[Federal Register Volume 59, Number 194 (Friday, October 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24935]


[[Page Unknown]]

[Federal Register: October 7, 1994]


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DEPARTMENT OF COMMERCE
[A-570-826]

 

Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Paper Clips From the People's Republic of China

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: October 7, 1994.

FOR FURTHER INFORMATION CONTACT: Dorothy Tomaszewski or Erik Warga, 
Office of Antidumping Investigations, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230; telephone: 
(202) 482-0631 or (202) 482-0922, respectively.

FINAL DETERMINATION: We determine that certain paper clips (paper 
clips) from the People's Republic of China (PRC) are being, or are 
likely to be, sold in the United States at less than fair value (LTFV), 
as provided in section 735 of the Tariff Act of 1930, as amended (the 
Act). The estimated margins are shown in the ``Continuation of 
Suspension of Liquidation'' section of this notice.

Case History

    Since the preliminary determination on May 11, 1994 (59 FR 25885, 
May 18, 1994), the following events have occurred.
    On May 24, 1994, the three participating respondent manufacturers 
submitted revised information on factors of production. We also issued 
an additional supplemental questionnaire to respondents (named below), 
to which respondents responded on June 2, 1994.
    From June 10 through June 24, 1994, we verified that responses of 
the exporters, Shanghai Lansheng Corporation (Lansheng), Zhejiang 
Machinery and Equipment Import and Export Corporation (ZMEC), and 
Zhejiang Light Industrial Products Import and Export Corporation 
(ZLIP); and the manufacturers, Wuyi Cultural and Educational 
Commodities General Factory (Wuyi), Shanghai Stationery Pins Factory 
Fengbin (Fengbin), and Jiaxing Stationery Pins Factory (Jiaxing). 
Petitioners, ACCO International Inc. and Noesting Inc., and respondents 
filed case briefs on August 8, 1994, and rebuttal briefs on August 15, 
1994. A public hearing was held on August 17, 1994.

Scope of Investigation

    The products covered by this investigation are certain paper clips, 
wholly of wire of base metal, whether or not galvanized, whether or not 
plated with nickel or other base metal (e. g., copper), with a wire 
diameter between 0.025 inches and 0.075 inches (0.64 to 1.91 
millimeters), regardless of physical configuration, except as 
specifically excluded. The products subject to this investigation may 
have a rectangular or ring-like shape and include, but are not limited 
to, clips commercially referred to as ``No. 1 clips,'' ``No. 3 clips,'' 
``Jumbo'' or ``Giant'' clips, ``Gem clips,'' ``Frictioned clips,'' 
``Perfect Gems,'' ``Marcel Gems,'' ``Universal clips,'' ``Nifty 
clips,'' ``Peerless clips,'' ``Ring clips,'' and ``Glide-on clips''.
    Specifically excluded from the scope of this investigation are 
plastic and vinyl covered paper clips, butterfly clips, binder clips, 
or other paper fasteners that are not made wholly of wire of base metal 
and are covered under a separate subheading of the Harmonized Tariff 
Schedule of the United States (HTSUS).
    The products subject to this investigation are classifiable under 
subheading 8305.90.3010 of the HTSUS. Although the HTSUS subheading is 
provided for convenience and customs purposes, our written description 
of the scope of this investigation is dispositive.

Period of Investigation

    The period of investigation (POI) is May 1, 1993, through October 
31, 1993.

Best Information Available

    As stated in the preliminary determination, we have based the duty 
deposit rate for all exporters other than the three identified above 
(the ``all others'' rate) on best information available (BIA). One 
exporter, Abel Industries, indicated that it would not participate in 
the investigation. Further, given that information has not been 
presented to the Department to demonstrate otherwise, Abel and all 
other PRC companies not participating in this investigation are not 
entitled to separate dumping margins. As such, because Abel decided not 
to participate in this investigation, we are basing the ``All Others'' 
rate, which will also apply to Abel, on BIA. This is similar to our use 
of the BIA-based ``All Others'' rate in other recent antidumping duty 
investigations. (See, e.g., Final Determination of Sales at Less-Than-
Fair-Value: Silicon Carbide From the People's Republic of China (59 FR 
22585, May 2, 1994) (Silicon Carbide)).
    In determining what to use as BIA, the Department follows a two-
tiered methodology, whereby the Department normally assigns less 
adverse margins to those respondents that cooperated in an 
investigation and margins based on more adverse assumptions for those 
respondents that did not cooperate in an investigation. As outlined in 
the Final Determination of Sales at Less Than Fair Value: Certain Hot-
Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel 
Flat Products, and Certain Cut-to-Length Carbon Steel Plate From 
Belgium (58 FR 37083, July 9, 1993), when a company refuses to provide 
the information requested in the form required, or otherwise 
significantly impedes the Department's investigation, it is appropriate 
for the Department to assign to that company the higher of (a) the 
highest margin alleged in the petition, or (b) the highest calculated 
rate of any respondent in the investigation. Here, since at least one 
PRC exporter failed to respond to our questionnaire, and because we 
presume all exporters to be centrally controlled absent verified 
information to the contrary, we are assigning a margin of 126.94 
percent (the highest margin in the petition, as recalculated by the 
Department for methodological inconsistencies at the time of the 
initiation of this case) as BIA to all exporters other than those 
responding exporters which have shown their independence from control 
in common with one or more other exporters of the subject merchandise.

