66 FR 11562, February 26, 2001 A-570-601 ARP: 6/1/98-5/31/99 PUBLIC DOCUMENT SManiam/G1O1 DECISION MEMORANDUM DATE: February 14, 2001 TO: Bernard T. Carreau Deputy Assistant Secretary AD/CVD Enforcement II FROM: Richard W. Moreland Deputy Assistant Secretary AD/CVD Enforcement I SUBJECT: Issues and Decision Memorandum for the 1998-99 Administrative Review of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China; Amended Final Results SUMMARY We have analyzed the allegations of ministerial errors made by the interested parties in the final results of the 1998-99 administrative review of the antidumping duty order covering tapered roller bearings and parts thereof, finished and unfinished, from the People's Republic of China. As a result of our analysis, we have made changes, including corrections of certain inadvertent programming and clerical errors, in the margin calculations. (1) Because these changes result in a de minimis margin for Wafangdian Bearing Company Ltd. and because Wafangdian Bearing Company Ltd. is now eligible for revocation, we have addressed certain revocation comments filed by interested parties in their case and rebuttal briefs, which were found to be moot in the Final Results. (2) We recommend that you approve the positions we have developed in the Discussion of Issues section of this memorandum. Below is a complete list of the issues in these amended final results. Comment 1: The Department Should Grant Revocations Comment 2: Limiting Revocation to Certain Trading Companies Comment 3: Limiting Revocation to Particular Models BACKGROUND On January 10, 2001, the Department of Commerce ("Department") published the Final Results of this administrative review of tapered roller bearings ("TRBS"). The period of review ("POR") is June 1, 1998, through May 31, 1999. On January 12, 2001, Wafangdian Bearing Company Ltd. ("Wafangdian"), Luoyang Bearing Corp. (Group), and Zhejiang Machinery Import & Export Corp. ("ZMC") submitted allegations of ministerial errors by the Department. On January 18, 2001, the petitioner submitted rebuttal comments to the ministerial error comments. Below, we discuss the revocation issues raised by the interested parties in the case and rebuttal briefs. DISCUSSION OF ISSUES Comment 1: The Department Should Grant Revocations Petitioner's Arguments: The petitioner argues that the Department should reverse its preliminary determination of intention to revoke the antidumping duty order in part with respect to certain companies, even if the Department calculates zero or de minimis margins in this review. Noting that the revocation determination is a discretionary decision, the petitioner contends that an evaluation of evidence related to "information concerning trends in prices and costs, currency movement, and other market and economic factors that may be relevant" will demonstrate that the continued application of an order is necessary to offset dumping, pursuant to section 751(d) of the Tariff Act of 1930, as amended ("the Act") and 19 CFR 351.222(b)(2)(i)(C). First, the petitioner alleges that the zero margins were largely attributable to the recent Asian financial crisis, which caused steel prices to be depressed during the POR. With the end of the financial crisis, economic recovery and growth in demand will cause factor values (particularly the prices of steel, the major input of TRBs) to rise. This will cause normal value to increase and, consequently, dumping margins to recur. Thus, because the zero or de minimis margins for the companies requesting revocation were based on depressed prices, and in light of expected increases in the costs of production, the continued application of the order is necessary to offset dumping. Second, the petitioner claims that China's institution of domestic programs (including import restrictions) designed to reduce Chinese producers' reliance on imported steel will result in increased normal values, inasmuch as domestic sourcing will result in increased use of surrogate values for factor valuations instead of the artificially low values of imported steel. Third, the petitioner argues that import prices of Chinese TRBs have significantly declined over the last two years, indicating a likely recurrence of dumping in the future, despite the calculation of zero or de minimis dumping margins in the instant review. Finally, the petitioner argues that the Department should not revoke the order because the Department found in the corresponding sunset review that dumping was likely to continue if the order was revoked. See Tapered Roller Bearings from the People's Republic of China; Final Results of Full Sunset Review, 65 FR 11550 (March 3, 2000) (Sunset Review). In sum, because the calculated zero or de minimis margins were the result of artificially low steel values that are likely to disappear in the near future, the petitioner urges the Department to reverse its preliminary revocation determinations. Respondents' Arguments: