66 FR 12759, February 28, 2001 A-570-859 Investigation Public Document MEMORANDUM TO: Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration FROM: Holly A. Kuga Acting Deputy Assistant Secretary for Import Administration Group II DATE: February 14, 2001 SUBJECT: Issues and Decision Memorandum for the Investigation of Steel Wire Rope from the People's Republic of China Summary We have analyzed the comments in the case and rebuttal briefs submitted by interested parties in the antidumping duty investigation of steel wire rope from the People's Republic of China (PRC). 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 Issues section of this memorandum. Below is a complete list of issues in this investigation for which we received comments from the parties. In Section I, we identify the issues in this investigation for which we received comments from the interested parties. Section II sets out the scope, or product coverage, of this investigation. Section III identifies the changes made in the margin calculation program since the preliminary determination. Section IV analyzes the comments of the interested parties. Finally, we recommend approval of the Department's positions developed for each of the issues. Background On October 2, 2000, the Department of Commerce (the Department) published its preliminary determination in the antidumping investigation of steel wire rope from the PRC. See 65 FR 58736. The period of investigation (POI) is July 1, 1999, through December 31, 1999. Respondents in this investigation are Nantong Zhongde (Nantong) and Fasten Group Import and Export Co., Ltd. (Fasten). Dragon Trading, Inc. is an interested party in this proceeding. We invited all parties to comment on the preliminary determination. In the PRC investigation, we conducted verification of the sales and factors of production information submitted by respondents Nantong, and Fasten from October 9 through October 13, 2000, and October 16 through October, 20, 2000, respectively. In addition, we conducted a verification of Fasten USA's CEP information on October 23 and October 24, 2000. Counsel to Nantong and the petitioner requested a hearing on October 27 and October 30, 2000, respectively. Nantong, Fasten, Dragon Trading, Inc., and the petitioner (1) submitted case briefs on December 15, 2000. Dragon Trading, Inc. submitted a rebuttal brief on December 22; Nantong, Fasten, and the petitioner submitted rebuttal briefs on December 27, 2000. A public hearing was held on January 5, 2001. I. List of issues Surrogate Value for Wire Rod Surrogate Value for Fiber Cores Surrogate Value for Wood Pallets Surrogate Value for Sulphuric Acid Surrogate Value for Nuts and Bolts Surrogate Value for Hydrochloric Acid Surrogate Value for Lead Surrogate Value for Electricity Surrogate Value for Zinc Nitrate Use of a Market Economy Rate for Ocean Freight Critical Circumstances Correction of Ministerial Error for Valuing International Freight Correction of Ministerial Error for the Conversion Factor of Wood Reels II. Scope of the Investigation For purposes of this investigation, the product covered is steel wire rope. Steel wire rope encompasses ropes, cables, and cordage of iron or carbon or stainless steel, other than stranded wire, not fitted with fittings or made up into articles, and not made up of brass-plated wire. Imports of these products are currently classifiable under subheadings: 7312.10.6030, 7312.10.6060, 7312.10.9030, 7312.10.9060, and 7312.10.9090 of the Harmonized Tariff Schedule of the United States (HTSUS). Although HTSUS subheadings are provided for convenience and Customs Service purposes, the written description of the scope of this investigation is dispositive. III. Changes in the Margin Calculation Since the Preliminary Determination We adjusted the surrogate value for wire rod. See comment 1. We adjusted the surrogate value for fiber cores. See comment 2. We adjusted the surrogate value for wood pallets. See comment 3. We adjusted the surrogate value for sulphuric acid. See comment 4. We adjusted the surrogate value for nuts and bolts. See comment 5. We adjusted the surrogate value for lead. See comment 7. We corrected a clerical error in valuing Nantong's ocean freight. See comment 10. We corrected our methodology for calculating Nantong's ammonium chloride. See December 5, 2000, Nantong verification report, at 1. We corrected our calculation of Nantong's fiber core consumption. See October 2, 2000 submission from Nantong We corrected our methodology for calculating Nantong's wood reel consumption. See October 2, 2000 submission from Nantong We corrected our methodology for converting Nantong's wood freight cost. See October 2, 2000 submission from Nantong. We revised the basis on which we calculated Nantong's consumption of bolts. See December 5, 2000, Nantong verification report, at 1. IV. Discussion of Issues Comment 1: Surrogate Value for Wire Rod Nantong argues that the Department should not have relied on the Indian Import Statistics to value wire rod in the preliminary determination, because those prices are much higher than those reflected in other sources on the record. Specifically, Nantong notes that the Indian Import Statistics category relied upon in the preliminary determination is an overly-inclusive basket category, and includes aberrationally high values for wire rod from Malaysia. According to Nantong, wire rod is a fungible commodity for which prices should be relatively consistent throughout the world. Nantong suggests that the Department select from a number of alternative bases to value wire rod. Nantong proposes a number of specific alternatives, including (1) wire rod prices from the Steel Authority of India, an Indian wire rod producer (SAIL); (2) prices that the respondent Fasten paid to market-economy suppliers for wire rod; (3) prices for wire rod shown on an invoice for a sale