[Federal Register Volume 76, Number 191 (Monday, October 3, 2011)]
[Rules and Regulations]
[Pages 61042-61046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-24666]



[[Page 61042]]

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DEPARTMENT OF COMMERCE

International Trade Administration

19 CFR Part 351

[Docket No. 110420253-1577-02]
RIN 0625-AA88


Modification of Regulations Regarding the Practice of Accepting 
Bonds During the Provisional Measures Period in Antidumping and 
Countervailing Duty Investigations

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

ACTION: Final rule.

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SUMMARY: The Department of Commerce (the Department) is amending its 
regulations governing the effect of an affirmative preliminary 
determination in antidumping or countervailing duty proceedings to 
establish that the provisional measures will normally take the form of 
a cash deposit. Requiring that provisional measures will normally take 
the form of a cash deposit will help to strengthen the administration 
of the nation's antidumping (AD) and countervailing duty (CVD) laws by 
making importers directly responsible for the payment of AD and CVD 
duties.

DATES: This Final Rule is effective November 2, 2011. This rule will 
apply to all investigations initiated on the basis of petitions filed 
on or after this effective date.

FOR FURTHER INFORMATION CONTACT: Thomas Futtner at (202) 482-3814, Mark 
Ross at (202) 482-4794, or Joanna Theiss at (202) 482-5052.

SUPPLEMENTARY INFORMATION: 

Background

    On April 26, 2011, the Department published a proposed modification 
to its regulations regarding the practice of accepting bonds during the 
provisional measures period in AD and CVD investigations. See 
Modification of Regulations Regarding the Practice of Accepting Bonds 
During the Provisional Measures Period in Antidumping and 
Countervailing Duty Investigations, 76 FR 23225 (April 26, 2011) 
(Proposed Rule). The Proposed Rule explained the Department's proposal 
to modify its regulations to establish that the provisional measures 
during an AD or CVD investigation will normally take the form of a cash 
deposit. The Department received numerous comments on the Proposed Rule 
and has addressed these comments below. The Proposed Rule, comments 
received, and this Final Rule can be accessed using the Federal 
eRulemaking Portal at http://www.Regulations.gov under Docket Number 
ITA-2011-0005. After analyzing and carefully considering all of the 
comments that the Department received in response to the Proposed Rule, 
the Department has adopted the modification and amended its regulations 
to establish that the provisional measures during an AD or CVD 
investigation will normally take the form of a cash deposit.

Explanation of Regulatory Provision

    Our regulations describe the preliminary determination in AD and 
CVD investigations as the first point at which the Department may 
provide a remedy if we preliminarily find that dumping or 
countervailable subsidization has occurred. The regulations at 19 CFR 
351.205(a) stated that, ``[t]he remedy (sometimes referred to as 
`provisional measures') usually takes the form of a bonding requirement 
to ensure payment if antidumping or countervailing duties ultimately 
are imposed.'' Section 351.205(d) of the Department's regulations 
states that, ``[i]f the preliminary determination is affirmative, the 
Secretary will take the actions described in section 703(d) or section 
733(d) (whichever is applicable).''
    The provisional measures period is the period between the 
publication of the Department's preliminary affirmative determination 
and the earlier of (1) The expiration of the applicable time period set 
forth in sections 703(d) and 733(d) of the Tariff Act of 1930, as 
amended (the Act), or (2) the publication of the International Trade 
Commission (Commission)'s final affirmative injury determination.\1\ 
During this time the Department is instructed by the Act to order ``the 
posting of a cash deposit, bond, or other security, as the 
administering authority deems appropriate.'' See Sections 703(d)(1)(B) 
and 733(d)(1)(B) of the Act.
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    \1\ Also, pursuant to sections 703(e)(2) and 733(e)(2) of the 
Act, if the Department makes an affirmative determination of 
critical circumstances, then provisional measures shall apply on or 
after the later of (A) The date which is 90 days before the date on 
which the suspension of liquidation was first ordered, or (B) the 
date on which notice of the determination to initiate the 
investigation is published in the Federal Register.
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    Requiring that provisional measures will normally take the form of 
a cash deposit will help to strengthen the administration of the 
nation's AD and CVD laws by making importers directly responsible for 
the payment of AD and CVD duties. This change will help to ensure that 
the U.S. Government collects the full amount of the duties owed should 
an investigation result in the imposition of an AD or CVD order and, 
further, it will reduce some of the burdens that U.S. Customs and 
Border Protection (CBP) faces when trying to collect AD and CVD duties. 
Certain parties commented on the explanation the Department provided 
for this change in the Proposed Rule, and the Department has addressed 
those comments in the section entitled ``Response to Comments on the 
Proposed Rule''.