China National Machinery Import & Export Corporation, Liaoning MEC Group Co. Ltd., Wanxiang Group Corporation, Tianshui Hailin Import and Export Corporation, Weihai Machinery Holding (Group) Co., and Premier Bearing & Equipment Ltd. (collectively, "CMC et al.") (3) argue that revocation is appropriate for CMC and Wanxiang as both companies have satisfied the regulatory and statutory standards for revocation, in part, of the antidumping duty order. Both companies have (A) made sales above normal value for three consecutive years in commercial quantities, (B) provided certifications that they have not sold merchandise at less than normal value during the current period of review and would not do so in the future, and (C) agreed to immediate reinstatement of the antidumping duty order if the companies sell at less than normal value subsequent to revocation. Under the Department's regulations, at 19 CFR 351.222(b)(2)(i), CMC et al. continue, the Department does not have significant discretion in evaluating revocation requests and must revoke the antidumping duty order with respect to CMC and Wanxiang given that both companies have satisfied the requirements of that regulation. In particular, CMC and Wanxiang both received a zero or de minimis duty margin in each of the last four (Wanxiang) to six (CMC) administrative reviews (including the three-year period forming the basis of the revocation request). Given that both companies have agreed to the reinstatement of the order in the event future dumping is found, and since three consecutive years of sales above normal value gives rise to the presumption that the order is no longer necessary to offset dumping with regard to specific producers, CMC et al. claim that the Department was correct when it preliminarily decided to revoke the order with respect to CMC and Wanxiang. Furthermore, CMC et al. contend that the petitioner has not satisfied its burden of demonstrating with "substantial, positive evidence" that the continued imposition of duties is necessary with respect to CMC and Wanxiang. First, CMC et al. rebut the petitioner's argument that the possibility of higher steel prices justifies continuance of the order for CMC and Wanxiang because both companies received zero margins prior to the Asian financial crisis and, therefore, neither company was found to be dumping during that period of higher steel prices. Moreover, if steel prices rise, the companies would logically adjust their sales prices to account for the higher input prices. Second, CMC et al. argue that there is no direct evidence that CMC and Wanxiang are likely to use less imported steel in the future but, even if that were the case, the substitution would not necessarily result in dumping. The domestic programs do not create such significant disincentives against using imported steel as to predict CMC and Wanxiang will likely not use imported steel in the future. Moreover, the import substitution programs were in full effect during the POR, yet CMC and Wanxiang were not compelled to rely upon domestic steel. Additionally, given China's likely accession to the WTO, any non-tariff barriers, including import substitution measures, import quotas, and non-automatic import licensing and import registration requirements, would be eliminated. Finally, CMC et al. claim that even if the companies substituted domestic steel for TRBs production and normal value were to increase, dumping would not necessarily result because the companies would adjust their sales prices to take into account the higher steel input prices and costs. Third, the fact that some U.S. import prices for some TRBs models have declined does not constitute substantial, positive evidence that continuation of the order is necessary with respect to CMC and Wanxiang, in their view. Finally, CMC and Wanxiang contest the petitioner's argument that the Department should not revoke as to any company because of the finding in the Sunset Review that dumping was likely if the order was revoked. The sunset review found that both CMC and Wanxiang had zero margins, thus indicating that even though the revocation of the order would lead to a continuation or recurrence of dumping as to all companies, dumping would not continue or recur as to these companies (i.e., CMC and Wanxiang). Wafangdian argues that if its final antidumping duty margin is zero or de minimis for this review, the Department should revoke the order with respect to Wafangdian as it will have met all of the requirements for revocation pursuant to 19 CFR 351.222. ZMC argues that nothing in the statute, the regulations, or prior Department practice supports the petitioner's assertion that revocation should be related to the condition of future steel prices. It would be an unreasonable use of discretion by the Department to condition revocation on predictions about future steel prices. Department's Position: As in the Final Results, we continue