Public Document






Court No. 97-12-02161


The Department of Commerce (the Department) has prepared the redetermination of the final determination pursuant to the remand order from the U.S. Court of International Trade (the Court or CIT) in Paslode Division of Illinois Tool Works, Inc. v. The United States and Shenzhen Top United Steel Co., Ltd., Court No. 97-12-02161 (November 4, 1998).


On November 4, 1998, the Court issued an order remanding to the Department the final determination in the less-than-fair-value (LTFV) investigation of collated roofing nails from the People's Republic of China. This investigation covered subject merchandise produced and exported by four respondents, including Shenzhen Top United Steel Co., Ltd. (Top United) and Qingdao Zongxun Nail Products Co., Ltd. (Zongxun) (collectively, the respondents). In its order, the Court instructed the Department to reconsider its valuation of steel wire scrap relied upon in making the final determination, and, if necessary, to redetermine the final margins for Top United and Zongxun. (See Court order in Paslode Division of Illinois Tool Works, Inc. v. The United States and Shenzhen Top United Steel Co., Ltd., Court No. 97-12-02161 (November 8, 1998)).

On October 1, 1997, the Department published in the Federal Register a notice of final determination in the LTFV investigation of collated roofing nails from the People's Republic of China. See Notice of Final Determination of Sales at Less Than Fair Value: Collated Roofing Nails from the PRC, 62 Fed. Reg. 51410 (Final Determination). In the final determination and in accordance with its standard non-market economy (NME) methodology, the Department selected a scrap value for steel wire rod published in an Indonesian publication, Biro Pusat Statistik (Foreign Trade Bulletin), as the surrogate value for the respondents' scrap wire rod. 62 Fed. Reg. at 51414.

On October 9, 1997, after publication of the Final Determination, Paslode made a timely allegation of ministerial errors to the Department. In its allegation, Paslode, the petitioner in this case, asserted that the Department made a ministerial error in its selection of the surrogate value for steel wire scrap because this surrogate value exceeded both Top United's market-economy (Hong Kong) acquisition price of steel wire rod and the figure published in the Biro Pusat Statistik (Foreign Trade Bulletin) for steel wire rod. Pub. Doc. 169 at 2; see also Paslode's October 9, 1997, submission in the LTFV investigation.

On October 21, 1997, the Department responded to Paslode's allegation of clerical error stating that no ministerial error was made given that the Department selected a steel scrap value from Indonesia because Indonesia was the selected surrogate country from which the Department valued the factors of production. Pub. Doc. 172 at 2; see also Notice of Antidumping Duty Order: Collated Roofing Nails From the People's Republic of China, 62 Fed. Reg. 61729, 61730 (November 19, 1997).

On January 16, 1998, Paslode challenged the Department's final determination on seven issues in the CIT. On October 27, 1998, the parties filed a consent motion for the Department wherein the Department would reexamine the steel scrap issue and Paslode withdrew its remaining counts of its complaint. On November 8, 1998, the Court issued an order remanding the surrogate scrap value issue to the Department and instructed the Department to reconsider its valuation of steel scrap used for Top United and Zongxun in the final determination, and if necessary, to redetermine the final margins.

Pursuant to the Court's order, the Department reopened the administrative record and requested parties to provide information or comment on the surrogate value selection for steel scrap. We granted both parties until November 20, 1998, to submit comments or publicly available information (PAI) for consideration in valuing steel scrap. Neither Paslode nor the respondents offered any PAI alternatives for consideration in valuing steel scrap. In fact, Paslode claimed that it could find no PAI suitable for use. Paslode argued that PAI could not be used to value the type of steel scrap associated with collated roofing nails and offered its own business proprietary cost data for steel scrap (i.e., the ratio of its steel purchase price to the price it receives for its scrap) as an alternative value for steel scrap. On December 2 and 10, Paslode submitted unsolicited information to support its position that no PAI was appropriate for valuing steel scrap. On December 16, 1998, we returned to Paslode this unsolicited information which was submitted after the deadline set for submitting such information.

The respondents argued that the Indonesian scrap wire rod value remained appropriate given the Department's standard NME methodology.

On December 13, 1998, we released a draft remand redetermination to counsel for Paslode and the respondents. Paslode filed comments on the draft on December 21, 1998, as detailed below. The respondents did not submit comments on the draft.


