67 FR 36570, May 24, 2002 A-570-870 Investigation Public Document IA/III/IX: AV May 15, 2002 MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary for Import Administration, Group III SUBJECT: Issues and Decision Memorandum for the Antidumping Duty Investigation of Circular Welded Carbon-Quality Steel Pipe from the People's Republic of China: 10/1/00-03/31/01 ---------------------------------------------------------------------- SUMMARY: We have analyzed the case and rebuttal briefs of interested parties in response to the Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Circular Welded Carbon-Quality Steel Pipe from the People's Republic of China ("Preliminary Determination"), 66 FR 67500 (December 31, 2001). As a result of our analysis, we have made changes from the Preliminary Determination. Company-specific calculation changes can be found in each Respondent's (1) Analysis Memo. We recommend that you approve the positions we have developed in the "Discussion of the Issues" section of this Issues and Decision Memorandum. Below is the complete list of the issues in this antidumping duty investigation: General Issues Comment 1: Market Economy Purchases from Country X and Country Y Comment 2: Valuing a Respondent's Factors of Production using the other Respondent's Market Economy Purchases Comment 3: Surrogate Value for Hot-Rolled Coil Comment 4: Calculation of Zinc Usage Ratio Comment 5: Surrogate Companies used for the Financial Ratios Calculation Comment 6: Iran's Market Status in the Surrogate Value Calculation Comment 7: Treatment of Foreign Inland Freight and Brokerage and Handling in Normal Value Calculation DISCUSSION OF THE ISSUES: Comment 1: Market Economy Purchases from Country X and Country Y Petitioners (2) argue that the Department of Commerce ("Department") should not use the import prices paid by respondents for hot-rolled coil from Country X to value hot-rolled coil because there is substantial reason to believe that hot-rolled coil from Country X is subsidized and/or dumped. For purposes of this public memorandum, we refer to countries X and Y because the source countries are proprietary. These countries and previous Departmental cases that refer to them can be found in the APO version of the Memorandum to Edward C. Yang: Final Determination in the Investigation of Certain Circular Welded Carbon Quality Steel Pipe from the People's Republic of China - Market Economy Inputs, (May 15, 2002) ("Market Economy Input Memo"). Petitioners note that in the Preliminary Determination, the Department determined that exporters of hot-rolled coil from Country Y benefitted from countervailable subsidies and therefore disregarded the prices of hot-rolled coil from Country Y. See Preliminary Determination of Certain Circular Welded Carbon Quality Steel Pipe from the People's Republic of China: Factors Valuation Memorandum ("Factors Valuation Memo"), at 3 (December 20, 2001). However, the Department used the market economy prices of hot-rolled coil from Country X purchased by respondents in the production of subject merchandise. Id. According to the petitioners, recent Department investigations involving certain producers of hot-rolled coil from Country X, as well as other countervailing duty ("CVD") investigations involving general export subsidies from the government of Country X, demonstrate that evidence exists to believe that hot-rolled coil prices from Country X are not suitable for use as factor values in this investigation. Thus, petitioners argue that the Department should use surrogate values from India to value hot-rolled coil. Petitioners state that Department precedent and Congressional intent both instruct that the Department should avoid using prices which it has reason to believe or suspect may be dumped or subsidized. See Omnibus Trade and Competitiveness Act of 1988, H.R. Conf. Rep. No. 100-576 at 590-91 ("Conference Report"); Final Determination of Sales at Less Than Fair Value: Certain Automotive Replacement Glass Windshields from the People's Republic of China and accompanying Issues and Decision Memo, 67 FR 6482 (February 12, 2002) at Comment 1 ("ARG Final Determination"). Petitioners assert that a past finding of subsidization, even de minimis subsidization, is sufficient for the Department to disregard an export price. According to the petitioners, the standard the Department must employ in determining whether to avoid export prices is not an absolute finding of subsidy, rather it is "about making a reasonable inference from the evidence on the record that export prices may be subsidized." See ARG Final Determination at Comment 1. Moreover, petitioners stated that the level of subsidization is not a relevant factor in the Department's determination to avoid export prices. Id. Petitioners stated that the legislative history does not mandate an actual finding of subsidization and it does not require the Department to examine the actual level of subsidization of the export prices, because this would require the Department to conduct a formal investigation which was explicitly not envisioned. According to the petitioners, the Department should accept the finding of the existence of certain companies' receipt of subsidies in two other recent steel product investigations as a reasonable inference of the existence of subsidies regarding hot-rolled coil in the present investigation. Petitioners argue that certain companies from Country X, the source of the hot-rolled coil used in the production of standard pipe by two of the Chinese producers, have twice been found to benefit from specific subsidies as well as broadly available, non-industry specific export subsidies which may benefit all exporters in Country X. See Market Economy Input Memo. In addition to subsidies, petitioners claim that the hot-rolled coil imported into China from Country X may be dumped. Petitioners claim that a recent news article from Country X stating that the Chinese steel industry has requested that the Chinese government impose an antidumping order against all steel products from Country X, demonstrating that China has also had dumping complaints on hot-rolled coil prices from Country X. With this additional evidence, the petitioners urge the Department to reject the Country X hot-rolled coil prices and use surrogate values from India to value the hot-rolled coil factor of production instead. Shuang Jie argues that if the Department ignores the substantial market distortions resulting from India's minimum import floor price and other measures, it must reject all subsidized Indian import prices. Citing numerous Department determinations and publications, Shuang Jie asserts that other countries such as Indonesia, Malaysia, Pakistan, the Philippines, South Korea, Thailand, and the United States have non- specific and generally available export subsidies. In addition, Shuang Jie argues that the Department has found in previous hot-rolled CVD investigations that Argentina, Brazil, Indonesia, South Africa, and Thailand have subsidized hot-rolled coil industries. Consequently, Shuang Jie states that if the Department rejects all prices which it believes may be dumped or subsidized, it must also purge these countries from the Indian import data of hot-rolled coil. Baosteel argues that the Department should apply surrogate values from India, and that the Department has previously stated that a market economy import price paid by a non-market economy ("NME") producer will normally be the best available information to value a factor of production. See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China; Final Results of 1999-2000 Administrative Review, Partial Rescission of Review, and Determination Not to Revoke Order in Part, 66 FR 57420 (November 15, 2001) ("TRBs"). Baosteel points out that the legislative history of the Omnibus Trade and Competitiveness Act of 1988 reiterates the need to value factors using the best available information. Baosteel argues application of the "reason to believe or suspect" standard to actual import prices into the NME in question and the disregard of market-economy prices on the basis of non-industry specific subsidies that may benefit all exporters to all markets is impermissible. In the ARG Final Determination, the Department explained that a finding of reason to believe or suspect that export prices from a country may be subsidized is sufficient to disregard those market economy prices. See ARG Final Determination at Comment 1. Baosteel infers from this that prior CVD findings might not provide a basis for the Department to believe that inputs are subsidized. Following this conclusion, Baosteel argues that the Department's "reasonable inference" is that if a country has a government, the country has exports, exports may benefit from those possible subsidies, and there is a possibility that the exports are subsidized. Based on this reasoning, the Department's recent determinations are irrelevant to Baosteel in this investigation because its suppliers did not purchase steel inputs directly from certain companies in Country X and Country Y. See Market Economy