Separate Rates

    The three participating exporters, ZMEC, ZLIP and Lansheng, have 
each requested a separate rate. ZMEC and ZLIP are companies owned by 
``all the people'' and for five of the six months of the POI, Lansheng 
also was owned by ``all the people.'' In the sixth month, Lansheng was 
restructured into a share company. To establish whether a firm is 
sufficiently independent to be entitled to a separate rate, the 
Department employs the criteria developed in the Final Determination of 
Sales at Less Than Fair Value: Sparklers from the People's Republic of 
China (56 FR 20588, May 6, 1991) (Sparklers) and amplified in Silicon 
Carbide. Under this analysis, the Department assigns a separate rate 
only when an exporter can demonstrate the absence of both de jure\1\ 
and de facto\2\ governmental control over export activities.
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    \1\Evidence supporting, though not requiring, a finding of de 
jure absence of central control includes: (1) An absence of 
restrictive stipulations associated with an individual exporter's 
business and export licenses; (2) any legislative enactments 
decentralizing control of companies; or (3) any other formal 
measures by the government decentralizing control of companies.
    \2\The factors considered include: (1) whether the export prices 
are set by or subject to the approval of a governmental authority; 
(2) whether the respondent has authority to negotiate and sign 
contracts and other agreements; (3) whether the respondent has 
autonomy from the government in making decisions regarding the 
selection of management; and (4) whether the respondent retains the 
proceeds of its export sales and makes independent decisions 
regarding disposition of profits or financing of losses (see Silicon 
Carbide).
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De Jure Analysis

    The PRC laws placed on the record of this case establish that the 
responsibility for managing companies owned by ``all the people'' has 
been transferred from the government to the enterprise itself. These 
laws include: ``Law of the People's Republic of China on Industrial 
Enterprises Owned by the Whole People,'' adopted on April 13, 1988 
(1988 Law); ``Regulations for Transformation of Operational Mechanism 
of State-Owned Industrial Enterprises,'' approved on August 23, 1992 
(1992 Regulations); and the ``Temporary Provisions for Administration 
of Export Commodities,'' approved on December 21, 1992 (Export 
Provisions). The 198l8 Law states that enterprises have the right to 
set their own prices (see Article 26). This principle was restated in 
the 1992 Regulations (see Article IX). The Export Provisions list those 
products subject to direct government control. Paper clips do not 
appear on the Export Provisions list and are not, therefore, subject to 
the constraints of these provisions.
    Consistent with Silicon Carbide, we determined that the existence 
of these laws demonstrates that ZMEC and ZLIP, companies owned by ``all 
the people,'' are not subject to de jure control.
    Since Lansheng was initially a company owned by ``all the people,'' 
the laws cited above establish that the government devolved control 
over Lansheng by law. The only additional law that may be pertinent to 
the de jure analysis of Lansheng as a share company is the Company Law 
(effective July 1, 1994). While Lansheng indicated that it was 
organized consistent with the Company Law, the law did not enter into 
force until nine months after the POI. In any event, this law does not 
alter the government's de jure devolution of control that occurred when 
the company was owned by ``all the people.'' Therefore, we have 
determined that Lansheng is not subject to de jure control.
    In light of reports\3\ indicating that laws shifting control 
control from the government to the enterprises themselves have not been 
implemented uniformly, an analysis of de facto control is critical to 
determining whether respondents are, in fact, subject to governmental 
control.
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    \3\See ``PRC Government Findings on Enterprise Autonomy,'' in 
Foreign Broadcast Information Service-China-93-133 (July 14, 1993) 
and 1992 Central Intelligence Agency Report to the Joint Economic 
Committee, Hearings on Global Economic and Technological Change: 
Former Soviet Union and Eastern Europe and China, Pt. 2 (102 Cong., 
2d Sess)
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De Factor Control Analysis

    We analyze below the issue of de factor control based on the 
criteria set forth in Silicon Carbide.

ZMEC

    In the course of verification, we confirmed that ZEMC's export 
prices are neither set by, nor subject to approval, by any government 
authority. This point was supported by ZMEC's sales documentation and 
company correspondence. We also confirmed, based on examination of 
documents related to sales negotiations, written agreements and other 
correspondence, that ZMEC has the authority to negotiate and sign 
contracts and other agreements independent of government authority. We 
further found that ZMEC retained proceeds from its export sales and 
made independent decisions regarding disposition of profits and 
financing of losses. ZMEC's financial and accounting records as well as 
joint venture and purchase contracts supported this conclusion. 
Finally, we have determined that ZMEC has autonomy from the central 
government in making decisions regarding the selection of management. 
Although ZMEC's appointment of management is acknowledged by the 
Zhejiang Machinery Bureau (ZMB), we have concluded that this does not 
constitute control by ZMB. Based on our examination of minutes of 
management nomination meetings, appointment announcements and 
correspondence between ZMEC and ZMB, verification established that the 
ZMB's involvement in ZMEC's management appointment process reflects 
nothing more than an administrative formality\4\. Furthermore, based on 
examination of correspondence files, we found no evidence of 
involvement by Zhejiang Commission of foreign and Economic cooperation 
(ZCOFTEC), or any other government authority, in any aspect of ZMEC's 
operations. For these reasons, we have determined that ZMEC is not 
subject to de facto control by governmental authorities.
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    \4\As we confirmed at verification, the ZMB simply maintains 
communication with all companies in the machinery industry in the 
Zhejiang Province and provides general news, trade and statistical 
services for all companies in this industry.
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ZLIP

