determined not to use the MHPC value for this final determination. We are also unpersuaded that the APEDA study, which respondents advocate using, provides a more accurate representation of Indian raw honey prices than does The Tribune of India. The APEDA study is a feasibility study which projects possible future revenues for Indian honey producers. The prices reflected in the study, therefore, are not actual market prices but rather price projections or estimates. Although respondents are correct that the Department has used projections in the past, its preference is still to use actual prices whenever appropriate actual prices are available. Furthermore, the APEDA study appears to have been completed in 1999; thus, its price projections for 1999 are probably based on information gathered prior to 1999. Therefore, the APEDA study is not contemporaneous with the POI. The Department has also determined that the article published in The Tribune of India is more than just a "general interest" article. The Tribune's website indicates that the article upon which the Department is relying to value raw honey was originally published in the agricultural edition of The Tribune of India. Therefore, because the article was intended to serve the Indian agribusiness community, it has greater credibility than would a "general interest" article. Furthermore, the website indicates that the article was originally published on May 1, 2000. Therefore, its data directly coincides with the POI. For the reasons outlined above, in this final determination we have again valued raw honey using the value reported in The Tribune of India. Comment 5: Surrogate Value for Beeswax Petitioners assert that the Department should value beeswax based on the value reported in a study prepared by the National Bank for Agricultural and Rural Development (NABARD) in India. Petitioners maintain that this value is consistent with beeswax prices previously submitted by petitioners. Respondents argue that the Department correctly valued beeswax based on the average per kilogram import value of beeswax into India from recent import statistics. According to respondents, petitioners offer no valid reason why the import statistics used by the Department in the Preliminary Determination should be rejected. Respondents state that in the Preliminary Determination, the Department rejected the values for beeswax previously submitted by petitioners. Respondents contend that petitioners' beeswax value is a private price quote, with no independent measure of reliability, between a private unidentified buyer and a private seller. Respondents claim that the Department routinely rejects use of such private price quotes when more reliable information is on the record. They cite to Circular Welded Non-Alloy Steel Pipe from Romania; Final Determination of Sales at Less Than Fair Value, 57 FR 42957, 42959 (September 17, 1992), where the Department rejected a proposed surrogate value consisting of a private price quotation. Respondents maintain that the value for beeswax suggested by petitioners based on the NABARD study is unreliable because there is no indication of the time period covered by the study, nor any indication of the source of the price quotations. Respondents conclude that the NABARD study's prices are inconsistent with the prices in the Indian import statistics and therefore, should not be used for purposes of the final determination. Department's Position: We agree with respondents. There is no indication of the specific time period covered by the NABARD study. In addition, the purpose of the study was to provide a business model for honey producers. As with the APEDA study, therefore, the prices listed in the NABARD study may not be reflective of actual prices but rather based on assumptions and projections as to the revenues a beekeeper might expect to recover from sales of beeswax. For these reasons, in this final determination the Department has continued to use the average per kilogram import value of beeswax into India to value PRC beeswax. Comment 6: Surrogate Value for Scrap Honey Respondents assert that the Department should assign a value to scrap honey sold during the POI and offset normal value accordingly. Respondents reference their April 4, 2001 submission, in which they noted that scrap honey is a by-product resulting from the processing of raw honey, and that the value of scrap honey is 50 percent of the value of raw honey due to the impurities contained in scrap honey. Additionally, respondents maintain that the Department has verified scrap honey transactions and obtained relative value information for scrap and raw honey. Respondents contend that it would be unfair not to allow a reasonable offset for the sales of scrap honey. Respondents argue that, for the final determination, the Department should utilize a value of 50 percent of the value of raw honey, as reported in the APEDA study, as the surrogate value for scrap honey. Petitioners assert that record evidence provides no basis for the Department to value scrap honey sold by respondents. Petitioners maintain that none of the respondents submitted any information to the Department prior to verification that either valued scrap honey sales or indicated the amount of scrap honey sold. Instead, according to petitioners, respondents provided information only on the amount of scrap honey produced. Petitioners contend that the Department should not use new factual information discovered at verification as a means