[Federal Register Volume 70, Number 125 (Thursday, June 30, 2005)]
[Notices]
[Pages 37761-37764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-12862]


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DEPARTMENT OF COMMERCE

International Trade Administration


Expected Non-Market Economy Wages: Request for Comment on 
Calculation Methodology

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

ACTION: Request for comments

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SUMMARY: The Department of Commerce (``Department'') has a long-
standing practice of calculating expected non-market economy (``NME'') 
wages for use as surrogate values in antidumping proceedings involving 
NME countries. These expected NME wages are calculated annually in 
accordance with Sec.  351.408(c)(3) of the Department's regulations. 
This notice describes the Department's methodology for the calculation 
of expected NME wages and provides the public with an opportunity to 
comment on this methodology in response to comments that have been 
submitted in several NME proceedings. For purposes of public comment, 
the Department has also calculated expected NME wages using currently 
available data for 2003 and the methodology described herein. This is a 
sample calculation based on 2003 data, and is subject to data updates 
and revisions.

DATES: Comments must be submitted no later than thirty days after 
publication of this Notice.

ADDRESSES: Written comments (original and six copies) should be sent to 
Joseph A. Spetrini, Acting Assistant Secretary for Import 
Administration, U.S. Department of Commerce, Central Records Unit, Room 
1870, 14th Street and Pennsylvania Avenue N.W., Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: John D. A. LaRose, Assistant to the 
Senior Enforcement Coordinator, Office of China/NME Compliance or 
Shauna Lee-Alaia, Policy Analyst, Office of Policy, Import 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue N.W., Washington, DC 20230, (202) 482-3794 or (202) 
482-2793.

SUPPLEMENTARY INFORMATION:

Background

    With regard to its calculation of expected NME wages, the 
Department stated in its November 17, 2004, Final Determination in the 
investigation of Wooden Bedroom Furniture from the People's Republic of 
China, that it would ``invite comments from the general public on this 
matter in a proceeding separate from the {Furniture{time}  
investigation.'' Final Determination of Sales at Less Than Fair Value: 
Wooden Bedroom Furniture From the People's Republic of China, 69 FR 
67313 (November 17, 2004) and accompanying Issues and Decisions 
Memorandum at 180 (Cmt. 23).

The NME Wage Rate Methodology

    The Department's regulations generally describe the methodology by 
which the Department calculates expected NME wages:
    For labor, the Secretary will use regression-based wage rates 
reflective of the observed relationship between wages and national 
income in market economy countries. The Secretary will calculate the 
wage rate to be applied in nonmarket economy proceedings each year. The 
calculation will be based on current

[[Page 37762]]