    During verification, our examination of correspondence and sales 
documentation revealed no evidence that ZLIP's export prices are set, 
or subject to approval, by any governmental authority. That ZLIP has 
the authority to negotiate and sign contracts and other agreements 
independent of any government authority was evident from our 
examination of correspondence and written agreements and contracts. We 
also confirmed that ZLIP retained proceeds from its export sales and 
made independent decisions regarding disposition of profits and 
financing of losses (based on our examination of bank account records, 
financial records, and purchase contracts).
    Based on our examination of management appointment announcements 
and other correspondence, we have determined that ZLIP had autonomy 
from the central government in making decisions regarding the selection 
of management. According to ZLIP's company charter, both the general 
manager and the deputy general manager are appointed by the local 
administering authority, the ZCOFTEC. While this may indicate that ZLIP 
is subject to the control of ZCOFTEC, there is no evidence that any 
other exporter of the subject merchandise, is currently under the 
control of ZCOFTEC. Therefore, we have concluded that ZLIP is entitled 
to a separate rate.\5\
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    \5\All non-responding exporters are presumed to be under the 
control of the central government. Moreover, there is no basis on 
which to conclude that Abel, the only exporter that has not 
participated in this proceeding, in subject to control by ZCOFTEC. 
Abel is located in Shenzhen Province, and ZCOFTEC is an agency of 
Zhejiang Province. Therefore, there is no basis to conclude that any 
non-responding exporter is controlled by ZCOFTEC. ZMEC, also located 
within Zhejiang Province, is not subject to such control by ZCOFTEC.
---------------------------------------------------------------------------

Lansheng

    In conducting a de facto analysis of Lansheng, we have examined the 
factors set forth in Silicon Carbide, and whether the change in 
corporate structure alters our conclusion regarding those factors. 
Lansheng's sales documentation and correspondence supports the 
conclusion that no government entity exercises control over Lansheng's 
export prices. Additionally, our examination of numerous contracts with 
domestic and foreign trading companies demonstrates that Lansheng has 
the authority to negotiate and sign contracts and other agreements 
without interference from any governmental entity. We confirmed during 
verification that this situation did not change after Lansheng became a 
share company.
    Before Lensheng became a share company, the general manager of its 
predecessor company, Shanghai Stationery & Sporting Goods Import and 
Export Company (Shanghai Stationery), was elected on February 27, 1993. 
The election proceeded in the following manner. First, for every ten 
employees, there was one elected representative. Second, the 
representatives then elected the general manager. Third, once the 
general manager was elected, the company sent a letter, announcing the 
election to the Shanghai Commission of Foreign Trade and Economic 
Cooperation (Shanghai COFTEC). Shanghai COFTEC then approved the 
manager and sent a letter of congratulation to the company. While 
Shanghai COFTEC technically had the authority to reject an elected 
manager, it reportedly had never done so. After Lansheng became a share 
company, the same manager continued to lead the company. At the first 
general shareholder's meeting, when Lansheng's Board of Directors was 
elected, the shares held by the State Assets Management Bureau (SAMB) 
were voted by the general manager of the former company, Shanghai 
Stationery. Subsequently, the newly elected Board of Directors 
appointed the former general manager as Chairman of the Board for 
Lansheng (see the Final Concurrence Memorandum in this proceeding, 
which attaches the Department's report of its verification of Lansheng 
in the Antidumping Investigation of Certain Cased Pencils from the 
PRC). There is no evidence that any government entity participated in 
the election of the Board of Directors or the decision to retain 
current management.
    We also found that Lansheng retained proceeds from export sales and 
made independent decisions regarding the disposition of profits and 
financing of losses both before and after becoming a share company. 
This point was supported through examination of Lansheng's bank account 
records and bank loan applications. (See Lansheng's verification 
report.)
    As indicated above, Lansheng's change to a share company did not 
have any effect on the actual day-to-day operations. The record shows 
that, following its conversion to a share company, 25.1 percent of 
Lansheng's shares were sold publicly, with the proceeds returning to 
the company as new capital investment. The remaining 74.9 percent of 
the shares represents the value of the assets in the original company, 
Shanghai Stationery (which was owned by ``all the people''). Evidence 
on the record indicates that these remaining shares are held in trust 
by the SAMB, just as its assets were held in trust when Lansheng was 
owned by ``all the people.'' The company's management, which has 
remained the same throughout its transition to a share company, votes 
these shares at the general shareholders' meetings of Lansheng. This 
evidence supports the conclusion that, under the new corporate 
structure, the government has not exerted control over Lansheng through 
the exercise of shareholder rights or otherwise; operational control 
remains in the hands of company management.

Conclusion

    In the case of ZMEC and Lansheng, the record demonstrates an 
absence of de jure and de facto government control. With respect to 
ZLIP, we have determined that ZLIP is not controlled by the central 
government and that, although ZLIP may be controlled by ZCOFTEC, 
ZCOFTEC does not control any other PRC exporter of paper clips. 
Accordingly, we determine that each should receive a separate rate.

Fair Value Comparisons

    To determine whether sales by the three responding exporters of 
paper clips from the PRC to the United States were made at less-than-
fair-value prices, we compared the United States price (USP) to the 
foreign market value (FMV), as specified in the ``United States Price'' 
and ``Foreign Market Value'' sections of this notice.