by a U.S. manufacturer to a U.S. customer; (4) values of wire rod listed in the financial statement of Usha Martin Industries (a respondent in the companion investigation of steel wire rope from India); (5) wire rod values from a different HTSUS category; or (6) wire rod valued from the same HTSUS category used in the preliminary determination, but excluding an aberrational Malaysia value. Fasten did not file any comments on this issue. The petitioner argues that the Department should continue to use the same wire rod surrogate value used in the preliminary determination. The petitioner contends that the wire rod import category used by the Department in the preliminary determination captures the specific type of wire rod used in the production of steel wire rope, and that none of the alternatives proposed by Nantong are preferable to that source for wire rod surrogate values. The Department's Position: The Department's general practice in NME cases is to value inputs using surrogate values derived from the import statistics of the surrogate country. Further, the Department has excluded - where appropriate - aberrational data that appear to distort the overall value for a specific import category. See Chrome-Plated Lug Nuts From The People's Republic of China; Final Results of Antidumping Duty Administrative Review, 63 FR 53872 (October 7, 1998), and accompanying Decision Memorandum at Comment 1. We agree with Nantong that the unit values of Malaysian imports in the Indian Import Statistics for the period in question are aberrational, as they are many times higher than the import values from other countries, and are not in line with numerous other prices for wire rod on the record. (2) Therefore, we have excluded the Malaysian values from our analysis, and relied on the average of the remaining values. Regarding Nantong's suggested alternatives, it would be inappropriate to rely upon the SAIL prices, the prices that Fasten paid to market-economy suppliers for wire rod, and the prices for wire rod shown on an invoice for a sale by a U.S. manufacturer to a U.S. customer because they are not publicly available information. It would also be less appropriate to rely upon values of wire rod listed in the financial statement of Usha Martin Industries because it is the Department's preference to rely upon Indian Import Statistics when available. See Coumarin From The People's Republic of China; Final Results of Antidumping Duty Administrative Review, 59 FR 66895, 66900 (December 28, 1994). Moreover, the Usha Martin Industries figures do not indicate the source of the input. It would also be inappropriate to rely upon wire rod values from a different HTSUS category because the HTSUS category relied upon in the preliminary determination appropriately captures the wire rod used in the production of wire rope. In fact, respondent Fasten, in its July 14, 2000, submission, suggested that HTSUS category 7213.9102/9109 was the appropriate category from which to value this input. We note that Fasten reported market-economy purchases of wire rod from market-economy sources. For the final determination, we have used a weighted average of Fasten's multiple market-economy wire rod purchase prices to derive a value for wire rod. Comment 2: Surrogate Value for Fiber Cores The petitioner argues that the Department should not continue to value fiber cores based on the Indian Import Statistics for raw jute, because jute is merely a raw material used in the production of fiber cores, and there is no record evidence that either of the respondents manufacture their own fiber cores. On the contrary, the petitioner argues that the record indicates that the respondents in fact purchase finished fiber cores. According to the petitioner, the Department should rely on the Indian Import Statistics value for "cordage, cable, rope and twine of jute" (i.e., fiber cores made of jute). Fasten argues that it uses natural jute fiber cores (i.e., raw jute), in its production process. According to Fasten, the Department correctly valued this input using a raw jute value from the Indian Import Statistics. Fasten contends that it would be less appropriate to rely on the Indian Import Statistics value for "cordage, cable, rope and twine of jute," as proposed by the petitioner, because (a) the latter value includes prices for synthetic fiber cores, (b) is not contemporaneous with the POI, and (c) reflects small import quantities that lead to aberrational values. The Department's Position: We agree with the petitioner. The Department's verification reports establish that both respondents purchase fiber cores from outside sources (see exhibit 13 for Nantong and see exhibit 18 for Fasten), and do not manufacture fiber cores internally from raw material inputs. Fasten incorrectly argues that the petitioner's proposed surrogate value for "rope-synthetic fiber" is not contemporaneous with the POI. In fact, the petitioner's proposed value is based on April through June 1999 Indian Import Statistics, the most current data for fiber cores on the record. While some of the values in the "rope-synthetic fiber" category correspond to relatively small import quantities, and the import category includes prices for synthetic fiber cores, this import category most accurately reflects the actual fiber core material that each respondent uses in its manufacturing process. Comment 3: Surrogate Value for Wood Pallets and Reels Nantong and Fasten argue that because they produce their own pallets and reels, the Department should simply apply a surrogate value for the wood used in producing pallets and reels, and not a surrogate value for finished pallets and reels. The petitioner argues that the Department correctly valued both respondents' pallets and reels by using a value for the finished product, and notes specifically that the Department verified that Nantong purchased