for calculating and valuing the scrap honey sold and bartered by respondents during the POI. Petitioners argue that, in the case of Inner Mongolia, the barter nature of its scrap honey "sales" (i.e., scrap honey exchanged for towels, work clothes, gloves, soap, etc.) precludes the Department from assigning a value to the scrap honey. Furthermore, petitioners contend that respondents' assertion that the value of scrap honey is 50 percent of the value of raw honey is unsubstantiated. Department's Position: We agree with respondents that we should make a by-product offset adjustment for the scrap honey sold during the POI, but disagree that we should value scrap honey using a ratio based on the value of scrap to raw honey in renminbi (RMB-PRC currency). This ratio is based on sales in an NME in NME currency and is therefore not appropriate for valuation purposes. As an alternative, for this final determination, we have valued scrap honey using an Indian value for inedible molasses as listed in the Monthly Statistics of the Foreign Trade of India. See the final determination analysis memoranda for details. Molasses is a thick, syrupy residual by-product of the process of extracting and refining sugar. When refined, it is used as a food additive for human consumption. The unrefined product ("inedible molasses"), like scrap honey, is used as animal feed. Because it is similar in constitution, production, and use to scrap honey, "inedible molasses" provides the most reasonable surrogate currently available to the Department for valuing scrap honey. We disagree with petitioners that the respondents reported the amount of scrap honey produced, rather than sold, during the POI, and that sales volumes were reported only at verification. Respondents all stated for the record prior to the verification that the volume of by-product produced was identical to the by-product sold. See the March 16, 2001 submission of each respondent, page 6 (for Inner Mongolia and Zhejiang) and page 7 (for Kunshan). We found nothing at verification to contradict this information. Furthermore, because we are valuing the scrap honey using a market economy surrogate value, it does not matter that some of Inner Mongolia's sales of scrap honey were bartered. The fact remains that the scrap honey produced by Inner Mongolia had value and that scrap honey was exchanged for other goods of value. As a result, it is appropriate to assign a surrogate value to scrap honey which was bartered for other goods. Comment 7: Surrogate Value for Drums Respondents argue that the Department should use the revised surrogate value for drums provided in their July 3, 2001 submission. Respondents maintain that their revised surrogate value is more reliable and accurate. They contend that the revised price quotes are for drums that are "food grade," the specific type of steel drum used for packing processed honey. Petitioners contend that the Department should continue to rely on the surrogate used to value steel drums in the Preliminary Determination. Petitioners state that the drums offered for sale in the September 15, 2000 price quote are also for the type of drums used to pack processed honey. Petitioners maintain that the September 15, 2000 price quote is more contemporaneous with the POI than the June 19, 2001 offer submitted by respondents on July 3, 2001. Department's Position: We agree with petitioners. The September 15, 2000 price quote used by the Department in the Preliminary Determination is also for the type of drum used in the food processing industry, and represents prices more contemporaneous with, and hence more relevant to, the POI than the June 2001 surrogate value proposed by respondents. Therefore, for this final determination, we have continued to value PRC steel drums using the September 15, 2000, price quote submitted by petitioners. Comment 8: Surrogate Value for Energy Respondents argue that the Department incorrectly based the surrogate values for coal and electricity on the expenses for these inputs as reported in various Indian companies' financial statements. According to respondents, because none of these companies are honey producers or are otherwise involved in the honey industry, their energy costs have no demonstrated relevance to the expenses incurred for these inputs by Indian honey producers. Respondents also contend that such information from individual companies is subject to aberrational and unique conditions that only apply to the individual companies and not to India as a whole. They assert that the Department often prefers, instead, to use nation-wide figures to value basic inputs, such as coal and electricity. Respondents argue that the Department should use the broad-based average prices for electricity and coal as determined by the International Energy Agency (IEA), and used in a recent determination. See Freshwater Crawfish Tail Meat from the PRC; Preliminary Results of the Antidumping New Shipper Administrative Reviews, 66 FR 18604, 18608 (April 10, 2001). Petitioners contend that the energy values reported in the Indian companies' financial statements reflect the actual costs incurred by producers in India to obtain energy. Petitioners claim that the uniformity in the electricity rates reported by the Indian companies suggest that none of the producers are subject to aberrational and unique conditions. Petitioners also argue that the values reported in the financial statements are more contemporaneous with the POI than the value reported by the