[Federal Register Volume 69, Number 181 (Monday, September 20, 2004)]
[Notices]
[Pages 56188-56190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21208]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration


Separate-Rates Practice in Antidumping Proceedings involving Non-
Market Economy Countries

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

ACTION: Request for Comments.

-----------------------------------------------------------------------

SUMMARY: On May 3, 2004, the Department of Commerce published a notice 
in the Federal Register requesting comments on its separate rates 
practice. This practice refers to the Department's long-standing policy 
in antidumping proceedings of presuming that all firms within a non-
market economy country (``NME'') are subject to government control and 
thus should all be assigned a single, country-wide rate unless a 
respondent can demonstrate an absence of both de jure and de facto 
control over its export activities. In that case, the Department 
assigns the respondent its own individually calculated rate or, in the 
case of a non-investigated or non-reviewed firm, a weighted-average of 
the rates of the fully analyzed companies, excluding any rates that 
were zero, de minimis, or based entirely on facts available. In 
response to its May 3, 2004, request for comments on its separate rates 
policy and practice and on its options for changes (69 FR 24119), the 
Department received 23 submissions from interested parties.
    Taking into account the submissions in response to its first notice 
requesting comments on various changes to its separate rates policy and 
practice, this notice outlines revised options for such changes in 
order to provide the public with an opportunity to comment on whether 
those changes would be consistent with the statute and would redress 
problems that have been identified concerning separate rates 
appropriately. The Department intends to consider additional 
modifications to its NME practice and may solicit additional public 
comment on other potential changes, as appropriate.

DATES: Comments must be submitted by October 15, 2004.

ADDRESSES: Written comments (original and six copies) should be sent to 
James J. Jochum, Assistant Secretary for Import Administration, U.S. 
Department of Commerce, Central Records Unit, Room 1870, Pennsylvania 
Avenue and 14th Street NW., Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: Lawrence Norton, Economist, or Anthony 
Hill, Senior International Economist, Office of Policy, Import 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington DC, 20230, 202-482-1579 or 202-
482-1843.

SUPPLEMENTARY INFORMATION:

Background

    In an NME antidumping proceeding, the Department presumes that all 
companies within the country are subject to governmental control and 
should be assigned a single antidumping duty rate unless an exporter 
demonstrates the absence of both de jure and de facto governmental 
control over its export activities. See Final Determination of Sales at 
Less Than Fair Value: Bicycles from the People's Republic of China, 61 
FR 19026, 19027 (April 30, 1996). The Department's separate rates test 
is not concerned, in general, with macroeconomic border-type controls 
(e.g., export licenses, quotas, and minimum export prices), 
particularly if these controls are imposed to prevent the dumping of 
merchandise in the United States. Rather, the test focuses on controls 
over the decision-making process on export-related investment, pricing, 
and output decisions at the individual firm level. See Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate from Ukraine, 62 FR 61754, 61757 (November 19, 
1997); Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, from the People's Republic of China: Final Results of 
Antidumping Duty Administrative Review, 62 FR 61276, 61279 (November 
17, 1997); and Preliminary Determination of Sales at Less Than Fair 
Value: Honey from the People's Republic of China, 60 FR 14725, 14727 
(March 20, 1995).
    To establish whether a firm is sufficiently independent from 
government control in its export activities to be entitled to a 
separate rate, the Department analyzes each exporting entity under a 
test arising from the Final Determination of Sales at Less Than Fair 
Value: Sparklers from the People's Republic of China, 56 FR 20588 (May 
6, 1991), as modified in the Final Determination of Sales at Less Than 
Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 
22585, 22587 (May 2, 1994) (Silicon Carbide). Under this test, the 
Department assigns separate rates in NME cases only if an exporter can 
demonstrate the absence of both de jure and de facto governmental 
control over its export activities. See Silicon Carbide and Final 
Determination of Sales at Less Than Fair Value: Furfuryl Alcohol from 
the People's Republic of China, 60 FR 22544, 22545 (May 8, 1995). In 
order to request and qualify for a separate rate, a company must have 
exported the subject merchandise to the United States during the period 
of investigation or review, and it must provide information responsive 
to the following considerations:
1. Absence of De Jure Control: The Department considers the following 
de jure criteria in determining whether an individual company may be 
granted a separate rate: (1) An absence of restrictive stipulations 
associated with an individual exporter's business and export licenses; 
(2) any legislative enactments decentralizing control of companies; and 
(3) any other formal measures by the government decentralizing control 
of companies.
2. Absence of De Facto Control: Typically, the Department considers 
four factors in evaluating whether each respondent is subject to de 
facto governmental control of its export functions: (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 central, provincial, or local governments in making 
decisions regarding the selection of its 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.
    In an antidumping investigation or review, the Department will 
usually assign a weighted-average of the