finished pallets. The petitioner also argues that because the Indian Import Statistics value used by the Department contains an aberrationally low value for German imports, the Department should instead rely on Indian Import Statistics for a later period, which contains no aberrational data and is more contemporaneous with the POI. The Department's Position: We agree with Fasten that, as evidenced in the Fasten verification report at section 3, the respondent makes its own pallets and reels from wood. In addition, the Department verified that all labor used to make reels and pallets was accounted for in Fasten's reported packing labor. See Fasten verification report at exhibit 22. Therefore, for Fasten, we valued the material input in question using the Indian Import Statistics for wood. We also agree with Nantong that, as evidenced by the verification report at section V, the respondent makes its own reels. We have valued the wood for Nantong's reels using the same Indian Import Statistics data as we have for Fasten. However, we verified that Nantong purchased its pallets in a finished form from an outside supplier. See Nantong verification report at exhibit 13. Therefore, we have valued Nantong's pallets using the Indian Import Statistics average value for finished pallets. We relied on the value for the period April 1996 through January 1997 (inflated to the POI) because it is the most contemporaneous, non-aberrational value for finished pallets on the record and because data prior to, and after, the period April 1996 through January 1997, contain German values that are a small fraction of the second lowest value in the same import category. Comment 4: Surrogate Value for Sulphuric Acid Fasten contends that the Department should have based the surrogate value for sulphuric acid on India Chemical Weekly figures, rather than Indian Import Statistics, because the former is the Department's preferred source, and the latter often provides aberrational values for chemicals. Fasten also contends that the India Chemical Weekly value is more appropriate because it is more contemporaneous with the POI. The Department's Position: We agree with Fasten. The Department's common practice in past PRC antidumping proceedings has been to use India Chemical Weekly, when possible, to value chemicals. See, e.g., Persulfates from the People's Republic of China, 65 FR 46691 (July 31, 2000). We have used the India Chemical Weekly value for the final determination. Comment 5: Surrogate Value for Nuts and Bolts Both respondents contend that the Department should not use the Indian Import Statistics category for threaded machine screws to value nuts and bolts, because the import category is not specific to those products. Fasten argues that the Indian Import Statistics value is considerably higher than those used in previous Department cases, and suggests that the Department value nuts and bolts using data from the Indonesian Foreign Trade Statistical Bulletin. Nantong contends that the Department should use information from the Metal and Minerals Review of India for the POI to value nuts and bolts. Finally, Nantong argues that the Department verified that Nantong manufactures its own bolts using cut-to-length steel bars, and should therefore value bolts using a value for steel bars The petitioner argues that the Department should continue to use the Indian Import Statistics value used in the preliminary determination because it corresponds to an import subcategory ("machine screws, threaded") that is as specific to nuts and bolts as those of alternative sources on the record, and is derived from the Department's preferred source for surrogate values (i.e., import statistics). The Department's Position: We agree with Nantong that it is more appropriate to value nuts and bolts using the Metal and Minerals Review of India, because this value is (a) contemporaneous with the POI, (b) specific to nuts and bolts, and (c) derived from the surrogate country selected in this case. While it is the Department's general preference to rely on import statistics, the value in question from the Indian Import Statistics is less contemporaneous and specific. We also verified that Nantong manufactures its own bolts from steel bars. See section I of the Nantong verification report. Therefore, we have valued bolts using a value for steel bars (HTS category 7211.1900) for the final determination. Comment 6: Surrogate Value for Hydrochloric Acid Nantong argues that the value used for hydrochloric acid, based on data from the India Chemical Weekly, is aberrationally high, and that the Department should use information from the 1998 United Nations Statistics for Indonesia to value hydrochloric acid for the final determination. The Department's Position: We agree with Nantong that the average value for hydrochloric acid in India Chemical Weekly for the period in question is not an appropriate surrogate value, as the range of prices varies by a factor of six, and because the upper range of these values is many times higher than the historical values for the same input published in India Chemical Weekly for prior periods, even accounting for inflation. The Indian Import Statistics value for hydrochloric acid is even higher, and thus also aberrational. Given that there are no reliable surrogate values from Indian sources, we have relied on a value from an alternative surrogate country (i.e., the 1998 United Nations Statistics for Indonesia). Comment 7: Surrogate Value for Lead Nantong argues that the Department verified that the company uses lead ingots to produce wire rope and that the value used in the preliminary determination for lead bars is inappropriate. Furthermore, Nantong argues that the Department should use a surrogate value for lead ingots from the Economic Times of India because it more specifically corresponds to the lead type used by Nantong