United States Price

    USP and ZMEC, ZLIP and Lansheng was calculated on the same basis as 
in the preliminary determination. The following adjustments were made 
to the reported U.S. sales of these exporters pursuant to our findings 
at verification (see Calculation Memorandum, on file in room B-099 of 
the Main Commerce Department Building, for details on these 
adjustments):
    * We adjusted foreign inland freight for ZMEC based on verified 
distances between factory and port of exportation.
    * Minor adjustments were also made to ZMEC's reported ocean freight 
and marine insurance charges.
    * We adjusted ZLIP's and ZMEC's respective USP for unreported bank 
transactions fees based on findings at verification.
    * In the case of ZMEC, three unreported sales were discovered at 
verification which were verified and included in the final 
determination. Commission fees related to these unreported sales were 
verified and also included in the final determination.
    * Several CIF sales reported by ZMEC were clarified and verified as 
C&F sales and considered as such for the final determination.
    * The reported quantity for one of Lansheng's transactions was 
adjusted.

Foreign Market Value

    We calculated FMV based on factors of production cited in the 
preliminary determination, making adjustments based on verification 
findings (see Calculation Memorandum). To calculate FMV, the verified 
factor amounts were multiplied by the appropriate surrogate values for 
the different inputs. We have used the same surrogate values used in 
the preliminary determination with the exception of nickel and sodium 
hydroxide. Instead of using the value for non-alloy nickel bar, we used 
for this final determination the value for unwrought nickel, which was 
found to be the form of nickel used for plating purposes. We also used 
a surrogate value for sodium hydroxide in liquid (rather than solid 
flake) form based on verification findings. We correctly valued two 
other proprietary factors whose names had been incorrectly reported.
    Based on verification, we adjusted certain factors' values to 
reflect the actual purity used in the production of subject 
merchandise.
    We have adjusted the surrogate inland freight charge for 
transporting factor inputs from supplier to factory to reflect the 
surrogate value for the actual quantity being transported. We 
recalculated inland freight distances between factory and input 
supplier based on verified distances for Jiaxing and Fengbin.
    For Wuyi and Jiaxing, we used verified packing factor amounts to 
calculate packing cost for the final calculations.
    In the case of Fengbin, three additional proprietary factors of 
production were identified after the preliminary determination. These 
factors were verified and considered for the final determination. In 
addition, factors of production, labor and energy used in 
electroplating subject merchandise were adjusted to reflect allocation 
based on actual electroplating process time.
    In the case of Jiaxing, verification findings made it possible to 
calculate type-specific FMVs for No. 1 and Giant paper clips for the 
final determination. Reported direct labor was adjusted based on 
verification findings.
    In the case of Wuyi, total reported clip production was found to be 
overstated at verification and adjustments to factors of production 
were made accordingly. For certain factors, adjustments were made to 
reflect actual amounts consumed during the POI instead of simple 
averages. Adjustments were also made to material, labor and electricity 
factors used in electroplating subject merchandise, to reflect actual 
quantities consumed for paper clip plating during the POI. We also made 
a downward adjustment to reported electricity usage in the clip 
production process based on verification findings.

Surrogate Country

    Section 773(c)(4) of the Act requires the Department to value the 
factors of production, to the extent possible, in one or more market 
economy countries that are (1) at a level of economic development 
comparable to that of the non-market economy country, and (2) 
significant producers of comparable merchandise. The Department has 
determined that India and Pakistan are the countries most comparable to 
the PRC in terms of overall economic development. (See memorandum from 
the Office of Policy to the file, dated November 29, 1993.) Although 
India is the preferred surrogate country for purposes of calculating 
the factors of production, we have resorted to Pakistan for certain 
surrogate values where Indian values were either unavailable or 
significantly outdated. We have obtained and relied upon published, 
publicly available information, wherever possible.

Verification

    As provided in section 776(b) of the Act, we verified the 
information submitted by respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records and original 
source documents provided by respondents.

Interested Party Comments

Comment 1: PRC Exporters and Separate Rates

ZMEC and ZLIP

    Petitioners argue that ZLIP and ZMEC are both subject to control by 
one or more government agencies in the Zhejiang Province. Since the 
ZCOFTEC has the authority under the company charter to appoint ZLIP's 
general manager and deputy general manager, petitioners contend that 
ZLIP's operations are overseen by ZCOFTEC. Petitioners argue that ZMEC 
also is under the supervision of the ZCOFTEC since ZCOFTEC communicates 
with ZMEC, an export trading company located in the Zhejiang province. 
Petitioners also note that ZMEC's appointment of its general manager is 
subject to approval by another Zhejiang province government agency, the 
ZMB.
    Respondents counter that little evidence is provided to support 
Petitioners' claim that ZMEC and ZLIP are both subject to the control 
of the ZCOFTEC and the ZMB. The fact that the ZCOFTEC communicates to 
all export trading companies in the Zhejiang province does not evince 
governmental control over the companies' operations. with respect to 
ZMB, respondents argue that the ZMB's role is also limited to the 
communication of market information, and statistical services to 
companies in the machinery industry. Even though the ZMB has the right 
under law to object to any general manager nomination, respondents 
state that this responsibility does not allow the ZMB total control 
over ZMEC's operations. In fact, no evidence was found to indicate that 
the ZMB has ever actually exercised that right in the case of ZMEC. 
Furthermore, respondents note that evidence on the record regarding 
other aspects of de facto control demonstrates that both ZLIP and ZMEC 
clearly are independent from central or provincial government control. 
Both companies act independently without governmental interference in 
setting their own export prices, negotiating contracts and agreements, 
and disposing of profits and financing of losses. Respondents argue 
that the ``totality of information'' contradicts petitioners' 
assertions that ZLIP and ZMEC are controlled by the governmental body 
and therefore, should not be assigned company-specific, separate rates.