IEA study. Petitioners maintain that, should the Department reconsider the values used in the Preliminary Determination, it should, at a minimum, value electricity using the information contained in the financial statements of four Indian canned mushroom producers provided in their April 4, 2001 submission. Petitioners state that the electricity rates reported by the canned mushroom producers are relevant to the experience of the Indian honey industry, and that the uniformity in the rates provided by the canned mushroom producers suggests that none of the producers are subject to aberrational and unique conditions. Department's Position: We agree with respondents. While there is no evidence that the companies whose financial statements we used in the Preliminary Determination experienced aberrational conditions affecting energy costs, they are nevertheless individual companies, and their costs are therefore not the broad-based figures that the Department normally seeks to use as surrogates. Because the coal and electricity values in the IEA study are nation-wide figures, we find, upon reconsideration, that they are more appropriate surrogates for basic inputs such as coal and electricity than the values derived from the financial statements of individual companies, especially where, as here, the financial statements are for companies that do not produce the merchandise subject to the investigation. Therefore, in this final determination we have used the data from IEA, adjusting them to POI prices using an inflator. See the Final Determination analysis memoranda for the calculations. Comment 9: Labor Hours Petitioners argue that the Department found at verification that employees at the respondent producers were required to be at work for eight hours a day. They contend that the number of working hours should be reported as the number of hours an employee is required to be at work, rather than the number of hours for which respondents claim they pay their employees. Petitioners explain that while the number of hours spent by employees at work has been verified by the Department, it is unsubstantiated that workers were only paid for seven hours instead of eight. Petitioners question the lack of consistency in Inner Mongolia's reporting of the eighth hour spent at work each day, and argue that because respondents have failed to provide copies of labor contracts or other documentation substantiating their claims that employees were only paid for seven hours, the Department should rely on the facts available and increase the respondents' reported labor factors of production from a seven-hour workday to the actual eight-hour workday required by the company. Respondents argue that the Department used the proper number of labor hours in the Preliminary Determination. Respondents maintain that at verification the Department verified completely and thoroughly the reported labor hours for each honey supplier by reviewing actual labor contracts and other payroll documents. Respondents conclude that the record evidence supports its reported daily labor hours. Department's Position: We agree with respondents. As noted in the Sales Verification Reports, the Department at verification reviewed actual labor contracts, attendance records, and other payroll documents confirming that respondents' employees are paid for a seven-hour workday. We found no evidence to the contrary at verification. Therefore, in the final determination, we have continued to calculate respondents' labor consumption based upon a seven- hour workday. Company-Specific Issues Zhejiang Comment 10: Zhejiang Willing Foreign Trading Co., Ltd. (Zhejiang Willing) Zhejiang argues that the Department should assign the antidumping duty margin for Zhejiang to Zhejiang Willing. Zhejiang states that it recently transferred the activities of its Bee Products Department, as well as some of its other product and export sales departments, to its subsidiary Zhejiang Willing, which is owned by Zhejiang and by all of Zhejiang's employees. Zhejiang notes that the purpose of the transfer was to encourage its employees, as partial owners of Zhejiang Willing, to increase sales and obtain higher prices by allowing them to retain a portion of the profits earned in their sales. According to Zhejiang, the transfer did not affect the management, production facilities, suppliers, or customers relating to the sale of subject merchandise, and that the only effect of the transfer is that subject merchandise will be sold under the "Zhejiang Willing" name. Zhejiang cites to Sugar and Syrups from Canada; Initiation and Preliminary Results of Changed Circumstances Antidumping Duty Administrative Review; 61 FR 48885, 48886 (September 17, 1996) (Sugar and Syrups from Canada) and Industrial Phosphoric Acid from Israel; Preliminary Results of Changed Circumstances Antidumping Duty Administrative Review, 58 FR 59010-11 (November 5, 1993) (Industrial Phosphoric Acid from Israel), in which the Department has employed successor-in-interest analysis in those cases where the resulting operation is similar to that of its predecessor. Zhejiang claims that the Department has stated that a company will be considered a successor-in- interest if the resulting operation is similar to its predecessor, and that, in determining whether sufficient similarities exist, the Department has examined whether there have been any significant changes in management, production facilities, supplier relationships, and customer base as a result of the