[Federal Register Volume 76, Number 34 (Friday, February 18, 2011)]
[Notices]
[Pages 9544-9547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3743]


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DEPARTMENT OF COMMERCE

International Trade Administration


Antidumping Methodologies in Proceedings Involving Non-Market 
Economies: Valuing the Factor of Production: Labor; Request for Comment

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

ACTION: Request for comments.

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SUMMARY: The Department of Commerce (``the Department'') requests 
public comment on the means by which it can best capture the cost of 
labor in its wage rate methodology in antidumping proceedings involving 
non-market economy (``NME'') countries. As part of this process, the 
Department invites comments on the interim methodology for determining 
a surrogate value for wage rates that is currently being applied in 
antidumping proceedings for companies in NME countries.

DATES: To be assured of consideration, comments must be received no 
later than March 21, 2011.

FOR FURTHER INFORMATION CONTACT: Christopher Mutz, (202) 482-0235, 
Office of Policy, Import Administration, Julia Hancock, (202) 482-1394, 
Office of Antidumping and Countervailing Duty Operations, Import 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Background

    Section 733(c) of the Tariff Act of 1930, as amended (``the Act''), 
provides that the Department will value the factors of production 
(``FOPs'') in NME cases using the best available information regarding 
the value of such factors in a market economy (``ME'') country or 
countries considered to be appropriate by the administering authority. 
The Act requires that when valuing the FOPs, the Department utilize, to 
the extent possible, the prices or costs of factors of production in 
one or more ME countries that are (1) at a comparable level of economic 
development and (2) significant producers of comparable merchandise. 
See section 733(c)(4) of the Act.
    Previously, the Department calculated wages using a regression 
analysis that captured the worldwide relationship between per capita 
Gross National Income (``GNI'') and hourly wage rates in manufacturing 
pursuant to 19 CFR 351.408(c)(3). See Antidumping Methodologies: Market 
Economy Inputs, Expected Non-Market Economy Wages, Duty Drawback; and 
Request for Comments (``Antidumping Methodologies Notice''), 71 FR 
61716 (October 19, 2006). On May 14, 2010, the Court of Appeals for the 
Federal Circuit (``CAFC''), in Dorbest Ltd. v. United States, 604 F. 3d 
1363, 1372 (Fed. Cir. 2010) (``Dorbest I''), invalidated 19 CFR 
351.408(c)(3). Subsequently, the Department issued a remand 
redetermination in the Dorbest litigation, and on February 9, 2011, the 
Court of International Trade (``CIT'') affirmed in part, and remanded 
in part, the Department's wage rate methodology applied in that 
redetermination. See Dorbest Ltd. v. United States, Slip Op. 11-14 (CIT 
Feb. 9, 2011) (``Dorbest II''). As a consequence of the CAFC's ruling 
in Dorbest I, the Department is no longer relying on the wage rate 
methodology described in its regulations. Since July 2010, the 
Department has applied an interim wage rate methodology that derives a 
surrogate wage rate from countries that are both economically 
comparable and significant producers of merchandise comparable to the 
merchandise subject to the antidumping duty proceeding.\1\ In October 
2010, the Department modified its calculations to apply a simple-
average of industry-specific wage rates from those countries.\2\
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    \1\ See Certain Woven Electric Blankets From the People's 
Republic of China (``PRC''): Final Determination of Sales at Less 
Than Fair Value (``Blankets from the PRC''), 75 FR 38459 (July 2, 
2010) and accompanying Issues and Decision Memorandum at Comment 13.
    \2\ Between July 2010 and October 2010, the Department 
implemented an interim wage rate methodology that reflected a simple 
average of national wage rates from countries found to meet both 
criteria under section 733(c)(4) of the Act. Industry-specific data, 
if available, is now the presumptive surrogate data used in the 
Department's calculations. See Certain New Pneumatic Off-the-Road-
Tires from the People's Republic of China: Preliminary Results of 
the Antidumping Duty Administrative Review, 75 FR 64259 (October 19, 
2010) (``Tires from the PRC''); see also Certain Activated Carbon 
from the People's Republic of China: Final Results and Partial 
Rescission of Second Antidumping Duty Administrative Review, 75 FR 
70208 (November 18, 2010) and accompanying Issues and Decision 
Memorandum at Comment 4f (``Activated Carbon Final'').
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Request for Comment on International Labor Organization (``ILO'') 
Chapter 6A Data