[[Page 56189]]

individually calculated rates, excluding any rates that were zero, de 
minimis, or based entirely on facts available, to exporters who have 
not been selected as mandatory respondents if they fulfill two 
requirements. First, they must submit a request for separate rates 
treatment, along with a timely response to section A of the 
Department's questionnaire. Second, the Department must determine, 
after reviewing the requesting companies' submissions, that separate 
rates treatment is warranted. See Final Determination of Sales at Less 
Than Fair Value: Certain Circular Welded Carbon-Quality Steel Pipe from 
the People's Republic of China, 67 FR 36570, 36571 (May 24, 2002).
    As it announced in its May 3, 2004, notice in the Federal Register 
(69 FR 24119), the Department is considering changes to the practice 
detailed above, in particular in response to the growing administrative 
burden of analyzing requests for separate rates. The Department has 
received increasing numbers of requests for separate rates in recent 
years and is facing an exceptionally large number of such requests in 
two ongoing investigations. See Notice of Preliminary Determination of 
Sales at Less Than Fair Value and Postponement of Final Determination: 
Wooden Bedroom Furniture from the People's Republic of China, 69 FR 
35312 (June 24, 2004), Notice of Preliminary Determination of Sales at 
Less Than Fair Value, Partial Affirmative Determination of Critical 
Circumstances and Postponement of Final Determination: Certain Frozen 
and Canned Warmwater Shrimp from the People's Republic of China, 69 FR 
42654 (July 16, 2004), and Notice of Preliminary Determination of Sales 
at Less Than Fair Value, Negative Determination of Critical 
Circumstances and Postponement of Final Determination: Certain Frozen 
and Canned Warmwater Shrimp from the Socialist Republic of Vietnam, 69 
FR 42672 (July 16, 2004). Despite the administrative burden, the 
Department has analyzed the large number of separate rates requests in 
these cases. Nevertheless, there are concerns that processing these 
requests consumes an inordinate amount of the Department's resources. 
One particular concern which the Department faces is the complaint that 
parties responding to the Department's questionnaire have, in many 
cases, not responded fully to the initial request for information, 
forcing the Department to issue numerous supplemental questionnaires, 
which, again, create an administrative burden on the agency. Further, 
as noted by various parties submitting responses to the Department's 
May 3, 2004 notice on its separate rates policy and practice, the 
separate rates test, as currently constructed, may not offer the most 
effective means of determining whether exporters act, de facto, 
independently of the government in their export activities.
    Another issue that has been raised by parties concerns potential 
evasion of duties. Under current practice, separate rates are assigned 
only to exporters, and the assigned rate applies regardless of which 
entity produces the subject merchandise. In cases where the rates vary 
widely from exporter to exporter, there is a strong incentive for 
exporters assigned either the country-wide rate or a high calculated 
rate to ship their merchandise through an exporter assigned a lower 
rate. Such diversion arguably undermines the effect of other 
antidumping or countervailing duty margins the Department calculates.
    In order to address these concerns, the Department is now 
considering an additional set of options, set forth in the Appendix to 
this notice, and is particularly interested in comments relating to 
these possible approaches, including comments on their consistency with 
the statute and regulations.

Comments

    Persons wishing to comment should file a signed original and six 
copies of each set of comments by the date specified above. The 
Department will consider all comments received before the close of the 
comment period. Consideration of comments received after the end of the 
comment period cannot be assured. The Department will not accept 
comments accompanied by a request that a part or all of the material be 
treated confidentially because of its business proprietary nature or 
for any other reason. The Department will return such comments and 
materials to the persons submitting the comments and will not consider 
them in development of any changes to its practice. All comments 
responding to this notice will be a matter of public record and will be 
available for public inspection and copying at Import Administration's 
Central Records Unit, Room B-099, between the hours of 8:30 a.m. and 5 
p.m. on business days. The Department requires that comments be 
submitted in written form. The Department recommends submission of 
comments in electronic form to accompany the required paper copies. 
Comments filed in electronic form should be submitted either by e-mail 
to the webmaster below, or on CD-ROM as comments submitted on diskettes 
are likely to be damaged by postal radiation treatment.
    Comments received in electronic form will be made available to the 
public in Portable Document Format (PDF) on the Internet at the Import 
Administration Web site at the following address: http://ia.ita.doc.gov/.
    Any questions concerning file formatting, document conversion, 
access on the Internet, or other electronic filing issues should be 
addressed to Andrew Lee Beller, Import Administration Webmaster, at 
(202) 482-0866, e-mail address: [email protected].

    Dated: September 15, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.