Lansheng

    Petitioners contend that the record in this investigation reflects 
no de facto evidence of Lansheng's independence from government 
control. The fact that the SAMB holds 74.5 percent of the shares in 
Lansheng allows the SAMB to have absolute control over the selection of 
the company board of directors and the appointment of the company's 
general managers and chairman of the board. Because the SAMB, a 
governmental agency, has control over the company's operations, 
petitioners argue, Lansheng should not be considered for a separate 
rate.
    Respondents argue that the record shows the role of the SAMB in the 
operation of Lansheng to be extremely limited. The shares held by the 
SAMB are ``entrusted'' to the management of the company and, therefore, 
the SAMB's role is similar to that of an ``inactive investor'', or 
title holder. Respondents point to the fact that Lansheng will be free 
to sell all of its shares to the public within three years as an 
indication of the limited role of the SAMB during Lansheng's transition 
from a state-owned company to a share company. Respondents state that 
the functions of the board of directors and general manager are not 
governed by the SAMB but are defined in the company's articles of 
association. Respondents contend that petitioners fail to recognize 
that the Department considers evidence relating to all aspects of de 
facto control and does not necessarily preclude a respondent from a 
separate rate based on information dealing with one aspect of 
governmental control. According to respondents, evidence regarding 
other factors of de facto control further demonstrates that Lansheng's 
operations are not subject to governmental control by the SAMB or any 
other governmental entity. Therefore, respondents argue, Lansheng 
should be given a separate rate.

DOC Position

    We agree with respondents, as explained above in the ``Separate 
Rates'' section, that each exporter should receive a separate rate.

Comment 2: Universe of Manufacturers/Sellers

    Petitioners argue that only a fraction of the manufacturers and 
sellers of paper clips in the PRC during the POI participated in the 
investigation, and cite several firms which were listed in the petition 
and submissions by respondents that did not respond to the 
questionnaire. Two of these firms are reported as being located in 
Zhejiang Province, where ZLIP and ZMEC are located. Petitioners cite 
several cases stating that all PRC firms owned by the same governmental 
authority, and which produced or sold the subject merchandise during 
the POI, must cooperate in the investigation in order for respondent 
firms to receive a separate rate from the Department (see, e.g., Final 
Determination of Sales at Less Than Fair Value: Helical Spring Lock 
Washers from the People's Republic of China (HSLW) (58 FR 48833, 
September 20, 1993)). Because certain firms mentioned in previous 
submissions did not participate in the investigation, petitioners 
assert that it is impossible for the Department to determine that the 
respondent firms seeking a separate rate are actually independent and 
not related to any other, unidentified or non-participating PRC company 
involved in the production and sale of the subject merchandise to the 
United States.
    ZMEC, ZLIP and Lansheng argue that the Department should not 
preclude them from receiving their own company-specific separate rate 
simply because other potentially state-owned paper clip manufactures 
and exporters did not respond to the Department's questionnaire. 
Respondents cite Silicon Carbide, wherein ``state-ownership'' is not 
considered to be indicative of common control by a single entity. 
Respondents assert that any state-owned company is entitled to a 
separate rate if it can prove absence of de facto and de jure control 
by a government entity. Firms which refuse to participate or which do 
not satisfy the above-mentioned separate rates test are assumed to be 
under central government control and are assigned a country-wide ``all-
others'' rate. Respondents assert that AMEC, ALIP and Lansheng have 
established that there is an absence of de facto and de jure control by 
the central government and, therefore, that they qualify for company-
specific separate rates, even though other state-owned firms in the PRC 
did not participate in the investigation.

DOC Position

    We agree with respondents that each participating exporter in this 
investigation (i.e., ZMEC, ZLIP and Lansheng) is entitled to its 
company-specific separate rate regardless of whether other potential 
PRC exporters and sellers of subject merchandise participated in this 
investigation. Petitioners' concern that all firms that produced paper 
clips during the POI did not participate in the investigation is 
misplaced. Each of the three exporters investigated established that 
they were independent of any central government control and, therefore, 
received a company-specific separate rate. The ``all other'' exporters 
are presumed to be under central government control and, therefore, 
received a single rate, which, in this case, was based on BIA due to 
Abel's failure to respond to the questionnaire (see ``Best Information 
Available'' section of this notice, above). Because the ``all other'' 
exporters are presumed to be under central government control and the 
three responding companies have established that they are not under 
central government control, the responding firms and the ``all other'' 
exporters are not within a common sphere of control.

Comment 3: Choice of ``All-Others'' Rate

    Petitioners assert that the Department incorrectly calculated the 
margin to be used as the ``all-others'' rate in the preliminary 
determination by using the information set forth in the October 13, 
1993, petition. Petitioners assert that the Department should have 
chosen the highest margin (150.00 percent) set forth in the petition, 
as amended on January 26, 1994. According to petitioners, the margin 
resulting from the amended petition is based on Petitioners' updated 
values for certain chemicals used to plate paper clips. Petitioners 
claim that the January 26, 1994, submission clarified that the values 
which the Department had disregarded in adjusting the petition for 
initiation purposes were not being used as ``surrogate values'' in the 
manner in which the Department might apply Indian and Pakistani values. 
Petitioners state that the values set forth in the amended petition's 
exhibits reflect the actual experience of an affiliate of one of the 
petitioners in producing wire paper clips in Mexico. Those values were 
provided because, given the specialized nature of the particular 
inputs, petitioners were unable to obtain publicly available published 
information from an appropriate surrogate country. By basing these 
values on the actual experience of petitioners' affiliate, petitioners 
claim to have followed the established practice of the Department to 
permit a petitioner in an antidumping case to base certain values and 
costs on petitioners' own experience. Petitioners cited to several past 
cases to support this argument (e.g., Final Determination of Sales at 
Less Than Fair Value: Sebacic Acid from the People's Republic of China 
(Sebacic Acid) (58 FR 37908, May 31, 1994)).
    Respondents request that the Department continue to reject 
petitioners' unsubstantiated and untimely petition amendments for 
purposes of determining the ``all others'' rate. According to 
respondents, the amended data submitted by petitioners should not be 
accepted by the Department since the data is from a Mexican affiliate 
and this does not satisfy the requirement that costs submitted under 
the rubric of ``petitioners' data'' be based on U.S. cost. Second, 
respondents contend that the amended data should not be considered for 
the final determination since petitioners did not demonstrate that 
Mexico qualifies as a reasonable surrogate country for the PRC. 
Finally, respondents claim that petitioners' amendments to the petition 
were filed in an untimely fashion.