    As part of the on-going process of evaluating options for 
determining labor values, the Department is considering methodologies 
that will best capture all labor costs. Currently, the Department uses 
earnings or wage data as reported in ``Chapter 5B: Wages in 
Manufacturing'' of the International Labor Organization (``ILO'') 
Yearbook of

[[Page 9545]]

Labor Statistics. Chapter 5B captures the pre-tax monetary remuneration 
received by the employee.
    Chapter 5B data includes two types of compensation: (1) Direct 
wages and salaries (``wages''), as well as (2) earnings data, which 
include wages plus bonuses and gratuities (``earnings''). The 
Department prefers ``earnings'' data, when available, since it more 
accurately reflects the full remuneration received by workers. See 
Antidumping Methodologies Notice, 71 FR at 61721.
    The ILO defines Chapter 5B wage rate data to include:

    Basic wages, cost-of-living allowances and other guaranteed and 
regularly paid allowances, but exclude overtime payments, bonuses 
and gratuities, family allowances and other social security payments 
made by employers. Ex gratia payments in kind, supplementary to 
normal wage rates, are also excluded.\3\
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    \3\ See http://laborsta.ilo.org/applv8/data/c5e.html (emphasis 
added).

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The ILO defines Chapter 5B earnings data to include:

    Remuneration in cash and in kind paid to employees, as a rule at 
regular intervals, for time worked or work done together with 
remuneration for time not worked, such as for annual vacation, other 
paid leave or holidays. Earnings exclude employers' contributions in 
respect of their employees paid to social security and pension 
schemes and also the benefits received by employees under these 
schemes. Earnings also exclude severance and termination pay.\4\
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    \4\ Id (emphasis added).

    The ILO Chapter 5B data that the Department currently uses in its 
interim, simple-average industry-specific wage rate methodology for 
valuing labor is comprehensive (i.e., this dataset includes annual 
earnings and wage data reported by most countries in the world). 
Additionally, the ILO Chapter 5B data is reported both on a national 
and an industry-specific level for each reporting country.
    Under the current interim wage rate methodology, the Department 
assumes that indirect labor costs (i.e., employer expenses for social 
benefits, pensions and training, etc.) are included in the calculated 
surrogate financial ratios (i.e., factory overhead (``OH''), selling, 
general and administrative (``SG&A'') expenses, and profit) for the NME 
producer. When the OH and SG&A line items are disaggregated, the 
Department has a practice of adjusting the surrogate financial ratios 
for OH, SG&A, and profit by categorizing all identifiable labor costs 
not included in the ILO's definition of Chapter 5B data as overhead 
expenses.\5\ However, when OH and SG&A are aggregated, the Department 
is unable to determine whether adjustments are needed to account for 
all of the indirect labor-related costs.
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    \5\ See Folding Metal Tables and Chairs from the People's 
Republic of China: Final Results of Antidumping Duty Administrative 
Review, 71 FR 2905 (January 18, 2006) and accompanying Issues and 
Decision Memorandum, at Comment 1.
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    Due to concerns that reliance on data from Chapter 5B of the ILO 
may under-count the NME producer's labor costs, the Department is 
considering alternative data sources for valuing labor to ensure all 
labor costs incurred by the NME producer are accounted for in the 
normal value (``NV'') calculation. The Department proposes relying on 
labor and wage data that include all costs incurred by the producer 
related to labor including wages, benefits, housing, training, etc. One 
example of such a data source is ``Chapter 6A: Labor Cost in 
Manufacturing'' from the ILO Yearbook of Labour Statistics.
    The ILO defines Chapter 6A data to include:

    The cost incurred by the employer in the employment of labour. 
The statistical concept of labour cost comprises remuneration for 
work performed, payments in respect of time paid for but not worked, 
bonuses and gratuities, the cost of food, drink and other payments 
in kind, cost of workers' housing borne by employers, employers' 
social security expenditures, cost to the employer for vocational 
training, welfare services and miscellaneous items, such as 
transport of workers, work clothes and recruitment, together with 
taxes regarded as labour cost * * *.\6\

    \6\ See http://laborsta.ilo.org/applv8/data/c6e.html.