transaction under review. Zhejiang claims that, in the present case, Zhejiang Willing clearly meets the criteria set forth by the Department for the following reasons: 1) the Department verified that Zhejiang Willing is wholly owned and controlled by Zhejiang and Zhejiang's employees; 2) the transfer of the activities of the Bee Products Department and other departments to Zhejiang Willing did not affect the management, production facilities, suppliers, or customers for the subject merchandise; and, 3) the transfer was merely an organizational change to encourage employee productivity through profit sharing. Therefore, according to Zhejiang, the Department should apply the margin for Zhejiang to subject merchandise entering under name "Zhejiang Willing." Petitioners counter that there is no basis for the Department to assign the calculated margin for Zhejiang to Zhejiang Willing. They argue that, because this transfer of operations did not occur within the POI and because the Department has a formal investigative procedure for dealing with such transfers, the Department should reject respondents' request to assign a dumping margin to Zhejiang Willing. Petitioners contend that there is no record evidence addressing Zhejiang's restructuring. Petitioners assert that Zhejiang had more than sufficient opportunity to place information regarding the transfer on the record of this investigation. Petitioners note that, rather than provide the Department with this information, however, Zhejiang raised the transfer for the first time at verification, well after the record had closed, and more than six months after it claims to have "announced" the transfer in December 2000. According to petitioners, because the Department has not verified the transfer of Zhejiang's Bee Products and export sales departments to Zhejiang Willing, and because the record before the Department is insufficient to demonstrate that the transfer has occurred, the Department should reject respondents' request and withhold any decision on that issue until an appropriate investigation is conducted. Petitioners further argue that the Department's regulations specifically provide for a changed-circumstances review to confirm reorganizations of the type alleged by Zhejiang. In particular, petitioners cite to section 751(b) of the Act, noting that it vests with the Department the discretion to initiate a changed circumstance review where the Department is presented with information that "shows changed circumstances sufficient to warrant a review of such determination or agreement." Department's Position: We agree with petitioners. In this investigation, respondents did not timely inform the Department of the succession of Zhejiang by Zhejiang Willing. Therefore, it would be inappropriate for the Department to make a successorship determination based on the minimal record presently before it. Accordingly, the Department, for purposes of the final determination, has not assigned Zhejiang's calculated dumping rate to Zhejiang Willing. As noted above, there is minimal evidence on the record with respect to Zhejiang's succession by Zhejiang Willing for the Department to conduct a successor-in-interest analysis at this time. However, the Department may conduct a changed circumstances review of an antidumping duty order at any time. See 19 CFR 351.216(b). In Fresh Atlantic Salmon from Chile; Preliminary Results of the Antidumping Administrative Review and Partial Recission of the Antidumping Administrative Review, 65 FR 48457, 48464 (August 8, 2000), the Department indicated that although information concerning the merger of Pesquera Mares Australes, Ltda. and Marine Harvest Chile, S.A. was received by the Department prior to and during a verification conducted in connection with the first administrative review, the Department nevertheless declined to address this issue in the first administrative review, but instead initiated and conducted a changed circumstances review to determine the appropriate cash deposit rate for the merged entity. Should this investigation result in the imposition of an antidumping duty order, Zhejiang may request a changed circumstances review in order to determine whether Zhejiang Willing is its successor-in- interest. Comment 11: Honey Consumption Factor for Hangzhou Green Forever Apiculture (Group) Co. (Hangzhou) Petitioners note that, during verification, the Department found that Hangzhou had revised its total honey production figure. Petitioners contend that the Department should recalculate Hangzhou's raw honey consumption factor using the revised total honey production as the denominator. Respondents did not comment on this issue. Department's Position: We agree with petitioners. At verification we found that Hangzhou had revised its total honey production figure following its initial submission of this value to the Department. Accordingly, for the final determination, we have recalculated Hangzhou's raw honey consumption factor using the revised total honey production value as the denominator. Comment 12: Hangzhou's Water Consumption Factor Petitioners note that, during verification, the Department found that Hangzhou had revised its total water consumption figure. Petitioners contend that the Department should recalculate Hangzhou's water consumption factor using the revised and reported total provided at verification. Respondents did not comment on this issue. Department's Position: We agree with petitioners. At verification, we found that Hangzhou