DOC Position

    We agree with respondents and will continue to use the highest 
margin in the petition, as recalculated by the Department in the 
initiation notice (126.94 percent). Petitioners failed to provide any 
explanation or documentation of their efforts to find surrogate country 
value information. Moreover, petitioners' use of Mexican values is 
tantamount to selecting Mexico as a surrogate country, regardless of 
how petitioners choose to characterize their intentions. Petitioners 
never explicitly stated why their use of Mexican values is appropriate 
in light of the Department's hierarchy for selecting surrogate country 
economies.

Comment 4: Application of BIA/``All Others'' Rate to Respondents Who 
Did Not Sell Subject Merchandise to the United States During the POI

    Respondents request that the Department not apply the ``all 
others'' rate based on BIA to the ten PRC companies that responded to 
the Department's November 4, 1993, survey advising that they had not 
shipped the subject merchandise to the U.S. during the POI. Because the 
``no-shipment'' companies responded to the Department's survey and were 
cooperative, respondents argue that the Department should modify the 
``all others'' rate with respect to these companies. Respondents note 
that the Department did not issue further questionnaires to these 
companies or otherwise indicate that these responses were considered to 
be incomplete. Moreover, respondents assert that the Department was not 
precluded from verifying the statements of the ``no-shipment'' 
companies. Respondents cite Olympic Adhesive, Inc. v. United States, 
where the Court of Appeals Federal Circuit held that ``a `No' answer is 
a complete answer.''
    Therefore, respondents contend, these ten companies complied with 
Department regulations and should not be given the same BIA rate as 
respondents which refused to respond to the Department's questionnaires 
entirely. Respondents argue that these companies should be considered 
cooperative respondents and should not be assigned a margin based on 
BIA. Instead, respondents request that these ten companies be given a 
margin based on a weighted-average of the other participating 
exporters' margins.
    Petitioners assert that respondents' request that the Department 
modify the ``all others'' rate for the ten ``no-shipment'' companies 
should not be granted. First, petitioners state that the Department's 
recent determinations involving the PRC assigned companies a rate based 
on the highest margin stated in the petition because the companies in 
question were unable to show entitlement to a separate rate. 
Petitioners contend that claims by these PRC firms that they did not 
produce or sell paper clips exported to the U.S. during the POI is not 
factual information that can be used by the Department to calculate an 
appropriate antidumping margin. Petitioners further argue that any 
reference to the use in past cases of a weighted-average of other 
respondents' margins are inapposite, because the cited determinations 
do no discuss a method for assigning an antidumping duty rate to 
companies which did not submit factual information. In addition, 
petitioners state the 1991 determinations cited by respondents have 
been superseded by more recent decisions by the Department, in which 
the highest margin alleged in the petition was selected for firms 
deemed ineligible for a separate rate. Petitioners also maintain that 
the respondents' assertion that the application of the highest margin 
alleged in the petition to the no-shipping firms constitutes punitive 
``BIA'' is incorrect. Petitioners counter that the Department 
regulations authorize the reliance on factual information submitted in 
support of the petition, if the Department does not receive a complete, 
accurate, and timely response to its request for factual information. 
Given the lack of factual information from the non-shipping firms, 
petitioners maintain that the Department properly assigned to those 
firms an ``all others'' rate based on factual information from the 
petition. Finally, petitioners argue that to give the non-participating 
firms a rate based on an average of separate rates assigned to the 
respondent exporters would reward companies that remained outside of 
the Department's investigation. Such firms, by not participating, would 
actually receive a margin that is lower than half of the responding 
firms which submitted factual information.

DOC Position

    We agree with petitioners. Even though the ten companies reported 
that they made no sales of subject merchandise to the U.S. during the 
POI, the companies did not take the opportunity to answer the ownership 
and government control questions presented in the November 3, 1993, 
survey and/or complete the Separate Rates attachment of the 
Department's questionnaire, which the Department issued both to PRC 
government agencies and directly to all but one\6\ of the ten 
companies. The companies did not respond to the Department's requests 
for factual information in an accurate and timely fashion. On the 
contrary, the companies did not submit any factual information 
pertaining to their respective ownership and control status to 
demonstrate that they are eligible for a separate rate. Therefore, we 
reject respondents' request to modify the ``all others'' rate for the 
ten ``no-shipment'' companies.
---------------------------------------------------------------------------

    \6\One company was not issued a questionnaire despite being 
named in the petition because there was no indication that it had 
shipped subject merchandise to the United States during the POI.
---------------------------------------------------------------------------