The ILO Chapter 6A data include all costs related to labor including 
wages, benefits, housing, training, etc.\7\ To the extent that Chapter 
6A data includes some of the expenses that may already be captured in 
the surrogate financial ratios, there is a possibility that the use of 
Chapter 6A data may overstate the cost of labor in certain cases. The 
Department's ability to identify and adjust for such individual labor 
costs is fact-specific in nature and subject to the available 
information on the record of the specific proceeding. See Antidumping 
Methodologies Notice, 71 FR at 61721. There will be some cases where 
information is available to make such adjustments, but there will be 
other cases where the Department cannot make such an adjustment due to 
a lack of available data. However, if the Department does not use an 
all inclusive data source, such as the ILO Chapter 6A data, the NME 
producer's total labor cost will be understated in cases where the 
surrogate financial statements do not include certain indirect labor 
costs that are also excluded from ILO Chapter 5B data.
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    \7\ See Antidumping Methodologies Notice, 71 FR at 61721.
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    The Department further notes its preference for data from as many 
countries as possible when considering alternative data sources for 
valuing labor, such as the ILO Chapter 6A data. Although information 
from a single surrogate country can reliably be used to value other 
FOPs, wage data from a single surrogate country does not normally 
constitute the best available information for purposes of valuing the 
labor input due to the variability that exists across wages from 
countries with similar GNI.\8\ As a result, we do not find reliance on 
wage data from a single country to be preferable where data from 
multiple countries are available for the Department to use.\9\ Although 
the Department discounted the use of the ILO Chapter 6A data in 2006 
because very few market economy countries reported labor data, this may 
no longer be the case.\10\ As of January 2011, sixty-six market economy 
countries reported ILO Chapter 6A data at the national level. Though it 
is improbable that all of these countries would be considered 
economically comparable to the country subject to an investigation or 
review, sixty-six is not an insignificant number of initial countries. 
The Department also notes that some market economy countries report 
industry-specific data under ILO Chapter 6A, which is in keeping with 
the Department's current, interim practice of relying on industry-
specific data within the existing ILO source where available. The 
Department is aware that there may be data constraints using industry-
specific data classified under ILO Chapter 6A because fewer market 
economy countries that are found to be economically comparable to a 
subject country report industry-specific under ILO Chapter 6A than 
under ILO Chapter 5B. Accordingly, in determining whether to source 
wage data from alternative data sources, such as ILO Chapter 6A, the 
Department will need to evaluate how to address situations where there 
are significant data constraints in light of its current preference for 
data from multiple countries at the industry-specific level.
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    \8\ See e.g., International Labor Organization, Global Wage 
Report: 2009 Update, (2009) at 5, 7, 10. http://www.ilo.org/wcmsp5/groups/public/-dgreports/-dcomm/documents/publication/wcms-116500.pdf.
    \9\ Both the statute and our regulations recognize the need to 
source factor data from more than one country where appropriate. See 
Sections 773(c)(1) and (c)(4) of the Act and 19 CFR 351.408(c)(2).
    \10\ See Antidumping Methodologies Notice, 71 FR at 61721.

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[[Page 9546]]

    The Department invites parties to comment on these methodological 
issues described above.