Input Memo. Therefore, Baosteel argues, CVD findings against these countries and companies cannot support a reason to believe or suspect that actual import prices of hot-rolled steel from the market economy exporters are distorted by subsidies. If the Department ignores the actual prices paid by the company, Baosteel argues it should follow its practice of using size, type and grade specific surrogate data to value the hot-rolled steel used. Baosteel provides evidence that identifies the appropriate Harmonized Tariff Schedule of the United States ("HTSUS") numbers of the hot-rolled steel sheet and strip consumed by the two companies, which it states should be used for the Indian surrogate value calculation. However, Baosteel argues that because there are no market-economy import statistics on the record for those HTSUS numbers in the Monthly Statistics of the Foreign Trade of India, Vol.II ("Indian Import Statistics"), the Department should use separate surrogate values for the types of hot-rolled steel consumed by these two companies. Additionally, Baosteel proposes that if the Department does not accept market economy purchase prices from Country X or Country Y for purposes of valuing hot-rolled steel because of possible subsidies, the Department should exclude imports from these two countries from the Indian Import Statistics in calculating surrogate values. Citing section 351.408(c) of the Department's regulations, Baosteel argues that "where a factor is purchased from a market economy supplier and paid for in a market economy currency, the Secretary normally will use the price paid to the market economy supplier" to value the factors of production. According to Baosteel, the Department has consistently utilized reported market economy input prices, and the U.S. Court of International Trade and the U.S. Court of Appeals for the Federal Circuit have affirmed this practice. See Olympia Industrial, Inc. v. United States ("Olympia"), 1997 WL 181529, at 2 (Ct. Int'l Trade, April 10, 1999); Final Results of Redetermination On Remand Pursuant to Shakeproof Assembly Components Division of Illinois Tool Works, Inc. v. United States, Court No. 97-12-02066 (September 9, 1999), aff'd, 102 F. Supp. 2d 482, aff'd No. 00-1521 (Fed. Cir. October 12, 2001); and Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China; Final Results of 1997- 1998 Antidumping Duty Administrative Review and Final Results of New Shipper Review 64 FR 61837 (November 15, 1999) ("TRBs 97-98"). According to Baosteel, the Department has also stated that a market economy import price paid by a NME producer will normally be the best available information to value a factor of production. See TRBs at Comment 1. Baosteel disagrees with the petitioners' statements that its subject merchandise suppliers purchased material inputs directly from Country X and Country Y. Baosteel argues that, as verified by the Department, both of its suppliers did not purchase the inputs from the original producers in Country X and Country Y or from other exporters located in those countries, but rather purchased hot-rolled steel from a market economy exporter. The market economy suppliers did not receive any subsidies from Country X and Country Y, and there are no antidumping orders in effect for such inputs into China. Therefore, Baosteel argues, there is no reason for the Department to believe or suspect that the actual import prices paid by its suppliers might have been dumped or subsidized. Baosteel also argues that even if the Department might be able to conclude or infer that certain companies' exports from Country X and Country Y benefitted from subsidies, there is no record evidence to support any further inference of a latter pass through benefit to the suppliers. In this case, argues Baosteel, there is no evidence that the market economy exporters are affiliated with or are agents of the certain companies from Country X and Country Y, or that the market economy exporters and the steel producers could in any way be construed to be the "same companies." According to Baosteel, there is no evidence that the prices paid by Baosteel's suppliers were not at arm's-length or not determined by market forces. According to Baosteel, the Department previously held that "[t]he responses stated that the only raw materials that TAMSA purchases are purchased from unrelated suppliers. Without relationship between the purchaser and the supplier, we have no reason to believe, nor is there any evidence of, a pass through of subsidies." See Notice of Sales at Less Than Fair Value: Oil Country Tubular Goods from Mexico, ("OCTG from Mexico") 49 FR 35482 (December 12, 1984). Baosteel argues that although OCTG From Mexico involved a CVD investigation initiated prior to the 1988 Act, the policy behind the Department's decision in that case remains valid in the current investigation: no pass through of subsidies can be inferred when there is no relationship between the purchaser and the supplier. Baosteel asserts that Congress instructed the Department to base its decision about alleged subsidized or dumped prices on information that is generally available to it at the time it is making its determination. See Conference Report at 590-591. According to Baosteel, at the heart of the issue in this case is who bears the ultimate burden of proof of establishing that export prices might be subsidized and what are the appropriate procedural burdens of production for determining if export prices might be subsidized. Baosteel argues that these issues were explored in Creswell Trading Company v. United States 15 F.3d 1054 (Fed. Cir. 1994) ("Creswell"). Baosteel argues that the Creswell court noted that the Department bore the burden of showing, with a preponderance of the record evidence, that certain imported products were subsidized. The court acknowledged that, despite having the legal burden of persuasion, the Department was not in a position to gather evidence on that issue because the evidence was within the control of other parties (i.e., respondents). Accordingly, the Court of Appeals for the Federal Circuit created a legal presumption that - when triggered by an initial showing by the Department - shifted the burden of going forward onto the government to put forth evidence that the imports in question were not subsidized. However, any rebuttal of that presumption by respondents shifted the burden of proof back to the Department. Id. and U.S. Steel Group, 96 F.3d 1352, 1359 (Fed. Cir. 1996). Unlike the situation in Creswell, where the Indian government controlled the information required by the Department, Baosteel argues that its subject merchandise suppliers in this case purchase market economy inputs from unaffiliated suppliers. Thus, it cannot control the information the Department might require in determining whether market economy inputs purchased from market economy exporters are subsidized because of the existence of subsidies or generally available export subsidies. See Zenith Elec. Corp. v. United States, 988 F.2d 1573, 1583 (Fed. Cir. 1993). Baosteel notes that, notwithstanding the inability of its suppliers to control access to all of the market economy exporters' sales data and financial information, the companies nevertheless have provided evidence demonstrating that no government or other public entity provided the market economy exporters with any financial contribution or that the prices of the market economy exporters' steel sales to China benefitted from any programs that might constitute countervailable subsidies. Baosteel argues that this evidence sufficiently rebuts any presumption or inference the Department might make with regard to the subsidization of market economy inputs purchased from the exporter. Baosteel also argues that the Department should disregard petitioners' argument that hot-rolled steel coil imported into China from Country X may be dumped. According to Baosteel, the Department's practice is to avoid the use of dumped prices for valuing factors of production only if there previously has been a formal finding of dumping with respect to the input and country in question. See Final Results of 1998-1999 Administrative Review, Partial Recission of Review, and Determination Not to Revoke Order in Part: Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China and accompanying Issues and Decision Memo, 66 FR 1953 (January 10, 2001) ("TRBs 98-99"). According to Baosteel, the Department explained that the "believe or suspect" standard is met when the importing country has a dumping finding on the input in question, and because dumping analyses typically compare the prices of imports in the investigating country with the home market prices in the country being investigated, dumping findings are market specific. Thus, Baosteel asserts, the Department concluded that "we do not agree that U.S. (or other third country) antidumping findings provide a basis to believe or suspect that import prices into the surrogate country are dumped." Id. In this case, Baosteel argues, not only is it unclear whether the legislative history language cautioning