Comment 5: Double-Counting of Indirect Expenses in Manufacturers' FMV 
Calculations

    Respondents claim that the Department's preliminary calculation 
includes the cost of chemical factor inputs used in the electroplating 
stage of paper clip production both in the cost of manufacture (i.e., 
raw material valuation) and in factory overhead (which was based on an 
industry-specific income statement in the Reserve Bank of India 
Bulletin). Respondents believe that all materials, other than steel, 
nickel and nickel sulfate, should be treated by the Department in its 
final determination as indirect, not direct materials, According to 
respondents, these remaining chemicals are used to bathe the unfinished 
products during the electroplating stage and are not actually 
incorporated into the finished product and, therefore, are properly 
included in factory overhead. In support of this, respondents cite the 
Final Determination of Extruded Rubber Thread from Malaysia (57 FR 
38465, August 25, 1992) which stated that a particular input ``is 
properly treated as variable overhead rather than a direct cost because 
if is not part of the finished good.'' Specifically, respondents claim 
that the factory overhead components of the income statement included 
the item ``other manufacturing expenses.'' Respondents maintain that 
although the income statement includes a separate line for ``raw 
materials, components, etc. consumed'', it does not contain any similar 
category for indirect materials. Respondents cite additional cases to 
note the treatment of indirect materials in past NME cases and request 
the Department to correct its calculation of cost of manufacture by 
including only direct materials in the final determination.
    Petitioners contend that the chemical materials used in the 
electroplating process should be treated as direct materials in the 
final determination because respondents have failed to provide any 
evidence that double-counting actually did occur. Furthermore, 
petitioners assert that respondents' argument that plating chemicals 
are indirect materials is based on a faulty premise that the chemicals 
are not physically incorporated into the finished product. According to 
petitioners, the chemicals which form the bath used to plate the clips 
are actually incorporated into the clips by ensuring the nickel remains 
attached to the wire. Without these chemicals, the nickel would not 
stay on the wire. Petitioners further cite several cases involving the 
PRC where chemicals used in plating were valued as direct materials. 
Petitioners request that the Department follow prior determinations and 
treat plating chemicals as direct materials.

DOC Position

    We agree with petitioners that the chemical inputs in the plating 
process are direct materials because the chemicals are physically 
incorporated into, and become part of, the finished product during the 
plating process (see HSLW; Final Determination of Sales at Less than 
fair Value: Chrome-Plated Lug Nuts from the People's Republic of China 
(56 FR 46153, 10 September 1991) and Sparkers). There is no evidence on 
the record to prove that the chemical inputs used in the plating 
process are actually included in the factory overhead category of 
``other manufacturing expenses.'' Therefore, we have treated the 
chemical inputs as direct materials for the calculations in the final 
determination.

Comment 6: Treatment of Chemical Inputs Having Lower Concentration 
Levels

    If the Department decides to value plating chemicals as direct 
materials, respondents request the Department to adjust the surrogate 
values of those chemicals (which respondents contend represent values 
for undiluted products) to reflect verified actual concentration levels 
of chemicals used by the manufacturers.
    Petitioner argue that no authority exists for the Department to 
adjust its surrogate value calculations to reflect the concentration 
levels of chemical inputs used by the manufacturers because the 
Department would have to make an assumption regarding the purity level 
of the surrogate value selected. In this case, petitioners contend that 
there is no information on the record to base the percentage of purity 
of each of the published values.

DOC Position

    The Department is faced with three options in determining the 
appropriate purity concentration of the chemical factors in the Indian 
Import Statistics: assume the value is based on 100 percent purity for 
all factors; assume it is based on normal commercial strengths for 
chemical factors, as stipulated in the Condensed Chemical Dictionary; 
or assume the value is based on verified chemical strengths used by the 
manufacturers in the plating process. Unlike in Sebacic Acid (which 
petitioners cite for the prospect that the Department should not make 
unsubstantiated assumptions about the purity of the Indian import 
statistics for chemicals, information on the record in this 
investigation provides us with the basis upon which to infer purity 
percentages of Indian imports. Therefore, we have applied commercial 
strengths based on the Condensed Chemical Dictionary as the most 
reasonable method for valuing purity concentration of these chemical 
factors for commercial use.

Comment 7: Surrogate Country Value for Nickel and Nickel Sulfate

    Respondents contend that the surrogate values for nickel and nickel 
sulfate used in the preliminary determination are unreasonable because 
they represent a price which is approximately four times the 
international market price of those inputs. Therefore, respondents 
request the Department to revise its calculations for the final 
determination to adjust the surrogate values for nickel and nickel 
sulfate.
    Petitioners assert that respondents have not standing to criticize 
the use of the surrogate values since respondents failed to submit any 
information on publicly available published information in a timely 
manner, as requested by the Department. Moreover, petitioners contend 
that in past cases involving the PRC, the Department has maintained 
that to reject Indian surrogate values simply because respondents 
allege that those values did not reflect world market prices would be 
overly subjective on the part of the Department (HSLW, Final 
Determination of Sales at Less Than Fair Value: Sulfanilic Acid from 
the People's Republic of China (57 FR 29705, July 6, 1992)).

DOC Position

    We used a value for non-alloy nickel bar in the preliminary 
determination based on Indian Import Statistics. After consulting with 
nickel specialists and conducting independent research, it was 
discovered that unwrought nickel is the usual input for nickel plating. 
Accordingly, we have thus use this value for nickel for our final 
determination. In order not to overstate the value of nickel used in 
the plating process of paper clips, we have used the basket category 
for unwrought nickel in the Indian Import Statistics, to calculate the 
surrogate value of nickel used in the plating process for the final 
determination. Because we have learned nothing to call into question 
the surrogate value used for nickel sulfate, the value used for that 
factor remains unchanged.