Request for Comment on Interim Industry-Specific Wage Rate Methodology

    As discussed above, the Department's interim methodology for 
valuing labor in NME antidumping proceedings utilizes a simple-average 
industry-specific wage rate calculated with data reported in Chapter 5B 
of the ILO Yearbook of Labour Statistics. Under this interim 
methodology, the Department calculates an hourly wage rate by averaging 
industry-specific earnings and/or wages in countries that are 
economically comparable to the subject country and are significant 
producers of the comparable merchandise, pursuant to section 773(c)(4) 
of the Act. The following steps explain the current interim industry-
specific methodology.
    First, in order to determine the economically comparable surrogate 
countries from which to calculate a surrogate wage rate, the Department 
reviews the Surrogate Country Memo issued in each proceeding. Early in 
each case, the Department selects a number of countries for 
consideration as the surrogate country for that case.\11\ To determine 
which countries are at a level of economic development comparable to 
that of the NME country in question, the Department places primary 
emphasis on per capita GNI.\12\ The Department relies on GNI from the 
most recent year available, currently 2008, to generate an initial 
limited list of countries considered to be economically comparable to 
the subject country.\13\ From this list of countries contained in the 
Surrogate Country Memo, the Department identifies the country with the 
highest GNI and the lowest GNI as ``bookends'' for economic 
comparability.\14\ Relying on the World Bank's World Development 
Report,\15\ the Department then identifies all countries with per 
capita incomes from the same year that fall between the country with 
the highest GNI, and the country with the lowest GNI (commonly referred 
to as the ``bookend'' countries). This is the ``GNI band'' of countries 
that the Department considers to be economically comparable to the 
country in question for calculating wage rates.
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    \11\ See Policy Bulletin 04.1: Non-Market Economy Surrogate 
Country Selection Process, March 1, 2004 (``Policy Bulletin'').
    \12\ It is Departmental practice, pursuant to 19 CFR 408, to use 
per capita GNI, rather than per capita GDP, because while the two 
measures are very similar, per capita GNI is reported across almost 
all countries by an authoritative source (the World Bank), and 
because the Department believes that the per capita GNI represents 
the single best measure of a country's level of total income and, 
thus, level of economic development. See Antidumping Methodologies 
Notice, 71 FR 61716, 61716 at n. 2.
    \13\ The Department notes that this initial list of countries is 
part of a non-exhaustive list of countries that are at a level of 
economic development comparable to the subject country.
    \14\ Cf. Dorbest II, at *10-17. Parties are invited to address 
this case in their comments.
    \15\ Indicator: GNI per capita, Atlas Method (current US$) is 
obtained from http://data.worldbank.org/indicator/.
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    Second, regarding the ``significant producer'' prong of the 
antidumping statute (section 773(c)(4)(B) of the Act), the Department 
identifies all countries that had exports based on value data for 
exports of comparable merchandise (i.e., exports of any goods, by 
value, under the six-digit Harmonized Tariff Schedule (``HTS'') 
categories contained in the scope of the investigation or review). The 
Department obtains this export data for the last three years of 
available data. After obtaining total exports by value of comparable 
merchandise for all reporting countries, the Department filters the 
dataset to include only countries that are listed within the ``GNI 
band.'' If any of these countries had exports of the comparable 
merchandise for the last three years, that country is considered to be 
a significant producer.
    Third, the Department selects the most appropriate industry-
specific wage data based on the scope of the investigation or review, 
and the availability of industry-specific data.\16\ Industry-specific 
wage/earning data is reported by countries to the ILO under the United 
Nations' International Standard Classification of All Economic 
Activities (ISIC).\17\ The Department determines the most appropriate 
industry-specific wage rate/earning data for the subject industry by 
examining the ISIC industry classifications and determining which 
classification is most specific to the subject product for the most 
recent revision (currently Rev. 4). If no wage data is available for 
that industry, the examination moves to the next most recent revision, 
(i.e., Rev. 3.1, Rev. 3, and Rev. 2, etc.).
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    \16\ The CIT in Dorbest II affirmed the Department's decision to 
use industry-specific data as ``reasonable and in compliance with 
the statutory requirements '' set forth in Section 773(c)(4) of the 
Act. Dorbest II, at *25-27.
    \17\ The ISIC identifies different industry classifications. The 
ISIC provides industry classifications by section (i.e., A--
Agriculture, hunting, and forestry), then at the two-digit division 
level (i.e., 01--Agriculture, hunting, and related service 
activities), then further sub-detail at the three-digit major group 
level (i.e., 011--Growing of crops; market gardening; horticulture), 
and sometimes a four-digit group level (i.e., 0111--Growing of 
cereals and other crops, nec.). There are explanatory notes at the 
two-digit division level, three-digit major group level, and four-
digit group level that provide a detailed list of the industries 
covered in and excluded from each classification.
    The ISIC also has different revisions of this classification 
system: Rev. 2 (1968); Rev. 3 (1989); Rev. 3.1 (2002); and Rev. 4 
(2008).
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    Fourth, using the selected industry-specific wage rate data for the 
countries that are economically comparable to the subject country and 
significant producers of comparable merchandise, the Department chooses 
an earnings/wage rate that is most contemporaneous with the period of 
the subject proceeding. Various types of earnings/wages in that 
industry-specific wage rate data are sorted by a set of filters to 
arrive at the most appropriate single earnings/wage rate.\18\
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    \18\ The Department filters the data based on ILO data 
parameters in the following order:
    1. ``Type of Data--I,'' i.e., reported under the categories 
earnings or wages. We use earnings data if available and wages data 
where earnings data are not available;
    2. ``Sex,'' i.e., male/female coverage (we eliminate male only, 
female only, and indices data);
    3. ``Contemporaneity,'' i.e., the Department uses the most 
recent earnings/wage rate data point available;
    4. ``Worker Coverage,'' i.e., the Department selects from the 
following categories in the following hierarchy: (1) Wage earners; 
(2) employees; (3) salaried employees; and (4) total employment;
    5. ``Type of Data--II,'' i.e., the unit of time for which the 
wage is reported. The Department selects from the following 
categories in the following hierarchy: (1) Per hour; (2) per day; 
(3) per week; or (4) per month. Where data is not available on a 
per-hour basis, the Department converts that data to an hourly basis 
based on the premise that there are 8 working hours per day, 5.5 
working days a week and 24 working days per month.
    ``Source ID,'' i.e., a code for the source of the data. The 
Department prioritizes data with a ``Source ID'' value of ``no 
value'' over ``1,'' ``2'' and ``3,'' in that order.
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    Fifth, the Department inflates the selected single earnings or wage 
rate for each country to the year that covers the majority of the 
period of the proceeding using the relevant Consumer Price Index 
(``CPI'').\19\ Next, the Department converts these inflation-adjusted 
hourly earnings or wage rate data for each country, which are 
denominated in each country's national currency, to U.S. dollars using 
annual exchange rates \20\ as reported by the IMF's IFS for the year 
that covers the majority of the period of investigation or review. 
Finally, the Department calculates a simple-average,

