The Department of Commerce (the Department) has prepared these final results of redetermination pursuant to the remand order issued by the United States Court of International Trade (the Court) in Olympia Indus., Inc. v. United States, Consol. Ct. No. 95-10-01339, Slip. Op. 98-49 (April 17, 1998) (Olympia II). This remand covers certain aspects of the final results of the administrative review of the antidumping duty orders on heavy forged hand tools (HFHTs) from the People's Republic of China (PRC) covering the period February 1, 1992 through January 31, 1993. In accordance with the Court's remand order, we have reopened the administrative record to assess the reliability of the PRC trading company data for valuing steel inputs used to produce HFHTs during the period of review (POR). We find that, in accordance with sections 773(c)(1) and 773(c)(4) of the Tariff Act of 1930, as amended (the Act), a non-market economy (NME) trading company's import prices are not the best available information to value an NME producer's cost of producing the subject merchandise. In assessing the reliability of the import prices, we also find that the trading company's import prices are no more reliable or accurate than the selected surrogate country data. Accordingly, consistent with the statutory preference for surrogate country data, we have continued to use steel import statistics for India, the primary surrogate country, to value the steel inputs. However, we have removed an aberrational Japanese export value from the calculation of the Indian import price, and have therefore recalculated the weighted-average margins for Shandong Machinery Import & Export Corp. (SMC) and Fujian Machinery & Equipment Import & Export Corp. (FMEC), the PRC exporters in this administrative review. This change results in weighted average margins for FMEC of 14.23 percent for axes/adzes, 47.88 percent for bars/wedges, 27.71 percent for hammers/sledges, and 89.70 percent for picks/mattocks, and for SMC of 14.23 percent for axes/adzes, 33.87 percent for bars/wedges, 22.44 percent for hammers/sledges, and 36.62 percent for picks/mattocks.
On February 1, 1991, the Department issued antidumping duty orders on HFHTs from the PRC. See Antidumping Duty Orders: Heavy Forged Hand Tools, Finished or Unfinished, With or Without Handles from the People's Republic of China, 56 FR 6622 (Feb. 19, 1991). On September 22, 1995, the Department issued its final results of the second administrative review of HFHTs for two PRC exporters, FMEC and SMC. See Heavy Forged Hand Tools from the People's Republic of China; Final Results of Antidumping Duty Administrative Reviews, 60 FR 49251 (Sept. 22, 1995) (Final Results). In the underlying administrative review, FMEC and SMC reported that their NME factories used 1045 and 1060 grade steel of varying diameters in producing HFHTs sold in the United States. SMC reported that it imported steel from a market-economy source, and its three factory suppliers used imported steel to produce HFHTs. SMC requested that the Department use SMC's actual import prices to value the steel inputs used by the NME producers. However, in accordance with its longstanding practice, the Department valued the steel inputs using import data from India, the selected primary surrogate country. Final Results, 60 FR at 49254.
Both Olympia Industrial, Inc. (Olympia), a U.S. importer, and Woodings-Verona Tool Works, Inc., a domestic interested party in the underlying administrative review, challenged the final results of administrative review. The Court consolidated these actions, and on
April 10, 1997, issued an order in Olympia Indus., Inc. v. United States, Consol. Ct. No. 95-10-01339, Slip. Op. 97-44 (April 10, 1997) (Olympia I), remanding to the Department these final results. One of the issues remanded was the issue at hand pertaining to the value of the steel inputs used by the PRC factories. In Olympia I, the Court directed the Department to reconsider its decision to reject actual prices paid by SMC to value the steel inputs.