in its manufacturing process. The Department's Position: We agree with Nantong that the Department verified the company's use of lead ingots, rather than lead bars and rods. See Nantong verification report at section I. We have used a value from the Economic Times of India to value lead ingots for the final determination. Comment 8: Surrogate Value for Electricity Nantong argues that the electricity rate from the 1998 International Energy Agency used in the preliminary determination is an average of both industrial and household rates, and is not contemporaneous with the POI. Nantong argues that, since it is an industrial user of electricity, the Department should use an industrial rate for electricity, and proposes the rate from the Central Authority of India for this purpose. Nantong notes that, among the values on the record, these data are the most contemporaneous with the POI. The Department's Position: We disagree with Nantong. The rate used for electricity in the preliminary determination is an industrial rate. Moreover, while that rate predates the POI, the rate advocated by Nantong is for a period beyond the POI, and the difference in contemporaneity is of only a few months. The Department has relied on the International Energy Agency as a source for energy values in a number of recent cases. Accordingly, we have continued to rely on that source to value electricity for the final determination in this case. Comment 9: Surrogate Value for Zinc Nitrate Nantong argues that the Department should find more accurate information to value zinc nitrate. In particular, Nantong argues that the Indian Import Statistics category for zinc nitrate is overly inclusive and captures imports of items other than zinc nitrate. The Department's Position: The Department has been unable to find an alternative to the Indian Import Statistics value for zinc nitrate, and no party, including Nantong, has suggested an alternative. Therefore, we have continued to rely on this value for the final determination. Comment 10: Use of a Market Rate for Ocean Freight Nantong asserts that the Department verified that its market-economy derived ocean freight expenses for several shipments were accurately reported, and verified. Nantong argues that the Department should base the freight expenses for all U.S. sales on these values, rather than rely on surrogate values. (3) The Department's Position: We disagree with Nantong that its market-economy shipment rates should be used to value freight for all U.S. sales. Consistent with 19 CFR 351.408(c)(1), the Department's practice in NME cases is to base freight expenses for all sales on market economy rates when a significant percentage of shipments were made involving a market economy carrier. The Department also considers whether shipments were made to a representative number of different ports. See Notice of Final Results and Partial Recission of Antidumping Duty Administrative Reviews: Heavy Forged Hand Tools From the People's Republic of China, 65 FR 43290 (July 13, 2000), and accompanying Decision Memorandum at Comment 12. In the instant case, only a few shipments were made using a market carrier. Therefore, as in the preliminary determination, we have relied on the market-economy expenses to value the freight only for those transactions involving shipment by market-economy carriers. For all other U.S. sales, we have continued to value freight using surrogate freight rates. Comment 11: Critical Circumstances Dragon Trading and Nantong argue that the Department should make a negative critical circumstances determination for all PRC companies in the "all others" and PRC-wide categories in the final determination. Nantong contends that the Department's preliminary finding of massive imports of steel wire rope from the PRC over a "relatively short period" of time was based on country-wide import data that included imports from both Nantong and Fasten - the two largest PRC exporters of steel wire rope. Nantong argues that excluding shipments from Nantong and Fasten from country-wide import data would support the fact that there were not massive imports from companies other than those specifically investigated in this proceeding. Finally, Nantong argues that it is not the Department's practice to extend a finding of critical circumstances for investigated companies to the "all others" category. Fasten argues that for the final determination the Department should rely upon Fasten's own monthly shipment data in evaluating for the final determination whether or not there were massive increases in imports. Fasten proposes using base and comparison periods of either three or six months. The petitioner argues that the Department should uphold for the final determination its affirmative critical circumstances finding for all producers and exporters in the PRC, and that the Department should continue to rely upon country-wide import data and a four-month base and comparison period in conducting its analysis. The Department's Position: We agree with the petitioner. Section 735(a)(3) of the Act provides that the Department will determine that critical circumstances exist if: (A)(i) there is a history of dumping and material injury by reason of dumped imports in the United States or elsewhere of the subject merchandise, or (ii) the person by whom, or for whose account, the merchandise was imported knew or should have known that the exporter was selling the subject merchandise at less than its fair value and that there would be material injury by reason of such sales, and (B) there have been massive imports of the subject merchandise over a relatively short period. In determining whether the first criterion under section 735(a)(3) of the Act is met, we have taken note of an affirmative European Union antidumping and injury determination, announced in August 1999, on steel wire rope from the PRC. On this