Explanation of Final Modification to 19 CFR 351.205

    Prior to this modification to the regulations, the second sentence 
of 19 CFR 351.205(a) stated that ``[t]he remedy (sometimes referred to 
as `provisional measures') usually takes the form of a bonding 
requirement to ensure payment if antidumping or countervailing duties 
ultimately are imposed.'' The Department deleted most of the sentence 
to no longer permit under normal circumstances, U.S. importers to post 
bonds during the provisional measures period. However, the Department 
retained the phrase ``(sometimes referred to as `provisional 
measures')'' but moved it to the first sentence of 19 CFR 351.205(a). 
We view this phrase as a useful link between this part of our 
regulations and the terminology under Article 7 of the WTO Agreement on 
Implementation of Article VI of the General Agreement on Tariffs and 
Trade 1994 (``ADA'') and Article 17 of the Agreement on Subsidies and 
Countervailing Measures (``ASCM'').
    Further, to clarify that provisional measures will take the form of 
cash deposits, the Department added a sentence to 19 CFR 351.205(d) 
that states, ``With respect to section 703(d)(1)(B) and 733(d)(1)(B) of 
the Act, the Secretary will normally order the posting of cash deposits 
to ensure payment if antidumping or countervailing duties ultimately 
are imposed.'' This change, in our view, places the requirement for 
cash deposits in the appropriate part of 19 CFR part 351 (i.e., in the 
part that explains the effects of an affirmative preliminary 
determination). This amendment reflects the Department's change in 
practice to now normally require cash deposits rather than bonds during 
the provisional measures period. This modification is also in line with 
19 CFR 351.205(d), which provides that ``if the preliminary 
determination is affirmative, the Secretary will take the actions 
described in section 703(d) or section 733(d) of the Act (whichever is 
applicable)'' because these sections of the Act provide that the 
Department

[[Page 61043]]

shall order the posting of cash deposits or bonds, as the Department 
deems appropriate.

Response to Comments on the Proposed Rule

    The Department received numerous comments on its Proposed Rule. As 
indicated in the ``Background'' section, these comments can be accessed 
using the Federal eRulemaking Portal at http://www.Regulations.gov 
under Docket Number ITA-2011-0005. The Department has analyzed and 
carefully considered all of the comments received. Below is a summary 
of the comments, grouped by issue category, and followed by the 
Department's response.

Issue 1--U.S. Law, the WTO Agreements, and Cash Deposits During the 
Provisional Measures Period

    Several commenters assert that section 703(d)(l)(B) and 
733(d)(1)(B) of the Act provide the Department discretion to collect 
cash deposits as provisional measures. Some of the same parties also 
note that Article 7 of the ADA and Article 17 of the ASCM indicate that 
WTO members may require importers to post cash deposits as provisional 
measures. Another commenter asserts that Article 7 of the ADA and 
Article 17 of the ASCM indicate no hierarchy between cash and bond 
requirements for provisional measures, and that allowing the importer 
to choose the kind of guarantee that is suitable for them reduces the 
chance of default. Another commented that the ADA and ASCM clearly 
provide for the acceptance of bonds as one of the options for the 
purpose of covering provisional duties.
    Response: It is within the Department's discretion to require that 
provisional measures will normally take the form of a cash deposit. The 
Act does not specify a preference for cash deposits or bonds, nor does 
it provide the importer with the option of selecting which method the 
importer prefers. For the provisional measures period in AD and CVD 
investigations, the Act provides for ``the posting of a cash deposit, 
bond, or other security, as the administering authority deems 
appropriate.'' See sections 703(d)(1)(B) and 733(d)(1)(B) of the Act.
    The modification to our regulations is also consistent with the ADA 
and the ASCM. Article 7.2 of the ADA states that, ``[p]rovisional 
measures may take the form of a provisional duty or, preferably, a 
security by cash deposit or bond equal to the amount of the antidumping 
duty provisionally estimated, being not greater than the provisionally 
estimated margin of dumping.'' (emphasis added). Article 17.2 of the 
ASCM states that, ``[p]rovisional measures may take the form of 
provisional countervailing duties guaranteed by cash deposits or bonds 
equal to the amount of the provisionally calculated amount of 
subsidization.'' (emphasis added). U.S. law and the WTO Agreements 
provide that the Department may require either the posting of cash 
deposits or bonds, and do not prohibit the Department from normally 
requiring the posting of cash deposits only during the provisional 
measures period.