In Olympia I, in accordance with section 773(c)(1) of the Act, the Department used surrogate country data to value steel inputs used by the NME manufacturers. The Department did not use steel import prices paid by SMC, the NME trading company, because these prices were not actual prices paid by the NME manufacturers. We followed the Department's longstanding policy that interprets section 773(c)(1) of the Act as authorizing use of actual prices only in instances where the NME manufacturer purchases the input from a market-economy supplier and pays in a market-economy currency. We cited Final Determination of Sales at Less Than Fair Value: Oscillating Fans and Ceiling Fans From the People's Republic of China, 56 FR 55271, 55274-75 (Oct. 25, 1991) (Fans from the PRC) and other cases as evidence of the Department's practice in this regard. The Department explained that because this redetermination was reached based on the record evidence at that time, it was unnecessary to reopen the record for purposes of obtaining additional information from the respondents on this issue.
In Olympia II, the Court remanded this issue to the Department for a second time. Although the Court recognized that the Department normally relies upon surrogate country data in the factors of production methodology, the Court ruled that the Department unreasonably rejected SMC's import prices in the absence of an inquiry into this data's reliability.
Olympia II, Slip. Op. 98-49 at 9. The Court found that the Department failed to comply with its statutory obligation to determine the best available information for valuing the NME producer's factors of production because the Department neither explained why trading company import data is never reliable nor explained why the surrogate country data is inherently more reliable or accurate. The Court also considered the Department's first remand determination to be inconsistent with Lasko Metal Prods., Inc. v. United States, 810 F. Supp. 314 (CIT 1992), aff'd 43 F.3d 1442 (Fed. Cir. 1994) (Lasko) because the Department failed to explain how the PRC trading company data, which was based upon a market-economy source, produced less accurate results than the Indian import data. Olympia II, Slip. Op. 98-49 at 12-13. However, the Court noted that "on remand the trading company data may prove to be unreliable." Id. at 13. Thus, the Court ordered the Department to reopen the record to obtain information necessary to assess the reliability of the PRC trading company data and reconsider its decision to use Indian import data to value the steel inputs.
In accordance with the Court's instructions, on May 22, 1998, we requested additional information from FMEC and SMC. On June 10, 1998, FMEC responded by reaffirming that it did not purchase steel from market-economy sources during the period of review. On June 12 and June 15, 1998, we received responses from SMC. On July 30, 1998, we issued draft remand results, and requested comments thereon from interested parties. On August 5, 1998, we received a submission from SMC allegedly correcting an error in the June 12 submission that we had referenced in the draft results. On August 6, 1998, we received comments from Olympia and from petitioner.
We do not consider SMC's steel import prices to be the best available information for purposes of the Department's factors of production methodology. Section 773(c)(1) of the Act directs the Department to value a NME producer's factors of production based upon "the best available information regarding the value of such factors in a market country or countries considered to be appropriate by the administering authority." (emphasis added). Section 773(c)(4) of the Act requires the Department to determine the value of such factors, to the extent possible, using prices or costs of production in one or more market-economy countries that are comparable to the NME in terms of economic development and production of the subject merchandise. The Department has interpreted these provisions as imposing a statutory preference for using appropriate surrogate country data in the factors of production methodology. Final Results of Antidumping Duty Administrative Review; Certain Iron Construction Castings From the People's Republic of China, 57 FR 10644, 10654 (March 27, 1992). See also Magyar Gordulocsapagy Muvek v. United States, 890 F. Supp. 1111, 1116 (CIT 1995) ("Title 19, United States Code, Section 1677b(c)(1) (1988) provides simply that 'valuation of the factors of production shall be based on the best available information' regarding the values in a surrogate country.").
The Department interprets section 773(c)(1) of the Act as authorizing a narrow exception to the statutory preference for selected surrogate country data. This exception applies only when the NME producer sources an input from a market-economy source and pays in a market-economy country currency. See Fans from the People's Republic of China, 59 FR at 58822-23; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China; Final Results of Antidumping Duty Administrative Reviews, 61 FR 65527, 65553 (Dec. 13, 1996); Notice of Final Determination of Sales at Less Than Fair Value; Disposable Pocket Lighters from the People's Republic of China, 60 FR 22359, 22366
(May 5, 1995). The courts upheld this interpretation in Lasko Metal Prods., Inc. v. United States, 810 F. Supp. 314 (CIT 1992), aff'd 43 F.3d 1442 (Fed. Cir. 1994). As recognized by the Federal Circuit, this narrow exception is reasonable because when an NME producer purchases an input from a market-economy source, the best available information concerning the producer's cost in a market-economy is the price that the NME producer actually pays for that input on the world market, rather than a surrogate value. Lasko, 43 F.3d at 1446.