basis, we find a history of dumping and material injury from the PRC. Therefore, we find that the first criterion under section 735(a)(3) of the Act is met with respect to all companies. With respect to massive imports, the second criterion under section 735(a)(3) of the Act, we considered imports for a seven-month period ending with September 2000, the month of the preliminary determination, compared to imports during the preceding seven months. On August 28, 2000, the Department requested that Fasten and Nantong submit updated shipment data, as it became available, through September 30, 2000. Fasten and Nantong failed to submit data for the month of September 2000, despite our specific request to do so, and never claimed that such data was unavailable. This precluded the Department from examining the issue for massive imports based on the most up-to-date company-specific shipment figures for this determination. Because Fasten and Nantong failed to submit the requested shipment data for September 2000, we have determined that the use of facts available is appropriate under section 776(a) of the Act, and we have relied on import data in conducting our analysis related to the massive imports criterion noted above. The U.S. Census import data for imports of steel wire rope from the PRC for a seven-month period, ending September 2000, demonstrates that imports of steel wire rope from the PRC was greater than 15 percent. See Memorandum to the File, Critical Circumstances Analysis Regarding Massive Imports (February 14, 2001). Accordingly, we determine that there were massive imports during the period in question for Fasten and Nantong. With respect to the "all others" (4) category of companies, we normally rely on the massive imports findings for the selected mandatory respondents. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, 65 FR 5554 (February 4, 2000). In this case, we determined that there were massive imports for Fasten and Nantong, the only mandatory respondents. Although we made this determination on the basis of the facts available, we did not use an adverse inference. Therefore, we have considered this as evidence of massive imports for the "all others" category of companies. Furthermore, we were able to use U.S. Census import data to determine that there were massive imports. We have determined that critical circumstances exist with respect to Nantong and the six companies included in the "all others" category. (5) We have not determined that there are critical circumstances with respect to Fasten because Fasten's final dumping margin is de minimis. Finally, as adverse facts available, we have determined that critical circumstances exist with respect to the "PRC-wide" category of companies. These producers/exporters were uncooperative in this investigation, in that they did not respond to any portion of the Department's antidumping questionnaire. (6) Comment 12: Correction of Ministerial Error for Valuing International Freight The petitioner argues that in the preliminary margin calculation program the Department did not use the surrogate value for ocean freight set forth in the Department's Surrogate Value Memorandum. The Department's Position: We agree with the petitioner, and have used the correct value in the margin calculation program for the final determination. Comment 13: Correction of Ministerial Error for the Conversion Factor of Wood Reels Nantong argues that the Department used two different methodologies in converting Nantong's reported factor for wood for reels at different stages of the margin calculation. The respondent contends that the Department should use a consistent methodology. The Department's Position: We agree with Nantong and have, for the final determination, applied a consistent conversion methodology for the factor in question. Recommendation Based on our analysis of the comments received, we recommend adopting the positions described above. If these recommendations are accepted, we will publish the final determination and the final weighted-average dumping margins in the Federal Register. Agree__________ Disagree__________ __________________________________ Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration __________________________________ (Date) _______________________________________________________________________ footnotes: 1. The petitioner in this proceeding is the Committee of Domestic Steel Wire Rope and Specialty Cable Manufacturers. 2. The record of this case contains wire rod pricing data from numerous different sources. A comparison of the Malaysian import value to these data supports a finding that the Malaysian import value is aberrational. 3. In the preliminary determination, the Department used market-economy ocean freight rates only for those specific shipments for which Nantong reported that it used a market economy carrier. For all other U.S. transactions, the Department applied a surrogate value in adjusting for Nantong's ocean freight expense. 4. The "all others" category in a non-market economy proceeding, unlike the "all others" category in a market-economy investigation, includes only those companies that expressed a willingness to participate in the proceeding but whose responses were not examined due to limited Department resources. 5. We note that the finding of critical circumstances with respect to Fasten is moot given that, as shown in the Federal Register notice accompanying this memorandum, Fasten's final dumping margin is de minimis. 6. At the outset of this case, the Department forwarded its antidumping questionnaire to the Ministry of Foreign Trade & Economic Cooperation (MOFTEC), with a letter requesting that it forward the questionnaire to all exporters of steel wire rope who had shipments during the POI. The "PRC-wide" rate applies to producers/exporters that did not respond to the Department's questionnaire.