Issue 2--Use of Bonding by Other Countries

    Several commenters assert that the practice of most, if not all, 
other WTO members is to require cash deposits during the provisional 
measures period, and that the proposed modification will bring the 
United States in line with the practices of other WTO members. Other 
commenters assert that the laws of certain WTO members provide for an 
option to post bonds or other security as provisional measures.
    Response: The Department has considered the information the 
commenters provided on the practice of various countries of permitting 
or not permitting importers the option of posting bonds during the 
provisional measures period of AD and CVD investigations. As detailed 
in the above section entitled ``Issue 1--U.S. Law, the WTO Agreements, 
and Cash Deposits During the Provisional Measures Period,'' requiring 
cash deposits is permissible under the WTO Agreements and this also 
appears to be the practice of many WTO members. While certain WTO 
members may provide for an option to post bonds, sections 703(d)(1)(B) 
and 733(d)(1)(B) of the Act grant the Department the discretion to 
select the form of security that it deems appropriate as a provisional 
measure. After considering all the comments received, and for the 
reasons outlined in the Proposed Rule and this Final Rule, we have 
decided to proceed with the modifications to our regulations specified 
in the Proposed Rule. Accordingly, we are modifying our regulations to 
normally require cash deposits rather than bonds during the provisional 
measures period of AD and CVD duty investigations.

Issue 3--Effective Date of Rule Change

    Several commenters urged the Department to make the change 
effective immediately. Two of these parties asked that we apply the 
change not only in future investigations, but to all pending AD or CVD 
proceedings for which a final determination has not yet been issued. 
One commenter asserted that implementation of this modification to the 
Department's regulations will involve minimal administrative burden in 
light of the very limited number of pending proceedings.
    Response: As indicated in the DATES section above, this Final Rule 
will apply to all investigations initiated on the basis of petitions 
filed on or after November 2, 2011. The Department believes that this 
is a reasonable approach to the effective date issue for this 
particular rule change. Importantly, implementing the Final Rule in 
this manner will provide parties (e.g., importers of merchandise that 
are subject to an AD or CVD investigation) time to prepare for the new 
requirement to normally post cash deposits upon the publication of an 
affirmative preliminary determination.

Issue 4--Financial Consequences of Cash Deposits

    Several commenters assert that the change would have significant 
adverse consequences for importers. They argue that it would be 
burdensome for the importers, some of which are small businesses, 
because their cash flow would be negatively impacted. Certain 
supporters of the change assert that any burden placed on importers by 
the cash deposit requirement is mitigated by the fact that provisional 
measures are in place for a short period of time.
    Response: The Department acknowledges that, in the past, certain 
importers may have benefited from the option of posting bonds during 
the provisional measures period and that upon implementation of this 
Final Rule that option will no longer be readily available to them. 
Nonetheless, the Act clearly provides the Department with discretion to 
require either cash deposits or bonds should a company choose to import 
merchandise that has been preliminarily determined to be dumped or 
subsidized and likely to be causing injury to an industry in the United 
States. The Department considers the security for provisional measures 
to be an important matter for the collection of duties. The requirement 
of a cash deposit will better ensure that importers bear full 
responsibility for any future AD and CVD duties they may owe, as the 
Department and CBP have learned from the agencies' extensive experience 
in the administration of the AD and CVD laws.
    The provisional measures period lasts, at most, six months. The 
Department considers this to be a