However, nothing in the Lasko decision alters the statutory mechanism for selection of surrogate values. In Lasko, the Court merely recognized that, where the actual cost to the producer was a market economy price (and paid in a market economy currency), the actual cost to the producer was better information than a surrogate value. Lasko, 43 F.3d at 1446. Thus, the Court was addressing the issue of actual versus surrogate data, not a choice between two surrogate values. The selection of surrogate values is governed by section 773(c)(4), which, as discussed above, establishes a preference for values from a comparable market economy that is a significant producer of comparable merchandise. Had Congress intended a preference for using import prices into the NME as surrogate values, it could easily have done so.
As the Court acknowledged in Olympia I, SMC's import prices are not actual costs to the producer but rather an alternative surrogate value. Olympia II, Slip. Op. 98-49 at 12 ("As with the surrogate country data, it may be true that the trading company data does not represent actual prices paid for the steel input by the PRC HFHTs manufacturers. And, in this sense, the use of trading company data would also create a fiction.") Although there is a clear statutory preference for data from a market-economy country that is a significant producer of comparable merchandise and at a level of economic development comparable to that of the NME country, this preference can be overcome and other market-economy data used if such data is deemed better for factor valuation purposes. See Final Determination of Sales at Less Than Fair Value: Coumarin from the People's Republic of China, 59 FR 66895, 66900 (Dec. 28, 1994); Notice of Final Determination of Sales at Less Than Fair Value: Certain Case Pencils from the People's Republic of China, 59 FR 55625, 55633 (Nov. 8, 1994). The question, therefore, in this case, is whether SMC's import prices, as alternative surrogate data, are good enough to overcome the statutory preference described above. In our view, for the reasons below, they are not.
To value steel inputs in the underlying review, the Department used Indian imports, in quantities that were not insignificant, of merchandise that was classified in an HTS category consisting of bars and rods with a range of carbon content reflecting that of the steel used in the production of HFHTs. See Final Results, 60 FR at 49254. To assess the reliability of SMC's steel import prices, we have similarly examined factors such as (1) the value and volume of steel imports, (2) the type and quality of the imported steel, and (3) consumption of imported steel by the NME producers. We believe that these factors provide sufficient indicia of reliability to determine whether SMC's import prices are the best available surrogate information to value the steel inputs used to produce HFHTs during the review period.
The record evidence demonstrates that SMC purchased steel from a market-economy country, in a convertible currency, and on a [ * * * ] basis. SMC's invoices show that SMC purchased [ * * * ] at prices ranging from $ [ * * * ] per MT to $ [ * * * ] per MT. Based on these invoices for the imported steel, and the specifications of the steel sourced by the factories domestically, we conclude that the imported steel is of the same grade and has the same range of diameters as steel that the NME manufacturers used to produce the subject merchandise. However, when we examined relevant factors concerning SMC's import prices, we determined that the PRC import data for steel is aberrationally low. For the final results of the 1992-93 review, we compared the 1991 Indian surrogate value of $706.73/MT to 1991 Indonesian and U.S. import prices for steel of $553.51/MT and $434.80/MT, respectively, and the 1992 Indian surrogate value of $478.10/MT to 1992 Indonesian and U.S. import prices for steel of $494.13/MT and $428.61/MT respectively. Using this analysis, which was upheld in Olympia I, we found that while the 1992 Indian surrogate value was comparable to the Indonesian and U.S. prices, the 1991 Indian surrogate value, which was $212 higher than the 1991 average, was aberrational.(1) Applying the same analysis to SMC's 1991 invoice price of $ [ * * * ] /MT demonstrates that the average of the U.S. and Indonesian comparison values for 1991, $494, is $ [ * * * ] more than SMC's 1991 invoice price. With respect to SMC's 1992 invoice prices of $ [ * * * ] and $ [ * * * ] /MT, the average of these values is approximately $ [ * * * ] less than the U.S. and Indonesian comparison values for 1992, $461/MT. Therefore, we conclude that SMC's invoice prices are aberrational and, therefore, unreliable. Based upon the analysis above, we find that SMC's import prices are not acceptable information for valuing the steel inputs used to produce the HFHTs during the POR.