against the use of dumped prices applies to actual market economy input prices, but there also are no antidumping findings in China against hot-rolled steel coil or Country X. Moreover, any such U.S. or third country antidumping findings are irrelevant to whether the prices of imports from those countries into China might be distorted. Accordingly, Baosteel concludes, there is no reason for the Department to avoid using the actual market economy steel input purchase prices of its suppliers in valuing their respective steel input factors of production. WeiFang states that it made three market economy purchases of hot-rolled coil from Country X during the period of investigation ("POI"), which the Department used in its calculation of WeiFang's factors of production in the Preliminary Determination and the petitioners made no objection at that time. WeiFang points out that the purchases were verified and that there is no evidence that its market economy purchases were not at fair market prices. WeiFang notes that it is Department policy to use market economy purchases by companies in NME countries wherever possible because it produces the most accurate results. See Final Determination of Sales at Less Than Fair Value: Hot-Rolled Carbon Steel Flat Products from the People's Republic of China, 66 FR 49632 (September 28, 2001) ("Hot-Rolled from China") at Comment 1. WeiFang notes that the petitioners' reliance on the ARG Final Determination, that market economy purchases may be excluded if the Department has a "belief" or "suspicion" that the prices are distorted by non-specific export subsidies is unsupported. WeiFang argues that it has demonstrated that there is no evidence on the record of this investigation, and no evidence cited in the ARG Final Determination, that the prices WeiFang paid were in any respect distorted by subsidies or dumping. According to WeiFang, the ARG Final Determination does not identify any export subsidy programs from Country X, specific or non-specific, that affected the price of the Country X hot-rolled coil purchased by WeiFang during the POI. In addition, WeiFang argues that what the petitioners represented as the "most recent WTO Policy Review for Country X" (from 1996) in support for their argument regarding subsidies in the ARG Final Determination is not correct. In fact, WeiFang asserts, a more recent WTO Report, issued in 2000, eighteen months before the ARG Final Determination, indicates that many of Country X's previous export subsidies were revoked years ago and that much of the remaining support for exports is indistinguishable from that provided by the United States Government to its exporters. Moreover, WeiFang argues that a statement by the United States Trade Representative ("USTR") in a National Trade Estimate Report on Foreign Trade Barriers (2001) (that Country X aggressively promotes exports through a variety of policy tools that include export subsidies cited in the ARG Final Determination) does not indicate whether the report identifies any specific export subsidy, whether the USTR identified the impact of any such subsidy on specific exports from Country X, or whether the Department has confirmed that any such subsidy remains in effect. While petitioners argue that certain companies recently were found to have received subsidies from the government of Country X in two separate CVD investigations involving other steel products, WeiFang contends that one of those cases specifically reviewed each of the alleged non-specific subsidies and found that some are no longer in force and others are at lower levels. See Market Economy Input Memo. WeiFang notes that the petitioners conspicuously omit the most important finding that in both cases, the Department found de minimis subsidies for certain companies from Country X. WeiFang claims that the Department, therefore, specifically excluded WeiFang's supplier of hot rolled coil from Country X from any such duties in both the 1999 and 2002 decisions. See Market Economy Input Memo. Accordingly, WeiFang asserts that the petitioners' argument is without merit, since the company from which WeiFang purchased the hot-rolled coil from Country X was found to have a de minimis subsidy rate by the Department in two recent investigations. Department's Position: After reviewing the arguments summarized above, we agree with the respondents that the market economy prices they paid for pipe inputs from Country X should not be disregarded. Country X: Petitioners correctly note that the Department's regulations direct the Department to avoid using prices as factors of valuation when it believes or suspects the product is dumped or subsidized. However, we disagree with the petitioners' argument that the ARG Final Determination provides sufficient reason to disregard the prices that the respondents paid for market purchases from Country X. (3) Our decision to disregard the market economy prices paid in that investigation was based on a reason to believe or suspect that Country X exporters may be subsidized. Since that decision, the Department clarified the intent articulated in that case, stating that "The petitioner has misinterpreted our decision in the ARG Final Determination, where we stated that the level of subsidization is not a relevant consideration in determining whether we have a reason to believe or suspect that prices may be subsidized." See Notice of Final Determination of Sales at Less Than Fair Value: Folding Metal Tables and Chairs from the People's Republic of China and accompanying Issues and Decision Memorandum, 67 FR 20090 (April 24, 2002) ("Tables and Chairs from China"). Moreover, the Department clarified its position from the ARG Final Determination by stating that, "however, that does not mean that where the Department has in fact investigated the industry and input suppliers in question, the findings from such an investigation should not be taken into account." Respondents in that case noted that previously, the Department found several of Country X's steel producers had received de minimis subsidies. See Tables and Chairs from China. Like Tables and Chairs from China and unlike the ARG Final Determination, in this investigation the Department previously conducted CVD investigations on the companies from which some of the Chinese respondents purchased market economy inputs. See Market Economy Input Memo. Based on these investigations, the Department has company specific subsidy information regarding the companies which produce the hot-rolled coil that was eventually used in the production of the subject merchandise by some of the respondents. In all of the investigations noted above, the subsidies received by the companies from which the respondents purchased the hot-rolled coil were found to be de minimis. Petitioners note that in previous Departmental determinations, the Department found a net positive subsidy rate existed for certain companies from Country X. See Market Economy Input Memo. For purposes of this final determination, we do not believe it is appropriate to rely on the ongoing and incomplete CVD investigation identified in the Market Economy Input Memo. The preliminary findings in that case have not yet been verified or commented upon by the interested parties and are subject to change. In a recent determination, the Department concluded that a positive net subsidy rate existed for certain companies, including that company from which some of the respondents' suppliers purchased hot-rolled coil. See Market Economy Input Memo. Although the Department calculated a net positive subsidy rate for that company, it is considered de minimis under section 703(b)(4)(A) of the Tariff Act of 1930, as amended ("the Act"). The respondents have correctly noted that the Department has recently investigated the steel producers from Country X and found that those producers received de minimis subsidies. a close analysis of hot-rolled steel CVD final determinations for Country X show that the programs found to be countervailable in 1993 for certain companies have either recently been shown in other Country X CVD proceedings to provide no or de minimis benefits to those certain companies, or any benefits they conferred would have been long since exhausted. Therefore, the reasonable inference with respect to those certain companies is that the hot-rolled steel it sells to the Chinese pipe producers is not subsidized. Consequently, bearing in mind that in the instant investigation the Department has investigated the industry and the input suppliers in question, unlike in the ARG Final Determination, the findings from these investigations should be taken into account. While we did establish a general presumption in the ARG Final Determination, based on generally available information, in this case we have company specific information that demonstrates that the producers' prices to some of the respondents for the hot-rolled coil were not and continue not to be subsidized. Consequently, for purposes of this final determination, we continue to use the market economy prices paid by respondents in valuing