to find that CMC and ZMC are not eligible for revocation, based on the fact that they made sales at less than normal value in the instant review, and Wanxiang is not eligible for revocation based on the fact that it did not make sales in commercial quantities during the three-year period being analyzed. However, we do find that the evidence on the record demonstrates that Wafangdian is not likely to sell subject merchandise below normal value in the future. With respect to 19 CFR 351.222(b)(2)(ii), regarding likelihood, "when additional evidence is on the record concerning the likelihood of future dumping, the Department is, of course, obligated to consider the evidence" by the parties which relates to the likelihood of future dumping. (4) Steel Wire Rope From the Republic of Korea: Final Results of Antidumping Duty Administrative Review and Revocation in Part of Antidumping Duty Order, 63 FR 17986, 17988 (April 13, 1998) (citing Brass Sheet and Strip From Germany; Final Results of Antidumping Duty Administrative Review and Determination Not to Revoke in Part, 61 FR 49727, 49730 (September 23, 1996)). In doing so, the Department may consider such "factors as conditions and trends in the domestic and home market industries, currency movements, and the ability of the foreign entity to compete in the U.S. marketplace without {sales at less than normal value}." Id.; see also, Proposed Regulation Concerning the Revocation of Antidumping Duty Orders, 64 FR 29818, 29820 (June 3, 1999) (explaining that when additional evidence as to whether the continued application of an antidumping duty order is necessary to offset dumping is placed on the record, "the Department may consider trends in prices and costs, investment, currency movements, production capacity, as well as all other market and economic factors relevant to a particular case"). Thus, while three consecutive reviews with zero or de minimis margins leads the Department to presume that the company requesting revocation is not likely to resume selling subject merchandise at less than the normal value in the near future, that presumption can be refuted. Based upon the evidence presented in this proceeding, we have considered various factors in considering whether Wafangdian is likely to sell merchandise in the future at less than normal value. We have reviewed the factual submissions and briefs presented by the petitioner and Wafangdian, and find that the evidence does not indicate a likelihood of future dumping. First, the petitioner alleges that the three consecutive years of sales above normal value were largely attributable to the depressed input prices resulting from the Asian financial crisis. As the petitioner's factual submissions note, however, the Asian financial crisis began in late 1997 and, after a recession that ensued upon the stabilization of market conditions, ended in late 1998. Thus, the crisis affected only one of the three years forming the basis of Wafangdian's revocation request. Yet Wafangdian received zero or de minimis margins in all three years, including years in which factor values were allegedly higher. Therefore, we agree with CMC et. al. that the Asian financial crisis did not cause the zero or de minimis margins, as claimed by the petitioner. Moreover, the fact that input prices might increase does not mean that dumping will resume. As CMC et.al. contend, they can increase their sales prices to account for the higher input costs. Therefore, a finding by the Department that dumping is likely to resume in the future by these companies would be speculative on the basis of the evidence presented. Second, we do not find persuasive the petitioner's argument that China's domestic programs will result in increases to normal value. As the petitioner's factual submission notes, the "Steel Import Substitution Program" ("SISP") is "a government initiative designed to encourage steelmakers to replace imported steel material used to make goods for re- export, with Chinese sourced material with the reward of a full VAT rebate . . . " (emphasis added). Thus, such programs are not aimed at TRBs producers, who are steel users, but at steelmakers. Therefore, TRBs producers do not enjoy the incentives to use domestic steel. Moreover, as the petitioner notes, the program was in full effect by the end of 1999. Despite this, these companies continued to receive zero or de minimis margins. Thus, assuming arguendo that TRBs producers were affected by the import-substitution programs, Wafangdian's sales above normal value in this review indicate that the company has adjusted its sales prices to account for higher steel input prices and costs resulting in part from SISP or any similar programs. Third, we disagree with the petitioner that the decline in TRB import prices indicates a likely recurrence of dumping in the future. These price declines may be caused by many factors. Lower steel input prices due to the Asian financial