Additionally, we found discrepancies regarding the amounts of market-economy steel purchased by factories from SMC. SMC has three hand tool suppliers: Linyi factory, Rizhao factory and Zibo factory, all of which used steel sourced from a market-economy by SMC. FMEC has three suppliers, one of which, Rizhao, used imported steel to produce subject merchandise. According to SMC's June 12, 1998 questionnaire response on page 4, during the period of review (POR) Zibo used [ * * * ] MT of steel in the production of HFHTs and purchased [ * * * ] MT of imported steel from SMC, Linyi used [ * * * ] MT of steel in the production of HFHTs and purchased [ * * * ] MT of imported steel from SMC, and Rizhao, which produced both subject and nonsubject merchandise, used [ * * * ] MT of steel in the production of HFHTs and purchased [ * * * ] MT of imported steel from SMC. However, SMC reported on the first page of the June 12, 1998 questionnaire response that, during the POR, SMC supplied Zibo with [ * * * ] MT of steel, Linyi with [ * * * ] MT of steel and Rizhao with [ * * * ] MT of steel.
For the reasons discussed above, we determine that, consistent with section 771(c)(1) of the Act, the Indian import data is the best available information to value the steel inputs in this administrative review.
Interested Party Comments
Petitioner urges the Department to reject SMC's August 5 submission. Petitioner argues that because this new information came to the attention of the Department and of interested parties one day before the deadline to submit comments, neither the Department nor interested parties were prepared to assess the accuracy of this revised data. Petitioner further argues that there is no evidence on the record corroborating SMC's [ * * * ] steel to any of the factories, as claimed in the August 5 submission.
SMC, in its June 9, June 12, June 15, June 25, and July 8 submissions, failed to mention the existence of sales of [ * * * ] to the factories. While we have not rejected respondent's new information, respondent's new data is untimely, and it cannot be accorded any consideration for our final remand results.
Olympia argues that the discrepancy in the figures reported for the trading company's sales of imported steel to the factories was clarified by SMC in SMC's August 5, 1998 submission. Therefore, Olympia argues that the reliability of SMC's data has been restored.
As discussed in our response to Comment 1, we are not considering respondent's August 5 submission.
Olympia argues that the Department was incorrect in its determination that the PRC import data for steel were aberrationally low, and cites the Department in Final Results as stating that "there is no basis for rejecting import values simply because the values are too high or too low." Final Results at 49253.
Olympia argues that a comparison cannot be made between the PRC data and other market economy surrogate data for purposes of finding the PRC data to be aberrationally low, because the PRC import data is based on steel that was of the same grade and same range of diameters as the steel used to produce subject merchandise, while the surrogate values are based on imports in a statistical category that includes other types of steel. Similarly, Olympia argues that the Indian surrogate data include bars that are already forged, while respondents perform the forging themselves in the production of hand tools.
We disagree with Olympia. While we are precluded from arbitrarily discarding surrogate data simply because the values are high or low, we are justified in discarding surrogate data when that data is deemed aberrational in comparison with other sources of market value. As stated in Final Results, we " . . . used the Indian import statistics unless we . . . found that the values are aberrational by comparison to other sources of market value." Final Results at 49253.