the hot-rolled coil input. With respect to Baosteel's argument that the Department has incorrectly stated that its suppliers purchased hot-rolled coil from Country X and Country Y, we agree. A careful review of Baosteel's verification exhibits show that its suppliers' hot-rolled coil purchases were made through a market economy exporter, not from Country X or Country Y. See Baosteel Verification Report at Exhibit A-4. In fact, the hot-rolled coils' countries of origin were Country X and Country Y, but the market prices paid by Baosteel's suppliers were paid to the market economy exporters, who are not from Country X or Country Y. Country Y: Baosteel argues that the Department should use its hot-rolled coil prices purchased from Country Y because the inputs were bought through third- country market economy trading companies. Baosteel contends that even if the company, industry and/or input in question have been subsidized, there is no proof that the effects of subsidization would have benefitted these market economy trading companies. However, the legislative history and recent Department determinations support the principal that we should disregard prices that we have reason to believe or suspect are distorted by subsidies. In a recent Department determination, the exact pipe input in this case from Country Y was found to be subsidized. See Market Economy Input Memo. The Department is also directed by the legislative history not to conduct a formal investigation to ensure that such prices are not subsidized. Rather, the Department was instructed by Congress to base its decision on information that is generally available to it at the time it is making its determination. Because of this recent case where the input for subject merchandise in this determination was found to be subsidized, we will disregard Baosteel's purchase prices from Country Y. On a related matter, in the ARG Final Determination, the Department stated that it would be excluding Korea, Indonesia, and Thailand from the Indian Import Statistics because these countries maintained broadly available, non-industry specific export subsidies that may benefit all exporters to all markets. See ARG Final Determination at Comment 1; see also Tables and Chairs from China at Comment 1. Therefore, we have excluded Korea, Thailand and Indonesia from the Indian Import Statistics surrogate value calculation. Comment 2: Valuing a Respondent's Factors of Production using the other Respondent's Market Economy Purchases Shuang Jie argues that the Department has a statutory obligation to consider whether the market prices for hot-rolled coil paid by the other respondents are the best information for valuing Shuang Jie's hot-rolled coil. According to Shuang Jie, in TRBs 97-98 at 61845, the Department suggested that the court's decision for the Department to test the reliability of the trading company value to determine whether it has the best available information, was nothing more than "dicta." Shuang Jie claims that the Department's refusal to consider the reliability of the other respondents' actual hot-rolled coil prices is inconsistent with the Department's own regulations, which states "in those instances where a portion of the factor is purchased from a market economy supplier and the remainder from a NME supplier, the Secretary normally will value the factor using the price paid to the market economy supplier." See 19 C.F.R. §351.408(c)(1). Shuang Jie also argues that the Department should use actual market prices paid by other respondents as a surrogate to value Shuang Jie's hot- rolled coil inputs. Shuang Jie emphasizes prices paid by other producers of the subject merchandise provide a closer approximation of "what (Shuang Jie's) costs or prices would be if such prices or costs were determined by market forces." See Tianjin Machinery Import & Export Corp. v. United States, 806 F. Supp.1008, (the Department found that such prices were the best available information for valuing the other respondents' hot-rolled coil inputs). Shuang Jie further contends that the other respondents' hot- rolled coil import prices are more market-oriented, better reflect the circumstances under which Shuang Jie purchases hot-rolled coil, as well as the type and quality of hot-rolled coil that Shuang Jie uses to produce the subject merchandise, and more closely resemble the hot-rolled coil price in Indonesia. The factors used in the past to determine the reliability of hot-rolled coil prices are: the value and volume of steel imports; the type and quality of the imported steel, and the consumption of imported steel by the NME producers. See Redetermination Following Olympia II, at 4, and TRBs 97-98 at 63854. If the Department decides to examine whether these prices are "aberrational," it will find that the only aberrational price is the Indian import price. Shuang Jie also states that the volume of the other respondents' imports of hot-rolled coil is also significant and commercially meaningful. The type and quality of the imported steel is essentially identical to the type and quality that the respondents use to produce the subject merchandise. Shuang Jie reported that it consumed hot-rolled coil from the following HTSUS categories: 7208.3700; 7208.3800; and 7208.3900. Three of the respondents purchased hot-rolled coil for the same use, suggesting a similarity between their inputs that cannot be found in the Indian import data. According to Shuang Jie, the purpose of finding surrogate values is to determine the producer's material costs if market forces were in place, thus, the Department should favor a price that more closely reflects market principles. Shuang Jie states that the other respondents purchased hot-rolled coil at arm's length and in market economy currencies from hot- rolled coil producers. In contrast, the Indian import prices were established by the government of India and were distorted and unreliable and Shuang Jie notes the Department has formally recognized India's "Market Distorting Practices," Indian producers have formed cartels, and India's import barriers keep import prices artificially high. According to Shuang Jie, the Department should use a value that is based on purchases of material of the same type and quality as the merchandise used by Shuang Jie (i.e., the material purchased by other respondents to produce pipe). Shuang Jie argues that Indian data does not show imports for the most important HTSUS category or include a wide range of material. And while approximately 88% of the Indian imports of hot-rolled coil are classified under HTSUS 7208.3900, Shuang Jie used a significantly lower percentage of pipe from this category. Finally, Shuang Jie notes that Indian hot-rolled coil prices are well above Indonesian hot-rolled coil prices, which are in the same range as the other respondents' market prices and are reliable indicators of what a Chinese pipe producer would pay for hot-rolled coil. According to the petitioners, the statute states that the valuation of the factors of production shall be based on the best available information regarding the values of such factors in a market economy country or countries considered to be appropriate by the administering authority. See Section 773(c)(1) of the Act . Petitioners note that the Department's normal practice is to use the price paid to the market economy supplier if the respondent purchased a factor from a market economy supplier and paid in a market economy currency. See 19 C.F.R. § 351.408(c)(1). While petitioners have argued that the Department should disregard these market economy purchases entirely, they assert that regardless of the determination on these market economy purchases, the Department should continue to use surrogate value methodology for Shuang Jie's hot-rolled coil prices, because it did not have any market economy purchases. Petitioners argue that even though Shuang Jie argues that the market economy purchases of other respondents are the best available information, those purchases are not publicly available information and are company specific information. Petitioners note that the Department normally will use publicly available information to value factors. See 19 C.F.R. § 351.408(c)(1). In this case, the petitioners argue that the Indian import prices of hot-rolled coil are the best available public information on the record. Therefore, the petitioners argue the Department should not use the market economy purchases of other respondents, but should instead use Indian import prices to value Shuang Jie's hot-rolled coil prices. Department's Position: We agree with the petitioners and disagree with Shuang Jie. In this case, the best information available for calculating the surrogate value for the hot-rolled coil input is the Indian Import Statistics, as noted above in Comment 2. India was selected as the surrogate country because it is at a comparable level of economic development to that of China, is a significant producer of subject merchandise, and both the petitioners and respondents placed evidence on the record for a significant number of factors