had revised its total water consumption figure. Accordingly, for the final determination, we have recalculated Hangzhou's water consumption factor by dividing the revised total water consumption figure by the revised total honey production figure. Comment 13: Hangzhou's Electricity Consumption Figure Petitioners note that, during verification, the Department found that Hangzhou had revised its total honey production figure. Petitioners contend that the Department should recalculate Hangzhou's electricity consumption factor using the revised total honey production as the denominator. Respondents did not comment on this issue. Department's Position: We agree with petitioners. As noted above, at verification we found that Hangzhou had revised its total honey production figure. Accordingly, for the final determination, we have recalculated Hangzhou's electricity consumption factor by dividing the total electricity consumption figure by the revised total honey production figure. Inner Mongolia Comment 14: Movement Expenses Petitioners argue that the Department should value and deduct all movement expenses incurred by Inner Mongolia or Sheng Li. Petitioners note that Inner Mongolia reports that it pays a freight charge that includes inland freight, inland insurance, and brokerage. Petitioners contend that, of these expenses, only inland freight has been reported. Petitioners further contend that, although Inner Mongolia claims that such expenses are included in its inland freight expense, this has not been substantiated. Furthermore, petitioners argue that Inner Mongolia's assertion that such charges are included in the amount reported for inland freight is further contradicted by three documents on the record: 1) a service contract which separately itemizes various fees normally included under "brokerage;" 2) an invoice issued by a shipping agent which separately itemizes inland insurance; and 3) an invoice issued by the municipal tax bureau which also itemizes various expenses which petitioners take to be brokerage and insurance expenses. Petitioners assert that, because Inner Mongolia can report inland insurance and brokerage charges separately, for the purposes of the final determination the Department should value domestic inland freight, domestic inland insurance, and brokerage expenses using Indian surrogate values. Inner Mongolia maintains that petitioners' claims are inaccurate and should be rejected. Inner Mongolia notes that, in the Preliminary Determination, the Department has already deducted domestic inland freight and domestic brokerage and handling from the U.S. price. Therefore, according to Inner Mongolia, the only expense at issue that the Department has not already accounted for is inland insurance. Furthermore, Inner Mongolia contends that it properly and accurately reported in its questionnaire responses that it pays a single freight charge that includes inland freight, inland insurance, and brokerage charges, and that record evidence fully supports its statements. With regard to the service contract, Inner Mongolia states that the contract is for loading charges, not freight charges. With regard to the invoice issued by a shipping agent, Inner Mongolia states that the petitioners are incorrect in stating that the invoice indicates a separate itemization for inland insurance. Inner Mongolia argues that no such separate itemization exists on the invoice. With regard to the invoice issued by the municipal tax bureau, Inner Mongolia states that this invoice does not indicate a separate itemization for inland insurance, but does indicate an item for "freight and other expenses," thus confirming that Inner Mongolia pays a single charge for foreign inland insurance and brokerage. Inner Mongolia further claims that the Department's Verification Report of Inner Mongolia (dated July 27, 2001) fully confirms the accuracy of the reporting information for the inland freight and all other movement charges. Inner Mongolia specifically notes that the Department examined foreign inland freight at verification, and found no discrepancies, other than a very minor discrepancy concerning the distances covered. Department's Position: With respect to brokerage charges, the Department made an adjustment for these expenses in the Preliminary Determination, and Inner Mongolia did not challenge the correctness of our having done so. Therefore, petitioners' comments with respect to brokerage charges are moot. In this final determination, we have again made an adjustment for brokerage charges. With respect to inland insurance, we agree with Inner Mongolia. The record evidence indicates that Inner Mongolia pays a single freight cost which includes insurance for the goods being shipped. In our Preliminary Determination, we valued inland freight costs using freight rates from an Indian freight provider. There is no evidence on the record to indicate whether these surrogate freight rates include inland insurance, and we were unable to obtain clarification on this point prior to this final determination. As a result, as in the Preliminary Determination, we are valuing inland freight costs using the freight rates from the Indian provider. We will, however, further examine the issue of whether the surrogate freight rates include insurance in any future proceeding. Kunshan Comment 15: Inland Insurance Charges Petitioners contend that the Department should value and separately deduct the inland insurance expenses incurred by Kunshan. Petitioners state that, in