That the data regarding SMC imports may be more specific than the Indian import statistics is not sufficient to overcome the Department's preference for surrogate information from a market-economy country at a level of development comparable to that of the PRC. See Sigma Corp. v. United States, 888 F. Supp. 159 (CIT 1995); Sigma Corp. v. United States, 841 F. Supp. 1275 (CIT 1993) (Sigma I); Technoimportexport v. United States, 783 F. Supp. 1401 (CIT 1992); see also Magyar Gordulocsapagy Muvek v. United States, 890 F. Supp. 1111, 1116 (CIT 1995); Final Results of Antidumping Duty Administrative Review; Certain Iron Construction Castings From the People's Republic of China, 57 FR 10644, 10654 (March 27, 1992). In Sigma I, the Court upheld the Department's use of Indian import statistics to value steel scrap despite the submission of actual price quotes for scrap from Pakistan, which the domestic interested parties claimed provided a more accurate basis to value steel scrap than the Indian import values. Sigma I, 841 F. Supp. 1285. Thus, even where actual price quotes are available, the Court has not viewed less specific surrogate country data as inappropriate in the factors of production methodology.(2)
Furthermore, with regard to Olympia's argument that the Indian surrogate data include bars that are already forged, we do not have information on the record indicating that the imported steel was unforged. Since the Indian import data represents a reasonable valuation of the steel used by the factories, it can also serve as a benchmark to determine whether or not the SMC import data is aberrational.
Olympia argues that the Department is unjustified in declaring SMC's data to be aberrational by comparing the price paid by SMC for a single type of steel with statistical averages consisting of a multitude of individual prices for a variety of steel products. The Indian import value that we used was comprised of import prices from Indonesia and Japan; Olympia argues that the difference between the Japanese export value and the Indonesian export value upon which the 1992 Indian import value was based is [ * * * ] the difference between the SMC price of $ [ * * * ] per ton and the weighted average Indian import value.
We disagree with Olympia. As stated in our response to the previous comment, less specific surrogate data can be used as a benchmark to determine whether the PRC data is aberrational.
With respect to Olympia's argument that the differences between the individual prices that comprised the average import value used by the Department [ * * * ] the differences between the SMC price and the surrogate value, we have reviewed the Indian import statistics. The relevant HTS classification included imports from three countries, Germany, Japan, and Indonesia. We disregarded Indian imports from Germany because the quantity imported was small when compared with total imports. See memorandum to the file dated September 13, 1995, "Analysis Memorandum for the Final Results of the Second Administrative Reviews of Heavy Forged Hand Tools from the People's Republic of China for the Period February 1, 1992 through January 31, 1993." What remained were imports of 41 MT from Japan, valued at 956,092 Rupees, or 23,319 Rp./MT, and imports of 205 MT from Indonesia, valued at 2,420,307 Rupees, or 11,806 Rp./MT. Because of the limited number of countries exporting steel under this HTS category to India, we compared the Japanese price to 1992 Indonesian and U.S. import prices for steel of the same HTS category. These were $494.13/MT and $428.61/MT, respectively. The Japanese price of 46,154 Rp./MT, when converted using the 1992 Federal Reserve rate of 0.034834 $/Rp., equaled $812/MT. Because this figure differs so greatly from the U.S. and Indonesian import prices, as well as the price of Indian imports from Indonesia, we have concluded that the Japanese price is aberrational and should be excluded from the Indian import price. Therefore, we have eliminated Japanese exports to India for purposes of these final remand results. The SMC data is aberrational even in comparison with the remaining Indian imports, which are all from Indonesia. This change results in a recalculated 1992 Indian import price of 11.81 Rupees per kilogram. See memorandum to file dated August 31, 1998, "Heavy Forged Hand Tools from the PRC: Final Remand Analysis for the 1992-93 Review Period."
Olympia argues that the Department is unjustified in declaring SMC's data to be aberrational by comparing the price paid by SMC on a [ * * * ] basis with Indian, Indonesian and U.S. prices, which are reported on a CIF basis. Olympia argues further that the comparison is unfair because SMC's shipments came from [ * * * ] while the CIF imports into India, Indonesia, and the U.S. include ocean freight costs of much greater distance.