used in the production of the merchandise under investigation. Shuang Jie has not provided sufficient evidence supporting the rejection of the Indian Import Statistics. The prices on the record not only demonstrate that one of the Indian surrogate values is actually less expensive than the price paid by one of the respondents, but also, that same surrogate price falls within the range of the prices already on the record. In addition, Shuang Jie failed to provide evidence that the other hot-rolled coil price was distorted. Shuang Jie argues that the Department should value its hot-rolled coil using the market economy prices paid by some of the other respondents. With regard to this argument, the Department's practice here is to value a factor using the market economy price if the Respondent "purchased from a market economy supplier and paid for in a market economy currency, the Secretary normally will use the price paid to the market economy supplier. In those instances where a portion of the factor is purchased from a market economy supplier and the remainder from a NME supplier, the Secretary normally will value the factor using the price paid to the market economy supplier." In other words, the Department prefers to apply 19 C.F.R. §351.408(c)(1) on a respondent-specific basis. Because Shuang Jie did not purchase from a market economy supplier, we have not valued Shuang Jie's hot-rolled coil using market economy prices paid by other respondents. We agree with the petitioners that it is the Department's practice to use publicly available information when valuing a factor of production. See Notice of Final Determination at Sales of Less than Fair Value: Foundry Coke Products from the People's Republic of China, 66 FR 39487, at Comment 1 (July 31, 2001). This requirement is only superseded when a respondent has purchased from a market economy supplier, and Shuang Jie did not make such a purchase. See 19 C.F.R. 351.408(c)(1). Therefore, since we were able to locate a surrogate value from India, our primary surrogate, that is publicly available, sufficiently contemporaneous, specific to the input in question, and sufficiently reliable, we will continue to use the Indian surrogate value from our Preliminary Determination. Comment 3: Surrogate Value for Hot-Rolled Coil According to Shuang Jie, the Department should not disregard market economy hot-rolled coil purchases and use surrogate values from India instead. The actual market prices paid by some of the respondents provide the "best available information" for valuing Shuang Jie's hot-rolled coil prices. Shuang Jie argues that the Department cannot fulfill its mandate to use the "best available information" if it rejects these prices in favor of India's governmentally imposed minimum import floor price. Shuang Jie argues that the Department's mandate is to find the "best available information" from a market economy country or countries to determine "what a producer's costs or prices would be if such prices or costs were determined by market forces." See Shakeproof Assembly Components v. United States, 102 F. Supp. 2d 486, 491 (Ct. Int'l Trade 2001). Shuang Jie argues that, in the Preliminary Determination, the Department overlooked the following: (1) the government of India had imposed a "minimum floor price" on hot-rolled coil imports, (2) hot-rolled coil imports face tariffs and special custom surcharges of at least 35%, and (3) the Department's formal announcement that the government of India's role in the steel industry is a "matter of serious consideration" that has "contributed to a decline in imports of almost 35%, bringing the imports down below 5% of domestic consumption." See Report to the President: Global Steel Trade - Structural Problems and Future Solutions, published by the International Trade Administration, U.S. Department of Commerce, at page 163 (July 2000). Shuang Jie argues that the petitioners' only response has been that Indonesian data encompass even greater problems and that the Department should ignore all Indian market distortions. According to Shuang Jie, a comparison of Indian import values and actual prices paid makes clear that the actual prices paid provide the best and least market-distorted information for valuing Shuang Jie's hot-rolled coil. Shuang Jie argues that in its December 13, 2001 submission, it indicated that the international prices on the record range from $180 to $220 per metric ton of hot-rolled coil. Shuang Jie argues that market prices paid by the other respondents have been within the range while the Indian prices were more than 20% above the highest international price on record. According to Shuang Jie, the Department has already quantified any subsidy included in the actual prices and this data can be easily added to the hot-rolled coil price to determine precisely what these prices would be if determined entirely by market forces. Shuang Jie argues that it provided the Department with evidence and reason why the actual market prices paid by the other respondents provide the best available information for valuing Shuang Jie's hot-rolled coil. Moreover, the Department used these prices as surrogates to value those portions of the other respondents' inputs that were purchased from nonmarket suppliers. Shuang Jie states that the Department instead rejected Shuang Jie's proposal without even considering the evidence. According to the petitioners, the parties to this investigation agree that India is the appropriate surrogate country for China. Therefore, the Department should use Indian import prices as the surrogate values. Petitioners argue that Shuang Jie pointed out that India has a number of countervailable export subsidy programs and tolerates an Indian steel cartel. Petitioners argue that these two facts highlight that the Indian export price and the Indian domestic prices are not proper surrogates. According to the petitioners, this leads to the conclusion that the Indian import prices are a better surrogate. Citing their October 11, 2001 submission, the petitioners state that the public information related to Indonesia encompasses even greater problems. Consequently, according to the petitioners, the Department should continue to use Indian import prices because these prices will provide a more accurate normal value. Department's Position: We disagree with Shuang Jie and agree with the petitioners. Shuang Jie incorrectly states that in the Preliminary Determination, the Department ignored its argument that the Indian Import Statistics surrogate prices for hot-rolled coil were distorted. In fact, in the surrogate country selection memo, the Department fully addressed Shuang Jie's concerns regarding the Indian Import Statistics value for hot-rolled coil. See Memorandum from Robert Bolling, senior case analyst through James C. Doyle, Program Manager, and Edward C. Yang, Office Director, to the File: Antidumping Investigation of Circular Welded Carbon Quality Steel Pipe from the People's Republic of China, Selection of Surrogate Country, at 2-3 (December 20, 2001) ("Surrogate Country Memo"). In the Surrogate Country Memo, we stated that "where applicable, we valued Shuang Jie's hot-rolled coil using Indian Import Statistics for those HTSUS article codes used by Shuang Jie. Also, we note that the Indian Import Statistics' hot-rolled prices fall within the range of other hot-rolled prices on the record of this investigation." See Surrogate Country Memo at 3. In addition, we chose to include a range of data for the most recent eleven months available, which included five months of the POI, as a more representative basis for calculating an appropriate surrogate value. By doing so, we were able to calculate an average over a longer period of time, thereby reducing the probability of any distortive surrogate value prices. "Therefore, record evidence does not support Shuang Jie's position that using Indian Import Statistics to value hot-rolled coils are distorted, aberrational and do not provide a reliable basis for valuing this factor in China." Id. Furthermore, we stated that India was the more appropriate surrogate country for calculating surrogate values because "India is at a comparable level of economic development in the PRC, is a significant producer of subject merchandise and the petitioners and respondents placed evidence on the record for a significant number of factors used in the production of the merchandise under investigation." Id. In our Preliminary Determination, we noted "Shuang Jie stated in its November 5, 2001 submission that the hot-rolled coil it uses to produce the subject merchandise is classified under the HTSUS article codes 7208.37.00, 7208.38.00, 7208.39.00. When valuing Shuang Jie's hot-rolled coil, we noted that the Indian surrogate value used did not have imports for 7208.38.00 from market economy countries. See Factors Valuation Memorandum at 5. Therefore, we calculated a simple average of article codes 7208.37.00 and 7208.39.00." See Memorandum to the File from Alex Villanueva, Case Analyst: Analysis for the Final Determination of Certain Circular Welded