data, and will be made available to the public.
    19 CFR 351.408(c)(3).
    In accordance with Sec.  351.408(c)(3), the Department annually 
calculates expected NME wages in two steps. First, the Department uses 
regression analysis\1\ to estimate a linear relationship between per-
capita gross national income (``GNI'') and hourly wages in market 
economy (``ME'') countries. Second, the Department uses the results of 
the regression and NME GNI data to estimate hourly wage rates for NME 
countries.
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    \1\ Ordinary least squares regression.
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    There is usually a two-year interval between the current year and 
the most recent reporting year of the data required for this 
methodology due to the practices of the respective data sources. The 
Department bases its regression analysis on this most recent reporting 
year, which the Department refers to as the ``Base Year.'' For example, 
the Department relied upon data from 2001 to calculate expected NME 
wages in 2003, i.e., the ``Base Year'' for the 2003 calculation was 
2001. In practice, the ``Base Year,'' i.e., the year upon which the 
regression data are based, is two years prior to the year in which the 
Department conducts its regression analysis.
1. Regression Analysis
    The Department's regression analysis, which describes generally the 
relationship between wages and GNI, relies upon four separate data 
series: (A) country-specific wage data for 56 countries from Chapter 5B 
of the International Labour Organization's (``ILO'') Yearbook of Labour 
Statistics; (B) country-specific consumer price index (``CPI'') data 
from the International Financial Statistics of the International 
Monetary Fund (``IMF''); (C) exchange rate data from the IMF's 
International Financial Statistics; and (D) country-specific GNI data 
from the World Development Indicators of the World Bank (``WB'').
    The wage rate data described above are converted to hourly wage 
rates and adjusted using CPI data to be representative of the current 
Base Year. The data are then converted to U.S. dollars using the 
appropriate exchange rate data. These adjusted wage rate data are 
ultimately regressed on GNI.
    The following sections describe each data series and how it is 
used.
(A) Wage Data
    For each of 56 countries, the Department chooses a single wage rate 
that represents a broad measure of wages for that country that is most 
contemporaneous with the Base Year.
    To arrive at a single wage rate for each country from among the 
many wage rates included in the ILO database for each country, the 
Department prioritizes the following ILO data parameters\2\ in the 
following order:
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    \2\ Each data point in the ILO database is accompanied by values 
for each of a number of parameters that describe the characteristics 
of the data. These parameters include those enumerated above, and 
also include two other parameters: ``Source,'' i.e., the original 
survey source of the data and ``Classification,'' i.e., the 
industrial classification.
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    1. ``Sex,'' i.e., male/female coverage;
    2. ``Sub-Classification,'' i.e., coverage of different types of 
industry;
    3. ``Worker Coverage,'' i.e., coverage of different types of 
workers, such as wage earners or salaried employees;
    4. ``Type of Data,'' i.e., the unit of time for which the wage is 
reported, such as per hour or per month; and,
    5. ``Source ID,'' i.e., a code for the source of the data.
    First, the Department looks to the parameter for gender. For the 
``Sex'' parameter, the Department always chooses data that cover both 
men and women.\3\
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    \3\ The Department does not consider values of ``Indices, Men 
and Women'' for this parameter.
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    Second, for the ``Sub-Classification'' parameter, the Department 
chooses in each instance data that cover all reported industries in a 
given country (indicated in the database by a value of ``Total'' for 
the ``Sub-Classification'' parameter).
    When a wage rate that meets these two criteria (for ``Sex'' and 
``Sub-Classification'') is not available for the Base Year, the 
Department will use the most recently available data within five years 
of the Base Year, thereby considering a total of six years of data. For 
example, when the Base Year was 2001, the Department used the data 
reported for the most recent year between the years of 1996 and 2001.
    The Department does not choose wage rate data that do not meet the 
requirements for ``Sex'' and ``Sub-Classification'' described above. If 
there is more than one record in the ILO database that meets those 
requirements, the Department looks to the remaining parameters. Once 
the Department's requirements for these two parameters are satisfied, 
the Department then prioritizes data that are closest to the Base Year 
within the remaining ILO parameters discussed below.
    For example, for the third parameter, the Department generally 
prioritizes ``wage earners,'' ``employees'' and ``total employment,'' 
in that order for the parameter ``Worker Coverage.'' However, the 
Department would choose more contemporaneous ``employees'' data over 
less contemporaneous ``wage earner'' data.
    Fourth, when the values for all other parameters are equal, the 
Department prioritizes data reported on an hourly basis over that 
reported on a monthly or weekly basis for the parameter ``Type of 
Data.''
    Fifth, if necessary, the Department prioritizes data with a 
``Source ID'' value of ``1'' over ``2'' or ``3.''
    Finally, it is the Department's normal practice to eliminate 
aberrational values (i.e., values that vary in either direction in the 
extreme from year to year) from the wage rate dataset.
    The ILO data that are not reported on an hourly basis are converted 
to an hourly basis based on the premise that there are 44 working hours 
per week and 192 working hours per month.
(B) CPI Data
    Once hourly figures have been calculated based on the wage rate 
data discussed above, the wages are adjusted to the Base Year on the 
basis of the Consumer Price Index for each country, as reported by the 
IMF's International Financial Statistics. This adjustment is made for 
any wage rate data not reported for the Base Year.
(C) Exchange Rate Data
    These inflation-adjusted wage data, which are denominated in the 
national currency of their country, are then converted to U.S. dollars 
using Base Year period-average exchange rates reported by the IMF's 
International Financial Statistics.
    Thus, using (A) wage data, (B) CPI data and (C) exchange rate data, 
discussed above, the Department arrives at hourly wages, denominated in 
U.S. dollars and adjusted for inflation for each of the 56 countries 
for which all the above data are available.
(D) GNI Data
    The Department uses Base Year GNI data for each of the 56 countries 
in the Department's analysis, as reported by the WB. GNI data are 
denominated in U.S. dollars current for the Base Year. The WB defines 
GNI per capita as gross national product (``GNP'') per capita, which is 
``the dollar value of a country's final output of goods and services in 
a year divided by its population.'' The WB further explains that this 
measure ``reflects the average income of a country's citizens.'' See 
http://www.worldbank.org/depweb/english/modules/glossary.html.

[[Page 37763]]

    The Department conducts its regression analysis\4\ using the Base 
Year wages per hour in U.S. dollars discussed above and Base Year GNI 
per capita in U.S. dollars to arrive at the following equation: 
Wagei = Y-intercept + X-coefficient * GNI. The X-coefficient 
describes the slope of the line estimated by the regression analysis, 
while the Y-intercept is the point on the Y-axis where the regression 
line intercepts the Y-axis. The results of this regression analysis 
describe generally the relationship between hourly wages and GNI.
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    \4\ Linear, ordinary least squares regression.
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2. Application of Regression Results to NME GNI Data
    The Department applies the NME Base Year GNI to the equation 
presented above to arrive at an estimated wage rate for the NME. This 
is done for each NME.