In accordance with our practice to select surrogate values from PAI, we have re-examined the information placed on the record of the LTFV investigation and also have examined the information received during the instant proceeding. Based on this information, we determine that we must use facts available to value scrap wire rod pursuant to Section 776(a) of the Tariff Act of 1930, as amended (the Act) because, pursuant to our standard NME methodology, there is no surrogate value for steel scrap available on the record. Therefore, we have used as facts available the value for steel wire rod in the Indonesian publication, Biro Pusat Statistik (Foreign Trade Bulletin), to value steel scrap given that (1) there is no other PAI for scrap steel wire rod available on the record; and (2) this value is less than the market-economy import price (paid by Top United and Zongxun), which the Department used exclusively to value all of Top United's and Zongxun's steel wire rod input.

The Department's practice has been to rely, to the extent possible, on market-economy prices actually paid by respondents during the period of investigation (POI) or publicly available price data from the first-choice surrogate market-economy country. Our preference for using PAI to value any factors for which such information is available absent market-economy prices paid by the respondents was set forth in Carbon Steel Butt-Weld Pipe Fittings, 57 Fed. Reg. 21058 (May 18, 1992) (Comment 4) and is in accordance with section 773(c)(2)(A) of the Act. When selecting among publicly available price data, the Department generally considers the quality, specificity and contemporaneity of that data. With respect to surrogate country valuation, the Department's preference for using PAI data, rather than data which is not PAI (e.g., price data contained in cables from U.S. embassies and consulates, company price quotes, etc.), has led to greater certainty and predictability in the outcome of the Department's factor valuations. For these reasons, we have developed (and have consistently applied) the hierarchy for preferred input values set forth in Carbon Steel Butt-Weld Pipe Fittings.

Collated roofing nails are produced using steel wire rod as the major input. Steel scrap is produced during the course of producing collated roofing nails and is a by-product of collated roofing nail production. The respondents paid market-economy prices for the steel wire rod they purchased from Hong Kong. However, there is no market-economy price for purchases of steel scrap in the PRC on the record of the instant proceeding. Therefore, the Department had to determine a suitable surrogate value for the scrap resulting from the respondents' production of collated roofing nails.

In the LTFV investigation the Department obtained a value for steel scrap from published price data in a surrogate country. Using the Government of Indonesia's Biro Pusat Statistik, the Department selected this published value for steel scrap because, of all the possible surrogate values from which to choose from, only the Indonesian value represented the cost of scrap in a surrogate country which produced comparable merchandise.

In selecting this steel scrap value, however, the Department did not examine why it was significantly greater than the value for steel wire rod contained in the same publication. It is clear that our steel scrap value selection produced an unreasonable result -- a value for steel wire rod scrap (0.8390 USD/kg) that exceeded the price for steel wire rod (0.3119 USD/kg) -- one that cannot be explained by any notes or data in Biro Pusat Statistik. Consequently, the Department has selected a new value for the respondents' steel wire rod scrap for this remand redetermination.

Having rejected the steel scrap value found in Biro Pusat Statistik for the reasons stated above, we have no other specific PAI value for steel scrap. Section 776(a) of the Act permits use of facts otherwise available in reaching a determination when necessary information is not available on the record. Therefore, as facts available, we have selected the value for steel wire rod from the Indonesian publication, Biro Pusat Statistik, to value steel scrap because it is the only published price available. Although this is not a value specifically for scrap, but is, in fact, a value for wire rod, we note that it is less than the market economy price that the respondents paid for Hong Kong steel wire rod (which was used exclusively to value steel wire rod in the LTFV investigation). In addition, although the selection of this value was made as facts available pursuant to Section 776 of the Act, the selection of a PAI value also is in accordance with the Department's hierarchy for preferred input values set forth in Carbon Steel Butt-Weld Pipe Fittings; 57 Fed. Reg. at 21058.

In response to our request for suggestions on surrogate values for steel scrap, neither Paslode nor the respondents offered any alternative PAI. Paslode did, however, submit for consideration a new valuation methodology based on its own costs, as discussed below.


Paslode suggested that we derive an allocation factor using Paslode's costs for steel wire rod and steel scrap and apply that allocation factor to the steel wire rod price used in the LTFV investigation to derive a steel scrap value for respondents. Paslode further insisted that the use of this type of allocation methodology is consistent with the decision made in Timken v. United States, 894 F.2d 385 (Fed. Cir. 1990)(Timken), where the Department failed to reconcile a very high ratio of steel scrap value to raw steel value. Furthermore, in its comments on the Department's draft remand, Paslode argues that the steel scrap surrogate value selected by the Department on remand is still too high for steel wire rod and is drastically different from Paslode's steel wire rod/scrap ratio during the POI. In Paslode's opinion, use of this steel scrap surrogate value is contrary to Timken. In addition, Paslode argued that the value we have assigned to steel scrap is not a scrap value and that using a non-scrap value fails to take into account that in the real world, steel wire rod remains about seven times as expensive as roofing nail scrap.