Carbon Quality Steel Pipe from the People's Republic of China: Tianjin Shuang Jie Steel Pipe Company at 3 (May 15, 2002) ("Shuang Jie Analysis Memo"). For the remaining HSTUS article codes, the Indian surrogate prices used for valuing the hot-rolled coil are $229.58 U.S. dollars per metric ton for 7208.37.00, and $308.16 U.S. dollars per metric ton for 7208.39.00. While Shuang Jie argues that international prices on the record range from $180 to $220 per metric ton, and that the market prices paid by the other respondents in this investigation are within this range, the Indian prices the Department wants to use is more than 20% above the highest international price on record. However, the evidence on the record shows hot-rolled prices ranging from $183 U.S. dollars to $568 U.S. dollars per metric ton. As discussed above, the Indian surrogate hot-rolled prices range from $229.58 U.S. dollars to $308.16 U.S. dollars per metric ton, which is in the price range on record. In fact, Shuang Jie previously recognized that "the Indian hot-rolled steel price in the petition and in petitioners' October 1 submission range from $377 to $568 per metric ton." See Shuang Jie's October 3, 2001 submission. Accordingly, Shuang Jie's argument for using the market prices paid by the other respondents, over using Indian hot-rolled steel prices, for being "within the range" of prices on the record is without merit. Second, the evidence on the record clearly demonstrates that the Indian Import Statistics value is not distorted. A comparison of a respondent's market economy input price to HTSUS article code 7208.37.00 shows that, contrary to Shuang Jie's statements, the Indian Import Statistics value is actually less than the price paid by this respondent. Moreover, it is important to note the respondents did not offer sufficient evidence to support that the HTSUS article code 7208.39.00 is unusable. Therefore, a benchmark for comparison of the HTSUS article code 7208.39.00 does not exist on the record of this investigation. Consequently, given the fact that the Indian Import Statistics surrogate value for HTSUS article code 7208.37.00 falls within the range of the prices on the record and is less expensive than the price paid by one of the respondents, and the fact that there isn't an appropriate proxy for measuring the Indian surrogate price for HTSUS article code 7208.39.00, we continue to use the Indian Import Statistics surrogate data for calculating the hot-rolled coil value for those respondents which did not purchase from a market economy supplier. Comment 4: Calculation of Zinc Usage Ratio Petitioners note that, in the Preliminary Determination, the Department used the factors of production for zinc provided by WeiFang and Shuang Jie. According to the petitioners, zinc is the second major raw material of galvanized pipe and, because of its high cost, it is important to differentiate between the different sizes of pipe with regard to the zinc consumption during the galvanization process. Petitioners assert that the standard zinc usage is on a product-specific basis, but because WeiFang and Shuang Jie reported zinc usage by gross average, they significantly understated costs on small diameter pipe and overstated costs on large diameter pipe, which distorts the dumping margin. According to the petitioners, the Department had stated in a previous circular welded steel pipe case that "varnishing expenses should be allocated according to surface area." See Final Results of the Antidumping Duty Administrative Review of Certain Circular Welded Carbon Steel Pipes and Tubes from Thailand, 61 FR 1328 (January 16, 1996) ("Pipes and Tubes from Thailand"). Petitioners argue that zinc is a more significant factor input for galvanized pipe than lacquer is for black pipe. Thus, according to the petitioners, because the respondents produced various sizes of galvanized pipe, they must provide product-specific information. Petitioners argue that, because respondents failed to comply with the Department's requests to provide information on a product-specific basis, the statute authorizes the Department to use facts available information in reaching its determination. See section 776(a)(2)(B) of the Act. Petitioners urge the Department to use the ASTM specifications on the record as facts available in making its final determination, noting that zinc usage is understated if it is based on industry specification, and a product-specific basis would be better. Shuang Jie argues it reported actual zinc usage, while the petitioners ask the Department to apply theoretical industry specification as facts available, despite the fact that they admit "zinc usage is understated if it is calculated based on the industry specification. . . {I}t does not reflect the quantity of zinc actually on the pipe, because in practice pipe producers always apply a zinc coating heavier than what the specifications call for." See Petitioners' Brief at 10-11 (March 21, 2002). Shuang Jie also notes that the petitioners placed the ASTM standards on the record three weeks after the verification of Shuang Jie commenced. According to the Department's regulations, "a submission of factual information is due no later than . . . seven days before the date on which the verification of any person is scheduled to commence." See 19 C.F.R. §351.301(b)(1). As a result, Shuang Jie argues the Department should ignore petitioners' ASTM submission. Shuang Jie argues that relying on this new information after verification would prejudice Shuang Jie for petitioners' failure to comply with Department regulations. Shuang Jie has reported its actual consumption rate and usage of zinc, consistent with the manner in which it keeps its records, which the Department has verified. In addition, Shuang Jie argues that its sales data confirms there are no significant differences in zinc usage for its various pipe products. According to Shuang Jie, its sales prices do not indicate significant, if any, differences in prices by pipe size. Finally, Shuang Jie argues that, it does not recognize petitioners' theoretical arguments about zinc usage and pipe size in its normal course of business. Therefore, for these reasons, Shuang Jie argues, the Department should refuse to accept petitioners' methodology. WeiFang argues that there is no basis for the Department to engage in an artificial recalculation of zinc usage based on the surface area of specific sizes of pipe, which is not part of respondents' normal accounting practices. WeiFang argues that it is the Department's policy to use the accounting practices used by respondents in their normal course of business. WeiFang states that in its normal accounting practices it does not track zinc usage for each size pipe, but allocates the zinc usage over all of its products by weight. WeiFang notes that the Department verified WeiFang's data and methodology and found no discrepancies. Department's Position: Prior to the Preliminary Determination, the Department requested factors of production from all the respondents. The respondents submitted actual usage ratios, including zinc, calculated wherever possible, using a similar methodology of allocating consumption over total subject merchandise production. Moreover, the respondents' questionnaire responses indicated that they do not maintain CONNUM-specific zinc usage data. In addition, the verification reports explicitly describe the production process. At both Shuang Jie and WeiFang, we noted that the galvanization process of black pipe is simply done by dipping the black pipe into a large bin of liquified zinc. Once the black pipe has been galvanized, it is removed from the bin, dried, and prepared for packaging. See Shuang Jie Verification Report at 4 and WeiFang Verification Report at 7. We verified that the zinc usage reported by the respondents was the total amount of liquid zinc placed in the bin, and is the actual usage experienced by the respondents in their normal production process. We also confirmed that the respondents raw material and other appropriate ledgers maintain data at a monthly, aggregated use of zinc level. Also, during the plant tour we noted that the galvanizing stations did not maintain zinc usage records by pipe size or customer order. See Memorandum to the File from Alex Villanueva, Case Analyst, Verification of Response of Tianjin Shuang Jie Steel Pipe Co., Ltd with regard to the Sales and Production of Steel Pipe: Circular Welded Carbon Quality Steel Pipe from the People's Republic of China, (March 8, 2002) ("Shuang Jie Verification Report"); and Memorandum to the File from Amy Ryan, Case Analyst, Verification of Response of WeiFang East Steel Pipe Company with regard to the Sales and Production of Steel Pipe: Circular Welded Carbon Quality Steel Pipe from the People's Republic of China, (March 12, 2002) ("WeiFang Verification Report"). While there may be some variation in actual usage by product, petitioners have not shown that the respondents' reported usage rates are unreasonable in this case. As a result, we have continued to use the respondents' reported usage