We disagree with Olympia. We have no information on the record regarding the cost of marine insurance to SMC or to the surrogate market-economy importers; however, it is likely that in both cases the cost of marine insurance is negligible when compared to the actual cost of the steel transported. The Department has, in the past, used one of two surrogate values for marine insurance. The first, a 133.75 Rp./MT value taken from the publicly summarized version of the questionnaire response in the Final Determination of Sales at Less than Fair Value: Sulphur Vat Dyes from India, 58 FR 11835 (March 1, 1993), is equal to $4.65/MT when converted using the 1992 Federal Reserve exchange rate of 0.034834 $/Rp. The second value, used in the Final Determination of Sales at Less than Fair Value: Chrome Plated Lugnuts from the PRC, 57 FR 15052 (April 24, 1992), is between 1.8% and 2.2% of cost and freight. Neither figure represents a significant increase in the overall cost of steel to the importer.
Olympia argues that the prices to SMC from Korea can be proven to be reliable when compared to other published statistics on [ * * * ] steel bar. Olympia submits, as an exhibit, export statistics showing that the average unit value for [ * * * ] steel bar exports in 1992 is close to the price paid by SMC for [ * * * ] steel bar.
We disagree with Olympia. A careful analysis of Olympia's submission shows that Olympia suggests a comparison of SMC's price to an average [ * * * ] export price of steel categorized by "HTS# 7213.49.0000, others." First, the proper basis of comparison is not the price of exports from Korea, but of imports into a market-economy country at a level of development comparable to the PRC. Second, the HTS category for which Olympia provided [ * * * ] export statistics, 7213.49, was found in Final Results to be unrepresentative of the steel used in the production of HFHTs. See Final Results at 49254. Lastly, the source used by Olympia notes that the [ * * * ] export price covers the period 1/92 - 12/92 and a total of 10,736 MT, of which "8,366 MT [ * * * ] to China." It should be noted that SMC's June 1992 invoice alone reports a shipment of [ * * * ] MT of hot rolled round bar. Therefore, if, as Olympia argues, the steel included in the steel export statistics is the same steel imported by SMC, we can conclude that either the published [ * * * ] export statistics are incorrect or that SMC's data are incorrect. Furthermore, if the [ * * * ] export statistics include SMC's imports of steel from [ * * * ] , we would be comparing the same imports to themselves, a comparison which would be meaningless.
FINAL RESULTS OF REDETERMINATION
For the purposes of these final results of redetermination on remand, we have recalculated SMC's and FMEC's margins in accordance with our response to Comment 4 in these final remand results. Thus, they are as follows:
|Producer/Exporter||Product||Period of Review||Margin (%)|
|SMC||Axes/Adzes||2/1/92 - 1/31/93||14.23|
|FMEC||Axes/Adzes||2/1/92 - 1/31/93||14.23|
This redetermination is pursuant to the order of the Court in Olympia Indus., Inc., v. United States, Consol. Ct. No. 95-10-01339, Slip. Op. 98-49 (April 17, 1998).
When there is a final and conclusive judgment in this redetermination, we intend to instruct the U.S. Customs Service to liquidate FMEC's and SMC's entries on an importer-specific basis. We will calculate importer-specific duty assessment rates on a per unit basis. To calculate the per unit value for assessment, we summed the margins on U.S. sales with positive margins, and then divided this sum by the number of units of all U.S. sales.
Joseph A. Spetrini
Acting Assistant Secretary
for Import Administration
1. See Final Results, 60 FR at 49253 and Attachment 1 of the September 13, 1995 Analysis Memo for Final Results.
2. See also Union Camp Corp. v. United States, 941 F. Supp. 108,116 (CIT 1996) ("When Commerce is faced with the decision to choose between two reasonable alternatives and one alternative is favored over the other in their eyes, then they have the discretion to choose accordingly.").