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relatively short period in the context of an AD or CVD proceeding. 
Further, importers will receive the cash deposit back in full if the 
imports at issue are not dumped (sold in the United States at less than 
the normal value of the merchandise) or not found to benefit from a 
countervailable subsidy (or the Commission issues a negative injury 
finding). If the margin calculated for the final determination ends up 
lower than the margin calculated at the preliminary determination, the 
statute requires that the difference be refunded to the importer. See 
Sections 707(a)(2) (CVD) and 737(a)(2) (AD) of the Act. However, if the 
margin calculated for the final determination is higher than the margin 
calculated at the preliminary determination, the difference is 
disregarded. See Sections 707(a)(1) (CVD) and 737(a)(1) (AD) of the 
Act. In other words, in no circumstance will an importer be required to 
post cash deposits which equal more than the margin determined at the 
preliminary determination, and in fact will be refunded its cash 
deposit to the extent the deposit is higher than the duty that is 
determined to be due.

Issue 5--Significance of Change to the Regulation

    One commenter stated that the Department's reasoning as to why the 
change is not significant is ``subjective and without factual basis, 
especially since the Department ignores the market impact of 
preliminary determinations on small business industrial users/
consumers.'' Certain supporters of the change argued that the 
percentage of U.S. imports subject to AD or CVD orders is extremely 
small.
    Response: In determining whether this change to its regulations is 
significant, the Department first considered the fact that less than 
two percent of all entries of merchandise into the United States are 
subject to AD or CVD duties. Next, the Department examined the number 
of affirmative preliminary determinations which were issued in both AD 
and CVD investigations in 2007, 2008 and 2009. For instance, if an 
affirmative preliminary determination was published in June 2007, 
importers were required to post cash deposits or bonds generally 
beginning on the date of publication for a four to six month period. 
For each year, we also examined how many AD and CVD proceedings were 
ongoing, accounting for orders which had been revoked during a 
particular year. We then compared the number of affirmative preliminary 
determinations published in a given year to the number of ongoing 
proceedings in that year, to find the percentage of ongoing proceedings 
in each year where provisional measures were applied. We found that the 
average of the results of this comparison for 2007, 2008 and 2009 was 
less than ten percent. This analysis was used for the proposed 
regulatory change, and it demonstrates that the change is not 
significant because the change in the security requirement will impact 
less than ten percent of ongoing AD/CVD proceedings.
    For the Final Rule, our analysis included data from 2010, which we 
did not include in our initial analysis. The 2010 data further supports 
our initial analysis: in 2010, there were 15 preliminary affirmative AD 
determinations and six preliminary affirmative CVD determinations, in 
comparison to 260 ongoing AD proceedings and 46 ongoing CVD 
proceedings. For 2010, approximately seven percent of all AD and CVD 
proceedings involved the application of provisional measures during the 
year. Also, the simple average of the results for each year from 2007 
through 2010 is less than ten percent. Thus, we find that the market 
impact of altering the provisional measures security requirement is not 
significant for purposes of making a regulatory change. Finally, we 
disagree with the assertion that the Department is required to make an 
analysis of the significance of the change with regard to ``small 
business industrial users/consumers.'' The analytical requirements of 5 
U.S.C. 605(b), requires that the Department consider the ``economic 
impact on a substantial number of small business entities,'' which 
requires the Department to analyze the economic impact on all small 
business entities, and is not limited to industrial users/consumers.