crisis may have contributed and as those prices increase, TRB prices may increase correspondingly. The zero or de minimis margins during the two years of price declines show that lower TRB prices do not necessarily result in dumping, nor are two years of declining prices evidence that prices will continue to decline. Finally, we disagree with the petitioner that the Department's findings in the corresponding sunset review are relevant, inasmuch as five-year sunset reviews concern different statutory rules and procedures than the revocation procedure set out in 19 CFR § 351.222. See Procedures for Conducting Five-year ("Sunset") Reviews of Antidumping and Countervailing Duty Orders, 63 FR 13516 (March 20, 1998). (5) Comment 2: Limiting Revocation to Certain Trading Companies Petitioner's Arguments: The petitioner argues that if CMC, Wanxiang, and ZMC continue to qualify for revocation, thten revocation should be limited to those exporter/producer combinations that have been reviewed in the instant review period, as well as the prior two review periods, i.e., the period forming the basis of the revocation request. See 19 CFR 351.222(b)(3). Citing 19 C.F.R. 351.107(b)(i), the petitioner contends that where an exporter or trading company receives a zero margin, the Department will establish a combination exporter/producer rate in order to avoid the "redirection of exports {from a producer subject to the order} through an excluded trading company." Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27295, 27303 (May 19, 1997). Such a decision would be consistent with the Department's past practice of excluding only specific producer/exporter combinations from antidumping duty orders. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Creatine Monohydrate From the People's Republic of China, 64 FR 71104, 71110 (December 20, 1999); Brake Rotors from the People's Republic of China: Rescission of New Shipper Review and Final Results and Partial Rescission of First Antidumping Duty Administrative Review, 64 FR 61581, 61589 (November 12, 1999). Alternatively, if the Department revokes the orders in part with respect to specific producers, the petitioner contends that the Department should follow its past practice of limiting the revocation to products actually produced and sold by that producer, thus excluding from revocation products manufactured by other suppliers and sold by that producer in its capacity as a Chinese trading company. See, e.g., Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China; Final Results of Antidumping Duty Administrative Review and Revocation in Part of Antidumping Duty Order, 62 FR 6189 (February 11, 1997). Respondents' Arguments: CMC et al. contend that, in accordance with 19 CFR 351.222(b)(3), the Department should extend revocation to those suppliers of subject merchandise identified in the three review periods forming the basis of CMC's and Wanxiang's revocation requests, in which the two respondents received zero or de minimis margins. ZMC concedes that the petitioner is correct in that if there is a revocation of an order with respect to a trading company, the revocation should tie that exporter with the producer. Department's Position: In the Final Results, we found this issue to be moot for companies who were requesting revocation since we found that none of the companies were eligible for revocation. However, since Wafangdian is now eligible for revocation, we have examined the merits of this comment as it relates to Wafangdian. We find that during the time period forming the basis of this revocation, Wafangdian only exported merchandise that it produced and no other companies produced subject merchandise for, or supplied subject merchandise to, Wafangdian. Therefore, we are revoking the order for Wafangdian only as to the subject merchandise produced and exported by Wafangdian. Comment 3: Limiting Revocation to Particular Models Petitioner's Arguments: Assuming arguendo that the Department uses imported steel for any company's factor valuations without weight- averaging these values with surrogate values and decides to revoke the antidumping duty order in part for qualifying companies, the petitioner argues that the revocation should be limited to only those models actually using the imported steel. Without such limitation, the petitioner argues, a company-specific revocation would apply to the entire class or kind of TRBs, allowing respondents to export other models not made with the imported steel at prices below normal value. Moreover, if the Department bases its margin calculations on only imported steel values, the petitioner argues that the determination under 19 CFR 351.222(b)(2)(i)(C) as to whether the continued application of an antidumping order is necessary to offset dumping should be made on a model-specific basis in order to continue offsetting dumping of models not using such steel. Respondents' Arguments: CMC et al. contend that