Comment 8: Response Errors of ZMEC and ZLIP

    Petitioners note the failure by ZMEC to report relevant sales 
during the POI and to account for downward adjustments, such as related 
bank charges and commission fees, to U.S. price. Specifically, 
petitioner cite unreported bank transaction charges and three 
unreported sales and their accompanying commission fees discovered 
during ZMEC's verification. Petitioners request that the Department 
account for these omissions and draw, when appropriate, adverse 
inferences from respondents' failure to submit the aforementioned 
information prior to verification.
    Petitioners also suggest that bank transaction charges discovered 
during ZLIP's verification require the Department to draw adverse 
inferences.
    Respondents contend that the omissions are minor and insignificant, 
and are consistent in nature with minor errors found in virtually every 
verification conducted by the Department. Therefore, respondents 
conclude that there is no reasonable basis to warrant the use of 
``adverse inferences'' in the final determination.

DOC Position

    Petitioners are correct that unreported information discovered at 
verification must be evaluated in terms of the relative seriousness of 
the omission itself and to what extent its discovery calls into 
question the integrity of the entire response. However, we agree with 
respondents. The omissions are minor and do not significantly erode our 
confidence in the integrity of ZLIP's or ZMEC's response. Accordingly, 
the verified information related to these omissions has been used for 
the final determination.

Comment 9: Use of Semi-Skilled Labor Rates for PRC Production of 
Subject Merchandise

    Petitioners assert that the Department should use the Indian value 
for semi-skilled labor, rather than that of unskilled labor, in 
determining the value of labor used to produce paper clips in the PRC. 
Furthermore, according to petitioners, respondents have failed to 
support their claim that all labor used in the process was unskilled is 
not supported by any evidence on the record.
    Respondents counter that verification of all three respondent 
manufacturers revealed no discrepancies regarding labor in the forming 
or electroplating workshops. Therefore, respondents conclude that the 
record does not support petitioners' assertion that the Department 
should use semi-skilled labor rates in the final determination.

DOC Position

    We agree with respondents. Verification revealed no reason to infer 
that respondents' used semi-skilled labor in the production of paper 
clips. Further, even if we were to determine the use of semi-skilled 
labor rates to be appropriate, petitioners provided no basis for 
calculating a value for semi-skilled labor in the petition.

Comment 10: Use of Verified Packing Data

    Respondents request that the Department use the packing amounts 
verified at the manufacturers when calculating the manufacturers' 
packing material expenses in the final determination. While packing 
material and packing labor were verified at Jiaxing and Wuyi, only 
packing labor was verified at Fengbin. Respondents request that the 
Department use an average of packing materials data (from the other two 
manufacturers), rather than punitive data, for the final determination 
with respect to Fengbin's packing materials. Respondents assert that 
the Department should grant this request since Fengbin provided 
complete responses to the Department's questionnaires which were 
substantially verified. Furthermore, according to respondents, the use 
of an average of the verified packing material amounts would more 
accurately reflect the experiences of the PRC manufacturers.
    Petitioners request that the Department base its calculation of 
packing expenses on surrogate value information or on information set 
forth in the petition. In addition, since Fengbin failed to provide 
verified packing material data during this investigation, petitioners 
request that the Department use as BIA the information contained in the 
petition for Fengbin's packing materials.

DOC Position

    For Jiaxing and Wuyi, we have used the verified packing material 
data. It is the Department's practice to use partial BIA to correct 
minor data deficiencies. Fengbin's omission from its response of 
packing material data constitutes such a deficiency. Therefore, we 
continue to use the petition's packing material value as BIA for 
Fengbin's packing expenses in the final margin calculations.

Continuation of Suspension of Liquidation

    In accordance with section 733(d)(1) and 735(c)(4)(B) of the Act, 
we are directing the Customs Service to continue to suspend liquidation 
of all entries of paper clips from the PRC that are entered, or 
withdrawn from warehouse, for consumption on or after May 18, 1994, 
which is the date of publication of our notice of preliminary 
determination in the Federal Register. The Customs Service shall 
require a cash deposit or posting of a bond equal to the estimated 
amount by which the FMV exceeds the USP as shown below. These 
suspension of liquidation instructions will remain in effect until 
further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Margin   
              Manufacturer/Producer/Exporter                 percentage 
------------------------------------------------------------------------
Lansheng..................................................         57.64
ZLIP......................................................         46.01
ZMEC......................................................         60.70
All Others (including Abel)...............................        126.94
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
International Trade Commission (ITC) of our determination. As our final 
determination is affirmative, the ITC will determine whether these 
imports are materially injuring, or threaten material injury to, the 
U.S. industry within 45 days. If the ITC determines that material 
injury, or threat of material injury does not exist, the proceeding 
will be terminated and all securities posted will be refunded or 
cancelled. If the ITC determines that such injury does exist, the 
Department will issue an antidumping duty order directing Customs 
officials to assess antidumping duties on all imports of the subject 
merchandise entered, or withdrawn from warehouse, for consumption on or 
after the effective date of the suspension of liquidation.
    This determination is published pursuant to section 735(d) of the 
Act of 19 CFR 353.20(a)(4).

    Dated: September 30, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration
[FR Doc. 94-24935 Filed 10-6-94; 8:45 am]
BILLING CODE 3510-DS-M