ratios for zinc. With respect to Shuang Jie's argument that the petitioners' submission was filed after the deadline for submission of new factual information, we disagree. This submission did not contain new factual information; it was an additional explanation requested by the Department in its preliminary determination regarding zinc usage, which was filed timely. See Factors Valuation Memo at 6. In any event, this issue is moot, since we did not use the petitioners' proposed methodology or rely on any information in the February 21, 2002 submission for this final determination. Comment 5: Surrogate Companies used for the Financial Ratios Calculation Shuang Jie argues that the Department should not rely on the financial statements of TATA Steel and Iron ("TATA") to value financial ratios, but instead should rely on the financial statements of the four non-integrated Indian pipe producers whose financial data are already on the record in this investigation. See Factors Valuation Memo at 9. According to Shuang Jie, the Department derives factory overhead, selling, general and administrative ("SG&A"), and profit ratios from producers that most closely represent the respondents' experiences. Shuang Jie cites Certain Hot-Rolled Carbon Steel Products, 66 FR 22183, 22193 (May 3, 2001), where the Department refused to use the financial statements of a mini-mill steel producer for calculating surrogate financial ratios to value an integrated steel producer's financial ratios. Shuang Jie also states that the Department found "that degree of integration is a relevant factor that can affect overhead rates. A fully integrated producer will have an overhead to raw material input ratio that is higher than the same ratio for a non-integrated producer . . ." See Notice of Final Determination of Sales at Less Than Fair Value: Bulk Aspirin from the People's Republic of China, 65 FR 33805 at Comment 4 (May 25, 2000) ("Bulk Aspirin"). Shuang Jie also states that the degree of diversification is relevant. In the past, the Department has declined to use the financial statements of a company producing multiple products as the basis for calculating surrogate ratios for an undiversified company. See Issues and Decision Memorandum for the Final Results of the Antidumping Duty Administrative Review of Potassium Permanganate from the People's Republic of China- January 1, 1999 through December 31, 1999, 66 FR 46775 at Comment 1 (September 7, 2001). Shuang Jie argues that TATA is a large, fully integrated steel producer whose product line ranges from steel, to bearings, iron ore, manganese ore, coal and coke, and that welded pipe is less than 5% of its total sales. In contrast, Shuang Jie is a small company that produces almost exclusively welded pipe. Basically, Shuang Jie views TATA as an integrated conglomerate, and Shuang Jie is a non-integrated producer of subject merchandise. Finally, Shuang Jie argues the Department declines using financial data from surrogate producers of subject merchandise when data inclusion distorts the results. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Non-Frozen Apple Juice Concentrate from the People's Republic of China, 66 FR 19873 at Comment 8 (April 13, 2000). Here, TATA's 40% overhead ratio is almost five times greater than the average of the four Indian pipe producers and is four times higher than the highest overhead ratio of any other Indian pipe producer. Shuang Jie implies that the use of TATA overhead data would be aberrational and would distort the surrogate value for Shuang Jie's overhead. Baosteel argues that the Department prefers deriving these ratios from producers of identical or comparable merchandise to those of the subject company. In the Cut-to-Length Plate Final, Baosteel argues, the Department used only the financial data of Steel Authority of India Limited ("SAIL") and TATA in calculating the surrogate ratios because the two integrated producers' annual reports reflected the costs of producing the merchandise. Here however, Baosteel argues, because TATA is a fully integrated steel producer, TATA's capital investment and financial experience cannot reflect the experience of non-integrated Chinese respondents in this investigation. Baosteel recommends that the Department instead use non-integrated Indian producers of pipe. Baosteel cites the Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Preserved Mushrooms from the People's Republic of China, 63 FR 41794 (August 5, 1998), where the Department set the profit level of the two non-profitable surrogates to zero and then calculated a simple average of the profit levels of the three surrogate producers. Baosteel insists that this would be consistent with the entire Indian non-integrated steel pipe industry and that the same should be done with the three Indian companies for the final determination. Baosteel notes that the NME provision of the statute deals with "constructing the product's price as it would have been if the NME country were a market economy, using the best information available regarding surrogate values." See Air Products and Chemicals, Inc. v. United States, 14 F. Supp. 2d 737, 741 (1998). Baosteel argues that the average profit ratio of the four Indian producers reflects the best estimate of a market economy profit ratio for a Chinese producer because its experience may be similar to any of the previously identified non-integrated surrogate producers of identical merchandise. Baosteel states that the Department cannot assume that the Chinese producers would achieve the experience of the one Indian producer that was profitable and not the profit experience of the other three surrogate producers. Petitioners argue that the Department should continue to use TATA's financial information to calculate the surrogate financial ratios because TATA is a major steel pipe producer in India. Petitioners argue that it is the Department's practice to derive overhead, SG&A, and profit ratios from producers of merchandise that is identical or comparable to the subject merchandise. See Bulk Aspirin at Comment 4. Petitioners assert that TATA and Surya Roshni Limited ("Surya") produce identical or comparable subject merchandise. Therefore, the petitioners note, the Department should derive the financial ratios from TATA and Surya. Petitioners argue that the respondents ignored the public information that TATA is the market leader in the Indian galvanized pipe sector. See Petition on Imports of Circular Welded Carbon Quality Steel Pipe from the People's Republic of China at Exhibit 11. Petitioners assert that because the Department's preference is to derive the financial ratios based on the comparability of the merchandise, the size or capacity of the surrogate producer does not present a necessary consideration. See Bulk Aspirin at Comment 4. Petitioners argue that the Department calculates overhead, SG&A, and profit ratios that are representative of the entire surrogate industry. See Preliminary Results of Third New Shipper Review and Preliminary Results and Partial Rescission of Second Antidumping Duty Administrative Review: Brake Rotors from the People's Republic of China, 64 FR 73007 (December 29, 1999) ("Brake Rotors"). Petitioners note that TATA is one of the major pipe producers and that disregarding the financial experience of an important market player in India will distort the industry-wide experience. Therefore, the petitioners argue, the Department should include the financial statement of TATA in calculating the surrogate overhead, SG&A, and profit ratios. Petitioners further argue that the Department should not use the financial statements of Gemini Steel Tubes Limited ("Gemini"), Siddhartha Tubes Limited ("Siddhartha") and Zenith Limited ("Zenith") to calculate the profit ratio, because these companies did not have any profit. Petitioners note that "because a fair sales price would recover SG&A expenses and would include an element of profit, constructed value must include an amount for SG&A expenses and for profit." See Statement of Administrative Action ("SAA") accompanying the Uruguay Round Agreements Act, H. R. Doc. 316, 103d Cong. 2d Sess. at 839 (1994). Petitioners argue that the Department recently disregarded the financial statement of a company in calculating the profit ratio because that company incurred a loss, explaining that, although in some past cases the Department had averaged in loss as zero profit, it had adopted a better approach in disregarding those financial statements showing a loss for purposes of calculating the profit component. See Notice of Final Determination of Sales at Less Than Fair Value: Steel Concrete Reinforcing Bars from the People's Republic of China, 66 FR 33522 at Comment 8 (June 22, 2001) ("Rebar from China") and Hot-Rolled from China at Comment 6. Therefore, the petitioners argue, regardless of whether these three Indian pipe companies' financial statements are used in calculating overhead and SG&A ratios, the Department should not use their financial statements for the purposes of calculating the surrogate profit ratio. Department's Position: We agree with petitioners that TATA should not be included in the surrogate ratio calculations. With respect to calculating the factory overhead and SG&A ratios, we agree with respondents. It is the Department's preference to derive overhead, SG&A and profit ratios from producers of merchandise that is identical or comparable to the subject merchandise. See Heavy Forged Hand Tools From the People's Republic of China: Final Results and Partial Rescission of Antidumping Duty Administrative Review and Determination Not to Revoke in Part 66 FR 48026,48029 (September 17, 2001). As pointed out by respondents, TATA is a fully integrated steel producer with a wide range of products in its product line, with welded pipe constituting only a small portion of its products. In comparison, respondents are non- integrated welded pipe producers. While relying on TATA's data may be appropriate in other circumstances, in this case we do not need to use its financial information as we have four other surrogate companies which more closely approximate the Chinese respondents experience. Accordingly, we are excluding TATA's financial statements for calculating the factory overhead and SG&A ratios, and are limiting our calculation of surrogate ratios to the inclusion of Gemini, Zenith, Siddhartha and Surya. With respect to calculating profit ratio, we agree with respondents and are excluding TATA from our calculations, for the same reasons discussed above. We also agree with petitioners, to the extent that we are excluding the financial statements of those companies who incurred profit losses. In two recent antidumping duty investigations, the Department has excluded negative profits when calculating the surrogate financial ratios. See Rebar from China and Hot-Rolled from China. Therefore, since Gemini, Zenith and Siddhartha incurred losses, we will not average their loss into the calculation of the profit ratio. Consequently, for the final determination, the profit ratio will include only the profit from Surya. Comment 6: Iran's Market Status in the Surrogate Value Calculation Shuang Jie argues that although Iran is a market economy and therefore should be included in the Indian import data, the Department nevertheless excluded Iran from the Indian import data. Petitioners did not comment on this issue. Department's Position: We agree with Shuang Jie that India's imports from Iran should be included when calculating surrogate values. The Department recognizes that the exclusion of the Iranian data was an inadvertent error. The Department has treated Iran as a market economy in a recent CVD new shipper review. See Notice of Initiation of New Shipper Countervailing Duty Review: Certain In-Shell Roasted Pistachios From Iran 66 FR 59235 (November 27, 2001). Therefore, for the final determination, we have included Iran's exports into India when calculating surrogate values. Comment 7: Treatment of Foreign Inland Freight and Brokerage and Handling in the Normal Value Calculation Baosteel states that the Department should not deduct amounts for foreign inland freight and brokerage and handling from Baosteel's United States sales prices because the company's suppliers, as opposed to the company itself, incurred these expenses. Under Baosteel's contract with one of the suppliers, the supplier was responsible for all the transportation and costs in delivering the merchandise to the port. The same was true with another supplier. For subject merchandise produced by both of the suppliers and sold to the United States by Baosteel, the burden of foreign freight and brokerage and handling expenses therefore was borne by the factories. Baosteel states that it acted as a reseller that obtained constructive ownership of the merchandise from its suppliers and transferred title to its United States customers at the port of exportation. As such, the Department should consider the original place of shipment for sales to the United States to be the seaport where the suppliers delivered the merchandise to Baosteel for ultimate shipment to the U.S. Baosteel points out that movement expenses should be deducted only to the extent they are incurred. Since Baosteel did not incur inland freight expenses and brokerage and handling, the Department should not deduct amounts for foreign inland freight and brokerage and handling from its United States sales price. Petitioners argue that if the Department adopts Baosteel's approach, the Department should add these expenses to the normal value in order to have an "apples-to-apples" comparison. According to the petitioners, the statute requires that export price be reduced by charges incident in bringing the merchandise from the "original place of shipment in the exporting country" to the United States. See section 772 (c)(2)(A) of the Act. Therefore, the petitioners argue, since the original place of shipment of Baosteel was the seaport, the foreign inland freight, brokerage, and handling charges must be borne by its suppliers. Petitioners argue that the foreign inland freight, brokerage, and handling charges were foreign movement expenses, which are separately identified expenses. Petitioners assert that the calculation of normal value was to obtain an "ex-factory" price. Petitioners argue that in order to calculate normal value at the same point of shipment, the Department should include in normal value an amount for the inland freight from the producer to the reseller's point of shipment and the relevant brokerage and handling charges. See Notice of Final Results of Antidumping Duty Administrative Review: Titanium Sponge from the Russian Federation, 61 FR 58529 (November 15, 1996) ("Titanium Sponge"). Department's Position: The Department agrees with Baosteel that foreign inland freight and brokerage and handling should not be deducted from U.S. price. Section 772(c)(2)(A) of the Act states that export price shall by reduced by the expenses "incident to bringing the subject merchandise from the original place of shipment in the exporting country to the place of delivery in the United States." In Titanium Sponge, the Department decided that when the reseller is considered the exporter, the original place of shipment is the point from which the reseller shipped the merchandise. In this investigation, Baosteel is the reseller and its suppliers delivered the subject merchandise directly to the port, where they transferred title to a freight forwarding company acting on behalf of Baosteel. In this delivery process, the suppliers incurred the costs for foreign inland freight and brokerage and handling. See Baosteel Verification Report at 6- 7 and 15. Therefore, we have not deducted foreign inland freight from Baosteel's U.S. price. The necessary adjustments have been made to Baosteel's margin calculation program. See Baosteel Final Analysis Memo at page 2 and Attachment 2. The Department agrees with the petitioners that foreign inland freight and brokerage and handling should instead be included in the calculation of Baosteel's normal value. As determined in Titanium Sponge, the calculation of normal value is to obtain an "ex-factory" price to be compared with the export price. Id. Therefore, in order to calculate normal value at the same point of shipment as used in calculating export price, these expenses have been included in Baosteel's normal value calculation. Consequently, we have adjusted Baosteel's margin calculation program to include foreign inland freight and brokerage and handling in the calculation of normal value. RECOMMENDATION: Based on our analysis of the comments received, we recommend adopting all of the above changes and positions, and adjusting the margin calculation programs accordingly. If accepted, we will publish the final results of the investigation and the final weight-averaged dumping margins in the Federal Register. AGREE___________ DISAGREE___________ ____________________________ Faryar Shirzad Assistant Secretary for Import Administration ____________________________ Date _______________________________________________________________________ footnotes: 1. This investigation covers three mandatory respondents: WeiFang East Steel Pipe Co., Ltd. ("WeiFang"); Tianjin Shuang Jie Steel Pipe Co., Ltd. ("Shuang Jie"); and Baosteel Group International Trade Corporation ("Baosteel"). In addition, there are five voluntary respondents, Tai Feng Qiao Metal Products Co.("Tai Feng Qiao"); Pangang Group International Economic and Trade Corporation ("Pangang International"); ZheJiang JingZhou HuaLong Petroleum Corrosion-Resistant Steel Pipe Co., Ltd. ("Jinzhou"); Walsall Steel Pipe Co., Ltd. ("Walsall"); China MinMetals ZhuHai Co., Ltd. ("ZhuHai"). 2. The group collectively known as petitioners includes the following companies: Allied Tube & Conduit Corporation, Century Tube Corporation, IPSCO Tubulars, Inc., Laclede Steel, LTV Copperweld, Maverick Tube Corporation, Northwest Pipe Company, Sharon Tube Company, Western Tube & Conduit Corp., Wheatland Tube Co., and United Steelworkers of America, AFL- CIO. 3. Country X is the same country in the ARG Final Determination as it is here.