Department's Response

We agree with Paslode that there is no reasonable steel scrap-specific PAI available on the record. However, we disagree that we should be using Paslode's confidential cost data as a surrogate value for steel scrap. Unlike the record in Timken, we have substantial evidence (e.g., the market-economy prices for steel wire rod paid by the respondents in the LTFV investigation) which corroborates the steel wire rod value found in Biro Pusat Statistik. In Timken, the raw steel price from the Indian publication, Statistics for Iron & Steel Industry, originally used in the administrative proceeding, was in question given the contrasting price data for raw steel and steel scrap contained in two cables received from the U.S. consulate in Bombay. Here, there is no evidence calling into question the steel wire rod value the Department has selected from Biro Pusat Statistik. In addition, unlike Timken, Paslode has not provided a steel-to-scrap ratio based on the industry's experience in the surrogate country. Rather, Paslode is insisting that we use a steel-to-scrap ratio based on its own confidential cost data.

As discussed above, Paslode's steel wire rod/scrap ratio is based solely on its own confidential cost data. For the following reasons, we believe reliance on this data in the instant redetermination would be inappropriate. First, it is not PAI. As we stated in the preamble to the proposed regulations published in 1996, "the Department has developed a preference for using publicly available information" because it "enhances the transparency and predictability of our determinations." Antidumping Duties; Countervailing Duties; Proposed Rule, 61 Fed. Reg. 7308, 7344 (1996). Second, Paslode's data reflects manufacturing activities in the United States. The United States is not a preferred surrogate country for the PRC. The level of economic development in the United States is not comparable to the PRC. Third,

without knowledge of how Paslode's data was compiled, we have no basis to conclude that the methodology proposed by Paslode is reasonable. Moreover, Paslode's statement that scrap values in the "real world" are about one-seventh that of steel wire rod prices may have formed the basis for making a scrap value price adjustment, but Paslode provided no documentary support for its claim. Therefore, we have rejected Paslode's proposal in this remand determination. Moreover, we note that neither using Paslode's methodology nor assigning a zero value to the steel scrap changes the outcome of this determination.


As a result of our analysis, we have determined that the weighted-average margin for the period (the LTFV investigation), is as follows:

                                           Weighted-Average Margin
Manufacturer/Producer/Exporter                     Percentage

Qingdao Zongxun Nail                                   0.00
Products Co.
Shenzhen Top United                                    0.00
Steel Co., Ltd.
PRC country-wide rate                                118.41%

Robert S. LaRussa
Assistant Secretary
  for Import Administration

Date: January 15, 1999


We disagree with Paslode's analysis which seeks to compare a steel wire rod/scrap ratio based on surrogate values with a ratio based on Paslode's experience during the POI. The purpose of selecting surrogate values should not be based on whether or not those values or cost percentages approximate the costs or values experienced by producers in the U.S. industry as this will defeat the principles of transparency, predictability underlying the Department's factor valuation determinations. Instead, our selection of surrogate values has to take into account which publicly available value is most specific to the product we are trying to value and contemporaneous with the POI. In our situation, the first choice surrogate value (steel scrap) used in the LTFV investigation at first appeared to be specific to the product we were trying to value but the value bore no reasonable resemblance to the value of the material from which the product was sourced. Absent a market-economy price for steel scrap, which Paslode admits does not exist, a surrogate value specific to the scrap at issue is difficult, if not impossible, to obtain after attempts made by the Department and the interested parties. Therefore, we have considered a second choice surrogate value for this remand --- the value of the material from which the product we are trying to value was sourced. Though this value is not as specific as our first choice selection, it is legitimate PAI. Only in rare instances have we rejected PAI in favor of business proprietary data because the lack of PAI specificity rendered our analysis meaningless (see Notice of Preliminary Determination of Sales at Less Than Fair Value: Bicycles From the People's Republic of China, 60 FR 56567, 56573 ( November 9, 1995)) (Bicycles). In Bicycles, certain components and sub-components varied in terms of material content and design and these differences resulted in large price differentials. Therefore, to minimize the distortions, we placed more importance on the specificity of the price (i.e., publicly ranged price data paid by respondents based on business proprietary data) rather than on the PAI because the PAI did not reflect important differences in design and material composition. In our situation, we do not find that the surrogate value we have now selected is so imprecise, distortive and unreasonable that U.S. industry data should be used instead as an indicator of the price of steel wire rod scrap realized by the respondents.