the Preliminary Determination, the Department failed to deduct this expense from Kunshan's gross unit U.S. prices in the antidumping margin calculation. Kunshan argues that the Department properly did not deduct a separate amount for inland insurance. According to Kunshan, the freight charge that Kunshan pays includes inland insurance. Kunshan further states that there are no charges paid by the freight company itself to any third parties, and Kunshan does not pay inland insurance expenses to any parties. Kunshan notes that the Department specifically noted that it found no discrepancies at verification between the source documents and the data reported in its U.S. sales listing. Department's Position: We agree with Kunshan. Information on the record indicates that Kunshan pays a single freight cost which includes inland insurance for goods being shipped. See Kunshan's March 16, 2001 submission, page 3. As stated in response to the previous comment, there is no evidence on the record to indicate whether these surrogate freight rates include inland insurance, and we were unable to obtain clarification on this point prior to this final determination. As a result, as in the Preliminary Determination, we are valuing inland freight costs using the freight rates from the Indian provider. We will, however, further examine the issue of whether the surrogate freight rates include insurance in any future proceeding. Comment 16: Xinlong's Non-Production Electricity Expenses Petitioners argue that the Department should include all electricity charges incurred by Xinlong in its normal value calculation. Petitioners state that Xinlong reported in its questionnaire response that it has two sub-meters that record electricity in the factory and its offices, respectively. Petitioners argue that because the Department treated all energy as a direct expense in the Preliminary Determination, it should have treated all of Xinlong's electricity consumption as a direct expense. Petitioners contend that, for purposes of the final determination, the Department should include all production and non-production kilowatt-hours (KWH) in its normal value calculations. Kunshan argues that the Department should reject petitioners' assertion that electricity expenses should include Xinlong's non-production electricity expenses. Kunshan maintains that the purpose of reporting electricity expenses is to determine the amount of electricity that is incurred to produce the subject merchandise. Kunshan asserts that Xinlong properly segregated the KWH needed for actual production from those used for non-production purposes. Kunshan further contends that the Department properly excluded the non-production KWH in its normal value calculations, as the non-production electricity expenses are part of factory overhead and SG&A incurred by the honey processing factory. Kunshan argues that, as such, these expenses and all other types of factory overhead and other SG&A ratios are included in the Indian surrogate values, and it would be double-counting to include in normal value both the non-production electricity and the factory overhead and SG&A expense ratios incurred by the Indian producer. Kunshan maintains that petitioners acknowledged earlier on the record that double-counting will occur if non-production energy expenses are both reported as energy costs and included in the overhead ratio. Kunshan states that the Department's verification report for Xinlong does not note any discrepancies or differences in the reported electricity consumption information. Kunshan also notes that Xinlong's Verification Report notes further that the electricity meters are tracked separately for electricity consumed in production and, thus, the company was able to segregate production electricity accurately. Kunshan concludes that, for these reasons, the Department properly excluded the non-production KWH, and should continue to do so in the final determination. Department's Position: We agree with respondents. To include non-production electricity as a direct expense would double-count the non-production electricity because an amount for non-production electricity is included in factory overhead. Therefore, for this final determination, we have not changed our computation of electricity included in COM. Recommendation Based on our analysis of the comments received, we recommend adopting all of the positions set forth above and adjusting all related margin calculations accordingly. If these recommendations are accepted, we will publish the final determination and the final weighted-average dumping margins for all firms in the Federal Register. AGREE____ DISAGREE____ _______________ Faryar Shirzad Assistant Secretary for Import Administration _______________ Date _______________________________________________________________________ footnotes: 1. Honey from Argentina and China, Inv. Nos. 701-TA-402, 731-TA-892, 893 (Preliminary Injury Determination), Pub. No. 3369 (2000). 2. Respondents assert that this profit is after taxes, while the Department relies on profit before taxes for its analysis; this amount is therefore only an approximation of the profit which should have been used in the Preliminary Determination. 3. "Valuation Memorandum: Preliminary Antidumping Duty Determination: Honey from the People's Republic of China" (March 13, 1995). (This memorandum was placed on the record of this investigation in respondents' submission of surrogate values for the factors of production (July 3, 2001).)