[[Page 9547]]

industry-specific wage rate across the selected countries.
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    \19\ The CPI for each country is obtained from the International 
Monetary Fund (``IMF'')'s International Financial Statistics 
(``IFS'') database, located at http://www.imfstatistics.org/imf.
    \20\ The exchange rate for each country is obtained from the 
IMF's IFS database by selecting: (1) ``Economic Concept View;'' (2) 
``Country Exchange Rates;'' (3) ``National Currency Per US$ (Per 
Avg);'' and (4) ``RF.ZF NC/US$, Period Average.''
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    Since implementing this interim industry-specific wage rate 
methodology, the Department has encountered a number of methodological 
and practical challenges that must be considered in evaluating whether 
this methodology should be adopted for the longer term. For example, 
the Department normally prefers using multiple data points when 
evaluating labor data, because of the large variance in wage rates, as 
explained above. However, relying on industry-specific data necessarily 
constrains the amount of available data. Additionally, the Department 
notes that the interim method is a significant endeavor that requires 
screening hundreds of data points in each case. Given the statutory 
time constraints present in every proceeding, the Department will also 
be evaluating this methodology in relation to its long-term 
administrative feasibility. Based on the challenges described above by 
the Department regarding the interim industry-specific wage rate 
methodology, the Department invites comments by parties on these 
issues.

Submission of Comments

    To be assured of consideration, comments must be received no later 
than March 21, 2011. All comments must be submitted through the Federal 
eRulemaking Portal at http://www.regulations.gov, Docket No. ITA-2010-
0010, unless the commenter does not have access to the Internet. 
Commenters that do not have access to the Internet may submit the 
original and two copies of each set of comments by mail or hand 
delivery/courier. All comments should be addressed to the Secretary of 
Commerce, Attention: Christopher Mutz, Office of Policy, Room 1870, 
Import Administration, U.S. Department of Commerce, 14th Street and 
Constitution Ave., NW., Washington, DC 20230.
    The Department will consider all comments received before the close 
of the comment period. The Department will not accept comments 
accompanied by a request that part or all of the material be treated 
confidentially because of its business proprietary nature or for any 
other reason. All comments responding to this notice will be a matter 
of public record and will be available for inspection at Import 
Administration's Central Records Unit (Room 7046 of the Herbert C. 
Hoover Building) and on the Department's Web site at http://www.trade.gov/ia/.
    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: February 14, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-3743 Filed 2-17-11; 8:45 am]
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