Appendix

(1) The Department is considering a change in its separate rates 
process from a Section A response process to an application process. 
The goal of the separate rates application would be to both streamline 
the separate rates process for NME exporters and the Department and to 
focus the analysis on those issues most relevant to separate rate 
eligibility. For example, in such an application, all exporters, 
including those that are 100% foreign-owned, would be required to 
certify their eligibility for separate rates (i.e., to certify that 
they exported subject merchandise to the United States and that they 
operate de jure and de facto independently of the government), as well 
as to potentially identify any affiliates involved in the production or 
sale of the subject merchandise and the producers from whom they 
sourced the merchandise during the period of investigation. The 
Department would also list the documents required to substantiate these 
certifications and require that the applicant provide original and 
translated copies of all those documents with the application. The 
Department would not consider any application for separate rate 
eligibility unless all of the necessary fields of the application were 
completed and the required evidence and certifications were submitted. 
Moreover, the Department would continue to reserve the right to issue 
supplemental questionnaires and verify applicants if necessary.
    Through this streamlined and more focused separate rates 
application process, the Department could conserve resources by 
receiving and reviewing only the information most relevant to separate 
rate eligibility, such as an

[[Page 56190]]

exporter's independence over its own export activities and the 
potential influence, direct or indirect, of affiliated parties over the 
exporter's sales and production activities. Moreover, in the 
application, the Department could ask questions not addressed currently 
by its standard NME Section A questionnaire that are pertinent to 
separate rates eligibility, including questions about provincial or 
local government control over exporters. Such an application system 
could streamline the process of applying for a separate rate and 
provide a procedure which is less demanding of the Department's 
resources and time. To streamline the process further, the application 
would be available as a form on the Import Administration website. 
After a transition period, the Department would require that parties 
complete and submit this form electronically on the Import 
Administration website. The Department welcomes comments on the general 
advisability of introducing an application process for separate rates, 
as well on the specific proposal outlined above.
(2) Under current NME practice, the Department assigns exporter-
specific separate rates, and not exporter-producer combination rates, 
with three exceptions. The first exception concerns exclusions, in 
which case the exporter that is excluded receives an exporter-producer 
combination rate so that the exclusion from the antidumping order only 
applies when the exporter sources from the same supplier as in the 
original investigation. See Sections 733(b)(3) and 735(a)(4) of the 
Tariff Act of 1930, as amended, and 19 CFR 351.107(b)(1). The second 
exception involves the Department's enforcement of the law as it 
relates to middleman dumping. When a producer/exporter sells to an 
unaffiliated middleman with the knowledge of the ultimate destination 
of the merchandise, and that middleman subsequently sells merchandise 
to the United States at less than fair value, the Department will 
calculate a combination antidumping duty rate for the producer/exporter 
and middleman in many cases. The third exception concerns the 
Department's policy on new shipper reviews, where the rate is assigned 
to the exporter-producer combination. See Import Administration Policy 
Bulletin 03.2: Combination Rates in New Shipper Reviews, dated March 
04, 2003. The Department is considering extending this practice of 
assigning exporter-producer combination rates to NME exporters 
receiving a separate rate so that only the specific exporter-producer 
combination that existed during the period of investigation or review 
receives the calculated rate for establishing the cash deposit rate for 
estimated antidumping duties. That is, if an exporter qualifying for a 
separate rate during an investigation sourced its subject merchandise 
from three producers during the period of investigation, the separate 
rate it receives would only apply as a cash deposit to merchandise 
produced by any of the three suppliers that had supplied the exporter 
during the period of investigation. While the exporter would be free to 
adjust its sourcing from among the three suppliers that supplied it 
during the investigation, merchandise sourced from new suppliers would 
fall outside the combination rate. This combination rate would change 
as the result of subsequent administrative reviews establishing changes 
to the sourcing of the subject merchandise provided to the exporter. 
However, for cash deposit purposes, these combination rates would apply 
until the next administrative review.
    The Department welcomes comments on the legal and administrative 
advisability of combination rates and, if instituted, how best to 
construct them. In particular, the Department is interested in comments 
as to what rate it should assign to exporters' merchandise from 
suppliers for which the Department has not established a combination 
rate.
3) The Department is also considering changing its policy and practice 
concerning third-country resellers, i.e., when NME producers sell 
subject merchandise through exporters located outside the NME country 
(for example, Hong Kong, Taiwan, or Malaysia). Under current practice, 
the Department applies a knowledge test to determine the entity to 
which the rate applies, only where there is evidence that the producer 
knows that the ultimate destination of the merchandise is the United 
States does the Department apply a rate to the NME producer. Otherwise, 
the Department considers the third-country reseller to be the exporter 
and assigns it an antidumping duty rate.
    Recent antidumping investigations indicate that the relationship 
between Chinese producers, in particular, and resellers outside China 
can be complex and difficult to assess given the limited resources of 
the Department. Therefore, the Department is considering instituting a 
rebuttable presumption that NME producers shipping subject merchandise 
through third countries are aware that their goods are bound for the 
United States. In other words, the Department would assume that NME 
producers shipping through third countries set the export price to the 
United States and assign to them, and not the reseller, antidumping 
duty rates, unless evidence were presented to the contrary. In 
accordance with standard practice, the NME producer/exporter would be 
required to demonstrate lack of de facto and de jure government control 
in order to receive a separate rate. The Department is interested in 
comments as to whether there are grounds for such a rebuttable 
presumption.
[FR Doc. 04-21208 Filed 9-17-04; 8:45 am]
BILLING CODE: 3510-DS-P