Issue 6--Requiring Cash Deposits Based on a Preliminary Determination

    Several commenters argue that it is unfair to require cash deposits 
based on a preliminary determination, when a final order may not be 
issued. Some commenters assert that this change will serve as a trade 
barrier, and one party commented that the Department's true intention 
is to benefit petitioners in response to recent unfavorable WTO and 
court decisions. Several supporters of the change assert that importers 
are protected by the fact that provisional measures are not imposed 
without a preliminary determination of dumping (or countervailable 
subsidization) and injury. The parties also assert that the change will 
better ensure that the U.S. government can collect the full amount of 
duties owed, should the investigation result in the imposition of an AD 
or CVD order.
    Response: We disagree with the assertion that it is unfair to 
require cash deposits based on a preliminary determination in an AD or 
CVD investigation. Before imposing provisional measures, the Department 
must make an affirmative preliminary determination of dumping or 
countervailable subsidization and the Commission must also make a 
preliminary determination as to whether dumping or subsidization are 
likely to be causing material injury. While a preliminary determination 
may occur without an order being issued, in such a circumstance any 
cash deposits are completely refunded to the importer(s). We also 
disagree with the assertion that the change would act as a trade 
barrier because AD and CVD measures, when applied consistent with WTO 
rules, remedy injury and harm caused by market-distorting unfair trade 
practices.
    On August 26, 2010, in support of President Obama's National Export 
Initiative (NEI), the Department announced a number of proposals to 
strengthen the agency's administration of the nation's AD and CVD laws. 
One of those proposals is the modification of the regulations regarding 
the acceptance of bonds during the provisional measures period in AD 
and CVD investigations. Specifically, the Department indicated that it 
is ``[c]onsidering whether importers will be required to post cash 
deposits rather than bonds for imports that fall within the scope of an 
AD/CVD investigation starting with the issuance of the Department's 
preliminary determination (rather than following the imposition of an 
AD/CVD order).'' See ``NEI Trade Law Enforcement Package Fact Sheet'' 
at http://ia.ita.doc.gov/tlei/fachsheet-tlei-20101108.pdf. As indicated 
in the above section entitled ``Explanation of Final Modification to 19 
CR 351.205,'' the posting of cash deposits rather than bonds will make 
importers directly responsible for the payment of AD and CVD duties. It 
will also help to ensure that the U.S. Government collects the full 
amount of the duties owed should an investigation result in the 
imposition of an AD or CVD order. Further, the change will reduce some 
of the burdens that CBP faces when trying to collect AD and CVD duties.

Issue 7--Whether Bonds Will Be Accepted in Any Circumstance

    One commenter argues that the Proposed Rule would still allow 
bonding as an option for provisional measures, and suggests that the

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Department should set forth guidelines of circumstances in which 
bonding is permitted. Another argues that the Department should 
consider other options to address the issues it has experienced with 
the use of bonding during the provisional measures period (such as 
those used in new shipper reviews).
    Response: The change to the regulation provides that ``the 
Secretary will normally order the posting of cash deposits to ensure 
payment if antidumping or countervailing duties ultimately are 
imposed.'' The Department considers that this change appropriately 
addresses the concerns identified with the use of bonding during the 
provisional measures period of AD and CVD investigations. The use of 
the term ``normally'' provides the Department flexibility to address 
those rare and unusual circumstances that the Department may find 
warrant the acceptance of bonds. The Department intends to make such 
exceptional determinations on a case-by-case basis (depending on the 
particular facts of each case) as warranted rather than attempting to 
articulate a rule that predicts what unusual circumstances may arise in 
the future. With regard to the comment about new shipper reviews, 
unlike in investigations, bonding in new shipper reviews is required by 
the Act.

Issue 8--Administrative Burdens of Permitting Bonding

    One commenter asserts that the Department cites a subjective and 
unsubstantiated conclusion regarding the burden the bonding requirement 
imposes on CBP. Another commenter asserts that by requiring cash 
deposits, the administrative burdens and expenses, such as ensuring 
adequate bond coverage and handling claims for mitigation or relief 
from the bond requirement, will be minimized.
    Response: In the Proposed Rule the Department stated that, 
``[w]hile most of the duties on entries secured by a bond during the 
provisional measures period are ultimately collected, these collections 
can be very slow and involve burdensome administrative problems for 
(CBP).'' This conclusion was based on the U.S. Government 
Accountability Office's (GAO) Report to Congress on Antidumping and 
Countervailing Duties (GAO-08-391) (March 2008), in which the GAO 
stated that when an importer fails to pay supplemental AD or CVD 
duties, CBP frequently faces a lengthy process of trying to collect 
from bonding agents. Additionally, CBP reports bonding is more 
burdensome than collecting cash deposits because Single Transaction 
Bonds (STBs), which are required for the posting of bonds in AD and CVD 
investigations, must be reviewed for sufficiency and adequacy. Further, 
since bonds are legal documents, CBP must keep paper copies of STBs. 
CBP also has to manually enter an electronic note in its Automated 
Commercial System for STBs. Conversely, cash deposits are recorded 
electronically in ACS and are usually transmitted to CBP electronically 
and, thus, are recorded automatically.