the Department should not limit revocation to TRBs models for which the requesting respondents used imported steel. The Department's regulations, at 19 CFR 351.222(b)(2)(i), clearly direct the Department to revoke orders as to companies meeting the revocation standard. There is no authority within the Department's regulations to revoke orders as to particular models of subject merchandise. Once an exporter is excluded from an order, it is no longer subject to administrative review, but under the petitioner's arguments, excluded respondents would remain subject to administrative reviews in order to assign margins to unexcluded models, thus negating the purpose of the revocation provisions. ZMC argues that the petitioner's concerns involving the use of imported steel are unfounded. ZMC has provided written assurances that it will not sell below normal value in the future and, given that ZMC has met the condition of making sales at prices above normal value for three consecutive years, it should be trusted to keep those assurances. Furthermore, ZMC argues that it is unclear whether the petitioner's proposal to limit revocation "solely to models actually using {imported} steel" would cover only models previously reviewed that were made with imported steel or would cover only models produced using imported steel. Regardless, ZMC argues the proposal would essentially establish a system of managed trade that would require extensive and continuous monitoring, and that any shipper seeking revocation would be required to establish unreasonable conditions. Such conditions would place companies at competitive disadvantages because they would be required to use the same material supplier when seeking revocation even if steel prices in other parts of the world were declining. Department's Position: We disagree with the petitioner. As CMC et al. appropriately note, 19 CFR 351.222(b)(2)(i) directs us to revoke orders in part where "exporters or producers covered by the order have sold the merchandise at not less than normal value for a period of at least three consecutive years." Nowhere in the applicable law is there any indication that revocations can be limited to specific products produced by companies that qualify for revocation. Moreover, such an interpretation is inconsistent with the plain meaning of the statute and regulations. Agree: ______________ Disagree: ______________ ______________________________________ Bernard T. Carreau Deputy Assistant Secretary AD/CVD Enforcement II ______________________________________ (Date) _________________________________________________________________________ footnotes: 1. For a discussion of the ministerial error allegations, see Memorandum to Susan Kuhbach, "Ministerial Error Allegations for Final Results of Review" (February 12, 2001). For description of calculation changes made to the final results, see Memorandum to File, "Calculations for Amended Final Results for Wafangdian" (February 12, 2001). 2. Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China; Final Results of 1998-99 Administrative Review, Partial Rescission of Review, and Determination Not to Revoke Order in Part, 66 FR 1953 (January 10, 2001) ("Final Results"). 3. A single brief was filed by counsel for these companies which includes both general and company-specific sections. 4. The "likelihood" language of 19 CFR 351.222(b)(1) (B) and (C) was revised in Amended Regulation Concerning the Revocation of Antidumping and Countervailing Duty Orders, 64 FR 51236 (September 22, 1999) ("Amended Revocation Regulation"). Under the revised language, in making a determination with respect to revocation based on an absence of dumping, the Department must consider "whether the continued application of the antidumping order is otherwise necessary to offset dumping." Id. However, the effective date of this amended regulation was November 1, 1999. Inasmuch as this review was initiated prior to the effective date of the new regulation, in determining whether to revoke the order with respect to Wafangdian, we are examining the evidence under the former "likelihood" standard of 19 CFR 351.222. 5. See section 751(d)(2) of the Act and Procedures for Conducting Five- year ("Sunset") Reviews of Antidumping and Countervailing Duty Orders, 63 FR 13516 (March 20, 1998). See also, Policies Regarding the Conduct of Five-year ("Sunset") Reviews of Antidumping and Countervailing Duty Orders; Policy Bulletin, 63 FR 18871, 18872 (April 16, 1998). In a sunset review, the Department examines (a) the weighted-average dumping margins determined in the investigation and subsequent reviews, and (b) the volume of imports of the subject merchandise for the period before and the period after the issuance of the antidumping order or acceptance of suspension agreement. However, under 19 CFR 351.222, the Department examines, inter alia, only company-specific dumping margins for only the last three years of a review period.