Example of Methodology Applied to Base Year 2003 Data

    Following the criteria and methodology discussed above, and using 
the data available to the Department as of June 15, 2005, the 
Department has calculated sample expected NME wages.
    The Dominican Republic, Algeria and Kenya, three of the 56 
countries, have been excluded from the Department's regression analysis 
because ILO wage rate data were not available for these countries in 
the instant dataset.
    As noted in the ILO database, the wage rates for Turkey and Korea, 
two of the 56 countries, are denominated in units of 1,000 of their 
respective national currency, and have been converted accordingly.
    While the ILO database indicates that wage rate data for Greece and 
the Netherlands, two of the 56 countries, are denominated in euros, the 
notes to the ILO database indicate that these wage rates are 
denominated in drachmas and guilders, respectively.\5\ Because 
appropriate exchange rates were not available in the International 
Financial Statistics for Greece and the Netherlands, the Department 
relied on the exchange rate information that it regularly obtains from 
Dow Jones B.I.S. and the Federal Reserve and posts on the Import 
Administration web site for these countries. Thus, the Department has 
calculated the annual 2003 average exchange rates for Greek drachmas 
and Dutch guilders, which were 0.00328 U.S. dollars per drachma and 
0.51859 U.S. dollars per guilder.
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    \5\ This correction has been made in previous years, and 
addresses an apparent discrepancy when using the euro exchange rate.
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    2003 WB GNI data were not available for Zimbabwe, one of the 56 
countries. Consequently, Zimbabwe has been excluded from the 
Department's regression analysis.
    Following the data compilation and regression methodology described 
above, and using GNI and wage data for Base Year 2003, the regression 
results are: Wagei = 0.410466 + 0.000515 * GNI. The r-
square, which is a measure of the statistical validity of a regression 
analysis,\6\ is 0.91632 for the Department's regression analysis,\7\ 
indicating a statistically valid analysis.
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    \6\ Linear, ordinary least squares regression.
    \7\ Linear, ordinary least squares regression.
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    Application of these regression results to 2003 NME GNI data yields 
the following sample 2005 schedule of expected NME wages for 
antidumping (``AD'') purposes:

------------------------------------------------------------------------
             Country                   2003 GNI        Expected NME Wage
------------------------------------------------------------------------
Armenia.........................                $950               $0.90
Azerbaijan......................                $820               $0.83
Belarus.........................              $1,600               $1.23
Estonia[dagger].................              $5,380               $3.18
Georgia.........................                $770               $0.81
Kazakhstan[dagger]..............              $1,780               $1.33
Kyrgyz Republic.................                $340               $0.59
Lithuania[dagger]...............              $4,500               $2.73
Moldova.........................                $590               $0.71
China...........................              $1,100               $0.98
Romania[dagger].................              $2,260               $1.57
Russian Federation[dagger]......              $2,610               $1.75
Tajikistan......................                $210               $0.52
Turkmenistan....................              $1,120               $0.99
Ukraine.........................                $970               $0.91
Uzbekistan......................                $420               $0.63
Vietnam[Dagger].................                $480               $0.66
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[dagger]Applicable only to review periods that pre-date the effective
  date of graduation to market-economy status (Estonia (01/01/03);
  Lithuania (01/01/03); Romania (01/01/03); and Russia (04/01/02);
  Kazakhstan (10/01/01)).
[Dagger]On November 8, 2002, the Department determined that Vietnam will
  be treated as a non-market economy country for purposes of antidumping
  duty and countervailing proceedings (see Notice of Final Antidumping
  Duty Determination of Sales at Less Than Fair Value and Affirmative
  Critical Circumstances: Certain Frozen Fish Fillets from the Socialist
  Republic of Vietnam, 68 FR 37116, June 23, 2003).

    In order to facilitate a full opportunity for comment, and because 
the underlying data is voluminous, the results and underlying data for 
this sample calculation have been posted on the Import Administration 
website (http://ia.ita.doc.gov), but will not be used for AD purposes.

Comments

    Persons wishing to comment on the Department's methodology 
described above for the calculation of expected NME wages 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. Comments received after the end 
of the comment period will be considered, if possible, but their 
consideration 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

[[Page 37764]]

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 website 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: June 23, 2005.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 05-12862 Filed 6-29-05; 8:45 am]
BILLING CODE 3510-DS-S