Issue 9--The Use of Bonds in a Retrospective Duty Assessment System

    One commenter asserted that bonds are a more appropriate form of 
provisional measures for the United States since it has a retrospective 
duty collection system, and requests that the Department not modify the 
current regulations and practice of accepting bonds during the 
provisional measures period.
    Response: The Department disagrees with the assertion that bonds 
are a more appropriate form of provisional measures, and notes that no 
information or argument was provided to support this assertion. The ADA 
and ASCM permit the application of provisional measures in the form of 
cash or bond, regardless of whether the WTO member is operating a 
prospective or retrospective system. In either system, provisional 
measures serve the same function--to provide adequate security for the 
payment of AD or CVD duties pending the final determination of whether 
such duties are owed and in what amount.

Classification

Executive Order 12866

    This rule has been determined to be not significant for purposes of 
Executive Order 12866.

Regulatory Flexibility Act

    The Chief Counsel for Regulation has certified to the Chief Counsel 
for Advocacy of the Small Business Administration under the provisions 
of the Regulatory Flexibility Act, 5 U.S.C. 605(b), that this rule, if 
promulgated, would not have a significant economic impact on a 
substantial number of small business entities. The factual basis for 
the certification was published in the Proposed Rule. The Department 
received a comment regarding the factual basis for this decision, which 
appears in Issue 5--Significance of Change to the Regulation. Based 
upon the Department's analysis, as discussed above, the factual basis 
used in the Proposed Rule to determine that the rule, if promulgated, 
would not have a significant economic impact on a substantial number of 
small business entities did not change. See Issue 5--Significance of 
Change to the Regulation. As a result, a Final Regulatory Flexibility 
analysis is not required and has not been prepared.

Paperwork Reduction Act

    This rule does not contain a collection of information for purposes 
of the Paperwork Reduction Act of 1980, as amended (44 U.S.C. 3501 et 
seq.).

List of Subjects in 19 CFR Part 351

    Administrative practice and procedure, Antidumping, Business and 
industry, Cheese, Confidential business information, Countervailing 
duties, Freedom of information, Investigations, Reporting and 
recordkeeping requirements.

     Dated: September 15, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.

    For the reasons stated, 19 CFR part 351 is amended as follows:

PART 351--ANTIDUMPING AND COUNTERVAILING DUTIES

0
1. The authority citation for 19 CFR part 351 continues to read as 
follows:

    Authority:  5 U.S.C. 301; 19 U.S.C. 1202 note; 19 U.S.C. 1303 
note; 19 U.S.C. 1671 et seq.; and 19 U.S.C. 3538.


Sec.  351.205  [Amended]

0
2. In Sec.  351.205, revise paragraphs (a) and (d) to read as follows:
    (a) Introduction. A preliminary determination in an antidumping or 
countervailing duty investigation constitutes the first point at which 
the Secretary may provide a remedy (sometimes referred to as 
``provisional measures'') if the Secretary preliminarily finds that 
dumping or countervailable subsidization has occurred. Whether the 
Secretary's preliminary determination is affirmative or negative, the 
investigation continues. This section contains rules regarding 
deadlines for preliminary determinations, postponement of preliminary 
determinations, notices of preliminary determinations, and the effects 
of affirmative preliminary determinations.
* * * * *
    (d) Effect of affirmative preliminary determination. If the 
preliminary determination is affirmative, the Secretary will take the 
actions described in section 703(d) or section 733(d) of the Act 
(whichever is applicable). With

[[Page 61046]]

respect to section 703(d)(1)(B) and 733(d)(1)(B) of the Act, the 
Secretary will normally order the posting of cash deposits to ensure 
payment if antidumping or countervailing duties ultimately are imposed. 
In making information available to the Commission under section 
703(d)(3) or section 733(d)(3) of the Act, the Secretary will make 
available to the Commission and to employees of the Commission directly 
involved in the proceeding the information upon which the Secretary 
based the preliminary determination and which the Commission may 
consider relevant to its injury determination.
* * * * *

[FR Doc. 2011-24666 Filed 9-30-11; 8:45 am]
BILLING CODE 3510-DS-P